Every year, real estate sees the launch of beautiful products, offering awesome features, advantages, and benefits. Excellent marketing programs back them and the press creates a jubilee – Innovator of the Year!
Then the product launches, and the industry shrugs its shoulder. It is the conundrum of new product development and innovation for real estate.
Most of these companies are doing everything right. They are doing research, spotting trends, holding focus groups, testing usability, and modeling lovely financials. If they can only get 1% adoption of this, or 3% of that, revenues will be awesome. There are 1 Million real estate agents; hundreds of thousands of brokers transacting trillions of dollars in transactions, buying $6 Billion dollars of technology in the United States alone! Wait until we go International! Canada is next!
For most innovators, this never happens. The drawing on the napkin was flawed.
What did they miss? Surely such a great product should have found success by accident. So, they go after it again. They get a few customers with a great social media-marketing program. Really connect with a group of excited agent and broker evangelists, hit a couple of more trade shows announcing how the early adopters are crushing it.
More shoulder shrugging.
Many outsiders look at the real estate industry and believe that it is ripe for disruption. It looks old. It looks slow. It looks easy. When you contrast the real estate industry with other industries, all of the foundational elements that trigger change and give birth to disruption are there.
The industry really has not changed, ever. Sure, there was that shift from MLS books to electronic MLS; from newspaper advertising to website advertising; from chasing keys to lockboxes; and from paper forms to electronic forms. That is really about all that has changed. Innovation has happened very slowly and only because……
Here is what industry veterans know. For a new product to be adopted in the real estate industry, the customer must be willing to take the risk to change. And yes, every change from an existing product or service to a new product has embedded risks. Change hurts.
There are three risks in particular that must be addressed when introducing a new product or service into the real estate marketplace. Clearly the product or service must offer equivalent benefits at a much lower price; or, offer new and improved capabilities at the same value proposition. Moreover, it must be backed by unbelievable customer support and training. If you’ve achieved these offerings then you have won a seat at the table. You must then overcome the risks that customers perceive in any new product or service:
- How do we get customers to use it?
- Will it be compatible with all of their existing workflows?
- Does it do everything the old solution did and more?
No matter how well the idea ranks in evaluation frameworks, the customer is seeking products and services to make their job faster, better, cheaper. If your idea achieves those goals, that’s table stakes. If your idea is difficult to adopt, requires significant change, forces the customer to acquire education or more knowledge in order to use the product effectively, then you’ve probably lost the game.
Inertia is probably one of the biggest barriers to new product or service adoption, and to overcome inertia the customer bases has to recognize that a new product or service offers very enhanced benefits, and doesn’t create a lot of work for a customer in order to switch and adopt. The more work the customer has to take on to adopt the new product or service, the better the benefits had better be. This is why even great new solutions often aren’t quickly adopted; the inertia level and adoption effort is simply too high, even for a product that offers compelling new benefits.
Here is a prime example. An MLS runs a new MLS system in parallel for 90 days so that agents can become familiar with the new system before the old system is turned off. 15% of agents actually try the new system before the cut over. 5% take the training course. The old MLS system is turned off. Everyone acts surprised and complains. The new system is better, faster, cheaper, has awesome support, training videos, it even washes your car every day and your dog comes home.
Most agents will like the old system better. The old system was not easier to use. They used it so it was easier to understand how to use. The new system is easier to use, but the agents just don’t know it yet.
Beyond forcing the customer to change in the adoption of a new product or service, there’s another significant question – does the product or service “work” with the existing infrastructure of operating systems, conventions, protocols and other expected and long held agreements? New MLS systems usually break every agent and broker website, in-house reporting system, data feeds, virtual tours, CMA software, Market Reporting tools, and more.
If a new product offers compelling functionality but does not work well within the rest of the customer’s solution set or needs, it sucks. Far too often, innovators dream of “disruption” but don’t understand the power of compatibility. RETS is a standard, right? If my product works in MLS A, it should work in every MLS. If my product gets approved in MLS A, it will be approved in every MLS. If this large broker loves it, all large brokers will love it. If this agent doubles their business in year, all agents will buy it. Right?
Every product or service is launched in a market where thousands of formal and informal agreements, standards, conventions and protocols exist. No matter how compelling your product or service is, it had better be compatible with the existing infrastructure or offer so much value that it can force the rebuild of the current infrastructure from the ground up.
Technology innovators are often the “early adopters,” and as such we expect others to be early adopters as well. When Geoffrey Moore wrote about Crossing the Chasm, he wasn’t talking only to large corporate entities but also to every innovator. In the long run it does not matter how much the early adopters love your innovation, if the product or service can’t cross over to the early majority. And what the early majority wants is “completeness” or what Moore called the “Whole Product”. The difference between an early adopter and the early majority is that both are interested in new solutions, but early adopters are willing to try products that don’t quite have a support strategy, or perhaps don’t have all the documentation complete. Early majority, on the other hand, wants new technologies but wants the entire “augmented” product in place – support, communities, online and offline resources, channels, training, accessories and so forth. Without this “whole product” the early majority isn’t going to bite, no matter how compelling the new product or technology appears to be.
The core customer in real estate is 55-60 years old. Enough said.