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In 1997, Jeff Bezos gave an interview that details why he began selling books. Amazon was only three years old at the time. His reasoning revolved around quantitative data that revealed to him that there were more items in the book category than in any other. He stated that there were more than three million different books worldwide at any given time across all languages. Second to books was music.
Fast forward to 2020: Amazon is a retail empire that controls its entire ecosystem via an end-to-end marketplace. Gone are the days of starting your retail journey on a website and it ending with delivery by DHL, FedEx or UPS. Now, within days, a branded truck shows up to your house as the driver concludes your purchase by carefully delivering your package.
At what point did Jeff Bezos realize that until he controls the entire consumer experience, he can’t dominate the world of retail? As long as there were third-party companies providing services to his customers, he couldn’t control the experience, pricing and speed of services rendered. The art, science, technology and timing behind Amazon’s dominance resides in those three factors delivered via an end-to-end experience.
So how has the largest asset class in the world — the real estate industry — gone this long without being disrupted like the retail, lodging (Airbnb) and transportation (Uber) industries? With all the technological advancements, everybody’s access to the internet in the palm of their hands and access to excess information — how? And why? Because nobody has yet to connect all the dots.
This industry is flagrantly antiquated, expensive and fragmented. And no 20-something-year-old techie is going to disrupt an industry that’s as heavily regulated as real estate without vividly understanding the intricacies of how things work — in particular, the politics surrounding property data and other regulations that can ruin a disruptive and innovative idea.
There are four pillars needed to disrupt the real estate industry:
Art
When I refer to art as a pillar to disrupt the real estate industry, I’m referring to designing a compelling and dynamic business model. At the same time, let’s be very clear — a non-traditional business model is not innovative. Alone, it’s just a business model. That’s not defensible. Every real estate brokerage in the country can easily copy a business model. However, a compelling and dynamic business model built based on quantitative data with modern technology, a deep understanding of what the consumer wants, proper messaging and the right timing has a significant chance of disrupting the real estate industry.
Science
When I think about science in regard to the real estate industry, I’m specifically thinking about human behavior. Buyers and sellers throughout the country have been conditioned to believe that they must pay historically high commissions in order to transact real estate effectively. Consumers are led to believe that commissions are non-negotiable and that any company that does anything outside of the status quo would render horrible results. This couldn’t be farther from the truth.
The company that disrupts the real estate industry has to unequivocally understand the science behind human behavior, realize the methods to successfully evolve consumer beliefs and habits and be consumer-centric. Building something people want and making everything about the consumer experience is what has made Airbnb, Amazon and Uber stratospherically successful.
Technology
When it comes to technology in regard to the real estate industry, everything needed to disrupt the industry today actually already exists. However, it exists in the form of many independent companies that are all solving parts of the bigger problem. One segment of companies is creating better ways to search for real estate; another is creating transactional end-to-end platforms; others are creating robust customer relationship management (CRM) tools; some are building predictive analytics to determine when people are likely to sell their home and so on. However, nobody has the technology that collectively addresses the fragmentation — the friction — that plagues the real estate industry. The company that disrupts the real estate industry will have tech that connects all the dots.
Timing
When it comes to timing in regard to the real estate industry (or any industry), this pillar is pivotal. Too early and too late are both considered bad timing. That’s why, regardless of what’s being built, market fit is beyond important. Today, do people want what you built or created? Do they need it? How often? Is the technology ready today? Are you ready to capitalize on the opportunity today? Or are you admittedly early and evolving in the direction of the anticipated opportunity? Look at, for example, blockchain. The company that disrupts the real estate industry, luckily or intentionally, will have the timing right.
For current real estate platforms, even those with a ton of money and/or that are publicly traded, dominance has truly been a daunting task. But it helps to remember that it took Amazon over 20 years to become an “overnight success.” Its founder started with books and mastered the art of distribution. He understood what the consumer wanted and created a seamless end-to-end experience. His timing was impeccable.
For the real estate industry, I’m not convinced that any of the current real estate tech companies are architecturally, structurally and/or technologically positioned to disrupt consumer behavior for the next era of real estate. However, just like Jeff Bezos, founders with big ideas will either be thought of as fools or as geniuses. Only time will tell.