Tri-Directionalism: The Three-Choice Method of Strategic Planning

by Daniel Cunningham

Every real estate enterprise needs strategic planning. Few have the time or desire to do it right. But like it or not, one of the essentials of doing business is taking the time to determine how your business is doing — and where you want to take it.

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Clearly, that is easier said than done.

The act of observing your own business — and doing so objectively — is a powerful tool for change. When you have tried everything you know, and the old ways still come to the fore, in spite of your best efforts, that is the time to stop and observe — neutrally and as honestly as you can. That is the essence of good strategic planning.

After all, one way or another, your competitors are watching and sizing you up. Our industry is nothing if not brutally competitive. That means you always have to be making critical adjustments in your business plan to meet the market. If not, the market will do it for you.

One of the hardest things about strategic planning is simply getting started. In our work, we have found success in what we call “tri-directionalism,” our method of moving in three directions — all at once.

In our process, the first choice is to “stay the course.” The second is “grow the business.” The third is “create strategic combinations.” They are not mutually exclusive and require pushing in all of the directions in order to exploit opportunity.

Choice One: Stay the Course

Focus on your current business model. Understand how you exist in the entire ecosystem in which your business lives. Be on the lookout for looming threats and hidden opportunities. Remember that Amazon first knocked off thousands of booksellers simply by providing an easier way to buy books. Amazon used that success to pivot into a business behemoth where today they can — and do — sell anything. How does business get done in your sector? Who is out there focused on changing the game? Hint: it could be you.

At the same time, look at how you are working to preserve and enhance your value. Evaluate the way you manage, especially your property management plans. Be comfortable with the amount of money being spent on maintenance and repairs for your real estate. Check in with staff to confirm that you have the right people doing the right jobs. Analyze the streams of cash flow that comprise your income. Are they as strong as you expected based on your business model in your investments — whether they are multifamily, commercial, retail, industrial, or hospitality? If so, great. If not, figure out how to build a cash flow stream that is more in alignment with your goals.

Remember that a renewed assessment of the marketing plan is a core component of reimagining how to get the word out in a manner that is fresh and innovative.

Choice Two: Grow the Business

You need to be able to reassess your goals in the context of your potential growth trajectory. In the real estate business, often the phase “to achieve scale” serves as a proxy for growth plans. Knowing how large a business you seek to create — as measured by units, square feet, revenues, market capitalization, or whatever you utilize — helps to clarify what you are trying to achieve. Most importantly, it can reveal ways to get there.

Don’t measure growth only in terms of maximizing profits. Think through all of your goals. Conduct a series of internal discussions, where nothing is sacred. An open, fertile environment in which you cultivate insight into new ways of doing business, new product lines, and new pathways to reach those goals has great potential to unlock innovation.

Thinking about growth holistically will lead you to assess all your values. For example, is diversity, equity, and inclusion (DEI) baked into your DNA? If not, it needs to be. Of all the exogenous challenges confronting you, DEI sums up the most critical tools which cannot be ignored in today’s economy. If you fail at it, you will not be able to attract and retain the team you need to grow. If you have clients, tenants, or lessees who value DEI while you do not, where does that leave you? If they don’t value it, well, that is quite possibly an even greater problem.

Knowing the emerging trends in your business is just the beginning. Analyze whether and how to play in those new spaces. Know your strengths — and your limitations. Facing a realistic assessment of your team’s bandwidth is fundamental. Deciding to move into a new lane requires the right people and expectations — and a knife-edge balance of patience and impatience.

Choice Three: Create Strategic Combinations

No matter what, there will always be constraints in your business model which prevent you from doing some of the important things right. Excessive overhead? Too much debt? Too little? A dearth of research and development?

Never fail to ask: Are there ways in which a strategic partnership might allow a better way of doing business? We’ve all seen combinations, alliances, mergers, acquisitions, and other arrangements intended to pursue that magical and often elusive “synergy.”

Do your multifamily residents need better services? Safer and more reliable package distribution? More efficient leasing process? Maybe there is a peer or competitor doing it better than you are. Think through the possibilities of a combination of some sort.

In the process, beware of hubris. From time to time, we all want to believe that our way is the best or even the only way. In reality, understanding that someone is doing it better is a tangible sign that you’re open to growth opportunities. When allowed, talk to your competitors. You might find ways to do things together.

Conclusion

You have choices. The three we’ve discussed simply represent a broad outline of starting points. Within each is an expandable list of opportunities. The goal is to explore, analyze, test — and always stay flexible and open to creating a hybrid of options. Business is fluid. It is the management of obstacles and change. The best strategic planning anticipates that reality by preparing to make the right choices at the right time.

Cunningham is chief investment officer of the Housing Partnership Equity Trust (HPET), based in Washington, DC. HPET is a social-purpose real estate investment trust that acquires and preserves affordable housing in partnership with leading nonprofit apartment owners. Get to know him here.

The Housing Partnership Equity Trust is a social-purpose REIT that acquires and preserves affordable rental housing. www.hpequitytrust.com