“Digital transformation is not (just) about tech - It’s mainly about new business models”- Peter Mikulic - Executive Series #3

Peter Mikulic is the Chief Digital Transformation Officer at Stena Fastigheter, one of Sweden's largest privately owned real estate companies, owning and managing a total of ~2.1 million square meters.

Peter Mikulic is an experienced C-level executive specializing in digital transformation and aligning technology with business goals. With a background as a CIO, CDO, CEO, and COO, he has a proven track record of leading organizations through complex change by combining strategic vision with practical execution. Known for his calm demeanor and collaborative leadership, Peter builds strong teams and delivers tailored solutions that drive innovation and long-term value in rapidly evolving industries.

Tune into this session to gain insights into the topics of:

• Future-proofing buildings;
• Scaling digital initiatives;
• Optimizing property management systems;
• Leveraging AI for data-driven decisions;
• Fostering cross-functional collaboration in real estate;

And so much more!

Interviews with inspiring Founders, Investors, and Real Estate Executives will be shared weekly on this podcast series - follow the PropTech Talks interview series and stay tuned!

Connect with me on LinkedIn: https://www.linkedin.com/in/matthew-maltzoff/

Transcript

00:00:00 Matthew Maltzoff
 Welcome everybody to our next episode of PropTech Talks, where we talk with real estate executives, investors and founders, discussing key trends in the industry at the moment, what to do about them, how to capitalise on them. We're here with Peter Mikulic from Stena Fastigheter. I hope I said everything there correctly. Peter, it's fantastic to have you. Would you kindly give us an introduction?
 
 00:00:29 Peter Mikulic
 Thank you Matthew for inviting me to to your podcast. My name is Peter Mikulic. I work at the company in Sweden called Stena Fastigheter. Fastigheter is property in English, so you can also say Stena Property. Stena Property is one of Sweden's largest residential company, privately owned. We have about 28,000 apartments spread across the regions of Stockholm, Malmö and Gothenburg, where I'm also located.
 
 00:01:02 Matthew Maltzoff
 Amazing. And if I'm not mistaken, Stena Property also has not just residential but commercial space as well.
 
 00:01:10 Peter Mikulic
 Yeah. But our main business is the, the, the residential we have about 20% of our revenue is from, from commercial you can say. And we are actually expanding our business when it comes to commercials, acquiring properties in Poland, in Warsaw, Krakow, Rockland.
 
 00:01:34 Matthew Maltzoff
 Really interesting well, I'm sure we'll we'll get into that in a little bit let's start with with you. I'd love to, well, A, get to know you better and B, for our audience listening, I think your story has been, it's quite interesting. So you know, how did you get to where you are the chief digital transformation officer? It's a, it's quite a unique role for real estate, but also incredibly relevant given the last few years and where things are going. So tell us, tell us about, you know, how you ended up as the CDTO of a Stena Property.
 
 00:02:15 Peter Mikulic
 Thank you. Yes, it's a really exciting role and and I've been working within digitalisation all of my work life, you can say, starting off with programming in Kobo in the 80s and making my journey into different roles within digitalisation. So I have a large spread of of different roles which I have been working in. So I come from the technical side, you could say, but I'm not because I've grown up within the real estate business. I've only been here for five years. I actually been raised, you could say, within the educational business. So I worked for one of Sweden's largest educational organisation called Folkuniversitetet. What you can call is the kind of evening schools in Sweden where you can study different languages or, or or other ways to, to evolve yourself. So I worked there for 27 years actually. So the last years I I was CEO of the one of their companies providing IT services for all the the Folkuniversitetet organisation in Sweden and internationally. But working 27 years and one same place makes you curious what what can you do with my skills in other businesses. So I worked a couple of years in a small company consulting company where I discovered that real estate business actually is one of the least digitalised businesses if you look into different industries. So when this opportunity came during COVID, actually, I couldn't resist the applying to to this role. And so so that's why I'm here still.
 
 00:04:16 Matthew Maltzoff
 Understood, and I mean the real estate being under digitised could be seen as a as a good thing and a bad thing. It seems you saw it as an opportunity. I mean quite a bit has happened in the last five years. How would you say the industry has played out since your time at Stena?
 
 00:04:42 Peter Mikulic
 I see that there are two drivers. One of the drivers is that we have to have an efficient administration, which means that we have to secure that our workflows are are optimal, optimal that we have integrated digital solutions and not just solutions that provide how to say accounting, but other values that we seek. It could be both analysis or or data collection in in different manners. And the other driver is  -proofing our buildings, which means that we have to secure that they are energy efficient and also that they actually can start producing energy which is one of our our focuses here at Stena. We are striving to be self-sufficient when it comes to electricity. So we are working very focused on on solar panels and battery storage and charging infrastructure and so on, so on.
 
 00:05:55 Matthew Maltzoff
 I, I think it's, it's clear that sustainability, decarbonizing and net zero goals, these, these are fantastic drivers for digitalization, more efficient buildings, higher margin buildings. I think to go into a little bit of detail into how this is done, because it ends up being a, quite a complicated matter. I think that the real estate industry has sort of discovered that digital transformation means stakeholder management, change management. A huge part of this is leadership. So I guess so then the question is what principles do you feel are important for leaders when it comes to having a team, having a business that can adapt to make these necessary changes?
 
 00:06:47 Peter Mikulic
 Yeah, it's, it's about recognising the fact that the the digital transformation is not about technology. It's a matter of a little bit of technology, but mainly about new business models. It's about the human aspect, which means that there has to be new ways of doing things that's not been done before and to stimulate curiosity and courage both, you know, within the the self as such, but also when it comes to top management that they are needed to be curious and also need to be courageous and start to, to try out things. I think that since real estate is rather conservative, you can say business where you make plans and you, you conduct your work and you according to these plans. They are, we are rather uncomfortable trying out things that perhaps won't work all the way as planned. And that kind of mindset I think is very vital for a, for a company that to accept that there are risks that what we try out perhaps won't be what we thought it would be. But we have a saying here in Sweden that we stay in Stena that let's redecide, which means that we decide same thing, something on the the facts and the data that we got at hand. But when we discover new things, we are not shy of, of, you know, redecide to to another decision and say, let's do it this way. And that could sometimes mean that you have some cost, but you have to be rather quick in that decision-making to make sure that some cost is not too large because you're not well to end up in the the the old way of doing things, that you have a large sum cost and you throw good money on bad investments.
 
 00:09:05 Matthew Maltzoff
 Definitely. So when new information does come, be prepared to disconnect from a previous strategy if you find that there is a better one.
 
 00:09:16 Peter Mikulic
 Yeah, Yeah.
 
 00:09:18 Matthew Maltzoff
 It can be, it can be a painful ordeal, but of course, I mean that. That really makes sense. I think when it comes to a lot of businesses today, CapEx, CapEx spend the risk around a, a strategy that hasn't been done before. Of course, real estate has been more or less the same 20 years until you joined really till the 1st 5 years and now. And now these new business models, as you, as you call them, are critical to unlocking new growth, which of course that's, there's tension there. There's a way, there's a way that worked before. There's a way that's, that maybe not working anymore in the way that's, and that's, that's going to work. How, how do you look to get a positive return on investment or how do you look to prove a positive return on investment when you when you undertake a new project or a new business model or put new CapEx in a location, how can a business structure itself to do this successfully?
 
 00:10:33 Peter Mikulic
 I think that what you what you've got to do is start small, but always think about scaling because you don't want to end up in a proof of concept swamp, where you got a lot of proof of concepts which don't fly and you don't get them going as a proper project or full scale-ups. I think that's one of our problems in our business for the last five years that we have a lot of proof of concepts and that we are trying out things but don't think about how will this scale both when it comes to costs or organisation or or technology or such. What is very, I would say very, very good success factor for us here in Stena Property is that we are are a long term owner which means that we build and buy property which we will have in our portfolio for a very long time, which means that we also work in a portfolio perspective always. We are not looking at a single property as such, when we do our digital activities on investments, they are always looking at our complete portfolio. And we know that we have to do some investments that probably won't pay off the 1st or even the second year, it will pay off on the third year. But when we do that at portfolio level, you, you get a very, how do you say very good foundation for, for, for scaling up the, the different initiatives. For instance, we we already 2017 or 18 decided to connect all our property in one large data communication network. So we had one solution and we rolled out that thing. So we have this on our 450 properties today and that has been one our our how do you say infrastructure investments that we are now capitalising on very much. We also decided to to change the steering of our automation of heating and regulating the the heating in our buildings also from different solutions to 1 standard solution, which is not a closed, it's more like an open industry standard solution, which you can find in manufacturing and so on. And that's also one large investment that we decided on in 2021 or something like that. And that's also one of the things that we now capitalise on when we implement new solution.
 
 00:13:57 Matthew Maltzoff
 Interesting. So the, the, I guess the, the opportunity is often a long run game. But but do do you think that these sorts of technologies and in these sorts of CapEx investments, they really need to be looked at over a / a long run time horizon? It's not, it's not as simple as flick this switch for for profit margin today.
 
 00:14:24 Peter Mikulic
 No, you can't look at the a single property and say how will this benefit this property? It will benefit your portfolio. So you can't look at the at the at the property level. You have to look at the portfolio level.
 
 00:14:38 Matthew Maltzoff
 And, and and looking internally now less so the stakeholders, more the, the, the employees, because real estate has changed a lot. Are different skills required? Is a different mindset required for, for adaptive, say portfolio owners, real estate businesses? What, what do you think? Do you think we're going through a little bit of a shift in in mindset within these businesses?
 
 00:15:09 Peter Mikulic
 Yeah, because I see if we start to to usually I think that we have been organised around a single property as such. We have a property manager and we have the janitors and so on because the property could be looked at as a single company. But when we start now to, to deliver new services to our tenants, it could be broadband services or it could be, yeah, different added services. They will go, they will cut through the organisation on a horizontal level, which means that you can't work in silos. You have to work across the portfolio when it comes to charging water consumption or something like that because you have to build an infrastructure which is the being utilised across your portfolio. So I think that people have to work more closely. I think that you will have more shared functions in real estate business. Perhaps you haven't had them beyond I mean financial of course and so on. I'll see that there will probably be a new roles working across your portfolio rather than in single properties when it comes to energy management or when it comes to customer care of course, and so on.
 
 00:16:49 Matthew Maltzoff
 And do you think that then, so if I'm understanding correctly, the different divisions within, within Stena will have to communicate more, more effectively, more fluidly. There's an extra value on data transmission because they're they're closer to each other. At the same time, many businesses after the pandemic are moving more towards communication on Slack, communication on e-mail, less in the office. I don't know what your office policy is, but but how do you think sort of the the global working environment, how do you think Stena's trajectory fits into fits into that?
 
 00:17:38 Peter Mikulic
 We have always looked at our office as our starting point, which means that we are supposed to work at our office in Stena. So we are working here 3 days at least every week and we have also one one day where we which is Monday where we always are together on the on the office and then people can choose one to two days working from home. We also see that people really appreciate when we start to work in collaboration, which goes horizontally across the the company, which means that you mix property manager from different divisions or you, you mix energy, energy engineers across the portfolio. And then that's one, one way of of cross collaborating across divisions, which is very much one part of our change management you also could say and but we also mixing different roles within a company. So when we are doing whatever digital initiatives, we always try to mix. So, so they, they, there is a good mix of different perspectives, different ages, different seniorities. We mix young and old and so on and we are securing also that the the the ownership of the initiatives, it's on the business side. It's not my initiative, it's not my team's initiatives. We are all only supporting the initiatives and that's also been one of our success factors. I think that we get a very strong pull from the business when it comes come to digitalization. It's not something that me and my team has come up to having a good conference in London at PropTech Connect and somebody said it's really nice to do. It's actually something that they discovered themselves that they would like to do.
 
 00:19:58 Matthew Maltzoff
 Amazing. And I think any discussion about teams, the the workforce of a company, how it's changing, I think, AI must be, you know, must be involved in that discussion to some degree there. There is a lot of speculation, there's a lot of fear, a lot of hope, a lot of questions. Many specific agent applications are starting to become more widespread even within our own business. There are now what we're now seeing some movement towards general agent applications. What does that actually mean in terms of digital transformation within businesses? Do people need AI ? Is is tech literacy less of a requirement? We are talking about software and then software internally on a on business structure and then hardware for smart buildings, more efficient buildings? What does what? What does this new era of AI actually mean for digital transformation?
 
 00:21:11 Peter Mikulic
 I think, I think one of the discovery that we made when implementing in our our own AI colleague, you can say within Stena, she's called Sia, which mean foresight in English. We, I think that we received a lot of understanding from the business side that data quality is the key to, to have a good AI implementation implementation as as this AI assistant consider. So, so one many of these old struggles that we have when it comes to GDPR and data quality when, when, when it comes to data, documented storaging and so on. Now we have a very sharp light shining on, on, on this, which is called AI because now people understand that they have to do the housekeeping on our document storage places and securing that we have the correct data in our property management system and so on. So, so AI have become some kind of like how you say, enabler when it comes to, to data quality inside, both within top management and in the, the staff working in the systems. So, so that's all the things we discovered.
 
 00:22:55 Matthew Maltzoff
 So I mean, in essence, it's (AI) made data more more useful. What what does that mean in practise? I mean, I'd imagine people take the take take data input more seriously and those processes are carefully scrutinised such that the data can be used. But what? What is the? What is the output of this?
 
 00:23:22 Peter Mikulic
 It's actually that that people are are are more eager to, to keep data updated. So, so it's correct and, and relevant because we have, I think succeeded to, to to communicate that if you got the wrong answer from, from the AI system, it probably is not any problem with the system. It's a problem with the source, which the the the the system derives its knowledge. So, so this, this mantra you can say has actually, yeah, driven people to to do the, the job that they should have done before, but they really didn't see the, the, the how you say the benefit of doing doing the job. And one other thing that we had we done, doing the last years is also that every reporting from our financial systems also property management systems is now forbidded to be done in Excel, which means that you can do some consolidation, of course, in Excel and so on. But if somebody press a button that prints a report and the report is not correct, we say that print the report till it is correct. Which means that they have to correct the data source so the report is correct. They are not allowed to export that data to our excel and start to fiddling it with Excel to fix it. For that quarter, they have got to go to the source and fix the the source data.
 
 00:25:24 Matthew Maltzoff
 I mean, AI really is a, really is a, is a tool that seems to have come at a very good time because, you know, the, the real estate industry in Europe is settling into higher interest rates. Data decision, data-driven decision making has, has never been more business critical. And now with data becoming more useful, do you think that real estate businesses have, are, are, are going, are actually, I mean, from the PropTech Connect conference in September, people were quite optimistic because of a lot of the, the new tools that were, you know, yes, interest rates were high, but people are optimistic. There's a lot of, there's a lot of opportunity to be had. And this was sort of the kick up the butt that the industry needed a little bit. I guess strong businesses are made in difficult times, many say. So what would your outlook be for the industry both in 2025 and going forwards given, given all of that information?
 
 00:26:35 Peter Mikulic
 When it comes to the AI I think that I just have to, to look in our own initiatives and, and see that that when it comes to knowledge management, of course, the the generative AI is, is a very strong, strong contender when it comes to what we should focus on. Because we, we could have this colleague that has worked at Stena forever and ever and know everything because she's got access to all the documents, and the, you know, data in our internal systems and external, of course. But we also see when it comes to energy management, that traditional machine learning AI, which not is the generative AI is something that we are already using today when it comes to regulating district heating, incoming temperature, which we match together with weather forecasts and temperature measuring in all our apartments. So, so we have a optimised heated property when when the whole cold or hot weather strikes. So I think that when when you try to manage a complex energy environment surrounding your property, it means that you have heating, perhaps as we do in Sweden a lot of district heating. You have your own electricity production when it comes to solar panels, you can store it in batteries, you have charging infrastructure on, on, on your parking lots and so on. And when you connect that to the grid, you can start to actually have a decision. Should I use my own produced electricity for selling that to our charging infrastructure? Should I use it for my own? Should I sell it to the grid and so on. So you get a very complex energy system surrounding your your property, which must be managed with AI because it will be on a minute or 1/4 decision that you've got to make because you have fluctuating prices on and so on. So that's what we are now building is, is that kind of infrastructure surrounding our properties. So we can have a holistic, holistic energy management, if you say.

 00:29:15 Matthew Maltzoff
 Fantastic. And my, what I'm gathering is that a lot of what you do and forgive me if I'm wrong, a lot of what you what you're doing is, is building internally, not necessarily buying technology solutions. Is is that of or or is it? Is it a case by case?
 
 00:29:34 Peter Mikulic
 It's a case, it's case by case. We are very pragmatic. We, we don't believe that we know everything. So we partner up with for instance, universities here in Gothenburg, which has designed this, this AI algorithm for district heating. We are buying platforms for for AI assistance, which we believe are as future proof as we could, could want or things they so so and so on. So, so we're we're not developing a lot. We are more like lego constructors. Lego, yeah.
 
 00:30:20 Matthew Maltzoff
 Understood. In it it's, it's, it sounds like, you know, technology is core to, you know, every, everything that Stena is doing on a, from an environmental basis, from a internal operational basis, from a on a building level. It's sounds like a very exciting time. What would your advice be to portfolio managers and and real estate executives who are looking, looking to even, you know, even in current market conditions, expand their portfolio, expand real estate businesses? What would your advice be do this effectively?
 
 00:31:06 Peter Mikulic
 Hire someone like me. Of course, I was kidding, but hiring or or assigning someone that is support to to to secure that all the the digital initiatives that you are doing is concerning, is also looking into to the the business aspects and the human aspects. Secure that the the role and the initiatives have people working with communication and change management. Make sure that that this role has a good solid connection with the business. So you don't have a detached innovation department, which I think is very usual mistake that you, you set up somebody to be the innovation manager and so on. And then if you got that, that role in your company, people would think that innovation will be done there because you have innovation somewhere. If you don't, I don't, I don't believe that you should have an innovation manager. You should have someone facilitating innovation within your business, facilitating methods or structures, roles and making sure you have a thriving innovation culture where people are allowed to be curious and allowed to to to try things out and be be participating in diverse initiatives, preferably across your company organisation structure, not working with the same colleagues that they're all are doing. But when it comes to to other advices, since the digital, how do you say solutions are not one solution, They are a system of systems, which means that you have a have to have a good architecture, a digital landscape architecture. Which means that I would always recommend anyone who's starting to their digital journey to, to employ IT architects or somebody like that that can lay out that kind of plan because things need to be connected or, or, or interact together and so on. Because that, that is what, yeah, that's what we needed.
 
 00:33:58 Matthew Maltzoff
 That's great advice. I think just to them to summarise, yeah, the that the, the innovation component and the digital transformation component cannot be superficial. It has to be core to the business and really fundamental to the business and by extension of that an IT architecture layout is crucial to this taking place successfully. Isn't that a fair summary? (Yeah, that's correct.) Fantastic. Peter. This has been an amazing podcast to hear, you know the really exciting thing Stena is doing, hope that a lot of listeners can listen to this and re listen to this to see see the same sorts of results that Stena is seeing through their business. I'd love to give you a huge thank you to speaking with us. See you at the the event in eight months.
 
 00:35:09 Peter Mikulic
 Yeah, Yeah, of course. Thank you for having me, Matthew. I'm looking forward to that too, of course.
 
 00:35:14 Matthew Maltzoff
 Fantastic. Thank you so much, Peter.
 
 00:35:16 Peter Mikulic
 OK, bye, bye bye.