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TODAY'S OTHER NEWS

PropTech Today: Do’s & Don’ts of transformation - Countrywide, Foxtons

It’s not often we can enjoy beautiful sunshine on bank holidays, but I suppose this one was a particularly blessed weekend, so it’s the least we should expect!

I hope you all enjoyed the weather and grabbed some time with the family; chocolate and roast beef.

But now it’s back to it, and I’m picking up where I left off last week, with the first instalment of my market transformation do’s and don’ts series.

Each week, I plan to analyse one ‘do’ and one ‘don’t’, starting today with ‘don’t deny’, and ‘do embrace’.

Countrywide

To analyse both of these, it’s helpful to use Countrywide as a case study because it has, over the years, both embraced and denied digital transformation. What’s unusual is, it embraced first, and then chose to deny.

In 2014, when Alison Platt became CEO of Countrywide, she began to proactively push a digital overhaul of the entire company, keen to embrace digital transformation.

As my good friend Eddie Holmes has written, Countrywide’s strategy under Platt had ‘two main pillars’, pitched under the title of ‘Building Our Future’.

1. Launch an online hybrid competitor of its own (the multichannel approach)

2. Rationalise the existing business by closing branches and consolidating brands

In May 2016, Countrywide launched the pilot of its online hybrid offering, and closed 200 branches and four brands.

The company was boldly trying to evolve, spending many, many millions on the overhaul, including £8.1 million on redundancy payments. But share prices began to fall and shareholders grew concerned at the choices being made by Platt.

On top of this, by attempting to implement both the pilot launch and the branch consolidation simultaneously, we can safely assume there was significant cultural friction between top level employees.

In her time as CEO, Alison Platt oversaw a 90% fall in the company's share price, and two profit warnings in just three months. She ‘resigned’ in January 2018

Alison Platt failed to take her staff on the transformation journey with her. She set off alone and clearly didn’t have the support of many at all. To say she was unpopular is putting it politely. 

The results of her efforts were tragic. Quite, quite terrible. But, Platt was earnestly trying to implement brand new models to a stringently traditional organisation, so I sympathise with her to a degree.

She was trying to embrace change and it didn’t work. As soon as she was gone, Countrywide abandoned the two pillars of Platt’s transformation entirely, before anything had really had the chance to get off the ground.

The organisation flipped entirely from embrace, to deny. No longer was Countrywide to make any attempts to incorporate innovative digital models alongside or in place of the existing practices. It even went so far as to name the reversal process the ‘Back to Basics’ programme. 

This decision must have been inspired by madness or delirium, or both. To abandon transformation halfway through because things haven’t panned out perfectly on the first attempt is an almost satirical display of ignorance.

It seems the fear of failure got the better of Countrywide, and rather than dusting itself down and trying again, it quit the race and entered a prolonged period of denial. The arms which were once outstretched were now definitely akimbo. 

Even though there is a risk of short-term failure when adopting innovation, to deny digital transformation entirely can only result in failure. 

Foxtons

Foxtons makes for another interesting case study. It could be argued that Foxtons was leaning into digital transformation before anyone else, certainly on the high street. 

It embraced the digital future as early as the early-2000s with new models based around centralised CRM technology, attractive, cafe-style offices, and so on. 

This, however, was twenty years ago and just because it embraced digital transformation back then, it cannot rest on those laurels and fail now to embrace change once again. 

As I have written before: “Foxtons was the first residential agency to go through a digital transformation and it was this process which created its competitive advantage but, as is often the case, it was so early, it now needs to transform again or risk huge challenges ahead”. 

The internal system that Foxtons uses, for example, is incredibly valuable to the company and has been perfected over twenty years, but it is also an isolated entity, unable to integrate nor be integrated with separate, third-party software systems. 

Integration is now a vital part of real estate’s future. In the early-2000s, it was not, so now Foxtons urgently needs to address this flaw. 

It also needs to take an internal staffing audit. Are there too many ‘company men’ in high powered positions? Because, although experience and loyalty are important qualities, the firm needs to bring some more technologically-minded people into the C-Suite. 

Otherwise, how will it become clear what innovation can be done? It needs a new digital innovation strategy and this can only be written with help from people who bleed digital innovation.

Finally, in order to fully embrace market transformation, Foxtons must rethink its value proposition. A huge part of its revenue comes from lettings, a sector now swarming with innovative and cheap alternatives.
If Foxtons cannot compete on a pricing level - and let’s face it, why should it? - it needs to find an innovative new value proposition to secure future success.

Sleek, whitewashed, cafe-style high street offices aren’t enough to differentiate anymore. I hope, for the sake of my old employer, that its early embracing of transformation does not turn into a stance of denial like we’ve seen at Countrywide.

It is undeniably frustrating sometimes, but embracing transformation is a constant activity, not something which goes on a decade-by-decade review process. Foxtons worked incredibly hard to be ahead of the competition twenty years ago, now it needs to do it again. 

Do embrace, don’t deny

It’s a fear of failure and pressure from shareholders which has neutered Countrywide’s digital aspirations. 

And, as many of us are wont to do, it has reacted to the pressure by seeking the false security of denial. 

If Foxtons mimics this disastrous decision, expecting its previous work at transformation to see it safely through the future, it won’t matter how great its branches look because nobody will be going in. 

Tune back in next week for part two of my do’s and don’ts of market transformation series.

*James Dearsley is a leading PropTech influencer and commentator, and is co-founder of PropTech platform Unissu. You can follow James on Twitter here

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    Good article - It's really tough to turn big oil tankers in property industry waters which is essentially a zero sum game (meaning a fixed or declining amount of revenue / addressable commission) is fought over by an increasing number of competitors against a rightly increasingly transparent market place. Integrated innovation is essential around delivering the current service and client experience AND in adding client value in lateral and connected ways

    James Dearsley

    Absolutely Adrian. A very tough job for a senior executive to attempt, especially if surrounded by a group of people who are used to doing things a certain way and have built their careers doing so.

     
  • Simon Shinerock

    Interesting James but I would take issue with a couple of your observations. Firstly it’s important to balance technological innovation with other forms of innovation. One of the best straplines I have come up with for my business is ‘Choose Innovation Choose Freedom Choose Choices’ but the innovation I was referring to wasn’t tech it was our business model. So I changed how homesales worked by charging an upfront fee plus a reduced commission on sale back in 1989 and we achieved 70% market share back in the day. However my biggest innovation and the one with the most potential and promise has been in lettings. In 2008 I created the Primary Tenancy which has proven to be a better safer more profitable model for the lettings industry and one which will probably eventually replace the conventional model, especially since we have introduced our Advanced Rent Option. The second thing I take issue with is your assertion that lettings is awash with cheap alternatives. There may be a lot of them but I don’t smell the sweet scent of success, do you? I think lettings is a big challenge for cost cutters given the ever tightening grip of the regulators, I can’t see a bright future for those who try to introduce cost cutting into this environment. The best thing Countrywide and Foxtons can do is come knocking on my door and for a price I’ll show them how real innovation can revive their businesses

    James Dearsley

    Hey Simon,

    Completely agree on the point of innovation not just being technological. Innovation has many root causes. As for lettings, it isn't just cost but process. Lettings is tied up with many processes that are time inefficient and do not suit either the agent nor the tenant nor the landlord. There are alternatives out there but they are taking time to come to market when they are much needed.

     
    Simon Shinerock

    Hey James, agreed, the automation of the lettings process is key, even essential to providing a better service and in the future it will happen but as you say, it’s taking a lot longer than expected. There will come a time when tenants can communicate seamlessly on a 24 hour basis with their agent or landlord without the breakdowns in communication that currently happen all the time. In that future agents that add value through their business models will be the winners

     
  • Paul Morgan

    Hi James,

    In your two case studies, you suggest Countrywide should not cut themselves off from new tech, and Foxtons should look for new business models supported by tech.

    In both cases the implication is performance can be improved by embracing technology.

    However, you do not state what technologies will help bring about change, nor provide an indicative ROI on the expected change.

    The helpfulness of these commandment style articles would increase if you identified new technologies, proposed steps to bring about the change you suggest is needed, and indicated some form of ROI.

    James Dearsley

    A fair point Paul but there are so many different models that could be used there isn't a one size fits all evolution for every business.

    As Simon suggests above innovation isn't just technology either. Digital Transformation is a huge, costly and timely evolution of a business.

    We are tracking nearly 7,000 businesses on Unissu that could support the real estate industry - not all of them will and many will falter in coming years but there is a starting point to look at newer business models to work with, copy, develop or just partner with.

     
  • David Thomas

    Hi James,

    Great article! I often struggle to understand why some of the larger organisations haven't embraced change and technology faster, especially given they have the manpower and budgets to be able to do so quickly.

    I think this must come down to the change factor and that unless you have a culture throughout the business that embraces change and a leader that champions, innovation and change to constantly be improving, then it will never fully work.

    As an entrepreneurial independent agency we were the first to have our own podcast and alexa skill to help educate the consumer. We are rolling out a vlog to show a behind the scenes of what Estate Agency is really like and we are constantly looking at ways to innovate our service offering to cater for what the consumer wants and needs. Any of the big chains could have done what we have done years ago and dominated the space but maybe it was because they couldn't quantify the ROI and therefore see the value that still stops them to this day!

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