When Gary Keller declared that his company was a technology company, most industry experts thought this was aspirational. Here’s why industry veteran and regular Inman columnist Bernice Ross believes doubters are dead wrong.
With more than 1,000 Inman posts, Bernice Ross is a long-time contributor whose weekly column on real estate trends, luxury, marketing and other best practices publishes every Monday.
When Gary Keller declared that his company was a technology company, most industry experts thought this was aspirational — they were utterly wrong.
In 2004, I was appointed the acting vice president of Keller Williams University where I reported directly to Gary Keller. During that time, I oversaw the creation of Camp 4-4-3, its new agent sales training program.
Keller is passionate about the changes that are taking place in terms of the platform revolution in technology. As a long-time Inman columnist who lives in Austin, Keller invited me to attend a meeting with his team leaders to share the work KW has been doing to transform its business into this new model and to share that model with Inman readers.
My biggest takeaway from this meeting was that the changes ahead will be so profound that how we transact today may soon be as antiquated as doing business before the internet.
The platform revolution
I remember having a conversation with Alex Perriello, chairman emeritus of Realogy Franchise Group, where he described the challenge that real estate companies have versus technology companies in terms of their valuations.
If you want to understand why this is the case, read the book Platform Revolution: How Networked Markets Are Transforming the Economy – and How to Make Them Work for You by Geoffery Parker, Marshal Van Alstyne and Sangeet Paul Choudary. Keller has urged all his team leaders to read this book.
Platform Revolution describes the traditional system employed by most business models as a pipeline model. A pipeline business “employs a step-by-step arrangement for creating and transferring value, with producers at one end and consumers at the other.”
This is the case for virtually all real estate brokerages today. Sellers offer their houses for sale, brokerages take the listings and market them through the MLS, print and online marketing, and buyers show up to purchase. The authors call the pipeline business model a “linear value chain.”
A “platform,” in contrast, is: “A new business model that uses technology to connect people, organizations, and resources in an interactive ecosystem in which amazing amounts of value can be created and exchanged.
“Examples of disruptive platforms include Amazon, YouTube, eBay, Facebook, Twitter, Instagram, Pinterest and dozens more. Apple, Google, and Microsoft all run platform business models.”
Why are platform-based companies worth more than pipeline-based companies?
The authors go on to say, “Platforms eat pipelines,” as we have certainly seen in the case of Airbnb, Expedia, Uber, etc.
In the platform model, value is determined by the community that participates in the platform. This is why Zillow and Redfin have such high valuations in contrast to pipeline models such as Realogy and RE/MAX — it’s the number of people who participate on their platform that drives value, not the number of sales or the profitability as in the pipeline model.
The book goes on to say: “In the world of network effects, ecosystems of users are the new source of competitive advantage and market dominance.”
The bulk of the real estate industry is still running on a pipeline model. In fact, this is the very reason that Compass is missing the boat — it’s recruiting agents into a pipeline model.
Operating without a platform model: A Frankenstein nightmare for users
Keller shared a spreadsheet one of his top team leaders had created to manage the numerous “bolt-on” technologies the agent uses to run his team.
Examples include accounting, Customer Relationship Management (CRM), lead generation platform, digital signature platform, transaction tracking platform, print and online marketing systems, video, etc. These systems are often incompatible.
The result is that users are stuck creating elaborate workarounds just to cope with this stitched together, hodgepodge of “bolt-on” services.
What Fast Company says
On February 22, 2019, Fast Company named Keller Williams as one of its most innovative companies for 2019, placing it first in the Urban Development and Real Estate category.
David Lidsky, deputy editor of Fast Company, explained the reasons KW earned the top spot in this sector:
“Established players are showing the same kind of nimbleness that we’ve generally associated with startups. Keller Williams is a prime example of this. The brokerage – established in 1983 – saw no choice but to evolve, and to evolve quickly, in order to empower its agents to meet the consumer demands of today.”
“In February 2018, Keller Williams launched Kelle, an AI-powered virtual assistant, designed by real estate agents for real estate agents. The app gives KW agents a voice assistant that lets them quickly access neighborhood market reports, pulled from Keller’s own cloud-computing platform, which uses data from MLS and the social-networking site Nextdoor.
“They get an understanding of neighborhood boundaries, current listing data, and statistics on sale prices. Agents can filter by such details as square footage and when a home was built. The hyperlocal snapshots can also be shared with buyers and sellers. Keller made these Market Snaps widely available to its agents after incubating it in KW Labs, its innovation arm. Kelle also allows agents to manage referrals and check their progress against career goals.”
The key words to note in the Fast Company quote are “AI-powered virtual assistant” and “pulled from Keller’s own cloud-computing platform.”
Keller began the transition to a platform-based model over four years ago with the hiring of Josh Team, who is now the president of KW.
Building an AI-based platform is a daunting effort. You not only have to build the technology — you must also allow a minimum of two years to train the AI.
KW’s AI is now sophisticated enough that the company can roll out the key components of its platform including Kelle, its AI-powered virtual assistant, its CRM and other back-office functions.
In pursuit of the holy grail in real estate
Many experts have described creating a seamless consumer experience from point of contact to well after closing as being the holy grail of real estate.
Team describes how KW has been working to this end for the last four years:
“People think that we’re just talking about building Kelle, a CRM or a marketing platform, but what we’re really marching toward is a seamless transaction. This is why we have been building data alliances with companies like Google, Nextdoor, Porch and dozens of others.
“In addition, we’ve been building ancillary companies around mortgage, insurance, plus many others, so that everything works together creating one unified experience for the consumer.”
Couple this with the size of the platform that KW begins with (160,000 agents and their clients), detailed transaction history required for profit sharing that dates back to 1983 (a powerful data set from which to train its AI), plus the ability to drive 100 percent adoption because every transaction will ultimately be conducted on its platform, and KW is well on the road to creating “user experience” akin to what consumers experience on Netflix or Amazon.
Who will win?
Today, the bottom line is not whether a company is a technology company, but whether it is doing business using a platform versus a pipeline model, the size of the community it creates, the strength of the data upon which its AI is built and to what degree the company can provide the most valuable experience to consumers.
Zillow, realtor.com and Redfin have built powerful consumer platforms. The next round this battle will be won by those companies that nail the end-to-end consumer experience.
Bernice Ross, President and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.