Real Estate Industry Transformation – Looking Beyond Our Boundaries

The real estate industry stands at a pivotal juncture where innovation and transformation are not merely beneficial but essential for survival and growth. Here, we look at the importance of stepping beyond our comfort zone and examining relationships with organizations and businesses that may not obviously be aligned with the real estate industry. Companies that bring value to the homeownership experience can also provide value to the relationships realtors have with our clients.

Through this exploration, we can appreciate the benefits of looking beyond the buy/sell transaction. This emphasizes the necessity of innovation within real estate and highlights the potential for cross-industry learning and adaptation as a roadmap to success in a rapidly changing industry.?

Are you ready to redefine the boundaries of your professional practice?

Defining True Innovation

The process of bringing about new ideas, methods, products, services, or solutions that have a significant positive impact and value (1)

In a rapidly changing industry, innovation must be viewed as the lifeblood that empowers sustainability, growth, and enrichment. For Owners, Brokers, Agents, and many other professionals, being part of the Residential Real Estate Industry is more than a means of making a living and building a fulfilling life; it offers the opportunity to help consumers pursue their dreams. ?

Innovation is more integral than ever in this age of rapid change, outside influences, increasing regulatory conditions, and increased consumerization of services. While minor improvements in models and systems are often realized through innovative approaches, radical changes are often necessary to help realize true transformation in such a long-standing and established industry as residential real estate.

Getting clear on Incremental Innovation vs. Disruptive Innovation will help optimize resource use, support decisions on partnerships and alliances, and support strategic decisions that support business growth.?

Incremental Innovation, such as knowledge-sharing systems, standardized forms and processes, and new tech solutions, such as eSignature and online escrow processing, can streamline processes that improve efficiency and reduce costs. Disruptive Innovation, such as adopting tech-driven property management and smart homes, identifying new and creative solutions for lead generation, enhanced consumer experiences, and new services to increase revenues, can help redefine business models.

New Models:? Non-Traditional Partnerships and Collaborations

Looking outside the industry for partnerships that foster innovation is important. Benefits of such partnerships include expanded market reach, enhanced service offerings, and alternative revenue streams.? Examples include:

• Real estate firms partnering with technology startups for smart home integrations.
• Collaborations with environmental firms to develop sustainable living spaces.
• Partnering with entertainment and video industries to create unique living spaces.
• Partnerships with data suppliers to create new solutions for analysis and insights, e.g., identifying new channels for leads that are likely to move predictors and property valuation solutions to assist potential investors.

Which potential partnerships could expand your market reach?

Alternative revenue streams are already integral to the success of real estate businesses today. Broadening an organization's service portfolio to leverage the many vertical businesses (i.e., ancillary services) that contribute to the overall real estate business will become even more important as traditional business practices continue to change.?

Another industry provides a significant example of how alternative revenue streams contribute to business transformation's longevity and overall success. For example, despite accounting for a smaller fraction of Amazon's total revenue (around 16% as of 2023), AWS typically generates more than half of Amazon's operating profit.

The Future of Real Estate – How Do We Take The Lead?

Embracing Change and Innovation - Practical steps for real estate professionals to stay ahead:

Continuous Learning: Emphasis on continuous learning, broadening agents' knowledge base, and staying updated with market trends.

Technology Adoption: Integrating new tools and technologies to enhance efficiency and customer satisfaction and broaden our knowledge base to stay aware of technological advances.

Customer-centric strategies: Adapting to changing consumer preferences and expectations. Become trusted advisers to consumers. Embrace consumer-focused solutions, e.g., Internet of Things (IoT), Home Management Solutions, Home Security Solutions

Technology, Data-Driven & AI-Powered—Real Estate Technology is so much more than a CRM, Transaction Tools, Digital Marketing, or Online Search Solutions. AI has the potential to offer so much more than content creation. An AI-powered database is the future for agents managing their opportunities. Additionally, today’s consumer is looking for more. The future of real estate will require brokers and agents to get ahead of the curve when it comes to technology.?

Partnerships – Partnering with tech companies, solution providers, and collaborations with competitors and suppliers across the various segments of the real estate lifecycle are all becoming critical models to accelerate innovation, test new models, and implement new solutions that will help agents lead in this next evolution of the industry. Developing a portfolio of formal and informal partnerships will be crucial to increasing the value proposition of what you provide to your clients.? In addition to the more traditional relationships involving Mortgage, Title, and Insurance, examples of partnerships for consideration include:

• Virtual Tour Technologies:?These can enhance listings and attract more clients by providing a better online viewing experience.
• Renovation Firms:?Partnering with contractors specializing in renovation can help clients visualize the potential of fixer-upper properties.
• Legal Firms Specializing in Real Estate:?To provide clients with legal advice on transactions, property laws, and compliance.
• Local Businesses:?Creating deals or promotions with local businesses like furniture stores, home decor, or moving services as part of the buying process.
• Relocation Specialists:?To assist clients moving to new cities or countries, making the transition smoother.

Productization - The act of modifying something, such as a service, process, concept, or tool, and packaging it to be marketed and sold as a commercial product with clearly defined parameters and pricing.

Just as we need to listen to our customers when creating new offerings, we need to listen to them when taking those offerings to market. It’s a losing game to keep selling services the way you always have. What has gotten your organization to where you are today will not get you where you want to be in the future.?(2)

Companies that have productized are more profitable, grow faster, and achieve higher valuations than their peers.?(2)

• Without products, a firm’s revenue growth will be limited by the speed at which you can add and train staff
• A “product” company typically has a gross profit margin ranging from 60-90% vs. the industry standard of approximately 40% for customized professional services
• Product and “as a service” companies have much higher valuations?(e.g., 8x revenue) than traditional professional services firms (e.g., 1x revenue)

Benefits of Productization(3)

• Transparency – helping consumers to understand the various services being provided more clearly
• Scalability – packaged services are more easily leveraged as they’re clearly defined and repetitive in nature.
• Increased Efficiency – structuring commoditized services as products-free agents to handle more deals while ensuring standardization and predictable revenue
• Elevated Profit Margins—Optimizing costs and pricing leads to enhanced profitability. For example, realize lower margins on highly leveraged services such as transaction coordination, showings, etc., while securing higher margins for advisory-type services such as negotiations and portfolio planning, advanced technologies such as virtual/augmented reality, and innovative listing solutions.

Conclusion

• Look beyond the real estate industry for inspiration, experiences, relationships, and models that may not be intuitive from within the industry itself.
• Appreciate insights from other industries that aid in driving innovative breakthroughs.
• Non-traditional relationships (competitors outside the Real Estate industry) are a tremendous source of innovation.
• Packaging services in a clear and concise way helps consumers better understand the value we provide and is a great source of alternative revenue streams.
• Call to action for real estate leaders to think broadly, value innovation, and embrace change proactively.

Additional Resources

(1) Nick Jain, “What is Innovation? Definition, Types, Examples and Process” Ideascale.com/blog, July 15, 2023, https://ideascale.com/blog/what-is-innovation/

(2) Jaime Drennan, “The Business Case for Productization” Vecteris.com/blog, November 28, 2023, ?https://www.vecteris.com/blog/the-business-case-for-productization

(3) Brian Kerrigan, “The Top Ten Benefits of Productizing Your Service” LinkedIN/pulse, October 9, 2023, https://www.dhirubhai.net/pulse/top-ten-benefits-productizing-your-service-brian-kerrigan/