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continuous frustration. A second strategy, and one we think makes more sense for most large investment managers, is a "Data-Driven Strategy". Here, the information itself, not the tool, becomes the primary focus. It represents a subtle shift in thinking – but promises potentially profound results. Application-Driven Strategy Let's start by examining the application-driven strategy. You are probably pursuing an application-driven strategy if you're asking yourself questions like these… What property management tools should we implement? Which revenue optimization system is best? Why do I have so many "systems" people on my staff? In truth, the application- driven strategy is taken not because the manager is passionate about investing in and supporting a given property management platform, but, rather, because the manager believes (or believed) that this is the "only" or "best" path to getting required asset-level data. Following this strategy, the investment manager implements and hosts a property management platform that is vertically integrated with its 'upstream' investment management and accounting system, and requires their third-party property managers to use their platform to manage their properties. This strategy can be efficient, but only when a number of stars align: (1) all investment properties are entirely managed by third party fee managers; (2) the manager's chosen application is appropriately implemented for the asset types they currently and will own; (3) the application is viable for properties in any targeted region; (4) the investment manager has and wishes to retain an IT organization that can properly support the application and its many users at the property level; (5) the investment manager either commits to maintaining a state-of-the-art platform or accepts that its property managers might be forced to use a sub-par system; and (6) the investment manager accepts that its property and investment systems are bound together – and therefore their total platform is only as strong as its weakest component. However, such stars rarely either ever align or remain in alignment. This application-driven strategy, while seemingly elegant and simple, is almost invariably too rigid for the dynamic needs of an investment manager. The resulting challenges are many. First, only rarely (if ever) can the manager dictate use of their property management platform to 100% of their managers for use on 100% of their properties. Often this is simply because the manager has several investments in which the property manager is also an equity partner in the deal and the manager either cannot or will not dictate the property management platform. We also see economics problems: The investment manager bears the cost burden and complexity of maintaining a property management platform, and they also must figure out how to get data from the properties managed outside of its platform – and doing so with a high degree of fidelity, because going without required data for a subset of properties is not acceptable. Finally, we see real 'lock-in' flaws that flow from this strategy: It becomes difficult and expensive to upgrade any one component of an overall technology platform when the entire premise of the platform rests on having a 'single' system. Data-Driven Strategy You are probably pursuing a data-driven strategy if you are asking yourself questions like these: What data do I need to measure the performance of my investments? To run my business? Where does that data naturally originate? Who does the work that produces the data I need? How can I ensure that those who produce the data do so according to my definitions and quality standards? And finally, what tools do I need to retrieve, store, access, visualize and report on that data? With the data-driven strategy, the investment manager can focus its technology investments more appropriately on the tools and human capabilities required to collect and govern data, and to manage portfolios and make better investment decisions. At the same time, the investment manager can rely on its property managers and operating partners to make investments in their systems and processes, which allow them to be great property managers. It simply leads to a much better alignment of resources and investments in tools and systems. In the data-driven strategy, systems follow services; the investment manager focuses only on those systems that support its specific investment management business functions. In this strategy, property-level service providers run their own systems and are expected and guided to provision data. Going further, if the investment manager considers different sourcing strategies – for example, engaging third-party fund administrators – then those service providers would be expected to use their own systems and provide the required data back to the investment manager. This is yet another way in which a data-driven strategy can enable a nimbler consideration of operational improvement opportunities. 18 NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT MANAGERS NAREIM