Creating an Online to Offline Mindset

Podcast Transcript

Tania: Welcome to Pragmatism in Practice, a podcast from Thoughtworks where we share stories of practical approaches to becoming a modern digital business. I'm your host, Tania Salarvand.

Creating a seamless online to offline experience that delights customers is an admirable goal and one that is achievable if you leverage your data in the right ways. There is a lot that we can learn from other regions who are leading the way, including according to our next guest, many organizations in China who have done this right.

Today I'm at ParadigmShift speaking with Nigel Dalton, Chief Inventor at REA Group. Welcome Nigel, and thanks for joining us in New Orleans.

Nigel Dalton: Well, it's a pleasure to be somewhere warm again, so I'm delighted to be in New Orleans.

Tania: Why don't you tell us a little bit, Nigel, about what REA Group is and does and also what it means to be a chief inventor.

Nigel Dalton: We are an online portal company, but a consolidation of multiple online portals that we've built or bought over the years. We operate between India, Southeast Asia, up to Hong Kong, and we own 20% of a pretty well known portal in America called realtor.com. Our largest business is in Australia. It's quite diverse in nature. It's kind of changed strategy over 25 years from being purely focused on search, so helping people search for a home. The only clever tech involved in that, which was clever in 1997, was putting the photographs of secondhand houses on the worldwide web and letting people search through them.

The big metamorphosis has been becoming a match company, so now we need to match at scale people to inspiring property content. It might be redecorating or renovating their home. They might be need to be matched to a mortgage broker, an investment property, somewhere to rent, somewhere to buy, a great realtor or agent to help them sell it. And that match needs to happen at such a scale that data became core and architecting our systems became core around data science and that's what we've been doing, so we've gone from search to match. We've expanded a little more globally and that's been a heck of an adventure.

Tania: Now, I love that you call it match because essentially you're trying to take on the full end-to-end experience of anyone considering anything as it relates to home buying, home renting, home sharing.

Nigel Dalton: Yeah. And as luck would have it, I've worked in a field where we're, in terms of Maslow's hierarchy, we're at the bottom, the physiological needs, air, food, water, and shelter. I was shocked at it. I actually confirmed that for myself. I'm a curious person. I went back to Maslow's 1934 paper to see was that true or is a house more of a security thing? And in fact, no, it's right there, it's fundamental and that makes it a very different emotional experience for people. Not having a roof over your head is an incredibly disturbing experience.

I've got a shout out for the work that we've done that is not only for fulfilling our organization's purpose, which we've said is changing the way the world experiences property. It doesn't say changing the way rich people experience property. We've done a huge amount of work around changing the way homeless people experience property.

Tania: That's great to hear because I think to your point, it's a phenomenon globally, an issue that everyone is dealing with in some way, shape or form and many don't know how to help or support those who don't have those opportunities.

Nigel Dalton: Yeah, homelessness, I'm absolutely flabbergasted by the simplicity of the solution that is required. But the politics of it get in the way. So, you take Denmark who've solved homelessness by building homes, and there is a couple of places in the United States have done the same with tiny house communities for homeless people. Not all homeless people are of a state of mind of wanting to live in a community or even a home, and that we need to cope with that variation. But the answer is quite simple. If you want to solve it in the cheapest possible way, you build homes. The politics of that are not easy in the world today, but getting along the way.

Our work has been sort of in that third rail area of the thing, which is homelessness from domestic violence, which is the majority of the cause of homelessness in Australia, of the 120,000 odd people homeless tonight in Australia. And homeless being not having shelter that they will know they can be at tomorrow night as well. Maybe 10,000 of those are rough sleeping, living in cities in particular and communities. The majority of the rest of them are fleeing domestic violence and that's the thing we've focused in on particularly, and one we're all proud of, the difference we've managed to make to that.

Tania: That's wonderful to hear and I think it speaks to many on different levels. I appreciate you sharing that. Going to your title, chief inventor, not a common one we hear. Tell us a little bit about what your mandate is and what you see the role really partaking in, in the organization.

Nigel Dalton: Well, we made it up, so I guess that's probably why you're not seeing it everywhere. It came from a conversation we had where we've actually lived by our ability to innovate for 25 years and the innovation being finding a product customer or product market fit because we solve the simple problems of real estate, so long ago by putting the photos of secondhand houses on the web and making them searchable. Then it was all uphill from there and now it's all test and learn. So we don't have any brilliant ideas that are just going to change the world overnight. Those were just easily had a long time ago, so now everything is an experiment. So all of the work of the hundreds and hundreds of people on our teams is innovation.

Well what comes before that? Well, what comes before that is invention and invention in the... to define it is the combination of factors that results in something new, whether it's a metallic alloy, or my favorite example is a shandy, which is a much belittled alcoholic combination of a beer and lemonade invented in Germany after World War II. It was invented in very clever circumstances for a need where cycling became a big kind of revival of German community exercise after World War II. People in Berlin and the in the cities that have been terribly bombed needed to seek solace, and the forest was still standing, so they'd ride out into the forests.

A publican got caught short with not enough beer, which I think is probably a crime in Germany, to be honest. He had the brilliant idea of inventing a drink for cyclist, a health drink for cyclists to be able to energize them to get home called a radler, which was to mix his stocks of lemon squash and beer together and serve that, extending his beer supply well enough to last the weekend, and that caught on massively. The English followed suit.

You go, that's how invention happens. You put two things together. And that was my job was to put things together, whether they were technologies like virtual reality, augmented reality, machine learning, stuff that's coming in the future, 3D modeling and as the source of much of that, and our business model, and our customer needs and just see what came out of it. I run our hackathons called REA.io as a result. And I have a lab, which is five people just engineering ideas together to see how they float.

Tania: And so, when you talk about pulling things together to maybe multiple that individually are doing what they're supposed to be doing together or creating something new that maybe people or customers didn't know they needed, but now all of a sudden are recognizing a need for, what does that actually mean for those end customers? What are you giving them that maybe is a delighter, a experience that they were not expecting? What does that mean for you at REA group?

Nigel Dalton: That combining as a philosophy results in an awful lot of disappointment, to be honest, because what you have to get used to as an inventor is failure at least 90% of the time. And reading signals that you would do in traditional, in more an innovative field, that will lead you down the right path, misreading them and ending up a long way into a project to discover it was never going to work anyway.

My best example of that is virtual reality property. It was an obvious spatial play with people to be able to put virtual reality glasses on, experience walkthroughs, save immense amounts of time not having to travel across the city on a wet Thursday night, get the kids out of their daycare only to arrive and discover 50 people outside the home and it's raining and there is just no way you're going to do that, or discover a place that the advert didn't mention that it had a gang headquarters next door. That would have been useful information. You were never going to live there, but you just lost hours.

Our maths alone showed the loss of hours of Australians to people going to open for inspections for a range of properties that would never have taken place if they'd know more about it or could walk through it. We also observed, because we do a lot of what the Lean people call gemba. We observed that people visiting homes to buy or rent the three second inspection. And the three second inspection is someone who comes to the door, steps two steps inside, immediately knows the property isn't for them and goes straight back out again. Now what magical human capability is being used there? It's our incredible brain's capacity to capture from a visual spatial experience that this is not for me.

We realized that virtual reality headset experience could do that for them, so we invested a lot in that space. We built the world's first virtual reality portal and had about 4,000 properties in it for people to explore. It was really just the realization that it was more than a combination of the consumer experience and the virtual reality technology. It was also finding a business model for that, that proved the challenge in the end. We shut real estate VR down, no doubt consumer benefit, but without the whole ecosystem sorted, you don't have a product.

Tania: That brings up a really good point. This idea that you're going to shoot certain ideas down as an inventor and sometimes you have to throw a lot of things out there for that one, maybe two things to really stick. How do you know when something is the right thing to put your bet on?

Nigel Dalton: We've always had tripwires is our phrase to use it. So if we look at things, well, we were the first with an Alexa-based property news inquiry data service, and that was very exciting to build, very frustrating to build, the API structures, even discovering our own data wasn't stored in a way that was particularly useful. It was content-based.

So imagine reaching a point where you have to go and find radio journalists to train your writers to write a first paragraph that when Alexa reads it from text to speech, it summarizes brilliantly what story is to follow. That was like, oh, okay, well we are going to have to retrain those people, let alone create the content pipeline.

So we created ourselves a tripwire of how many people would actually listen to this marvellous new invention with all the latest. It was brand new when Alexa launched, it was the Amazon Echo in Australia, and brutally disappointing to discover that in fact, we were the only people who were listening to it regularly after 90 days. We'd set ourselves a hurdle in the thousands and so, cut it, I'm afraid.

Tania: A lot of that has to do, I assume, with creating an experience for your customers that is something, again, that they're not expecting, but they want and hopefully as seamless as possible. You talk a lot about this line between online and offline experiences and what that actually means, how blurred it's becoming, how do you view that and how do you make sure that you create those seamless experiences?

Nigel Dalton: O2O is a concept that came up through my travel and in particular a trip where I read Kai-Fu Lee's book, AI Superpowers. It was recommended to me, and so I picked it up. I picked up the audible book and as I classically, classically make this mistake all the time I get the Audible and then find myself having to go back and buy the Kindle because I want to read particular segments. If I would just buy them the other way around, you get the Audible for next to nothing. There is a hint to folk. The first time I encountered the phrase O2O online to offline and he was using it to explain why China and their investment in machine learning would catch America, having started over a decade behind in terms of their ability to create algorithms that actually worked in a predictive way.

His argument was quite simple was that China didn't have this bizarre bias that online and offline were two separate parts of your business with two separate marketing teams. Only one would have a data team. And that the continuous tracking of that consumer through the journey was, which China does with alacrity tracking everyone on WeChat, every service comes up through WeChat, is connected through WeChat and then you're able to mine that data. That O2O was their secret to becoming the world leader in machine learning and ultimately artificial intelligence.

I just started thinking about the broader implications of that going, wow, I have clients who pride themselves on only bringing the online marketing team to one of our presentations, one of our talks about technology impacting real estate, and that's a good thing, by their mind. They have online teams with millennials who manage their Snapchat, Facebook and Instagram accounts and offline teams that spend millions of dollars planning show homes and outdoor campaigns and maybe television and they won't talk or share a budget. I'm just going, Oh my God, the competitive disadvantage we have structurally created for ourselves, for our own short-sightedness is really going to impact us.

And at that point, I became an O2O fanatic and I was desperately trying to find a way of explaining that and sort of evangelizing that to Australian businesses in particular because the longer we stay with this mindset of separate, the more difficulty we're going to have of serving customers at scale with the support of technology. And so I started looking for examples of people doing it well, and I lost heart to some extent because it is really a massive gap that's been created in the mindset of leaders.

It was going back to China and spending time with the Thoughtworks people who we have 120 Thoughtworkers work, support us doing software development in China, and going back and spending time with them, with a couple of people at the senior level with Hu Kai and Qiang Ma and Guo Xiao, who are central to our relationship with Thoughtworks over the years and putting this challenge to them. Explain to me how these two are not a contradiction? Because that is the fundamental thing I've experienced in Australia is that those two are completely separate, different mindsets, different budgets not to be linked.

And if, oh my God, if you're trying to track a product through its lifecycle online to offline in Australia, you think of delivering for example. You go, okay, well let's get all the data from my restaurant that relates to how much people are loving my product and whether I should adjust the recipe or those kind of things. Well, I've got to line up so many different partners in the delivery. I've got to find, oh man, we got to get Uber Eats. What are they lawyers going to say about sharing the data around that? Well, they're going to say, no. That's what I can tell you now. You end up with more lawyers in the room attempting to negotiate data access there and taking more time.

And in China, well just let's just tap WeChat and get everything out from payment data to customer satisfaction to all of your delivery metrics from your delivery people, or if they're a separate company, the recipe, the who was cooking that day, what temperature was it in the kitchen, how was the traffic, what was the weather? You consolidate all that data and you have the recipe for creating an amazing experience for delivering food, the right temperature and the right flavors and those kinds of things. So we were at a disadvantage.

The Thoughtworks people eventually, I think they super tax their network because they're super tech people, right, but they must have had some friends or relatives who did good Chinese literature or history degrees. They came up with this phrase, which is which is a fusion of things. So strength through combination is a beautiful phrase. We see things and we would use a word like a juxtaposition in the waste of online and offline and they would see it as a fusion. And that started for me and understanding of ah, when you see that, strength through combination, rather than them being two things side-by-side and separate and functional and different and with different metrics and different people and different mindsets that this is how we can start to win this game.

And so with that, we tested it out, the concept, with one of the toughest audiences we have at REA group, which is property developers, the top 20 or so property developers, which we'd taken to China. We decided a deep immersion in Chinese business ways of working and mindsets. Thoughtworks arranged an incredible trip to NIO, the electric car people and also to Xiaomi, Xiaomi HQ and the flagship stores and explain their philosophies.

I was able to kind of take that and at the end go, okay, well how many of you have an online and an offline marketing team? And everyone's hands goes up. And how many of you are going to go forward and bring those two together?

Tania: That is very interesting. I think you can probably relate that there are many industries that have this still separation of physical and digital as many might call it.

Nigel Dalton: Oh, and look, retail drives me crazy.

Tania: Yeah. Being a big part of that and they're trying to break the nut of what it is that creates a seamless experience. A lot of it, as you mentioned really relies heavily on data, but the lack of data from one side to the next, or the not able to, or incapable of sharing data from one to the next is a big, big hurdle.

Nigel Dalton: Yeah. The retailers of Australia have got the wrong goggles on looking at the competitive landscape, they've mostly in shops and retail spaces and shopping malls, those kind of places. They see Amazon, which have launched in Australia now and these online retailers as is the devil incarnate. It's just awful. And you'd think from the whining noises that you hear from the leaders of the industry that somehow online retail was like, man, it must be 50% of, what do you reckon it is? It just busted out of single figures. So maybe 10% of Australian retailers conduct it with online. And yet, their mindset is wrong and that's the click to collect. How hard would that be? Come on, you've got an amazing facility. I'm pleased to say.

I know of a couple of stories of people who are getting this, but it hit the news recently with a big shopping mall real estate owner who started to track the number of couriers coming into stores, in the store and going, "There has been a remarkable increase in traffic with couriers." You can see them on the films. They were probably using AI video to track them because they do a certain amount of that kind of level of tracking, carrying packages in yet, that's healthy. The store retail numbers are not going up. Now why are store retail numbers so important to mall owners? Here is a pop quiz test. How do you reckon renters [inaudible 00:00:21:05]?

Tania: Rent, yes. I was going to say it's based on rent.

Nigel Dalton: Yeah, so their rent that they pay is based on retail turnover, which is a lovely thing from way back when the mall owner would help out the struggling shop in tougher times. But click and collect is an amazing way around that because the revenue is not attributable to the store. So the store can be doing particularly well.

My theory was always that if a person is coming in to collect, if you've got the right display, you're going to kind of tempt them for a bit of a look around and you're going to get discretionary time out of them because they've got the functional bit done and they got a little bit of extra time.

We have a store in Australia called Bunnings, which is probably my favorite example. It's a Home Depot type home where still they're famous for one thing, which is their hot dog.

Tania: Which is what one would think when they think of home supplies.

Nigel Dalton: Absolutely. It's easy to get the kids to go with you to Bunnings on a Saturday because they know they're going to get like, it's a sausage sandwich kind of thing and if you're really extravagant you can get onions and tomato sauce on it and maybe mustard if you're a foreigner. But, it's so delicious. The people cooking are charities, so Bunnings had done an amazing job with that.

You just go man, that would be so good to avoid having to wander the aisles of this equivalent of Home Depot. They're massive, trying to figure out if this piece of plumbing fits that piece of plumbing? There can never be enough staff in there. That could be done with video, pre-book, click, come and collect, get my sausage. I've got Tim. I'll just go and see what else it is and what do you know? I'm tempted into a discretionary purchase. How can they not get their mindset around that way of thinking? It's frustrating to me.

So yeah, retail, they're the winners out of all of this. They can trick those mall owners into that they're not doing so well and make that extra money. Although, that war has broken out now they've noticed. And just add value to consumers' lives because time is the thing we can't make more of. As technologists, we don't have the control of that one just yet.

Tania: Yes, and I think you're right. I think as it becomes more relevant and evident that these things are quite frankly going to die otherwise, especially some of these retailers who are not accommodating some of the disruption that's happening and taking advantage of what's already there, we're probably going to see more and more of that happening around us.

Nigel Dalton: Look, China is the greatest place to see retail's options to change. [Xiaolei Wang 00:23:41] who works in the Shanghai office, who is Chinese-Australian, and gone back to Shanghai to just experience the incredible hype of that fast moving online economy. She gave us a talk on her day and how the online to offline thing is just integral to everything she does. It includes gives as well like facial recognition, which are a little frightening for those of us in the West because, only because of the misuse of them. It's a fantastic technology, but when misused it's pretty scary.

She talked about the stores there, which have been refurbished by people like Alibaba. She got a great photograph of one before and after. The store is like, it's dad and the son who are running this rundown little grocery store and it looks kind of like, oh wow, I wouldn't go in there, but it's the local store in an urban area. And then the after picture of this shining, beautiful, they've refurbished the front and it's still dad and son out front and looking just as proud.

But now the entire infrastructure of that store is technology. So, that store is run on an AI driven system, so it's now using all of Alibaba's predictions for what's going to be demanded in that area this afternoon. So they're enabling, using what amounts to good old fashioned drop shipping to predict that.

You know what? Five of the last six Thursday nights you've bought broccoli on the way home and you're probably making a stir fry. So we're going to stock some broccoli. And in fact, we are going to offer you half hour delivery when you go online and actually order that on the tram or the train on the way home. They can do half hour delivery because it's from that store, not from some central warehouse. The store owner has to submit to the system saying, you will accept these orders and that's a brilliant use. I can see shopping strips and shopping malls becoming healthy again by integrating those two factors, the on and the offline.

The other great example I've read about recently is [Oola 00:25:50], the Chinese post office. So I always go, if a government department like a post office can get this, we can get this. And that what they've done is sort of reversed the supply chain. So rural China is still a huge population, and they've got post offices, which are dying on the vine. What Oola is the redefinition of those is technology hubs basically. They can, not only get the walnut harvest to the kids in town who've gone to university and graduated and moved to Shanghai, so they can ship that way. But it gives the people in the village or the small town access to the internet to be able to order things the other way.

The end result is they've created this massive ecosystem of demand and supply all based around data. And then they're selling that data, which people have got to be comfortable with, to other people to say, did you know in this region, in this town, this happens, and we have a shortcoming of these particular vegetables for this particular season? That village over there could supply them to this one and it's the power of data. And tell you what, when a post office in a government organization can get it, anyone can get this.

Tania: A very fair point. We won't even get into the other government agencies who are struggling with some similar things. But since you mentioned data, you talked about facial recognition and the fear and misuse that comes from that. And obviously, as we know it's in the news it's all around us, data as data is becoming more prominent, not only in the use of and misuse of, but also just questioning what to do with it and how to best leverage it, so it's beneficial. It's a win-win situation. What are your thoughts on data storage usage, customer information in the space that you're in?

Nigel Dalton: I'm lucky enough, and I'm going to sneak a quick promo in here, sorry, but to cohost a podcast called AI Australia. James and I have the privilege of meeting some of the finest minds in the world around AI, and particularly ethics and the use of data and the application of data. I'm going to follow just the experts on this one and particular a guy called, Toby Walsh who wrote a book called 2062: The World That AI Made. He gets to think about this professionally every day. He's a professor at one of our universities and a government advisor, a wonderful all-around human being who's leading the way with the non-use of AI for weaponry. So he's one of the leaders of that little faction that might save the world one day.

He says this, there is no problem with AI, but there are good people and there are bad people and bad people will misuse AI and make what we will perceive to be evil AI. And that problem of good people and bad people has been around I think a couple of hundred thousand years.

Nigel Dalton: So how do we solve for that when the world's got that in its front of mind at the moment? All over the world, we've been worrying about this, but probably the last hundred years, I think we've been especially concerned about good people versus bad people because the consequences have become global. The sad news is Toby doesn't have a solution for what to do with good AI and bad AI. Some kind of legislation for things, a government interest in how it works and regulation of use of data is probably a good thing.

Everyone complained madly about the GDPR. I was in California this week and I think it's called CCPA and that's considered a massive constraint on business. Well, I'm not sure it's a massive constraint that's necessarily negative. If it just balances the scorecard a little, it's good. We've got a GDPR-like regime coming to Australia and I'm sure there will be a lot of complaints about the tax that we'll place on software development because we will have to be incredibly careful about how we treat data within our organization.

The fundamental fear of it is, oh my God, a consumer can ask to have their record deleted. Can you imagine how many places was inside a modern corporation that data is actually stored and to be able to prove that you have deleted it is going to be quite onerous. But I think, it's a solid balancing out of individual rights and respect for those with the need to develop new technologies to make things more productive, more efficient and smarter is a fair game to be playing.

Tania: I think that's a great way for us to end this segment because it gives people something to think about and look forward to. We'd love for those who are interested to check out AI In Australia. Is that what it is?

Nigel Dalton: It's called AI Australia. We debated that so much in terms of, because it's a mouthful and when you've got a New Zealand accent, it sounds like this blend of vowels that have been mixed up in a blender, but AI Australia.

Tania: AI Australia. Well thank you so much, Nigel. I think what you're doing at REA Group amongst your peers and your team is fantastic and inspiring and we are always very, very excited to have you with us. Thank you.

Nigel Dalton: Well, thanks for having me at ParadigmShift.

Tania: Thanks for listening. If you enjoyed this episode help spread the word by giving us a rating on iTunes, Spotify, or wherever you listen to your podcast. To hear more from Nigel, check out his talk at thoughtworks.com/paradigmshift.