Strategic planning for real estate startups
Nikolai Kolding at the new BH&G Real Estate blog inspired me to write more about the strategic planning process. Like Nicolai, I've always been hooked on how businesses work and why things happen, the essence of corporate strategy.
Simply put, there are two types of strategic planning - corporate planning and startup planning. Nicolai describes the former by introducing the "scenario planning" methodology used by conglomerate Royal Dutch Shell:
Shell uses scenarios to explore the future. Our scenarios are not mechanical forecasts. They recognise that people hold beliefs and make choices that can lead down different paths. They reveal different possible futures that are plausible and challenging. Our latest energy scenarios look at the world in the next half century, linking the uncertainties we hold about the future to the decisions we must make today.The next half century is long term planning (frankly, I think it is too long). This is the province of management consulting firms like McKinsey and Bain whose MBA pedigreed consultants apply their broad based intellect and vision to developing these ivory tower scenarios. They exist to confirm, bolster or even reject management and board strategies based on their skills to see scenarios beyond the scope of their client's insular corporate world. As far as we know, real estate companies don't use bulge bracket management consulting firms for long term planning perhaps because the management of real estate companies tends not to be packed with MBAs (btw, this can be good or bad for the obvious reasons).
Startups apply the same corporate scenario planning intellect to a monthly or quarterly term basis. Startups rely on technological advantage to grow quickly. With all the startup activity we see, we know we're in a window of opportunity where Internet marketing is completely changing the way consumers are buying real estate.
Startup planning requires different skills:
- Creativity to develop solutions that have never been seen before
- Broad based business knowledge to understand that real estate is getting closer to a data delivery and media business and farther from mom & pop brokerages.
- Fluid management skills to act decisively and intuitively in the correct direction, and to shift strategies on a dime in an emergency (like Google entering the market)
- Industry understanding to see the world from the perspectives of buyer, seller and real estate professional
All the industry's players compete among themselves to varying degrees - Trulia, Zillow, Realogy, Realtor.com and Active Rain are essentially trying to attract the same consumer and agent eyeballs, The most stimulating aspect of consulting is in the work of pulling the industry along the same progressive RE 2.0 direction because despite the competition, it behooves the online players to get all those consumers online. They're all on the same wavelength, and that's what makes them friends.
It just seems too obvious that real estate marketing is funneling through Web 2.0 and beyond... the industry is built on data (buying a house is the most data-intensive purchase a consumer can make) and media (it's about making the home look good and getting it exposed)
I think that the ivory towers would consider what you describe as strategic planning.
Entrepreneurial hunches are scenarios. Probably the larger difference is just in willingness to explore a variety of hunches, document the ideas and develop methods of reacting to (or better yet engaging) the scenarios.
The start-ups rarely have a technological advantage over established firms (IT support? Hardware and software resources? Technology implementation experience?).
What start-ups have is agility in their ability to allocate those resources quickly. This advantage is not limited to technology.
I think a future development to observe (a scenario, perhaps) is the lowering cost of business intelligence tools and general increase in understanding how to coax value out of BI, analytics and associated business processes.
The barrier-to-entry for engaging sophisticated strategic planning will boil down to willingness to do so. If it hasn't already.
Great topic!
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I run a real estate startup and I would like to say that this article hits a home run in my book. Right now, my entrepreneurial hunch says get out of the US market. Canada or Australia anyone?
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It's a truism that the largest purchase most people ever make is their home. It's not so obvious that -- except when you think about it! -- and I quote you:
"...buying a house is the most data-intensive purchase a consumer can make".
The implications of that one statement alone are many and important. And what does that mean in light of our dramatically accelerating ability (and willingness) to quantify real estate data -- e.g., developing MLS data standards, GPS property coordinates, property value assessments online, etc.?
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The data intensive nature of purchasing a real estate property rivals that of the due diligence required for business acquisition. Only the open source Internet can deliver these data... again, it's just too obvious all consumers are online to figure out how to handle a real estate transaction. The real estate community should be providing hands-on data to the consumer in order to reach them. It's mystifying why 97%-99% (take your pick) of agents don't actively provide these data to the online consumer in the form of blogs or other journalistic online interface.
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Blog Networks are powerful for their ability to use SEO strategies. And for a broker selling a house this can be a powerful resource. But I think data needs are a small part of the due diligence that a home buyer does. They likely select a neigbourhood (or a few), a price range, # BRs and then decide which bathroom and kitchen they like best. And residential buyers arent often in the market - say every 5-10 years. They only need to be engaged in a community for a few months, so the consumer of the data is transient.
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I agreed but not a good time to startup right now.
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