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Destroy Your Illusions

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Last week the well-known real estate author/speaker/consultant Stefan Swanepoel wrote on Facebook that money is flowing into real estate technology. That observation sparked a heated discussion; many argued that real estate doesn’t scale, it’s too complicated, transactions are too difficult, too expensive, and too emotional for technology to disrupt, and so on.

To paraphrase Darth Vader: I find your lack of paranoia disturbing.

The great Mark Steyn wrote “The assumption of permanence is the illusion of every age.” He wasn’t talking about real estate, but he might as well have been. Because this assumption is widespread throughout society at large, it is also deeply embedded in the real estate industry at large. So I thought it was worth meditating on.

Ends vs. Means

The graphic above is a classic quote from Theodore Levitt, economist and professor at Harvard Business School, often called a founder of modern marketing. His advice to companies is to stop focusing on what they do and start focusing on what customers want. People don’t want a quarter-inch drill, they want a quarter-inch hole. If a new technology comes about that produces a quarter-inch hole more efficiently and less expensively, people will stop buying quarter-inch drill bits overnight.

The history of business is full of such examples. Kodak forgot that people didn’t want film, or even photographs, but memories. Record companies everywhere forgot that people didn’t want albums and CD’s — they wanted music. Cab companies forgot that people didn’t want better taxis — they just wanted to get from one place to another. Before cab companies, buggy whip manufacturers forgot that people didn’t want better, cheaper buggy whips — they just wanted transportation.

People don’t want to hire real estate agents — they just want to buy or sell a house as efficiently and as inexpensively as possible.

Today, that might mean using a real estate agent. Tomorrow?

You could start by asking the 5,925 people who have used Opendoor.com to sell their homes. While the industry sits around saying it’ll never work and who the hell wants to take less money for their home and such, actual homeowners are voting with their wallets. They are saying that yes, as a matter of fact, they would take less money for less hassle.

Not Just Real Estate Agents

The illusion isn’t limited to only real estate agents.

Take the MLS for example. Many of them have forgotten that their customers don’t want a better, cheaper MLS with more bells and whistles. No, they want to know what homes are for sale, to advertise their own listings, and to run comps. Instead of thinking about adding yet another ancillary product that 3% of the subscribers would use, maybe talk to your MLS vendor about the user interface? (Yes, I realize many of you do offer those ancillary products for the “non-dues revenues” that the vendor kicks back to you, but… if you fix the UI, your subscribers might be willing to pay more.)

Brokers have forgotten that agents don’t want a better, cheaper brokerage — they want to make money and serve their buyers and sellers. Yet another happy hour for your agents isn’t really what they want from you, is it? Because if it is, you might want to open a bar instead.

Even technology providers often forget that their customers don’t want whatever latest doodad or gadget they are offering; they want business results. For instance, remember QR Codes?

And the REALTOR Association? Well, let’s just say it’s time they started to remember what their customers/members actually want. Hint: It’s probably not another golf outing or a lavish installation dinner party.

Feel Their Pain

I realize this next part is a bit pat, but… that’s because it’s an eternal truth. Business, politics, society… everything is not about you, but about them. You are a means to their ends.

Whether you are an agent, a broker, a MLS executive, an Association director, or a tech CEO, you have to know, understand, and feel their pain. I know it’s hard, because I have trouble with it myself. I constantly have to remind myself that my advice can’t be about me and what I want. It must be about them and what they’re dealing with, and what they want. Isn’t that what being in business is? Understanding what your customers are dealing with, what their pain points are, and trying to figure out how to address them?

As we try to understand, empathize, and create solutions, we have to keep Levitt’s maxim in mind: people don’t want the means, but the end. They don’t want a drill, but a hole.

The healthy paranoia of a healthy business is not whether someone else has a better drill, but whether someone else can make a better hole. Look beyond your horizons, think broadly about the hole instead of the drill, and you’re far more likely to survive and thrive.

And I can think of no industry more in need of that kind of broader healthy paranoia than real estate.

-rsh

13 COMMENTS

  1. I’ll add: Don’t be too quick to dismiss a technology if you don’t see the immediate value it has for others.

    You might be the only person not using QR codes. Boarding passes, document management (especially in mortgage) payment apps at Starbucks and Walmart, and half a billion people in China use them daily for making/receiving payments with WeChat and Alipay.

    It may not be the best way to make a ¼ inch hole, but it’s better than a hand drill.

  2. Just like the Record Store disappeared from America’s retail landscape, so too will the storefront real estate brokerage office.

    Firms like Nooklyn and Compass are proving the industry needs to change with the times …

    or contend with the fate of their own inertia while Teams, 100% Brokerages and 3rd Party Apps eat their lunch.

  3. Another great post Rob. 100% agree. It’s always about helping the customer achieve their desired end goal with the least amount of friction and pain.

    There’s also an illusion that you can’t herd cats but you can easily catch the mice the feed the cats.

    An interesting stat to highlight your point: Fortune 500 firms 1955 v. 2016: Only 12% remain.

    Technology is disrupting business and changing behavior at such a fast past that a study from the John M. Olin School of Business at Washington University estimates that 40% of today’s F500 companies on the S&P 500 will no longer exist in 10 years.

    Zillow has already completely disrupted real estate advertising in less than 10 years.

    IPhone has completely changed consumer behavior (and just about everything else) in just 10 years.

    If that can happen to the largest companies on the planet…

    • Yep! And, let’s also not forget that technology has completely disrupted even how we pick our so-called leaders. Trump simply is not president without social media and the Internet.

  4. “People don’t want to hire real estate agents — they just want to buy or sell a house as efficiently and as inexpensively as possible”. This is the only part of your article I disagree with. Not sure that this is the driving motivation behind buying and selling for the masses.

    • Oh, the ultimate motivation is life changes of course. Marriage, kids, divorce, new job, etc. etc. But once they decide to buy or sell, they just want it done.

  5. Rob, you ‘had me at hello’ with the reference to Professor Levitt. His “Marketing Myopia” is as relevant today as it was many cycles ago when I first was inspired by his research while in graduate school. As I sure you know, that premise was driven by the core question: ‘what business are you really in?’ IBM Watson, for instance, is a great example. It’s not hardware, software or a UI perse, it’s serving up anwers to complex questions, which of course, is what someone seeks when the buy a “data processing system” …. a 1/4 inch hole. Your perspective and delivery of the message are of ‘Levitt quality’, Rob.

  6. Finally,you started listening to your readers, ,”the establishment” is done,and that includes Zillow,nar,and the lousy mls’s,they are all going to be “repealed and replaced”,to borrow a current phrase, The present corrupt system most RE Agents operate under will soon be gone,its been dead for awhile,your article is very encouraging,the future will be great.

  7. Great read as usual and I love the comments: My question? What will keep us relevant if Opendoor.com appears to be thriving? (BTW first I’ve ever heard of this company…) If the bottom line becomes less important but, the quick fix does? Thoughts

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