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3 brokerage lessons learned from “Blown to Bits”

In 2000, Philip Evans and Thomas S. Wurster wrote a book called “Blown to Bits: How The New Economics of Information Transforms Strategy.” That same year, Evans addressed 300 principal owners at the Gathering of Eagles. That session had brokerage owners sitting at the edge of their seats for the entire 90-minute program. Let’s revisit some key insights from the book and consider what’s happened in the last 20 years.

“There is a universal trade off between richness and reach. But unbundle information from its physical carrier and the richness/reach trade-off can blow up.”

Think of how things have changed since 2000. Virtually every business has been transformed.  Online banking, on-demand shopping, professional sports, travel, telemedicine, etc. Not one facet of industry, education, or commerce has been unaffected—even real estate brokerage.

Our industry cautiously moved into universal information sharing with our customers—buyers and sellers of homes. At the end, we found that worries over how this information sharing would destroy our business were unfounded—thus far. We moved from an era where we traded reach (newspaper classifieds) and richness (in-person listing appointments and agents presenting in-person purchase offers), for the online world where there is more reach and richness in what we deliver. The trade off for all this reach and richness is the loss of personal interaction between agents in their day-to-day deal making.

“The insurgent’s greatest competitive advantage is the unwillingness of the incumbent to fight on a deconstructed definition of the business.”

Let’s talk about the Zestimate. An entire company—that now dominates online real estate-oriented traffic—was built on providing a service that our industry failed to compete with for years. Have you noticed the valuations of firms like Zillow? A firm that has no branch sales offices and few (if any) traditional agents has a valuation of more than all the other publicly traded real estate firms combined—by a multiple factor. 

Think of how three companies went online in small sectors of our industry: Lone Wolf, Showing Time and The CE Shop. They reaped valuations exceeding all but two of the largest brokerage sales in history.  

“Every business is an information business. Information is the glue that holds value chains, supply chains, consumer franchises and organizations together. Information accounts for the preponderance of competitive advantage.”

We’re at the dawn of a new age of brokerage. There are new diagnostic tools that can accurately predict which sellers are more likely to sell, which agents are likely to become top performers, which agents are more likely to consider one brokerage over another and which services matter the most to both consumers and agents.

The new brokerage will take full advantage of these and other information-derived services and tools. While we remain fundamentally a relationship business, how we surround our businesses with these new tools and resources will determine the winners of tomorrow.

Steve Murray is a senior advisor for HW Media and RealTrends.

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