MIT Action Learning course focuses on Chinese real estate

The MIT Sloan School of Management’s pedagogical approach of  “action learning” encourages students to engage with and find feasible measures to solve real-world problems through an array of subject- or area-specific labs. In spring 2016, the China Lab at Sloan had the opportunity to look at the Beijing-based developer Vantone Real Estate Co. Ltd. (Vantone) as a case. 

For the past 15 years, real estate development has been a booming industry in China, enabling many developers to profit significantly. However, the decline in housing demand and excess housing inventory have driven down retail prices in second- and third-tier cities, exacerbating competition among developers. Major players in real estate like Vantone recognize they must pursue new strategies to retain their profitability and lead the competition amid these market conditions. In 2008, Vantone began a project in Xianghe after the government named one of the company’s subsidiaries as the primary land developer of 9.7 square kilometers in the county. Located in the middle of the Beijing-Tianjin-Hebei region, Xianghe is well-served by transportation options, including major expressways and a high-speed railway. Vantone’s management team identified a sizeable deficit in the region’s medical resources and was looking to leverage its holding company’s stake in a healthcare company to develop a major medical infrastructure project.

The interdisciplinary nature of the case required the consulting team to leverage both business acumen and expertise in the real estate market. Thanks to the support of the Samuel Tak Lee MIT Real Estate Entrepreneurship Lab (STL Lab), students from the Department of Urban Studies and Planning (DUSP) were invited to take part in the Action Learning lab alongside Sloan MBA students for the first time. 

Vantone Real Estate’s chairman Jiang Hongyi personally visited the team in Cambridge at the beginning of the project in February 2016 to share his vision of integrating real estate development and medical services to remain competitive in the Chinese market. After hearing from Mr. Jiang, the team put together a report based on materials provided by Vantone and conducted independent research into similar projects in the US and Japan and the potential healthcare demand in Xianghe. 

The team briefed Jim Qian, a management delegate from Vantone and MIT alumnus, after spending a month on remote research. He approved the team’s early findings and encouraged them to explore the complexity of China's real estate construction through on-site investigation.

In March, the team embarked on the second stage of the project: conducting fieldwork in China. They visited Vantone’s Beijing office and Xianghe, and spent two weeks on interviews and further research. At the end of the trip, the team met with Mr. Jiang and other Vantone executives, presenting their interpretation of China's real estate market, the Xianghe market’s potential demand, opportunities in China's medical market, and Vantone’s real estate market competition strategy. They also presented a concrete scheme to combine the medical industry and real estate. Mr. Jiang spoke highly of MIT’s teamwork, saying this field trip had strengthened their understanding. It also provided an opportunity for Vantone senior executives to see the possibility of combining medical services and real estate development in other countries as well. 

Upon returning to the United States, the team finalized their findings and presented a report to Mr. Jiang at Vantone’s China Center in New York in May 2016. Their ultimate recommendation to Vantone was to pursue low-cost, high-value healthcare initiatives with an emphasis on in-home palliative care in the Xianghe development, based on the following insights/factors:

1)    “What got us here won’t get us there.”

Vantone must constantly innovate to retain their differentiated positioning in the market. Success can often create complacency and future failure while other competitors target Vantone and work hard to catch up. Vantone must innovate so that this does not happen.

2)    An attractive, growing healthcare market

Healthcare spending and healthcare subsidy per capita is growing rapidly, driven by rising disposable incomes, an aging population, and high chronic illness incidence rates.

3)    Company alignment

Vantone’s brand value is based on its association with quality and innovation; the firm must remain differentiated along these dimensions. Moreover, relevant networks and subject matter expertise already exist at the high levels of Vantone to catalyze implementation.

4)    Profitability

Healthcare solutions geared towards China’s aging population and the chronically ill are of high-value as the needs are unmet.

Professors Yasheng Huang, John Grant, and Joseph Battat of Sloan also attended the final presentation, along with the director of the STL Lab, Dr. Yu-Hung Hong. The professors were supportive of the findings and expressed interest in continued collaboration between MIT and Vantone. As a follow-up to the project, the MIT team was invited by Mr. Jiang to the China-US Diplomatic forum in December 2016.

Even though the MIT team provided Vantone with a thoroughly researched proposal, the implementation of the project still needs further discussion. We look forward to continuing a partnership between MIT and Vantone, and more opportunities to engage with Sloan through the STL Lab to further socially responsible real estate development in China. 

--Wange Wu, Master of Urban Studies Candidate, STL Fellow