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TODAY'S OTHER NEWS

PropTech Today: Market transformation – deterring, championing and Purplebricks

I hope you had another wonderful Bank Holiday weekend; only three weeks to hold on until the next one. Personally, it was a chance for me to spend some time with my bees - of all things.

This week, I’m bringing the next instalment of my ‘Do’s and don’ts of market transformation’ series. Last week, we discussed the importance of engagement and not downplaying innovation, using CBRE and Avison Young as examples. Today, it’s time for do champion, don’t deter.

Don’t deter the consumer or the market

Do not create barriers to new business models. That’s what this is all about. And while this piece of advice is today aimed at property professionals and businesses, the best way to assess the damage of deterring innovation is to consider a broader picture.

Look at Uber and Airbnb. Both companies find themselves, or have previously found themselves, in a complex position: they have the full support of the population, yet are being slapped with legislative deterrents, designed to temper their market-grabbing potential.

Uber has had well-reported struggles with Transport for London and the Mayor of London’s office, only just managing to maintain the right to operate in the capital. Meanwhile, Airbnb continues to be thwarted by government legislation that states one can only rent out their property for a maximum 90 nights of the year.

Despite this, both companies have the vast majority of the population supporting them. Sure, there are small circles who voice complaint and concern, but you’d be hard pressed to find a soul today who hasn’t, at some point in their life, been a patron of Airbnb.

As such, we have a situation where innovation and citizen mentality change are moving faster than legislation and the legal battles to overcome it.

Despite being some of the biggest businesses in the world, and despite having the people on their side, legislation - supposedly put in place to support the interests of the public - is actually, in many ways, working directly against their will.

What the government has done in both of these cases is believe its actions to be protecting the integrity of competition, when, in reality, it’s thwarting the progress of innovation.

This is what we see happening in all levels of real estate. Believing that they are protecting their integrity against technological rivals, many firms fail to make progress, fail to match their competition, and then, simply fail.

The recent news of Purplebricks leaving Australia and the departure of Michael Bruce is interesting in the context of this article. Something has clearly gone wrong - commiserations to all involved - but this downturn in fortunes should not act as a deterrent for others to try something similar in the future.

Despite many voices in the industry spending the past few years shouting and screaming at Purplebricks, warning the world of its damaging, flawed intentions, the company has found remarkable success; at least in the eyes of some.

It is, however, likely it has expanded too quickly. This, combined with what the board calls ‘some execution errors’, has led to a disruptive new business model seemingly falling apart. It could, as some are saying, be the beginning of the end, but it’s unlikely.

More likely, it will learn from these mistakes and realign its plans in the UK.  However, even if Purplebricks does soon collapse, it has obviously been doing something right.

There are elements of its business model that can be admired. As I wrote last week, failing must always be followed by trying again in a reviewed, adapted way.

Just because Purplebricks has done it wrong, online agency can still be made true, at least in some capacity. If the public wants it, none of us should ever deter its progress, certainly not for self-serving reasons. That’s the key part, though; ‘if the public wants it’.

If the public wants this certainty of pricing. If the public wants an easier way of doing things, these are what we should be drawing on. Purplebricks may not have got it 100% accurate but there are lessons to be learned here and you should be understanding what it has done right, not downplaying (a nod to last week again) what it hasn’t.

Do encourage people to be your champions

Instead, we should encourage progress in the areas of market transformation that the public, the end-user, is calling for.

People love Uber, TfL was scared of them. I got into a black cab the other day and watched the meter rise by 20p every five-seconds, regardless of whether the cab was making forward progress. The total was almost double that of an Uber.

What TfL should have done from the start is learn what it is that people love so much about Uber, understand the value, and then work in collaboration to encourage an efficient, safe, and competitive ride-hailing marketplace in one of the world’s busiest cities.

One could argue that Uber failed to encourage external champions around their innovation. They should have worked to gain the trust and support of TfL from the outset, educating them on what their technology is capable of, the inevitable gains and the potential risks which, together, they can create solutions for.

Instead, they presented themselves as radical outsiders, upsetters, turncoats. Without external champions, they became outlaws in London. They failed, as I have written in a previous article in this series, to bring important people on the journey with them.

The job of encouraging external champions should be done by your internal champion. Many people think this person should be ‘young’, someone who ‘gets all this stuff’. But age is a feckless measure, it just needs to be someone who understands technology in the way you understand residential real estate.

Someone who is accepting of technological and able to encourage a fresh mentality throughout the organisation.

(One piece of advice, quickly: don’t simply default the role of internal champion to your IT manager if your IT manager was involved with building your existing legacy systems. I have seen it happen before, they become protective of their systems and deter others from looking for alternatives.)

An individual can get the ball rolling, the catalyst for accelerated change and progress, but, before long, the entire team must become champions of progress.

This is just one more reason why ‘pale, male, and stale’ management structures must be abandoned like Christmas trees in January.

Diversity is an essential ingredient of positive change, you need different kinds of people with different experiences, knowledge, and skills in order to encourage sustained innovation. Having a staff or board of ‘yes men’ isn’t going to help anyone.

Two recent examples of injecting new life into old dogs are the appointments of Jack Sibley and Darryll Colthrust as leaders of digital innovation at Nuveen and Palmer Capital respectively.

While they don’t totally usurp the stereotype of a high-ranking property professional, they have been bought in to give a stern kick up the ar$e to anyone who fails to demonstrate appropriate excitement about the oncoming and never-ending process of change.

In larger residential players, I haven’t yet seen such bold appointments. Perhaps this is a first step to review? Incidentally neither Jack or Darryll had extensive real estate experience before their appointments. Is this a trend, too? Employ great minds who can look at things differently and are not tainted by the status quo?

You can follow the path of encouragement in these appointments: someone has encouraged the board to investigate the potential of technology. Then, someone has encouraged the board that a director of innovation needs to be appointed. Next, someone has encouraged the interview panel to look for a young, energetic, and technologically-minded candidate, rather than letting the CEO open their address book again to pick someone they share the same members club with. Then, someone has encouraged the new director of innovation to spread the gospel of change throughout the land. And, finally, the director of change has encouraged others to embrace digital innovation now and forever.

At no point during this series of events was there any room for negativity or deterrents. That’s how you find success in market transformation.

*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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    What has Purplebricks done right?

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    That was exactly my first thought. Fed up of clueless editorials talking about how ground-breaking and successful they have been. NO THEY HAVE NOT.

     
    James Dearsley

    If you and property pundit have read some of my previous articles you have will have seen I have been quite clear in what I believe are their (and other "online" agents by the way) successes and failures.

    There was an entire first hand experience where I pitched them against each other and was very vocal about both sides of the market.

    I found many positives to what the online agents have created and built and I hope we can all learn from what they have brought to the market.

    At the end of the day we can learn as much from success as well as failure

     
  • Andrew Stanton Estate Agency Insights And Strategies

    Hi James, some very valid points, but I am amongst other things an analyst and I look at lots of new starts, particularly Proptech companies, but also any new businesses that show up on the block.

    Many have new ways of doing business, and often they are in their second or third round or funding, but what 95% of them have in common I find is that when you look at their annual accounts or annual reports, they make zero profit at best or a massive loss which grows year on year.

    From beer brewing companies - yes lots of revenue - but tiny tiny profit margins, to well online only estate agents.

    I think in a decade people will look back on the present and see that just because someone has an 'idea' it should also pass the bank manager test, ie, would your local bank give you money to help fund this idea (I know these days you would never see a bank manager - but you get my drift).

    I am all for pushing the envelope, but more and more angels or shareholders are being encouraged to part with cash with no chance of a return, because there is a whole industry making folk feel that the next big thing is around the corner. If a business idea is a good one, does it need a 500K initial investment to get it up and running?, and if it does would the local bank have said yes to lending their funds?

  • Simon Shinerock

    Interesting as usual James. My background before becoming an estate agent was in the life assurance business. In 2000 I took a sabbatical from Choices and became the MD of a failing insurance business with a disruptive business model. They had already lost £6M and were burning cash fast. Because I understood the business I was able to make the changes necessary to stem the losses and to tweak the business model so it worked.

    It was a massive learning experience for me and taught me a lot about how money is invested, often unwisely. Good ideas as my dad used to say are two a penny, what’s rare is the ability, determination and experience to execute them successfully. I believe change is inevitable and seeing opportunities to do things better by what ever means is an invaluable talent. However, I don’t believe in change for the sake of change or that doing things differently necessarily means doing them better, with or without tech.

    In estate agency I can see how tech can help particularly medium sized businesses operate more efficiently but only in terms of delivering a better more consistent and more cost effective service, cost effective for the agent not the consumer, agents margins are already tight and innovation doesn’t affect the basics.

    Purple Bricks has always had a flawed business model, the up front fee system lacks incentive and being a nationwide call centre business means no real local engagement, buy in or connection with the local market. For this reason I think online sales agents will never break through into the big time and will remain, for the most part an unprofitable niche.

    Lettings could be different though, it’s much more of a sausage machine and requires more process than selling skill. It’s interesting and ironic that online lettings hasn’t taken off like sales. The reason is that managing a lot of properties is a challenge, we know this from experience. As it happens, I have a disruptive business model of my own in the lettings business, our Primary Tenancy model is safer, more secure, more profitable and more compliant than standard agency and more recently with the introduction of our Advanced Rent Option, allowing our landlords to enjoy up to a a years rent in advance without additional costs, it’s potentially industry changing. But because I’m not a 17 year old techie with acne it’s unlikely to get much interest from the type of investor who backs the likes of PB.

    However, just in case someone out there with money and the desire to make more is reading this, I’m looking for a funding partner to roll out the concept nationwide.

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