Tuesday, October 31, 2006

Real estate is ripe for innovation

An interesting article from MarketingProf’s today details an interesting approach to innovation, and I think the approach can be very pertinent to the real estate industry. Technology has advanced to a point where blatant inefficiencies in the traditional real estate business model are being continually challenged by simple innovation (think Zillow, RedFin, Zip Realty) and there is significant opportunity for people in the trenches to really succeed with a little innovation…..

Okay, back to the article and the lesson. The MarketingProfs article: To Innovate, Break A Rule recommends that approach of taking stock of traditional rules and dogma for doing business challenging the validity of those rules. With new technologies and tools, many of the old rules of the transaction no longer apply, and the groups that challenge those rules end up capturing market share. As an example, a comps report used to be the exclusive tool of the real estate agent. Zillow broke that rule and now we are reeling. The same concept applies to access to MLS data. Now you can get listing data off of thousands of websites and a full interface from Trulia. RedFin broke the rules of the two-party exclusive representation and is rapidly growing beyond the Northwestern market.

So what does the article teach about creating innovation in your own business? I have posted some excerpts below, but please read the entire article.

“How do you do it?
Rules come in innumerable forms: service levels, pricing models, distribution, product features, and customer experiences. Clearly, rules can only be broken that are operationally and financially realistic, but I recommend approaching the task openly, with three questions in mind:

1. What are the natural laws of your business? The practices that are so familiar and regular they are almost unnoticeable? This is perhaps the most difficult task, because by definition it requires seeing your business clearly, without the bias of "business as usual."

2. A rule must be relevant. Backroom processes and cost-reducing efficiencies don't count unless they translate into something profoundly meaningful for your customers. Ask: Which affects them the most? Are there ones that most obviously frustrate or irritate our customers? (A really clear indicator here is this: What do you fight with your customers most about?). At this stage, focused customer research can be useful, particularly if you can test alternative service/product models.

3. Which practices, if changed, could
have the most disruptive impact on the marketplace? What would really change the rules of the game? Breaking a rule isn't just about creating new value, it's about repositioning yourself. The question is as much about marketing as product/service innovation. It should send a dramatic signal that you do business differently. Even if few Commerce Bank customers go on Sundays, being open seven days a week gives immediate credibility to their "most convenient" market position. “

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