A Complex Job Just Got Simpler
Award-Winning Thesis Brings Innovative Tool to Real Estate Development
by Michael Mack
Posted December 23, 2009
It's no news to a real estate developer that his or her job is complex. Perhaps the most multidisciplinary of fields, real estate development demands the coordination of many domains – design, architecture, planning, engineering, construction, law, policy, and more.
What is news is that that process can now be simplified considerably with a tool long used in an entirely different industry. Called the Design Structure Matrix (DSM), the tool is a process model used for more than 20 years in the engineering of complex products. Historically the DSM has been used to develop aerospace vehicles, automobiles, microchips, and other complex systems, but now for the first time it is has been applied to real estate.
Responsible for the achievement are two graduates of the MIT Center for Real Estate (MIT/CRE), Ben Bulloch and John Sullivan. For their groundbreaking thesis work – entitled Application of the Design Structure Matrix (DSM) to the Real Estate Development Process – the two researchers have won the Annual Thesis Award co-sponsored by the New Boston Fund and MIT's Alumni Association of the Center for Real Estate (AACRE).
What Is a DSM?
In most development processes, certain tasks depend on information from other tasks to be fully completed. For example, a building's floor area, floor-to-ceiling height, air duct depth, and beam depth all share various dependencies, and changing one affects the others.
In a complex process, a task may depend on information inputs from dozens of other tasks, and may in turn send information outputs to dozens more. Although these complex relationships can be modeled by PERT and CPM network diagrams, these models can require hundreds of pages, making a "big picture" overview of key relationships in the process nearly impossible.
That's where the Design Structure Matrix comes in. A DSM is an N-square matrix (see image) that can graphically illustrate an entire complex development process on a single page. Every important information exchange and dependency within the system is represented, and decision-makers can visually understand the relationships between all tasks at a glance.
To better understand the model, consider Bulloch and Sullivan's DSM represented here (see image). Ninety-one distinct tasks are required in the real estate development process from idea inception to asset management and/or sale. Each point on the diagonal running from the top left to the bottom right of the matrix represents one distinct task.
Important to the power of the DSM is that each point below the diagonal line represents a task interaction where information from a specific task feeds forward to a later task. The points above the diagonal represent an interaction where information from a subsequent task will likely force a reexamination or rework (iteration) of a prior task. These latter points are important because unplanned iteration can significantly increase both project risk and the likelihood of failure.
As a complex process management tool, the DSM model can be invaluable for its simplicity and convenience. Not only does it represent every task at every stage of the process, it also specifies the relationships between them, and highlights the points of likely iteration.
The Thesis Research Process
How did Bulloch and Sullivan first conceive of applying the DSM to real estate? "The idea was presented during our spring Thesis Prep class by Professor David Geltner," Sullivan said. "Both Ben and I had expressed interest in the topic individually, but after the two of us met with Dr. Geltner together, we decided that such an ambitious endeavor would be best completed by both of us."
The thesis work was made possible in part with the generous participation of MIT/CRE industry partner Jones Lang LaSalle (Boston office). Through a comprehensive series of interviews and meetings with senior managers in JLL's Product Development Services team, Bulloch and Sullivan were able to determine the number of tasks and stages required for a generic real estate development cycle. "Since this was a first-ever attempt," Bulloch said, "we decided to focus broadly on the real estate development process rather than on any specific development project.As the thesis developed, we added examples and additional DSMs to help explain the findings."
Were any findings unexpected? "We were surprised by the lack of real estate development literature that clearly articulated the issue of iteration," Bulloch said.The two researchers were also struck by the many similarities between product development and real estate development, and what that implies."The amount of literature on product development is far greater than that on real estate development," Sullivan said, "and it seems likely that other product development methodologies could be effectively applied to real estate."
A Pioneering Application
David Geltner, Professor of Real Estate and Director of Research at MIT/CRE, described Bulloch's and Sullivan's work as "superlative," emphasizing its novel and practical nature. "This was a pioneering application," Geltner said, adding that the DSM process modeling tool was developed over the past two decades in MIT's Engineering and Management Schools.
Geltner went on to say that although the DSM has been successfully applied in real world practice to other branches of industry, "never until Ben's and John's thesis has it been applied to real estate development. It provides an intellectually rigorous and practical tool for modeling the real estate development process from a management and decision-making perspective," Geltner said. He also noted that the elegance of the one-page DSM is a useful pedagogical device for teaching students about real estate.
The thesis prize is awarded annually by MIT's Alumni Association of the Center for Real Estate (AACRE), and is sponsored by the New Boston Fund, a real estate investment, development, and management firm that has sponsored the prize for three years, and intends to continue doing so.
"Every year, students at MIT/CRE generate compelling, innovative research that advances knowledge of the real estate industry," said Charles Nolfi, Senior Vice President of New Boston Fund. "This year is no exception."
Dan McGrath MSRED '08 agreed. As Co-President of AACRE, he underlined the difficulty that the awards committee faced in determining a winner from so many theses that each represented exceptional scholarship and hard work. "The thesis by Ben Bulloch and John Sullivan was ultimately chosen because it demonstrated great creativity and originality," McGrath said, "applying a novel tool to our understanding of real estate development. In doing so, this thesis not only offered a new way to look at development, but it also opened up a whole new direction for further study."
MIT/CRE Chairman Tony Ciochetti emphasized how the work of the two researchers aligns with the Center's larger purpose. "Their thesis is a perfect example of what our tagline Leveraging Science, Developing Innovation articulates," he said. "Ever since the Center was founded, we've sought to foster innovation by linking with other research done at MIT. As we make new connections between scientific disciplines, we're shaping the future of real estate with the tools that science offers."