Revolutionary changes are underway. New, technology-enabled business models are earning rapid growth by solving what I call “the whole problem” for their users and customers. Their success will affect every industry.
Let’s look at the real estate industry as a case study of how this revolution is taking place. I’m going to explain here how real estate agents and portals work, why portals are focused on the wrong goals and Asia’s importance.
Then, we will look at the lessons that founders in every field can learn and why they should adopt the new whole-problem business model.
An unhappy marriage
First, you have to know that traditional real estate agencies, which employ teams of agents that help you buy or sell a home, have long been dependent on external sources of convertible leads.
The need for convertible leads binds agents to the traditional real estate portal in a sometimes unhappy marriage of convenience. While agents feel they have no choice but to stick with portals until a better alternative comes along, they also believe portals charge too much and have the wrong priorities.
As a former CEO of international real estate agency network LJ Hooker, I can testify that what real estate agents really want from portals is results — in the form of measurable progress towards a closed transaction.
If portals provide leads of high enough quality to be convertible, they would be solving the full problem for agents, but this is not what portals do. Instead of measuring and optimising for the number of transactions they enable via high-quality, convertible leads, portals trumpet the quantity of their leads, traffic and listings.
There is a strong focus on volume rather than on quality or convertibility. Portals do not measure how well or how often they solve agents’ whole problem.
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In this, portals are not so different from the old-fashioned print classifieds ads that they replaced. In the print era, newspapers exploited the fact that they were the only local media most people saw daily. They trumpeted their “readership,” an artificial number.
With their monopoly position, newspapers felt entitled to charge exorbitant advertising fees without even attempting to measure how efficiently they solved the whole problem for their advertisers.
Ripe for disruption
The factious relationship between agents and portals has lasted for as long as portals have existed. In the early days, the founders of one of the world’s most valuable real estate portal companies, the REA Group in Australia, had a difficult time getting agents to sign up.
They had to resort to buying newspapers so they could type in the listings themselves. You might call it an early form of “scraping.”
Despite their inauspicious start, traditional portals have long supplanted print advertising as the least bad marketing option for agents. Their large consumer audiences have allowed them to paper over the fact that they are not focused on solving their customers’ whole problem.
However, the ground is shifting, and a new business model has emerged that threatens to replace the old-fashioned real estate portal.
Your success depends on your customer’s success
This new business model starts with a focus on the most critical metrics that track a company’s success. A company’s success depends on the success of its users and customers.
Organising your company around a goal that only accounts for part of the commercial equation can lead you down a path towards failure. This is what real estate portals are starting to discover.
Even portals that attempt to launch revolutionary new business lines can mistakenly focus on the wrong metric. Just look at the iBuyer initiative launched by top U.S. real estate portal Zillow. The iBuyer initiative purchases homes sight-unseen directly from sellers, based on automated valuations.
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Zillow focuses on a highly conditional “return on homes sold” as its key metric. By this measure, the company claims that it earns US$21,830 per home sold. However, when one includes all actual expenses, the truth comes out.
Zillow actually loses US$72,000 per home sold, according to iBuyer expert Mike DelPrete. By not focusing on the most important metric, the company misleads itself and wastes shareholder resources.
As another example, at Juwai IQI, our mission is to “empower Asian consumers to be global residents.” With this focus and despite the pandemic, we more than doubled the sales and rentals we transacted in 2020. In 2021, our growth has only accelerated.
The secret to this success is that we have made it our mission to solve the real problem the home-buying consumer faces. We cannot fulfil the consumer’s need just by showing them homes. We have only solved their whole problem when we have used technology to help them successfully purchase their home, whether it is located down the street from them or across the globe.
For an example from another sector, look to China and the USA. In both countries, the old fashioned yellow pages were replaced by search engines, which in turn have now lost ground to Amazon’s and Alibaba’s end-to-end business models. The result today is that consumers can go from interest to purchase and delivery in a seamless process. Merchants have an equally integrated experience.
The example of Alibaba brings us to Asia and the specific features of the region that warrant mention.
A super-powered sandbox
It is lost on no one that Asia is distinguished from other regions of the world by its larger population, higher internet and mobile penetration and faster-moving commercial sector. When measured in dollars, China will be the world’s largest economy by 2028. ASEAN will be the world’s fourth-largest by 2050.
There are 400 million mobile users in ASEAN, making it the second-largest cluster of digitalisation in the world, after China and well ahead of the United States. By comparison, the United States has just 276 million mobile users.
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ASEAN and China also lead the world in the penetration of super apps like WeChat, Gojek and Grab. Only high-volume platforms like these can keep up with the scale and pace of Asian markets.
These facts have made Asia the world’s super-powered sandbox for business innovation. While Asian companies once copied Western business models, it has been the other way around for many years.
The lessons for founders in any industry are clear. If you optimise for just one step of the value chain, you will end up focused on the wrong metrics.
With your startup up failing to solve the whole problem for your customers, it may never have a chance to succeed. And, if you’re not exposed to the fast-growing, innovative markets in Asia, you may be limiting the scale of your potential growth.
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