Are You A Billion Dollar Beta Tester?
In certain instances this deviation worked out well and provided differentiation in the market financially, aesthetically, or functionally and led to new insight into the marketplace. When deviations work out it's a beautiful thing. Successful deviations are typically characterized by a concerted effort by the parties involved to conspicuously add value to their project, via better quality, better price, or some mixture of the two. When deviations don't work out it's typically because the parties involved are conspiring to extract value diluting the project to the point of being barely acceptable to the intended market.*
One project was derailed thanks to the mad rush to incorporate the latest in sustainability tracking software. An outside consultant elbowed their way into the project and convinced the developer that they had the best solution on the market. Instead it was vapor ware; unproven, untested, and unwritten programs that the developer was subsidizing to the benefit of the the consultant's other clients. This stalled the project, created conflict within the teams, and didn't yield the tools the developer was hoping for. Considering the size and scope of the project the developer turned out to be a billion dollar beta tester. If the developer really wanted the promised tools they could have trialled them on a much smaller project, a single district of the larger project, or simply let another developer do the beta testing for them.
Another project was instituting a new approvals process in an effort to streamline certain aspects that were otherwise problematic with similar developments. The net effect led to prolonged approvals that would sometimes take six months or more to complete. Potential buyers were frustrated and walked away, builders went rogue and built without design review board approval, and the entire process was undermined. It was a worthy effort addressing real pain points, to be sure, but this deviation contributed to the failure of the project. Part of the problem was the development team didn't have 100% buy-in on the system, another was the lack of available talent at the expected price point, and the final nail in the coffin was stiff competition from a new development that chose to closely follow the principles of traditional neighborhood development and retained top talent for their designs. In truth, much of the talent this new developer tapped had been consultants on the failed development. The difference between success and failure was the new developer heeded the advice of the professionals. The failed developer wasn't a billion dollar beta tester as far as total financial losses, but chose a new direction at the behest of his development manager and become a beta tester nonetheless.
Another beta tester had change thrust upon him and was given the task of attempting to meet the requirements of new rules while satisfying the approvals granted by the old rules. Completely adopting the new rules would require a new entitlement process starting from scratch and the previous process had already consumed a half decade. There are many factors that led to the downfall of his development but the root cause that allowed the other factors time to manifest was the parking requirements which forced the project to be built over a huge garage. The design of the garage was dependent upon the design of the buildings atop the garage, which required considerable effort and expense. The building designs required design review approval from the authority having jurisdiction further prolonging the process. The developer complied, but this process took seven years to go from acquisition through entitlement. That was long enough for the market to change and the economy to tank. The local government forced him to be a billion dollar beta tester with ever more onerous hurdles to jump (for a carbon neutral town, no less!) and led to the project going into receivership. The net result has been the continued march of sprawl along a landscape designated a World Heritage site and the opportunity cost of hundreds of millions of dollars in tax revenue for the local municipality.
Each scenario was different, yet they shared one common trait. They either chose or were compelled to be beta testers of unproven methods and systems. The first project could have tested the system on a smaller project after verifying the software actually existed. The second project could have slowly incorporated the new review method over a period of years transitioning to the new model while holding fast to their design principles. The third case could have built small at first with their existing approvals while designing the new garage on a reduced site to meet the parking requirements for the next phase of development. The key is recognizing the beta test and adjusting to circumstances in a way that doesn't jeopardize the project. There is always a path forward, be sure to look for it before it's too late.
*For those versed in the principles of the Lean Startup Methodology please note the vast chasm of difference that separates a Minimum Viable Product from a Minimum Acceptable Product. The world of real estate development has been relying on the MAP model providing a huge opportunity for those looking to provide what the market actually wants.
