Known Unknowns

Popularised by Donald Rumsfeld, the ‘Johari Window’ categorises risks into known knowns, known unknowns, and unknown unknowns. The latter are often considered to be the most dangerous because there is no account given to them in traditional business planning. Former Blockbuster CEO Jim Keyes is noted as having said that ‘Neither RedBox nor Netflix are even on the radar screen in terms of competition’. We know how that ended, but that was perhaps a case of a known unknown that was simply misjudged. PwC’s recent Real Estate CEO survey paints a divergent picture between the perception of risks in our sector vs the perception of the same risks by the wider world. Only 10% of real estate chiefs are reported to be ‘extremely concerned’ by the speed of technological change compared with 38% among their wider peer group. Similarly, only 7% felt this way about changing consumer behaviour, compared with 26% in the wider group. Why is this? Real estate tends to be insulated from the ‘real world’ in two respects. Firstly, fixed lease structures and long development lead times provide something of a cushion to market change. Secondly, PwC contends that asset-rich, people-light real estate businesses are less exposed to the feedback loop that presents itself to businesses with larger, more diverse workforces, and therefore they might be ‘lulled into the belief that they can safely proceed with business as usual’. Meanwhile, we shouldn’t forget that there are plenty more where Netflix came from.