Technology revolutions have changed the course of human history in profound and profoundly unpredictable ways since the dawn of human civilization.
When someone steps up in the early stages of a technological revolution and says, in contradiction of accepted dogma and with cool certainty, what shall come to pass, and it does, it is worth sitting up and taking note.
Take for example what Spencer Kirk, then CEO of Extra Space Storage, had to say ten years ago at a NAREIT conference about the increasingly important role that the internet would play within the sector:
“The larger, more sophisticated operators seem to have a significant, pronounced advantage when it comes to the Internet…The Internet is not the great equalizer. The Internet is the great divider.”
A decade later it is plain to see that Kirk was right on the money. Kirk’s prediction did just that.
That’s why we thought it would be worth reflecting on our changed world, and how his logic might be applied to the next decade as we find ourselves careening into the wild west of the next technological revolution.
Self-storage meets high-tech
Self-storage, it turns out, while maybe not a particularly sexy asset class, is just as fast-paced, high-tech, and sophisticated as any other tech sector.
Kirk predicted that the rise of internet transactions and unparalleled access to customer behavioral data wouldn’t level the playing field. Instead, it would lead to consolidation in the hands of those few with the resources to rapidly leverage the new productivity and intelligence tools at scale. And that is what came to pass.
The typical acquisition deal these days is dozens of properties and millions of square feet, for hundreds of millions of dollars, made by major players who can leverage technology at scale to rapidly increase occupancy and revenue. These are not just the well-known REITs and publicly traded companies; startups touting a tech advantage have managed to raise unprecedented funding for acquisitions and new developments. For example, tech-focused SecureSpace recently raised $1.5 billion for acquisitions and new developments, at the time the largest self-storage fund ever raised.
The next revolution: self-storage and AI
The arrival of artificial intelligence has ushered in a new competitive landscape. The board is reset.
There is still plenty of available space to consolidate. And suddenly we are in the midst of a new technology revolution that promises to be every bit as disruptive as the internet was.
It stands to reason that the next set of winners and losers in the race between REITs, publicly traded companies, extremely well-funded newcomers, will be determined by their creativity, agility, and resources applied to leveraging AI at scale.
That AI is rapidly approaching the point where machine capabilities and human creativity can combine to yield true disruption is not up for debate. The smartest folks in the room are suddenly buying Nvidia stock and speculating in fusion energy: the machinery and fuel of AI. So let’s highlight the ways that the technology/market landscape, including self-storage, is already leveraging and implementing the new tool.
Data acquisition and storage is one of the key drivers of the value upgrade gifted by the Silicon age. Collecting and storing rich data is easy and cheap.
Unfortunately, that data trove, in addition to being intractably broad from a human analysis perspective, often comes from multiple sources in different formats: it is unstructured. An estimated 80% of company data falls into this category.
AI can harness the power of this unstructured data in exciting new ways that storage operators can use to drive results:
- AI now has the power to expand automation from data collection to analysis, reporting and even decision-making. However, before AI can analyze the data, it needs to be organized and curated. AI algorithms can train a machine intelligence to analyze, sort, and structure the data rapidly and without human intervention, so it can easily extract insights at the next level of analysis.
- Security has emerged as a major selling point and differentiator in the self-storage market. AI can provide cost-efficient, real-time, 24/7, remote multi-site monitoring of video feeds to operators with the savvy and resources to implement AI security systems.
- AI can also help to lower operational costs by optimizing energy control in buildings to reduce energy waste and carbon footprint, helping companies seeking public or private investment meet ESG targets.
Speed is the name of the game with dynamic pricing. AI instantaneously applies algorithms to historical and incoming data to adjust pricing in response to location-specific customer profiles and preferences, seasonal market conditions, and competitor pricing trends, simultaneously gathering and learning from the results of the adjustments.
The constant training feedback loop allows AI to understand the relationships between these and other factors, becoming even faster and more efficient at balancing pricing and likelihood of purchase, learning and becoming a free-to-operate, proprietary advantage for the company with the resources and know-how to implement it effectively.
Of course, like any new technology, AI could be used unethically, for example to engage in price-gouging. But just like a human operator (arguably more reliably), AI’s can be trained to abide by rules and regulations set by their user, in alignment with each company’s mission and values.
Review management and response
With the advent of AI, digital data collection can now be augmented with data interpretation and therefore responsive action. A trained AI can instantly pick up on both local and global sentiment variations. Awareness triggers an immediate response to specific comments and negative trends, flagging persistent or more serious problems for further attention from their human manager.
Also, AI never sleeps. A well-trained chatbot plugs any gaps in live representation and contains negative sentiment before it gets out of control, negating the previously inescapable risk posed by potentially explosive brand management challenges. At the same time, AI can limit or even avoid negative sentiment altogether, providing improved and instantaneous customer service, which the tech-savvy millennial market, comfortable with bot interactions, has come to expect.
Customer service enhancement
Where millennials are fine with robots, Gen X and Boomers expect live, human interactions to solve their problems. Here AI can still deliver game-changing performance and efficiency advantages.
“Whisper coaching” allows managers to monitor agents’ calls and provide real-time guidance and advice. However, it relies on limited bandwidth of human managers to identify problem situations and respond appropriately. AI can perform similar tasks by recognizing patterns and suggesting responses, and it can do so for every call and at a faster rate because it learns from all calls, rather than relying on each manager’s individual experiences and trial-and-error.
Once trained, a machine intelligence whisper coach becomes a company’s proprietary, no-cost internal customer service trainer and mentor, with savings in both human resource efficiency and customer sentiment improvement. This AI advantage also applies to improving outbound sales calls with an on-call, everywhere-at-once, constantly improving machine intelligence coach.
Advertising, in particular ad management, in the digital economy is a no-brainer application for AI. Able to add learning and lightspeed reaction to the tracking element of digital advertising, AI contributes in all aspects of the endeavor:
- Allocating advertising budgets, both across channels and across audiences
- Adjusting advertising budgets automatically to hit KPIs
- Finding new advertising audiences and conversion opportunities
- Building richer audience profiles
- Determining and hitting campaign goals
- Gaining insight into competitors’ ad spend
- Generating hyper-personalized targeting and ad messages to individual consumers
- Predicting ad performance before launching campaigns.
AI can perform these functions faster and better than a human ever could, freeing the minds of the knowledge economy to focus on what humans can do: think creatively about innovative short-term and long-range tactics and strategies.
AI-powered predictive maintenance is already transforming the industry generally, and the self-storage industry is no exception. Preventative maintenance allows self-storage facilities to proactively address potential issues before they turn into costly repairs. By analyzing data streams from equipment and facilities, AI algorithms can now move on from big data collection to identifying patterns, predicting when maintenance is likely to be needed, and ordering action, all without human supervision or intervention or paying for human inspection.
This reduces unit downtime, and extends the lifespan of the facility, as problems can be addressed before they become more serious, translating to lower operational expenses and improved profitability. On the customer side, by ensuring that facilities are always in good working order, self-storage facilities can provide customers with a more reliable and secure storage experience, with the double-bonus of helping to maintain customer loyalty and attracting new customers.
Along with bespoke coding and internet research, content development prowess and process streamlining is a much anticipated and discussed benefit of AI. In theory, every author now has a research, brainstorming, and prototyping team at their fingertips, and will eventually be transitioning into the slightly different but still intellectually challenging and creative role of editor.
True, every author has their own unique style and character, but AI can be trained on their previous work to provide a digital model that is for all intents and purposes indistinguishable.
The promise of AI
We are only in the beta phase, the beginning of the exponential curve, and new and improved tools are appearing every day. AI never stops learning and improving. It doesn’t sleep. It doesn’t eat.
I was a bit skeptical when I started researching AI, but now that I have it is clearly not a fad. It will likely shape every industry in the years to come, including ours. From a career perspective everyone should spend some time experimenting with an AI tool, and thinking about how it might impact, and augment, their personal careers.
AI is already changing how we do things, not necessarily in the most visible front-end ways, but in the more important back-end ways, from data curation to data analysis to action response at speed and at scale. In addition to business adaptiveness, vigilance, and efficiency, an overarching, if optimistic, theme is the benefit to the human employees that still run things.
AI’s operational prowess frees up humans’ time, to allow knowledge workers to really be knowledge workers, to exercise that knowledge in creative ways, where AI handles the knowledge-economy equivalent of pre-industrial manual labor manufacturing tasks. It’s not just the bottom line that’s improved for the companies that implement AI to maximum effect – it’s employee retention and happiness on a market wide scale.
With the digital revolution, everyone predicted a massive productivity leap – but in the end, it did not really happen. Because the human brain is not tuned for actual multitasking, and suddenly there’s a digital email or a Slack interruption every 45 minutes, right as we’re getting into a productive groove focusing on an individual task.
Now there will be a robot army (ahem, “workforce” ) behind the scenes, giving us space to concentrate and create at work, and live our lives outside of work, which in the end is a proven productivity enhancer. At SecureSpace we’re equally excited about both the machine and human elements of the AI revolution.
Into the future
So what might Spencer Kirk say about what’s to come at the interface of self-storage and cutting-edge technology?
The post-Kirk-decade industry landscape is now more consolidated and even better funded, with increased competition for increasingly scarce low-hanging fruit as small operators now have a better sense of the value of their assets.
Those companies that can leverage AI’s analytical and predictive capabilities in terms of informing where to build and buy, and AI’s ability to effectively understand, predict, and interact with customers, will have the edge. Unlike the digital revolution, where throwing money at the concept can do the job, the AI revolution will require not just resource scale, but also the sophistication and agility to rapidly experiment, pivot, and act to develop proprietary AI machine intelligences that outperform the competition.
Let the race begin.