realonomics

In the ancient world it was not uncommon for story telling to include fascinating analogies. One such analogy was the idea of pushing large objects through a needle’s eye. This was pictorial imagery in the culture used to convey difficulty and in most cases the human impossibility of certain courses of action. Shoving large objects through channels that were sized for thread paints the analogy nicely, causing the mind to seize up momentarily.

There is no doubt about it, in increasing numbers and markets, Broker/Owners are being threaded through the needle’s eye and it isn’t just an ancient analogy! The needle’s narrow passage way is squeezing owners with new operating challenges, technology pressures and more importantly, sustained profitability.

Stitching up the Garments of a Tattered Industry

REALonomics could not help but notice that of the list of the Top Ten Trendsetters for 2006 in the Swanepoel Trends Report - 2007, the vast majority are what REALonomics would classify as “Non-Brokers” or “Neo-Brokers” (those outside the mainstream of real estate brokerage services). Swanepoel has this to say (page 121),

…The future of the real estate industry will be a better place because of companies with their spirit, drive, commitment and leadership…Stefan Swanepoel

The list includes companies like Zillow, Trulia and Obeo. Does this list demonstrate the industry’s need to do more than stitch up its tattered garments? The totality of Swanepoel’s list of trendsetters are companies whose business objectives are the reinvention of aspects of the industry’s economic model and its delivery to the markets.

Is the innovation coming from the outside. It seems so. Broker/Owners, to quote Friedman, live in a “flat world” where real estate is now becoming a democratized service. Who are those leading the democratization and how will their products and services impact traditional brokerage models? Will the eye of the needle tighten around the economic waistline of owners? We think so. In fact, signs are already surfacing, giving indication that it may be too late to stitch-up the garments of a tattered industry.

What if…and it’s a big “WHAT IT”…the so called, “trendsetters” never become brokerage firms (they won’t!) but focus primarily on the things that make brokerage work for owners (they will)? Will the tail then wag the dog, economically? Will the dog chase the tail until it is exhausted? Will the tail become the dog’s master?

Sewing Buttons that don’t Match

The real estate industry is rife with innovation and opportunity for owners, so let’s dispense with gloom and doom and instead, issue a call for definitive owner-directed change. Extricating ourselves from the eye of the needle is something we can do by managing the markets and reinventing our companies.

Right now, and for the foreseeable future, the requisite economic congruity within the industry is sorely lacking. We have a suit coat with buttons that don’t match one another and an environment that is introducing change so fast that we can hardly manage it day-to-day, much less harness the opportunities. In a vast sea of innovation, the last thing we need is a perfect storm.

A New Suit of Cloths, Tailored to Fit

What owners face is the daily barrage of the expedient that keeps them from running business as leaders, rather than managers. Too many owners have become minutia mechanics who exhaust themselves in the daily grind to the degree that any thought of reinvention is quickly dismissed. Survival of the immediate is the business precedent.

What we need as owners is a new suit of cloths, tailored to fit perfectly within a well defined reinvention model that will require some thoughtful planning, perseverance and guts (courage to blow off traditional models that cost too much to operate), to put it bluntly. Courtesy of REALonomics, here’s a set of ten starting points for owner-implemented change and each is a strategy used by the trendsetters:

1. Redefine your market to its widest playing field…use a macro model
2. Reduce your retail operating models in favor of less labor costs
3. Replace bricks and mortar with paperless tools systems
4. Redirect your organization toward consumer centric era practices
5. Reject the notion that money is a solution, adopt vision as a solution
6. Refine your web model so that it is a business model, not just a website
7. Regroup your team and point them toward a new business adventure
8. Rethink your systems, top to bottom and expunge duplication processes
9. Retool the model math in your organization; try fee-based commissions
10. Recharge your leadership by making innovative decisions each month

Getting through the Eye of the Needle

Here are ten questions that can help you think about your organization’s operating creed and bring you through the eye of the needle in good form.

1. Are you Agile Enough?
2. How do you Define Growth?
3. Is your Company Borderless?
4. What is your True Asset?
5. Do you Need Permission?
6. Are you Herding Cats?
7. What are the Great “ISMS”?
8. Do you Believe in Acquisitions?
9. Are you Extracting Capital?
10. Are you a Brand Fanatic?

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