Service Innovation in Real Estate

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To succeed in the future we will need to boost the real estate profession's “innovation quotient”, and be recognized by consumers as innovative. This Report uses case studies from within and outside of real estate to examine ways organized real estate can transform our value through service innovation. This research report is a part of the British Columbia Real Estate Association's Journey of Discovery. BCREA launched the Journey of Discovery (JOD) to help our organization and BC’s eleven member boards strategically plan for the next five years. This project seeks to understand where the greatest contributions of products and services could be for increasing the innovation of REALTORS® in service of their consumers. If organized real estate is to effectively adapt to and proactively initiate change, which we believe is necessary now more than ever, the first stage is to gain a solid understanding of the current and future states of the industry. For access to the slides with links and our other reports, please visit http://web.bcrea.bc.ca/jod/reports.htm This presentation was prepared by CE Holmes Consulting, Solvable & Monique Morden Consulting

Transcript of Service Innovation in Real Estate

  • JOURNEY OF DISCOVERY SERVICE INNOVATION FORCE OF INDUSTRY CHANGE 5 SLIDE DECK Please ensure you click the hyperlinks as you navigate 28 July 2014
  • lower expenses to counter smaller revenue streams. REALTOR membership decline: The combination of compensation model shifts, increased REALTOR spe- cialization, escalating consumer autonomy, and a push towards increased Professionalism may result in a signifi- cant decrease in the number of BC REALTORS. REALTOR performance gap widens: With the advance- ment of REALTOR technologies and the adoption rates of those technologies highly correlated to REALTOR success, we might see the gap between the top perform- ers and underperformers increasing. This could leave few REALTORS left in the middle. Conversely, previous underperformers could leave the industry, to be replaced by those who used to be in the middle as the new under- performing class. The Race We Are Running: In What is Strategy, Michael Porter defines the difference between operational effective- ness and strategy: Operational Effectiveness is assimilating, attaining and extending best practices. Strategic Positioning is creating a unique and sustainable competitive position. Put more simply, operational effectiveness is running the same race faster, while strategic positioning is running a different race. What Race Are We Running? Is BC ORE determined to run a different race? If so, should BCREA take a strategic direction that helps take us on this different course? Overview: Both the rate of industry change since our last strategic plan, as well as anticipated change in the near future demand that we re-identify who we serve, what we serve and how we serve customers without any precon- ceived notions of the outcome. If we are to continue to thrive over the next five years, we need to address fun- damental questions around our service model. While the other four JOD Forces of Industry Change address signifi- cant product opportunities, this Forces Report addresses innovations in service delivery by exploring case studies from other industries. REALTOR Assumptions: Based on the research con- ducted during the Journey of Discovery, we have identi- fied potential forces of REALTOR change. Each of these could have significant bearing on how BCREA serves REALTORS and Brokers in the future: Shifting compensation models: More varied types of compensation models, as well as the potential of REALTORS earning less per transaction, might de- mand more transactions per REALTOR to maintain prior income levels. We recognize that REALTORS may have
  • Image Credit: The sop for Children, Illustrator Milo Winter
  • How does our culture of innovation compare to those of other professions? We are all familiar with the four scenarios posed during the CREA Futures project. BCREA intends to align our strategic plan with supporting a future wherein REALTORS are both highly valued by consumers, and consumers have a myriad of options to meet their needs. Research demonstrates that both high service quality and being perceived as innovative are key determining factors of whether consumers switch providers (and likely whether they con- tinue to use REALTORS). We can only achieve our desired future outcome by boosting the Innovation Quotient of the Profession, and by being recog- nized by consumers as innovative. Companies will step in to fill the innovation gaps left by ORE, as exemplified by the recent merger of the two portal giants, Zillow and Trulia. And yet JOD research makes a clear case for a lack of per- ceived innovation by consumers. From consumers hosting REALTOR audi- tions to identify the seemingly invisible points of differentiation between REALTORS, to homogeneous, basic marketing plans that they feel could have been better created themselves, to sentiments about listing price deter- mination being cookie cutterconsumers are struggling with REALTORS who are delivering below expectations. Organized real estate is in an ideal position both to support strategies encour- aging greater innovation across BC real estate, as well as to ensure BCREAs services are innovative. In fact, these two levels of innovation should be inex- tricably intertwined as a measure of BCREA success. And yet, we have no quantifiable benchmark and tracking method for our own Innovation Quotient. Luckily, researchers have done the work for us, devising a corporate culture test based on studying the innovation of 759 companies. If we first identify our own innovation strengths and weaknesses, we will be that much more likely to encourage innovation both within our organization and within BC real estate. Encouraging Innovation
  • Image Credit: Six Building Blocks of an Innovative Culture, How Innovative Is Your Companys Culture?, MIT Sloan Management Review BUILDING BLOCKS FACTORS ELEMENTS SURVEY QUESTIONS ELEMENT SCORE FACTOR AVERAGE BUILDING BLOCK AVERAGE Entrepreneurial Hungry We have a burning desire to explore opportunities and to create new things. Ambiguity We have a healthy appetite and tolerance for ambiguity when pursuing new opportunities. Actionoriented We avoid analysis paralysis when we identify new opportunities by exhibit- ing a bias towards action. Creativity Imagination We encourage new ways of thinking and solutions from diverse perspectives. Autonomy Our workplace provides us the freedom to pursue new opportunities. Playful We take delight in being spontaneous and are not afraid to laugh at ourselves. Learning Curiosity We are good at asking questions in the pursuit of the unknown. Experiment We are constantly experimenting in our innovation efforts. Failure OK We are not afraid to fail, and we treat failure as a learning opportunity. Energize Inspire Our leaders inspire us with a vision for the future and articulation of opportu- nities for the organization. Challenge Our leaders frequently challenge us to think and act entrepreneurially. Model Our leaders model the right innovation behaviors for others to follow. Engage Coach Our leaders devote time to coach and provide feedback in our innovation efforts. Initiative In our organization, people at all levels proactively take initiative to innovate. Support Our leaders provide support to project team members during both suc- cesses and failures. Enable Influence Our leaders use appropriate influence strategies to help us navigate around organizational obstacles. Adapt Our leaders are able to modify and change course of action when needed. Grit Our leaders persist in following opportunities even in the face of adversity. Collaboration Community We have a community that speaks a common language about innovation. Diversity We appreciate, respect and leverage the differences that exist within our community. Teamwork We work well together in teams to capture opportunities. Safety Trust We are consistent in actually doing the things that we say we value. Integrity We question decisions and actions that are inconsistent with our values. Openness We are able to freely voice our opinions, even about unconventional or con- troversial ideas. No bureaucracy We minimize rules, policies, bureaucracy and rigidity to simplify our workplace. VALUESBEHAVIORSCLIMATE
  • How might organized real estate incubate innovation? Innovation can come in the form of direct service delivery by the association, as well as indirectly by supporting new platforms for innovation across the Profession for others to create those services. In the U.S., we see multiple exam- ples of real estate innovation being fostered through start- up incubators. There is the Inman Incubator, Realogy FWD, and NAR REach. It was particularly interesting to look at the business model behind REach, which is run by NARs investment wing (yes, they have one) called Second Centu- ry Ventures LLC. In exchange for expertise, networking con- nections, and marketing, startups pay $25,000 to join AND give 2-5% of equity to Second Century Ventures. While the implications on the revenue side of REach are interesting, as it provides a new, perpetual revenue stream for ORE, there are also cultural, ripple effects of an incubator. Through the structure of an incubator, could BC ORE en- courage a stronger culture of innovation amongst REALTORS and Brokers due to networking, content exposure and other levels of participation? Additionally, an incubator could provide a new venue for diversifying the age and experience of BC ORE leadership by engaging entrepreneurs as advisors. Innovation Through Incubation How might organized real estate attract younger, top per- formers to the profession? BC REALTORS dont need to see the data to know that we have a disproportionate percentage of REALTORS over 50 versus those under 40. BCREA data shows over 50% of members are over 50, compared to 25% under 40. The 2013 Imprev Thought Leadership Survey showed that the biggest business challenge facing Brokerages is attracting younger agents. 36% of Brokers said they are not able to get top producers to apply. With only 44% of REALTORS likely or somewhat likely to recommend real estate as a career according to CREA, this problem is unlikely to go away. It is imperative that BC ORE continues to pursue initiatives to attract young, talented professionals to keep the trend line moving up in REALTORS under 40 entering the profession.
  • Image Credit: NAR REach
  • Could higher barriers to becoming a REALTOR increase innovation and service quality? One of the critical roles ORE plays in the p