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Growth strategist Rebecca Homkes delivers insights and ideas for companies navigating a challenging economic landscape. With wit and real-world examples, she challenges leaders to think of uncertainty as a neutral and temporary state – and to guide their companies accordingly.
I Made It Through the Rain: Thriving in economic uncertainty
March 12, 2024 36 Minute Listen
I Made It Through the Rain: Thriving in economic uncertainty
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Unique insights on what matters most today in commercial real estate.
Unique insights on what matters most today in commercial real estate.
Key Takeaways:
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Survive, Reset, Thrive is a playbook for fortifying companies through times of change and challenge.
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Market uncertainty is neither good nor bad. It is a neutral fact to be dealt with.
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Leaders who are willing to think creatively are more likely to emerge from challenges successfully.
Download Transcript
Spencer Levy
Amid the aftershocks of the pandemic, an executive consultant sat down to email her clients and wound up writing a 12-page dissertation. The advice she shared would soon become a 279-page playbook for companies navigating change to come out stronger on the other side. On this episode, the author opens up about her book “Survive, Reset, Thrive” – which is hot off the presses right now – to tell us about her inspired ideas.
Rebecca Homkes
I had this realization. I told them all quite bluntly, like, you can't call yourself an entrepreneur if you can't grow a company through tough times too, right? So here's what we're going to do.
Spencer Levy
That's Rebecca Homkes, a strategist who advises CEOs and executives on innovation and uncertainty. She's also written for the Harvard Business Review, Forbes and other magazines, lectured at business schools in the U.S. and the UK, and more. Now, she shares her sought after perspective on innovation and evolution as a constant, execution with ruthless prioritization and relentless focus, new ways to think about work structure, and insights that borrow from her experience, and observations of financial crises and other colorful case studies -- even Formula 1 racing. Coming up, Rebecca Homkes on embracing change in order to survive, reset and thrive. I'm Spencer Levy, and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take, and this week I'm delighted to be here with Rebecca Homkes. Rebecca is truly one of the great minds in the business industry, and maybe the best public speaker I've ever seen. So Rebecca, rock on and thank you for coming out.
Rebecca Homkes
No thanks Spencer. It's great to be here.
Spencer Levy
So, Rebecca, it's been a long time. Rebecca and I have known each other for probably four plus years, and shockingly, this is the first time we've met in person. We're like Covid friends, but we’re real friends.
Rebecca Homkes
I know. We’re Covid friends, but we've been friends. But now we're taking it into the real world and it's fun.
Spencer Levy
Real world friendships coming from the virtual world. We actually do exist. Well, Rebecca, congratulations on your book “Survive, Reset, Thrive”. I read it and it is fantastic. A business book. Why don’t you tell us a little bit about the book, just what led to the idea of the book, and then we'll get into the details.
Rebecca Homkes
Yeah, absolutely. So “Survive, Reset, Thrive” is about leading breakthrough growth strategy in volatile times, and it's based on work I've been doing for over 15 years with companies that really want to lead a different kind of breakthrough growth journey. So a lot of the meat of it's been doing for years, but really some of the origin of the phrase “survive, reset, thrive” came out of Covid in March 2020. And I'm sure you, like me, remember those weeks where I was having CEO after CEO call me, that second week of March, and the storyline was the same. Why me? Why now? Everything was working so great, like things were going well. We had this strategy, we were executing it, and now I have to deal with crisis. And I had this realization. I told them all quite bluntly, like, you can't call yourself an entrepreneur if you can't grow a company through tough times too, right? So here's what we're going to do. You’ve got to stabilize and then, situations change, so we're going to reset. Then you can go back to being a “thrive” company. And those three simple words hold quite a lot of power in them. And it started providing a playbook from companies as big, you know, as 30, 40, 50 billion to as small as a couple of million. And just those three words allowed them to kind of tell their stakeholders, their employees, their board, here's where we are, and kind of get through the journey.
Spencer Levy
What I found most interesting about the book, and I have a thousand takeaways, but I'll give you one specific one, which is maybe a little counter to what the book is saying. I don't know that there's such a thing as thrive. I think that thrive is is a state of mind that we all think we're in. We all want to get there. But I think the common theme in the book is that change is constant.
Rebecca Homkes
Yes.
Spencer Levy
Is that a fair way to put it?
Rebecca Homkes
Yes. And, you know, a question is often like, do we really need another strategy book? There's 50,000-plus strategy books. Totally get it. But most strategy tools frameworks are about analyzing the situation, building a plan, tracking results, getting results, and they don't factor in change. And we are trying to run organizations, both public and private, in a world and industries that are constantly changing. Your industry is changing at a faster clip than others. But every leader I work with is in industries that change. And how do we think about these traditional tools and frameworks of strategy in a world that's always changing? You know, change is hard, right? Change is hard for individuals. It's harder still for organizations. But if you're willing to embrace that and build change into your strategy rather than as something you need to adjust for, then that's where the power is of getting to thrive.
Spencer Levy
So building change into your strategy. So, there are so many great case studies in this book. I don't even know where to begin, but I'm going to go back before the book and then come back to the case studies in the book. And there are famous case studies of the millionaire who put all his money into buggy whips. That did not work out too well. There's Betamax that they said, oh, we've got a monopoly on home entertainment. That didn't work out so well as well. What these folks thought they had was a monopoly on “thrive”, and they didn't realize that the world was moving beneath their feet. And I don't think the world has ever moved faster beneath our feet in our lifetimes than Covid. I liken it to a meteor hitting the Earth. How do you put it?
Rebecca Homkes
And it comes back to, I'm going to dramatically simplify, but it's the easiest way I can explain it. Growth is a loop, not a line, right? And our brains are framed for us to do linear thinking, right? Make plan, execute plan, get results, live in this wonderful world of getting results, right? And that goes by just why “thrive” is so difficult? Because you're going to have to go through the loop and back to “survive” and “reset”. And a lot of companies don't want to face up to that. They stop assessing the situation and asking that powerful question: what has changed? Instead, they default to only asking the question, you know, are we on track to plan? And if you never ask the question, has the situation changed? It's going to be changing dramatically under you, and you're not going to be ready for it by the time you get back there.
Spencer Levy
Those are, I think, the two biggest takeaways from our interview. At the same time, there's elements of our business that have done fine fundamentally: retail, hotels doing, record levels. But I still can't predict the future. But I'm going to try. So, since most of us are in the future predicting business, if not just formally like me, how do you handle that?
Rebecca Homkes
Yeah, well, the blunt, harsh news Spencer is you can't predict the future. No one can, right? But you can do this. You can get great at making good decisions even though you can't make great predictions. Now that is a skill set and capability that can be built even while prediction can't, right? Making great decisions even though I can't make great predictions. And a lot of that comes down to being really good at articulating your beliefs. So we're seeing lots of trends in the industry. We're seeing interest rates remain kind of higher for longer. Half of the world is voting in an election this year, which is going to have a lot of ramification for your industry. Those are trends. But instead of predicting, I'm saying, what are your beliefs? Articulate those top 3 to 5 beliefs that you have. Make those beliefs clear and testable, but be open to the fact that you got those beliefs wrong, because you're going to make choices based on that, right? If I had a belief at the end of 23, interest rates were going to fall dramatically in 24, which some in your industry did, you start making choices for those. But you need to be heads up and say, I've set these beliefs. I'm making choices. I'm going to be actively testing these beliefs even as I'm executing, and then be willing to take that feedback in and change as you're going. So it's moving from acting on facts, right, to acting on beliefs and then being willing to change and make those micro adaptations. You know, a lot of the power in this is a, being prepared to get some beliefs wrong and change because of it, but always being in that constant, those micro adaptations and adjustments. We fantasize these big growth pivots that organizations make and like to build case studies around them. But the most powerful ones are those companies that are constantly changing and evolving and adapting so constantly you might not even see it. And then they've got a new business model that's emerged because they're being very open to this learning. So you're making decisions based on beliefs, not facts. And you're getting great at making good decisions even though you can't make great predictions.
Spencer Levy
I might frame it differently. I think that some of the greatest business leaders in the world make their decisions with their guts, not their heads.
Rebecca Homkes
Yeah.
Spencer Levy
How do you get a business leader to go with that?
Rebecca Homkes
You know, a lot of times when people make decisions based on gut, yes, they're making decisions based on beliefs. They're just either implicit rather than explicit or poorly articulated, or they're moving at a pace, right, to not bring everyone on speed. And we are all taking some decisions based on beliefs. The power is making them explicit rather than implicit. And you're putting them up because, Spencer, if you don't communicate your beliefs, you just communicate your choices, you don't have permission to change. And this is kind of that hidden, underlying thing why a lot of organizations don't change, even as the world around them changes or doesn't change, when we come back to interest rates. Because they've communicated to their stakeholders and their employees, this is what we're going to do in 2024. Now, those decisions, 2023 planning, were based on their beliefs, but they didn't call out those beliefs first. They just communicate the choices. So then our brain defaults to stay on track to plan, get back on track to plan instead of asking the question maybe there was more than one track, right? Maybe this isn't the right track. So companies who do well communicate their beliefs first, and then the choices because they have now given themself permission to change. Now, I trust gut a lot, but I wouldn't bet the whole company's growth journey on it. What you're trying to do is tease out and say, what are you seeing? How is industry forming? How are customers and competitors acting and shaping differently? What big bets are you making and regulation happening or not happening? Let’s codify and crystallize those top beliefs, because then we can start testing them now.
Spencer Levy
Now, and I have circled here in my notes on your book data versus gut, but there are so many nuances here. So first, you just mentioned, Rebecca, that you don't give yourself permission to change, or many companies don't. But quoting your book, John Maynard Keynes, “When the facts change, I change my mind.”
Rebecca Homkes
Absolutely
Spencer Levy
But do you think…. And facts are constantly changing. That's why the backward looking facts. But I guess I would say that while that's an obvious thing, there's also the broader environment. So I go back to, I hate to quote The Godfather, but I think this kind of comes out of your book: wartime versus peacetime.
Rebecca Homkes
Yes.
Spencer Levy
And you have to have a different approach. How would you describe that?
Rebecca Homkes
Yeah. So, you know, wartime versus peacetime, we actually do romanticize wartime leaders and CEOs, which we could come back to as part of the trap that prevents people from coming to “thrive”. But good “survive” is proactive “survive”. And so when shocks hit an industry like high interest rates, like a big change in regulation, like a global pandemic, like a war like many of our companies in Europe are facing right now, if you have been employing these proactive “survive” strategies, then when shocks come, you have less to do, right? And where most industries default, and I think real estate is the poster child for an industry that defaults to this, is you swing. There are great times and there are bad times, and there's almost nothing in between. If you talk to some leaders. You know, interest rates are low, cash is flowing, regulations favorable, boom. We're all growing. And then all of those things change. We're all suffering and waiting for things to change again. And my point is, markets swing. But your growth plan does not have to. But you can still have a strong growth strategy throughout any of those if you do some of these proactive things.
Spencer Levy
I love that line. The market swings. Your growth strategies don't have to. And I think you've hit our industry's nail on the head because right now, people, we go up, we go down. But, I think the industry in part is designed for that, right? And I'll go one step further. Even though nobody likes feast and famine, there's something healthy about it. What do you think?
Rebecca Homkes
There's something healthy about froth coming out of a market, right? And that's real estate. That's crypto. That's technology. It's going to be AI quite soon, right? But we're still on the upswing of it. There is absolutely something healthy of the froth coming out. And frankly, the great entrepreneurs like that. Because that's when the true strategic insights come through. But if your business can be set up to, if you build a capability, look at it this way, Spencer. If you build a capability to be great at building, and then down scaling in a way that preserves your key differentiators, that's a very powerful strategic capability. I don't see that very often. Instead, I see, things are great, hire like crazy, even if it sometimes means sacrificing quality or some of the talents or some safety aspects. And then when things get bad, furloughs, layoffs stop, even when it means losing great employees and all of that invested knowledge that your company has. That's not something we should be setting up to do. So yeah, build a strategic capability. Absolutely. Because markets, construction and real estate are always going to swing a bit. But my point is you can be a “thrive” company in any industry explicitly and including real estate and construction. But you’ve got to put a different playbook in than everybody else.
Spencer Levy
I'm not sure which corporate leader said… it might have been Jeff Bezos, but it's been some famous corporate leaders…. disrupt yourself.
Rebecca Homkes
Yes.
Spencer Levy
Is that a fair statement?
Rebecca Homkes
Absolutely. Yeah. But it goes back to loops versus lines. If you're willing to embrace that growth as a constant set of loops, you're always cycling through survive, reset, thrive, survive, reset, thrive. Then you're still moving forward. But that's what breakthrough growth comes from. You cannot have breakthrough growth by small incremental changes to your linear growth pathway. You've got to employ these changes, like reset means change. And look Spencer, we are afraid of the word reset. Company leaders hate the word reset. I at least once or twice a week have a CEO, often of companies that you and I know the names of, that say love the book, love this framework. We'd like to do it, but can we use a different word rather than reset? Because reset is going to scare the team, or a reset is going to scare the board. Maybe we'll use words like, you know, relook at or revisit re-glance over and they're trying to kind of rename it. Why? Because we're afraid of change. But if you're not willing to embrace that, if we want to be consistently “thrive”, it means we're going to be consistently changing. And that's just a different mindset that you need to embrace.
Spencer Levy
One of the case studies you use in your book is for Ikea.
Rebecca Homkes
Yes.
Spencer Levy
And I think that for a typical retail experience, going back to, well, I guess the beginning of retail, it's about you, the clerk helping the customer. And the clerk gets the goods for the customer. And that's part of the whole experience. Until Ikea had no choice but to open up the warehouse and let the customers grab their own stuff, because there was some change in law that allowed customers to get a tax break, and Ikea just discovered that customers are perfectly fine grabbing their own stuff off shelves. Tell us about that case study.
Rebecca Homkes
Serendipity and luck still has a role to play in all of this, and I'm never going to say that it doesn't. But some companies are set up to get luckier than others, and what could have been a disaster for another company. We didn't have enough space. So what happened back in the story is, first of all, the furniture industry hated Ikea. They hated them because they were lower cost. They were a different quality. They put more on the customer. And because of some of these reasons, they were forced outside of the major cities, right? They couldn't be in the downturn locations that they wanted because they're almost a cartel of their competitors were pushing them out. And there was a weekend where the tax rules were going to change. But if you got something in before that Sunday night, you wouldn't pay this high VAT on it. So everyone kind of knew this change was coming, but no one had a belief that it would lead to something that much, so they were completely overwhelmed. So when customers came to the store, the few retailers working that day had no choice but to say, we can't help you. There's the warehouse. Go pick up what you want, pack it in your car, and like, we'll charge you then. And on the Monday morning, they were just timid and shaking, Spencer, going in to meet with a big boss about having to apologize for what happened on the weekend and what they made the customers do. But then the big boss said, well, how did the customers react? And they say, well, they actually loved it. They got out of there faster. They enjoyed it. They kind of made it into a game. And he’s like, well, that's what we're going to do now. And there's real power of saying, well, how did it work? What happened? Like, let's embrace this instead of trying to fix it right? The traditional non kind of thrive mindset would be, well, we’ve got to fix this going forward. We got to staff more. We got to plan better. We've got to change the customer end to end pathway. Instead of saying, this might be a new way of doing things.
Spencer Levy
So one of the things about beliefs… It goes to another point you're making in this book. Last week's guest does nothing but modular construction.
Rebecca Homkes
Yes, I heard that episode. Great episode. Yeah.
Spencer Levy
See that? That's one less shameless plug for our producers for the show. Rebecca's already a fan. But last week's episode, our guest is a laser beam focused, modular construction person, and I tried to move him outside his box a little bit, and say well, you know, we have all these buildings that need adaptive reuse. He's like, well, that's not my bag. I am focused on this Lego set and we're going to build it this way. You know who else was like that? My guest from six months ago, Marc Lore. Marc Lore, who, among other things, owns the Minnesota Timberwolves, made billions of dollars selling to Walmart and to Amazon. Now has this product called Wonder, which is a essentially and I'm going to diminish it by saying this, but I'm going to bring it back. It's essentially a ghost kitchen that's not a ghost kitchen because ghost kitchens have fallen out of favor. And what he has done is taking that concept. But rather than putting it into a industrial area, he stuck it right in the middle of a neighborhood. And he controls all of the delivery. All the delivery people work for the company. It's not like Grubhub or any third parties, but he was like a laser beam we talked about his business plan, and I tried to, like, make him veer for a moment. He almost got uncomfortable, just like the guy from modular. So tell us about this. About the only thing you really can control is the single mindedness of your own decisions. And how important is that?
Rebecca Homkes
So important. Ruthless prioritization and relentless focus are certainly key capabilities, and you need them to execute. And my argument is yes and, right, you are heads up to the beliefs you're testing along the way. Because making a better modular construction is the future, or a modular construction will work in these aspects, is based on several beliefs and assumptions. And even as you're executing, you've got to be open to testing those beliefs and assumptions. And we're not saying that the belief is going to be right or wrong sometimes. It's usually much more nuanced, Spencer. It's yes, it's going to work really well in these instances and not those. So that should influence his customer pipeline, and where they're thinking about playing and where they're thinking about not playing. Being relentlessly focused is only a strategic capability if you also have the capability of adaptability. It's that simple. You can be relentlessly and ruthlessly focused, but that's only a true strategic capability if you also have the capability of adaptability.
Spencer Levy
But there are some things, and you bring up several great case studies here with Steve Jobs being one of them. And use this MWB: must-win battle. We can talk about strategy all you want. Tell us what a must-win battle is.
Rebecca Homkes
So the term must-win battle actually originated from some colleagues at IMD and I just repurposed the term. But here's what I found when I got into the strategy execution game a long time ago. We have a lot of words that all mean the same thing, ready? We have strategies, goals, priorities, aims, KPIs, OKRs, targets. I could go on and on and all organizations have these, right? You can tell me later how many of these CBRE has. But if you translate them in the English dictionary, they all translate to most important thing. So if you're working at that company, how do I know among these two dozen competing lists, all of which probably have sub-points, what I'm actually supposed to work on. And then I can't make decisions. If I don't know the true prioritization, I can't make decisions. And so I love the term must-wins or must-win battles because it rises above all of that noise and says this. These are the ones that will truly make the most difference for value creation. Everything else is business as usual or nice to have. That relentless focus with the capability of adaptability. Otherwise, a lot of people are working on a long list of things which they can't relate to other people's long list of things, and then they can't make decisions. And making great decisions is the key differentiator of these companies who can thrive even when there's uncertainty.
Spencer Levy
What was the must-win battle to get this book done?
Rebecca Homkes
So the book started from an article, and the article's origin story is as simple as this. In March and April of 2020, I was having, no exaggeration, a dozen conversations a day that were all saying the same thing. You're first going to “survive”. Here's what we're going to do. Then you're going to reset. Then you can go back to “thrive”. And out of mere frustration, I wrote a 12-page, probably, email, sent it to probably 20, 30 of my top clients, on a Saturday night, mind you, because we were all home, like no one had a life back then. We can argue that we even do now. Sunday morning, almost all of them had replied and said, this is the first helpful thing I've read during all of this. I'm going to share it with my friends. Is that okay? And you don't get that often when you do what I do. You know, we get occasional oh, that was helpful. Great. But that was so reinforcing that that's when I started patching that way. And then my publisher reached out the next year because it had just been circulating and people had renamed it SRT. So SRT came out of the people using it, not myself, and then got the contract, started writing. Writing's hard. Everything about a book is hard. Anyone who tells you easy is lying, right? But I really love just putting it down into a practical playbook. And one of the first comments I got from a colleague who read it was he said, I can hear you talking to me when I read this. And he was trying to steer me to rewrite it so it didn't sound like that. And I said, great. That was exactly the goal that I had. I want you to kind of hear me reading this to you, because I just want you to do this. I'm going to lay out all of the steps. And that was the goal of the book. Just give a first practical, proven, and super pragmatic playbook of how to do something really hard. Consistently lead a growth journey, even when the world around us is changing.
Spencer Levy
You mentioned this early in the conversation. There's a lot of strategy books out there. I've read a lot of them. What do you think differentiates your ideas from others?
Rebecca Homkes
Well, there's lots of great books out there. The key differentiator here is that most books give you one piece of the playbook: how to recession proof, how to set a strategy, or how to be a high performing organization. And then as a leader, when a situation changes, you're stuck because you don't know among all these competing things, what should you do? So I wanted to put it together in one, end to end, that will take you through anything the market throws. And the second is, embrace the notion of a loop, not a line. This is not a linear pathway. It's not. So I'm not going to lay it out like it is. It's saying, I need you to embrace the notion you're constantly going to cycle through these three steps, including the frustrating notion of being in “thrive” and having to go back to “survive”. But I talk you through how to handle the emotional energy of that as well.
Spencer Levy
So the emotional energy, again, so much of what we try to do in the business world that we're taught to be in is not emotional. I disagree with that, by the way. And the reason I disagree with that is that both you and I, in addition to our day jobs, we're both professional speakers. And when I speak publicly, I emote. And the reason I emote, I use emotion as a means of persuasion.
Rebecca Homkes
Yes.
Spencer Levy
What I don't do is I don't use emotion as a means of fear. I try to use positive emotion. But even if I have fear before I get on stage, I use that as a means to channel it. Is that a good way to put it? To use emotion as a way to persuade? Or is it deeper than that?
Rebecca Homkes
You can't remove emotion from organizational decisions because that's removing the people. And we can go down the AI rabbit hole, but there are still people inside these, right? You know, we talk about there's no B2B or B2C, it's all like P2P, person to person. And to ignore the emotional drain that a downturn or a "survive” mode takes, to ignore the emotional uncertainty that going through a “reset” takes, or to ignore the emotional, almost trepidation when you're in “thrive” phase of how long it will last, is to limit yourself from doing what you need to do in any of those phases. And more companies should be heads up to the notion that there is a different emotional energy that all of these steps require, and then you can start preparing for that.
Spencer Levy
So much of what was debatable during the Covid crisis was trying to be boiled down to a cost benefit analysis, but ultimately, I think a lot of decisions were just based emotionally on fear. I'm not asking you to rewrite the playbook on how we handle Covid, but I think it's a terrific example of how sometimes emotion overcame what might have been a more clinical cost benefit analysis. Or is that the way all decisions are made?
Rebecca Homkes
Yeah, Covid is a great example of how terrible we are at framing uncertainty, Spencer, right? Is that all of us as organizational leaders, we saw Covid, we saw extreme uncertainty, and we immediately downshifted to recession playbook, cut staff, cut cost, hunker down, small micro metrics. And for many industries, Covid presented extreme opportunities. But leaders weren't looking for them because they were putting their recession proofing mode in place, right? And that's why my big push is we've got to reframe uncertainty as something that is going to be bad, that has to be managed through, that has to be overcome, to a series of events that may or may not occur. And whether or not those future events are good or bad depends on what you're trying to do and how you're set up. And that's why I don't even use the word recession proofing. I don't like to use the R word, as I say, because there is a growth opportunity in any market if you are willing to put a different playbook in place.
Spencer Levy
Most events don't get into the same ballpark as Covid, right? But sometimes they do. And one of the events you talk about in the book was the Japanese Tokyo Electric Company, and it didn't plan appropriately for the catastrophe of the tsunami. But now I'm gonna bring up an area that's controversial, but I think it's increasingly getting more acceptance. And there was an article about Canada doing this this morning, which is just nuclear power itself. Right? Which is one of those areas that there's a cost benefit analysis if done right, it has no emissions. It's been on nuclear submarines in America for 70 years, never had an accident. But people are so emotional about the topic that they are just… it's like the third rail. And so we have one side, the Tokyo Electric, that underestimated the risk and they had catastrophic implications. And then maybe you have a group of people that are overestimating the risk, which also has implications, because we don't have enough clean power. How do you look at that situation?
Rebecca Homkes
We spend an incredibly disproportionate amount of time protecting for downside risk, right, then preparing for kind of future opportunity and capability building. And you know, nuclear is an example, as are so many things around the ESG space. What I like to say to make it simple, because this is a tough topic, all of these are, is stop asking the question, what could happen? Because when you ask the question, what could happen, our brains immediately go to the risks. Instead ask the questions, what could make us? What could break us? What are those small tail events that could really set ourselves up for opportunity? What are those small they could kind of break us. I call them kickers and killers. And once you identify the kickers and killers and say, how do we need to set up to take advantage of these kickers? What will we need to do to prepare against these killers? And what you find, Spencer, in every industry is a couple of things. One, you can prepare against most of the killers, right? You don't need to stop exploring. You can prepare. Second, we are terrible at identifying kickers and then being prepared to seize them. I did this not too long ago with a big retail company, and when they identified their list of what they would call a kicker, eight out of the ten were what we would call we could just do it, like it was a quick win. Like something that they brainstormed. Okay, like, what are these like small possible upside opportunities. Oh we can actually just go do that right now. Right? Because we don't give ourselves the brain, that permission. So switch the question from what could happen to what could make us? What could break us?
Spencer Levy
So this gets to things outside of our control.
Rebecca Homkes
Yes, most, most things.
Spencer Levy
Most things are out of control. There are two things that are in our… two, there's a hundred things within our control. One that we have already dug deep into is the single minded focus on your ideas and then implementing. The other is organizational structure.
Rebecca Homkes
Yes.
Spencer Levy
Are there any tips you can give organizationally? And being selfish, this is a real estate show, in the real estate business, how we can better organize ourselves so that we can be resilient in the way you're suggesting in your book?
Rebecca Homkes
Yeah, absolutely. Is that when things become slow or complex or hard, we often default to blaming bureaucracy or process. Right? Now, in many of the things in this growth playbook are, I never like to say easy, but are easier in some ways if you're in a more entrepreneurial organization. But, this is a big but. We're blaming, often, the wrong culprit. One of the bigger things holding back, and this is a big issue in the real estate industry, and I won't name names, is lack of clarity of decision making rights. It's often not bureaucracy or process or the org structure. It's that we haven't been clear on where critical decisions take place. So we've got a team member out in the market, they’re talking to a key customer. There's little things, you know, like a change order. There's big things, like really shifting something. That team member doesn't know whether or not he or she can make the decision. So they ask their boss, and their boss has to ask their boss, and well, that has to go on the weekly kind of executive team meeting. But the agenda this week is full, so it's going to go on the next one. By the time we get back to the customer, it's too late, because that team member doesn't know where do I route this decision in the organization? So codifying decision making rights can allow you to move with the speed and agility and adaptability of the smallest organization, even when you're thousands and thousands of employees. It's where do critical decisions take place? And I'll give you my favorite example. I'll go outside of real estate. This is my favorite example of this: it’s Formula 1. Now your industry changes quickly I know, but Formula 1 things change really quickly, right? So decision making speed, big competitive advantage. So one of the teams did is they codify decision making rights by the physical location of the car. So if the car was in the factory, the head of operations. The car was in transit, the head of the race team. The car’s in the garage, the head of race engineering. The car’s on the track, the head of race strategy. Which meant this, Spencer. As the car would be like leaving the garage onto the pit lane, decision making rights have just transferred from the head of race engineering to the head of race strategy. So when something goes wrong, and it's Formula 1, so it always will, we don't fumble around, we don't call a meeting, we don't even pause. We look exactly to the individual who owns decision making rights in that instance and he or she says what we're going to do or the help that we need, and that's the power. So I urge every organization, don't blame bureaucracy, don't blame structure. We might need to change the structure. We'll come back to that. But first, what are those 4 or 5 repeatable critical strategy decisions? Who owns them and is that in the right place? Doing that will allow for this agility regardless of the org structure.
Spencer Levy
Well, Formula 1 is clearly going through changes faster than anybody. I was reading an article yesterday about self-driving Formula 1 cars. Imagine a world with all these famous drivers. We've got no drivers. And, you know, I believe, I guess we're talking about beliefs here, right? And mathematically, I'm certain that the sun rises in the east and we'd all be better off of every car on the road we're self driving. But I'm also certain that the minute a self-driving car has an accident and somebody gets hurt, which has already happened, it's going to be killed. We're making irrational decisions emotionally. I want to go to the number one or two issue in the real estate industry. The problems are interest rates, which you already talked about. The other one is the future of office. The office market is regrettably, for everything below the top tier offices and the best submarkets, extremely challenged. Probably the most challenged most people have seen in their careers. If I were the CEO of a big office company that owned anything but the top tier, what do you tell me?
Rebecca Homkes
Yes. And one of the things that I'm seeing, maybe a little bit less but I certainly saw in 21, 22 into 23 was this notion of it's going to return. And let's just wait till it gets back to normal. We don't use that phrase as much as we used to. But you're seeing this. I'm still building and preparing and planning as things are going to return. But return to what? And you've got to lose, as hard as it is, the notion that things will return to anything that you might know. And dropping that, while difficult, will free your brain to think about what you actually need to be doing in this space. Look, office needs a fundamental reset, right? I mean, the entire playbook we could rewrite, just, maybe that's your next book, Spencer. It’s just rewriting the reset for your industry. You know, what are your beliefs on the future of the office? What are your beliefs and who wants to come in, and why, and what space they want when they do and where it should be located? Bigger, smaller, fragmented, not, a couple times a year. Really articulate your beliefs and then think, what would I do because of that? And what's holding this back is sunk cost fallacy, right? And sunk cost, as you know Spencer….
Spencer Levy
Back up. Sunk cost fallacy. Explain what that is.
Rebecca Homkes
Yes. You know sunk costs are very simple definition: sunk costs are time or money spent in the past that no future action can get back. And so in meetings you will hear things like, well, we've got to keep working on this project, we've already invested $5 million or we need to keep working on this partnership, we've already invested six months of meetings. Like by definition, that time is sunk. And that's what I'm seeing in office right now. So the question should never be how much time or money have we spent? The question is based on our beliefs today, would we do this and why? And if the answer is no, or even maybe, pause and reassess. Start looking for repurposing and partnering opportunities now. Now sunk costs are emotional, going back to emotions underlies all of this, because we value our time and money, and when it's spent, we want to get something out of it. But you've got to be willing to drop that and say that is gone. Nothing I do in the future can get it back. So what should I be doing today based on my beliefs? So there are some pretty big mind shifts that need to happen for those leaders who are not sitting on one of those top grade, very sustainable, you know, great location buildings. A, except it's not returning to anything that you might recognize. B, watch out for sunk cost fallacy. And C, set a new set of beliefs and be prepared to build a new business based on those.
Spencer Levy
Well the sunk cost fallacy I think sums it up. It sounds harsh, but it's true. We can't go back now. I can debate the nuances of office.
Rebecca Homkes
And where we should squeeze out the ROI versus not. You can get into more nuance, but you've got to fundamentally accept that first, or you can't even have those more nuanced discussions.
Spencer Levy
So we've been speaking for a while, Rebecca. I could speak to you for days, hours, in fact, we've been speaking for years. What our listeners don't know is that Rebecca and I have probably been on, I don't know, half a dozen podcasts or shows together where Rebecca is the interviewer and I'm the interviewee.
Rebecca Homkes
I know. You've been waiting for this opportunity.
Spencer Levy
I’ve been waiting for this day…
Rebecca Homkes
For years. Yes, yes.
Spencer Levy
… to turn the tables on Rebecca and wow, what a great job Rebecca did today. What did we miss? What is the final message of your book that we can tell our listeners?
Rebecca Homkes
Yeah, I think the final message we've hit on, but I want to come back to the reframe. We are framed, and not due to fault, we are framed to see uncertainty as bad. And you're going to hear it in conversations now that you're looking for it. We talk about how are we going to manage uncertainty, get through uncertainty, wait through uncertainty and reframe right now, right? Uncertainty is a series of future events which may or may not occur. Whether or not those events are good or bad depends on what we're trying to do and how we're set up. Our job as organizational leaders is that. Figure out what we're trying to do and then set the organization up to succeed, regardless of what that future might be.
Spencer Levy
Well, I can't thank enough my good friend Rebecca Homkes for coming out here today, talking about her new book “Survive, Reset, Thrive” which was just published a couple of weeks ago, which I encourage all of you to pick up. She's a great friend and one of the truly great minds in management consulting in our entire business. So, Rebecca, thank you.
Rebecca Homkes
Thanks, Spencer. It was my pleasure.
Spencer Levy
For more, please visit our website CBRE.com/TheWeeklyTake. With our own relentless focus, to borrow a phrase from our guest, we're working on the must-win battle to bring you the best real estate podcast on the air. We hope you'll join us on that mission in the weeks to come, and that you'll help others find the show by sharing this episode and leaving a review on Apple Podcasts, Spotify, or your podcasting platform of choice. We'll be back next week with an episode on student housing, a residential asset type that's getting high marks right now. So join us for that and more. Thanks for tuning in. I'm Spencer Levy. Be smart. Be safe. Be well.
Spencer Levy
Amid the aftershocks of the pandemic, an executive consultant sat down to email her clients and wound up writing a 12-page dissertation. The advice she shared would soon become a 279-page playbook for companies navigating change to come out stronger on the other side. On this episode, the author opens up about her book “Survive, Reset, Thrive” – which is hot off the presses right now – to tell us about her inspired ideas.
Rebecca Homkes
I had this realization. I told them all quite bluntly, like, you can't call yourself an entrepreneur if you can't grow a company through tough times too, right? So here's what we're going to do.
Spencer Levy
That's Rebecca Homkes, a strategist who advises CEOs and executives on innovation and uncertainty. She's also written for the Harvard Business Review, Forbes and other magazines, lectured at business schools in the U.S. and the UK, and more. Now, she shares her sought after perspective on innovation and evolution as a constant, execution with ruthless prioritization and relentless focus, new ways to think about work structure, and insights that borrow from her experience, and observations of financial crises and other colorful case studies -- even Formula 1 racing. Coming up, Rebecca Homkes on embracing change in order to survive, reset and thrive. I'm Spencer Levy, and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take, and this week I'm delighted to be here with Rebecca Homkes. Rebecca is truly one of the great minds in the business industry, and maybe the best public speaker I've ever seen. So Rebecca, rock on and thank you for coming out.
Rebecca Homkes
No thanks Spencer. It's great to be here.
Spencer Levy
So, Rebecca, it's been a long time. Rebecca and I have known each other for probably four plus years, and shockingly, this is the first time we've met in person. We're like Covid friends, but we’re real friends.
Rebecca Homkes
I know. We’re Covid friends, but we've been friends. But now we're taking it into the real world and it's fun.
Spencer Levy
Real world friendships coming from the virtual world. We actually do exist. Well, Rebecca, congratulations on your book “Survive, Reset, Thrive”. I read it and it is fantastic. A business book. Why don’t you tell us a little bit about the book, just what led to the idea of the book, and then we'll get into the details.
Rebecca Homkes
Yeah, absolutely. So “Survive, Reset, Thrive” is about leading breakthrough growth strategy in volatile times, and it's based on work I've been doing for over 15 years with companies that really want to lead a different kind of breakthrough growth journey. So a lot of the meat of it's been doing for years, but really some of the origin of the phrase “survive, reset, thrive” came out of Covid in March 2020. And I'm sure you, like me, remember those weeks where I was having CEO after CEO call me, that second week of March, and the storyline was the same. Why me? Why now? Everything was working so great, like things were going well. We had this strategy, we were executing it, and now I have to deal with crisis. And I had this realization. I told them all quite bluntly, like, you can't call yourself an entrepreneur if you can't grow a company through tough times too, right? So here's what we're going to do. You’ve got to stabilize and then, situations change, so we're going to reset. Then you can go back to being a “thrive” company. And those three simple words hold quite a lot of power in them. And it started providing a playbook from companies as big, you know, as 30, 40, 50 billion to as small as a couple of million. And just those three words allowed them to kind of tell their stakeholders, their employees, their board, here's where we are, and kind of get through the journey.
Spencer Levy
What I found most interesting about the book, and I have a thousand takeaways, but I'll give you one specific one, which is maybe a little counter to what the book is saying. I don't know that there's such a thing as thrive. I think that thrive is is a state of mind that we all think we're in. We all want to get there. But I think the common theme in the book is that change is constant.
Rebecca Homkes
Yes.
Spencer Levy
Is that a fair way to put it?
Rebecca Homkes
Yes. And, you know, a question is often like, do we really need another strategy book? There's 50,000-plus strategy books. Totally get it. But most strategy tools frameworks are about analyzing the situation, building a plan, tracking results, getting results, and they don't factor in change. And we are trying to run organizations, both public and private, in a world and industries that are constantly changing. Your industry is changing at a faster clip than others. But every leader I work with is in industries that change. And how do we think about these traditional tools and frameworks of strategy in a world that's always changing? You know, change is hard, right? Change is hard for individuals. It's harder still for organizations. But if you're willing to embrace that and build change into your strategy rather than as something you need to adjust for, then that's where the power is of getting to thrive.
Spencer Levy
So building change into your strategy. So, there are so many great case studies in this book. I don't even know where to begin, but I'm going to go back before the book and then come back to the case studies in the book. And there are famous case studies of the millionaire who put all his money into buggy whips. That did not work out too well. There's Betamax that they said, oh, we've got a monopoly on home entertainment. That didn't work out so well as well. What these folks thought they had was a monopoly on “thrive”, and they didn't realize that the world was moving beneath their feet. And I don't think the world has ever moved faster beneath our feet in our lifetimes than Covid. I liken it to a meteor hitting the Earth. How do you put it?
Rebecca Homkes
And it comes back to, I'm going to dramatically simplify, but it's the easiest way I can explain it. Growth is a loop, not a line, right? And our brains are framed for us to do linear thinking, right? Make plan, execute plan, get results, live in this wonderful world of getting results, right? And that goes by just why “thrive” is so difficult? Because you're going to have to go through the loop and back to “survive” and “reset”. And a lot of companies don't want to face up to that. They stop assessing the situation and asking that powerful question: what has changed? Instead, they default to only asking the question, you know, are we on track to plan? And if you never ask the question, has the situation changed? It's going to be changing dramatically under you, and you're not going to be ready for it by the time you get back there.
Spencer Levy
Those are, I think, the two biggest takeaways from our interview. At the same time, there's elements of our business that have done fine fundamentally: retail, hotels doing, record levels. But I still can't predict the future. But I'm going to try. So, since most of us are in the future predicting business, if not just formally like me, how do you handle that?
Rebecca Homkes
Yeah, well, the blunt, harsh news Spencer is you can't predict the future. No one can, right? But you can do this. You can get great at making good decisions even though you can't make great predictions. Now that is a skill set and capability that can be built even while prediction can't, right? Making great decisions even though I can't make great predictions. And a lot of that comes down to being really good at articulating your beliefs. So we're seeing lots of trends in the industry. We're seeing interest rates remain kind of higher for longer. Half of the world is voting in an election this year, which is going to have a lot of ramification for your industry. Those are trends. But instead of predicting, I'm saying, what are your beliefs? Articulate those top 3 to 5 beliefs that you have. Make those beliefs clear and testable, but be open to the fact that you got those beliefs wrong, because you're going to make choices based on that, right? If I had a belief at the end of 23, interest rates were going to fall dramatically in 24, which some in your industry did, you start making choices for those. But you need to be heads up and say, I've set these beliefs. I'm making choices. I'm going to be actively testing these beliefs even as I'm executing, and then be willing to take that feedback in and change as you're going. So it's moving from acting on facts, right, to acting on beliefs and then being willing to change and make those micro adaptations. You know, a lot of the power in this is a, being prepared to get some beliefs wrong and change because of it, but always being in that constant, those micro adaptations and adjustments. We fantasize these big growth pivots that organizations make and like to build case studies around them. But the most powerful ones are those companies that are constantly changing and evolving and adapting so constantly you might not even see it. And then they've got a new business model that's emerged because they're being very open to this learning. So you're making decisions based on beliefs, not facts. And you're getting great at making good decisions even though you can't make great predictions.
Spencer Levy
I might frame it differently. I think that some of the greatest business leaders in the world make their decisions with their guts, not their heads.
Rebecca Homkes
Yeah.
Spencer Levy
How do you get a business leader to go with that?
Rebecca Homkes
You know, a lot of times when people make decisions based on gut, yes, they're making decisions based on beliefs. They're just either implicit rather than explicit or poorly articulated, or they're moving at a pace, right, to not bring everyone on speed. And we are all taking some decisions based on beliefs. The power is making them explicit rather than implicit. And you're putting them up because, Spencer, if you don't communicate your beliefs, you just communicate your choices, you don't have permission to change. And this is kind of that hidden, underlying thing why a lot of organizations don't change, even as the world around them changes or doesn't change, when we come back to interest rates. Because they've communicated to their stakeholders and their employees, this is what we're going to do in 2024. Now, those decisions, 2023 planning, were based on their beliefs, but they didn't call out those beliefs first. They just communicate the choices. So then our brain defaults to stay on track to plan, get back on track to plan instead of asking the question maybe there was more than one track, right? Maybe this isn't the right track. So companies who do well communicate their beliefs first, and then the choices because they have now given themself permission to change. Now, I trust gut a lot, but I wouldn't bet the whole company's growth journey on it. What you're trying to do is tease out and say, what are you seeing? How is industry forming? How are customers and competitors acting and shaping differently? What big bets are you making and regulation happening or not happening? Let’s codify and crystallize those top beliefs, because then we can start testing them now.
Spencer Levy
Now, and I have circled here in my notes on your book data versus gut, but there are so many nuances here. So first, you just mentioned, Rebecca, that you don't give yourself permission to change, or many companies don't. But quoting your book, John Maynard Keynes, “When the facts change, I change my mind.”
Rebecca Homkes
Absolutely
Spencer Levy
But do you think…. And facts are constantly changing. That's why the backward looking facts. But I guess I would say that while that's an obvious thing, there's also the broader environment. So I go back to, I hate to quote The Godfather, but I think this kind of comes out of your book: wartime versus peacetime.
Rebecca Homkes
Yes.
Spencer Levy
And you have to have a different approach. How would you describe that?
Rebecca Homkes
Yeah. So, you know, wartime versus peacetime, we actually do romanticize wartime leaders and CEOs, which we could come back to as part of the trap that prevents people from coming to “thrive”. But good “survive” is proactive “survive”. And so when shocks hit an industry like high interest rates, like a big change in regulation, like a global pandemic, like a war like many of our companies in Europe are facing right now, if you have been employing these proactive “survive” strategies, then when shocks come, you have less to do, right? And where most industries default, and I think real estate is the poster child for an industry that defaults to this, is you swing. There are great times and there are bad times, and there's almost nothing in between. If you talk to some leaders. You know, interest rates are low, cash is flowing, regulations favorable, boom. We're all growing. And then all of those things change. We're all suffering and waiting for things to change again. And my point is, markets swing. But your growth plan does not have to. But you can still have a strong growth strategy throughout any of those if you do some of these proactive things.
Spencer Levy
I love that line. The market swings. Your growth strategies don't have to. And I think you've hit our industry's nail on the head because right now, people, we go up, we go down. But, I think the industry in part is designed for that, right? And I'll go one step further. Even though nobody likes feast and famine, there's something healthy about it. What do you think?
Rebecca Homkes
There's something healthy about froth coming out of a market, right? And that's real estate. That's crypto. That's technology. It's going to be AI quite soon, right? But we're still on the upswing of it. There is absolutely something healthy of the froth coming out. And frankly, the great entrepreneurs like that. Because that's when the true strategic insights come through. But if your business can be set up to, if you build a capability, look at it this way, Spencer. If you build a capability to be great at building, and then down scaling in a way that preserves your key differentiators, that's a very powerful strategic capability. I don't see that very often. Instead, I see, things are great, hire like crazy, even if it sometimes means sacrificing quality or some of the talents or some safety aspects. And then when things get bad, furloughs, layoffs stop, even when it means losing great employees and all of that invested knowledge that your company has. That's not something we should be setting up to do. So yeah, build a strategic capability. Absolutely. Because markets, construction and real estate are always going to swing a bit. But my point is you can be a “thrive” company in any industry explicitly and including real estate and construction. But you’ve got to put a different playbook in than everybody else.
Spencer Levy
I'm not sure which corporate leader said… it might have been Jeff Bezos, but it's been some famous corporate leaders…. disrupt yourself.
Rebecca Homkes
Yes.
Spencer Levy
Is that a fair statement?
Rebecca Homkes
Absolutely. Yeah. But it goes back to loops versus lines. If you're willing to embrace that growth as a constant set of loops, you're always cycling through survive, reset, thrive, survive, reset, thrive. Then you're still moving forward. But that's what breakthrough growth comes from. You cannot have breakthrough growth by small incremental changes to your linear growth pathway. You've got to employ these changes, like reset means change. And look Spencer, we are afraid of the word reset. Company leaders hate the word reset. I at least once or twice a week have a CEO, often of companies that you and I know the names of, that say love the book, love this framework. We'd like to do it, but can we use a different word rather than reset? Because reset is going to scare the team, or a reset is going to scare the board. Maybe we'll use words like, you know, relook at or revisit re-glance over and they're trying to kind of rename it. Why? Because we're afraid of change. But if you're not willing to embrace that, if we want to be consistently “thrive”, it means we're going to be consistently changing. And that's just a different mindset that you need to embrace.
Spencer Levy
One of the case studies you use in your book is for Ikea.
Rebecca Homkes
Yes.
Spencer Levy
And I think that for a typical retail experience, going back to, well, I guess the beginning of retail, it's about you, the clerk helping the customer. And the clerk gets the goods for the customer. And that's part of the whole experience. Until Ikea had no choice but to open up the warehouse and let the customers grab their own stuff, because there was some change in law that allowed customers to get a tax break, and Ikea just discovered that customers are perfectly fine grabbing their own stuff off shelves. Tell us about that case study.
Rebecca Homkes
Serendipity and luck still has a role to play in all of this, and I'm never going to say that it doesn't. But some companies are set up to get luckier than others, and what could have been a disaster for another company. We didn't have enough space. So what happened back in the story is, first of all, the furniture industry hated Ikea. They hated them because they were lower cost. They were a different quality. They put more on the customer. And because of some of these reasons, they were forced outside of the major cities, right? They couldn't be in the downturn locations that they wanted because they're almost a cartel of their competitors were pushing them out. And there was a weekend where the tax rules were going to change. But if you got something in before that Sunday night, you wouldn't pay this high VAT on it. So everyone kind of knew this change was coming, but no one had a belief that it would lead to something that much, so they were completely overwhelmed. So when customers came to the store, the few retailers working that day had no choice but to say, we can't help you. There's the warehouse. Go pick up what you want, pack it in your car, and like, we'll charge you then. And on the Monday morning, they were just timid and shaking, Spencer, going in to meet with a big boss about having to apologize for what happened on the weekend and what they made the customers do. But then the big boss said, well, how did the customers react? And they say, well, they actually loved it. They got out of there faster. They enjoyed it. They kind of made it into a game. And he’s like, well, that's what we're going to do now. And there's real power of saying, well, how did it work? What happened? Like, let's embrace this instead of trying to fix it right? The traditional non kind of thrive mindset would be, well, we’ve got to fix this going forward. We got to staff more. We got to plan better. We've got to change the customer end to end pathway. Instead of saying, this might be a new way of doing things.
Spencer Levy
So one of the things about beliefs… It goes to another point you're making in this book. Last week's guest does nothing but modular construction.
Rebecca Homkes
Yes, I heard that episode. Great episode. Yeah.
Spencer Levy
See that? That's one less shameless plug for our producers for the show. Rebecca's already a fan. But last week's episode, our guest is a laser beam focused, modular construction person, and I tried to move him outside his box a little bit, and say well, you know, we have all these buildings that need adaptive reuse. He's like, well, that's not my bag. I am focused on this Lego set and we're going to build it this way. You know who else was like that? My guest from six months ago, Marc Lore. Marc Lore, who, among other things, owns the Minnesota Timberwolves, made billions of dollars selling to Walmart and to Amazon. Now has this product called Wonder, which is a essentially and I'm going to diminish it by saying this, but I'm going to bring it back. It's essentially a ghost kitchen that's not a ghost kitchen because ghost kitchens have fallen out of favor. And what he has done is taking that concept. But rather than putting it into a industrial area, he stuck it right in the middle of a neighborhood. And he controls all of the delivery. All the delivery people work for the company. It's not like Grubhub or any third parties, but he was like a laser beam we talked about his business plan, and I tried to, like, make him veer for a moment. He almost got uncomfortable, just like the guy from modular. So tell us about this. About the only thing you really can control is the single mindedness of your own decisions. And how important is that?
Rebecca Homkes
So important. Ruthless prioritization and relentless focus are certainly key capabilities, and you need them to execute. And my argument is yes and, right, you are heads up to the beliefs you're testing along the way. Because making a better modular construction is the future, or a modular construction will work in these aspects, is based on several beliefs and assumptions. And even as you're executing, you've got to be open to testing those beliefs and assumptions. And we're not saying that the belief is going to be right or wrong sometimes. It's usually much more nuanced, Spencer. It's yes, it's going to work really well in these instances and not those. So that should influence his customer pipeline, and where they're thinking about playing and where they're thinking about not playing. Being relentlessly focused is only a strategic capability if you also have the capability of adaptability. It's that simple. You can be relentlessly and ruthlessly focused, but that's only a true strategic capability if you also have the capability of adaptability.
Spencer Levy
But there are some things, and you bring up several great case studies here with Steve Jobs being one of them. And use this MWB: must-win battle. We can talk about strategy all you want. Tell us what a must-win battle is.
Rebecca Homkes
So the term must-win battle actually originated from some colleagues at IMD and I just repurposed the term. But here's what I found when I got into the strategy execution game a long time ago. We have a lot of words that all mean the same thing, ready? We have strategies, goals, priorities, aims, KPIs, OKRs, targets. I could go on and on and all organizations have these, right? You can tell me later how many of these CBRE has. But if you translate them in the English dictionary, they all translate to most important thing. So if you're working at that company, how do I know among these two dozen competing lists, all of which probably have sub-points, what I'm actually supposed to work on. And then I can't make decisions. If I don't know the true prioritization, I can't make decisions. And so I love the term must-wins or must-win battles because it rises above all of that noise and says this. These are the ones that will truly make the most difference for value creation. Everything else is business as usual or nice to have. That relentless focus with the capability of adaptability. Otherwise, a lot of people are working on a long list of things which they can't relate to other people's long list of things, and then they can't make decisions. And making great decisions is the key differentiator of these companies who can thrive even when there's uncertainty.
Spencer Levy
What was the must-win battle to get this book done?
Rebecca Homkes
So the book started from an article, and the article's origin story is as simple as this. In March and April of 2020, I was having, no exaggeration, a dozen conversations a day that were all saying the same thing. You're first going to “survive”. Here's what we're going to do. Then you're going to reset. Then you can go back to “thrive”. And out of mere frustration, I wrote a 12-page, probably, email, sent it to probably 20, 30 of my top clients, on a Saturday night, mind you, because we were all home, like no one had a life back then. We can argue that we even do now. Sunday morning, almost all of them had replied and said, this is the first helpful thing I've read during all of this. I'm going to share it with my friends. Is that okay? And you don't get that often when you do what I do. You know, we get occasional oh, that was helpful. Great. But that was so reinforcing that that's when I started patching that way. And then my publisher reached out the next year because it had just been circulating and people had renamed it SRT. So SRT came out of the people using it, not myself, and then got the contract, started writing. Writing's hard. Everything about a book is hard. Anyone who tells you easy is lying, right? But I really love just putting it down into a practical playbook. And one of the first comments I got from a colleague who read it was he said, I can hear you talking to me when I read this. And he was trying to steer me to rewrite it so it didn't sound like that. And I said, great. That was exactly the goal that I had. I want you to kind of hear me reading this to you, because I just want you to do this. I'm going to lay out all of the steps. And that was the goal of the book. Just give a first practical, proven, and super pragmatic playbook of how to do something really hard. Consistently lead a growth journey, even when the world around us is changing.
Spencer Levy
You mentioned this early in the conversation. There's a lot of strategy books out there. I've read a lot of them. What do you think differentiates your ideas from others?
Rebecca Homkes
Well, there's lots of great books out there. The key differentiator here is that most books give you one piece of the playbook: how to recession proof, how to set a strategy, or how to be a high performing organization. And then as a leader, when a situation changes, you're stuck because you don't know among all these competing things, what should you do? So I wanted to put it together in one, end to end, that will take you through anything the market throws. And the second is, embrace the notion of a loop, not a line. This is not a linear pathway. It's not. So I'm not going to lay it out like it is. It's saying, I need you to embrace the notion you're constantly going to cycle through these three steps, including the frustrating notion of being in “thrive” and having to go back to “survive”. But I talk you through how to handle the emotional energy of that as well.
Spencer Levy
So the emotional energy, again, so much of what we try to do in the business world that we're taught to be in is not emotional. I disagree with that, by the way. And the reason I disagree with that is that both you and I, in addition to our day jobs, we're both professional speakers. And when I speak publicly, I emote. And the reason I emote, I use emotion as a means of persuasion.
Rebecca Homkes
Yes.
Spencer Levy
What I don't do is I don't use emotion as a means of fear. I try to use positive emotion. But even if I have fear before I get on stage, I use that as a means to channel it. Is that a good way to put it? To use emotion as a way to persuade? Or is it deeper than that?
Rebecca Homkes
You can't remove emotion from organizational decisions because that's removing the people. And we can go down the AI rabbit hole, but there are still people inside these, right? You know, we talk about there's no B2B or B2C, it's all like P2P, person to person. And to ignore the emotional drain that a downturn or a "survive” mode takes, to ignore the emotional uncertainty that going through a “reset” takes, or to ignore the emotional, almost trepidation when you're in “thrive” phase of how long it will last, is to limit yourself from doing what you need to do in any of those phases. And more companies should be heads up to the notion that there is a different emotional energy that all of these steps require, and then you can start preparing for that.
Spencer Levy
So much of what was debatable during the Covid crisis was trying to be boiled down to a cost benefit analysis, but ultimately, I think a lot of decisions were just based emotionally on fear. I'm not asking you to rewrite the playbook on how we handle Covid, but I think it's a terrific example of how sometimes emotion overcame what might have been a more clinical cost benefit analysis. Or is that the way all decisions are made?
Rebecca Homkes
Yeah, Covid is a great example of how terrible we are at framing uncertainty, Spencer, right? Is that all of us as organizational leaders, we saw Covid, we saw extreme uncertainty, and we immediately downshifted to recession playbook, cut staff, cut cost, hunker down, small micro metrics. And for many industries, Covid presented extreme opportunities. But leaders weren't looking for them because they were putting their recession proofing mode in place, right? And that's why my big push is we've got to reframe uncertainty as something that is going to be bad, that has to be managed through, that has to be overcome, to a series of events that may or may not occur. And whether or not those future events are good or bad depends on what you're trying to do and how you're set up. And that's why I don't even use the word recession proofing. I don't like to use the R word, as I say, because there is a growth opportunity in any market if you are willing to put a different playbook in place.
Spencer Levy
Most events don't get into the same ballpark as Covid, right? But sometimes they do. And one of the events you talk about in the book was the Japanese Tokyo Electric Company, and it didn't plan appropriately for the catastrophe of the tsunami. But now I'm gonna bring up an area that's controversial, but I think it's increasingly getting more acceptance. And there was an article about Canada doing this this morning, which is just nuclear power itself. Right? Which is one of those areas that there's a cost benefit analysis if done right, it has no emissions. It's been on nuclear submarines in America for 70 years, never had an accident. But people are so emotional about the topic that they are just… it's like the third rail. And so we have one side, the Tokyo Electric, that underestimated the risk and they had catastrophic implications. And then maybe you have a group of people that are overestimating the risk, which also has implications, because we don't have enough clean power. How do you look at that situation?
Rebecca Homkes
We spend an incredibly disproportionate amount of time protecting for downside risk, right, then preparing for kind of future opportunity and capability building. And you know, nuclear is an example, as are so many things around the ESG space. What I like to say to make it simple, because this is a tough topic, all of these are, is stop asking the question, what could happen? Because when you ask the question, what could happen, our brains immediately go to the risks. Instead ask the questions, what could make us? What could break us? What are those small tail events that could really set ourselves up for opportunity? What are those small they could kind of break us. I call them kickers and killers. And once you identify the kickers and killers and say, how do we need to set up to take advantage of these kickers? What will we need to do to prepare against these killers? And what you find, Spencer, in every industry is a couple of things. One, you can prepare against most of the killers, right? You don't need to stop exploring. You can prepare. Second, we are terrible at identifying kickers and then being prepared to seize them. I did this not too long ago with a big retail company, and when they identified their list of what they would call a kicker, eight out of the ten were what we would call we could just do it, like it was a quick win. Like something that they brainstormed. Okay, like, what are these like small possible upside opportunities. Oh we can actually just go do that right now. Right? Because we don't give ourselves the brain, that permission. So switch the question from what could happen to what could make us? What could break us?
Spencer Levy
So this gets to things outside of our control.
Rebecca Homkes
Yes, most, most things.
Spencer Levy
Most things are out of control. There are two things that are in our… two, there's a hundred things within our control. One that we have already dug deep into is the single minded focus on your ideas and then implementing. The other is organizational structure.
Rebecca Homkes
Yes.
Spencer Levy
Are there any tips you can give organizationally? And being selfish, this is a real estate show, in the real estate business, how we can better organize ourselves so that we can be resilient in the way you're suggesting in your book?
Rebecca Homkes
Yeah, absolutely. Is that when things become slow or complex or hard, we often default to blaming bureaucracy or process. Right? Now, in many of the things in this growth playbook are, I never like to say easy, but are easier in some ways if you're in a more entrepreneurial organization. But, this is a big but. We're blaming, often, the wrong culprit. One of the bigger things holding back, and this is a big issue in the real estate industry, and I won't name names, is lack of clarity of decision making rights. It's often not bureaucracy or process or the org structure. It's that we haven't been clear on where critical decisions take place. So we've got a team member out in the market, they’re talking to a key customer. There's little things, you know, like a change order. There's big things, like really shifting something. That team member doesn't know whether or not he or she can make the decision. So they ask their boss, and their boss has to ask their boss, and well, that has to go on the weekly kind of executive team meeting. But the agenda this week is full, so it's going to go on the next one. By the time we get back to the customer, it's too late, because that team member doesn't know where do I route this decision in the organization? So codifying decision making rights can allow you to move with the speed and agility and adaptability of the smallest organization, even when you're thousands and thousands of employees. It's where do critical decisions take place? And I'll give you my favorite example. I'll go outside of real estate. This is my favorite example of this: it’s Formula 1. Now your industry changes quickly I know, but Formula 1 things change really quickly, right? So decision making speed, big competitive advantage. So one of the teams did is they codify decision making rights by the physical location of the car. So if the car was in the factory, the head of operations. The car was in transit, the head of the race team. The car’s in the garage, the head of race engineering. The car’s on the track, the head of race strategy. Which meant this, Spencer. As the car would be like leaving the garage onto the pit lane, decision making rights have just transferred from the head of race engineering to the head of race strategy. So when something goes wrong, and it's Formula 1, so it always will, we don't fumble around, we don't call a meeting, we don't even pause. We look exactly to the individual who owns decision making rights in that instance and he or she says what we're going to do or the help that we need, and that's the power. So I urge every organization, don't blame bureaucracy, don't blame structure. We might need to change the structure. We'll come back to that. But first, what are those 4 or 5 repeatable critical strategy decisions? Who owns them and is that in the right place? Doing that will allow for this agility regardless of the org structure.
Spencer Levy
Well, Formula 1 is clearly going through changes faster than anybody. I was reading an article yesterday about self-driving Formula 1 cars. Imagine a world with all these famous drivers. We've got no drivers. And, you know, I believe, I guess we're talking about beliefs here, right? And mathematically, I'm certain that the sun rises in the east and we'd all be better off of every car on the road we're self driving. But I'm also certain that the minute a self-driving car has an accident and somebody gets hurt, which has already happened, it's going to be killed. We're making irrational decisions emotionally. I want to go to the number one or two issue in the real estate industry. The problems are interest rates, which you already talked about. The other one is the future of office. The office market is regrettably, for everything below the top tier offices and the best submarkets, extremely challenged. Probably the most challenged most people have seen in their careers. If I were the CEO of a big office company that owned anything but the top tier, what do you tell me?
Rebecca Homkes
Yes. And one of the things that I'm seeing, maybe a little bit less but I certainly saw in 21, 22 into 23 was this notion of it's going to return. And let's just wait till it gets back to normal. We don't use that phrase as much as we used to. But you're seeing this. I'm still building and preparing and planning as things are going to return. But return to what? And you've got to lose, as hard as it is, the notion that things will return to anything that you might know. And dropping that, while difficult, will free your brain to think about what you actually need to be doing in this space. Look, office needs a fundamental reset, right? I mean, the entire playbook we could rewrite, just, maybe that's your next book, Spencer. It’s just rewriting the reset for your industry. You know, what are your beliefs on the future of the office? What are your beliefs and who wants to come in, and why, and what space they want when they do and where it should be located? Bigger, smaller, fragmented, not, a couple times a year. Really articulate your beliefs and then think, what would I do because of that? And what's holding this back is sunk cost fallacy, right? And sunk cost, as you know Spencer….
Spencer Levy
Back up. Sunk cost fallacy. Explain what that is.
Rebecca Homkes
Yes. You know sunk costs are very simple definition: sunk costs are time or money spent in the past that no future action can get back. And so in meetings you will hear things like, well, we've got to keep working on this project, we've already invested $5 million or we need to keep working on this partnership, we've already invested six months of meetings. Like by definition, that time is sunk. And that's what I'm seeing in office right now. So the question should never be how much time or money have we spent? The question is based on our beliefs today, would we do this and why? And if the answer is no, or even maybe, pause and reassess. Start looking for repurposing and partnering opportunities now. Now sunk costs are emotional, going back to emotions underlies all of this, because we value our time and money, and when it's spent, we want to get something out of it. But you've got to be willing to drop that and say that is gone. Nothing I do in the future can get it back. So what should I be doing today based on my beliefs? So there are some pretty big mind shifts that need to happen for those leaders who are not sitting on one of those top grade, very sustainable, you know, great location buildings. A, except it's not returning to anything that you might recognize. B, watch out for sunk cost fallacy. And C, set a new set of beliefs and be prepared to build a new business based on those.
Spencer Levy
Well the sunk cost fallacy I think sums it up. It sounds harsh, but it's true. We can't go back now. I can debate the nuances of office.
Rebecca Homkes
And where we should squeeze out the ROI versus not. You can get into more nuance, but you've got to fundamentally accept that first, or you can't even have those more nuanced discussions.
Spencer Levy
So we've been speaking for a while, Rebecca. I could speak to you for days, hours, in fact, we've been speaking for years. What our listeners don't know is that Rebecca and I have probably been on, I don't know, half a dozen podcasts or shows together where Rebecca is the interviewer and I'm the interviewee.
Rebecca Homkes
I know. You've been waiting for this opportunity.
Spencer Levy
I’ve been waiting for this day…
Rebecca Homkes
For years. Yes, yes.
Spencer Levy
… to turn the tables on Rebecca and wow, what a great job Rebecca did today. What did we miss? What is the final message of your book that we can tell our listeners?
Rebecca Homkes
Yeah, I think the final message we've hit on, but I want to come back to the reframe. We are framed, and not due to fault, we are framed to see uncertainty as bad. And you're going to hear it in conversations now that you're looking for it. We talk about how are we going to manage uncertainty, get through uncertainty, wait through uncertainty and reframe right now, right? Uncertainty is a series of future events which may or may not occur. Whether or not those events are good or bad depends on what we're trying to do and how we're set up. Our job as organizational leaders is that. Figure out what we're trying to do and then set the organization up to succeed, regardless of what that future might be.
Spencer Levy
Well, I can't thank enough my good friend Rebecca Homkes for coming out here today, talking about her new book “Survive, Reset, Thrive” which was just published a couple of weeks ago, which I encourage all of you to pick up. She's a great friend and one of the truly great minds in management consulting in our entire business. So, Rebecca, thank you.
Rebecca Homkes
Thanks, Spencer. It was my pleasure.
Spencer Levy
For more, please visit our website CBRE.com/TheWeeklyTake. With our own relentless focus, to borrow a phrase from our guest, we're working on the must-win battle to bring you the best real estate podcast on the air. We hope you'll join us on that mission in the weeks to come, and that you'll help others find the show by sharing this episode and leaving a review on Apple Podcasts, Spotify, or your podcasting platform of choice. We'll be back next week with an episode on student housing, a residential asset type that's getting high marks right now. So join us for that and more. Thanks for tuning in. I'm Spencer Levy. Be smart. Be safe. Be well.
Host
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Spencer Levy
Global Client Strategist & Senior Economic Advisor, CBRE
Spencer Levy is Global Client Strategist and Senior Economic Advisor for CBRE, the largest commercial real estate services firm in the world. In this role, he focuses on client engagement and public-facing activities, including thought leadership work performed in conjunction with CBRE Research. He also serves as Co-Chair of the Real Estate Roundtable’s Research Committee.
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