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October 2015

Brokerage Design

Avoiding secondary disruption with strategic design?

Jeremy ConawayA significant number of past commentaries from this column have discussed the various aspects of digital disruption both from the perspective of being a disrupter and being disrupted. The fact is that disruption is a primary factor affecting almost every aspect of the current brokerage scene. Most compelling brokerages are either in the process of responding to disruption or creating innovative disruptions of their own. Sometimes these disruptions are external and impact the brokerage's competitive position in the marketplace. In other cases the disruptions are internal and impact management and operations.

While disruption, as a business factor for real estate brokerages, is too new to have evolved a classic tactical or response pattern, certain matters are already clear. Chief among those is the absolute necessity that firms adopt and implement their own strategic and innovative course rather than adopting a response strategy that forces the firm to respond anew to each incursion of internal disruption and/or external market or competitive forces as they occur. With few exceptions response strategies equate to being led around by a leash with a blindfold. It is hard enough to anticipate the challenges of one's own strategic intent let along trying to track and prepare for the unknowns of another's.

The essence of strategic design requires taking a "total" or "big picture" approach. Brokerages that have a strong articulated strategic intent, set and maintain their own course. While the activities and actions of the market or competitors may require occasional course corrections they do not result in major shifts in strategic course or tactical deployment.

The first requirement for brokerages seeking to adopt strategic design as their lead business strategy is the designation of a specific individual to be the firm's Chief Design Officer (CDO). While such a title may sound arrogant and expensive the fact is that while the strategic design concept requires group participation it will not respond to group command. Someone must have overall responsibility. This is not to suggest that such a responsibility is, for the small and medium firm, a full time position. It does, however, suggest that this responsibility is best held by someone other than the senior executive or managing broker/owner. Strategic design programs work best when the senior executive is available to support the program from a distance by mediating the conflicts that naturally follow any plan that requires significant change.

The second requirement for a successful strategic design program involves implementing a program that addresses the full range of the firm's strategic intent rather than on a crisis-to-crisis basis. Some of the best brokerages in the country are in the process of addressing disruption on a piecemeal basis - a little here and a little there. Something in this office and something else in another office. A little upgrade to recruiting, a bit of transaction management, a few agent ratings, a new age manager here next to a 30 year expert in the downtown office, a new website that almost addresses the shortcoming of the old one, and perhaps a thought about regulatory compliance. This approach to disruption will ultimately leave these firms even more vulnerable to the ultimate disruption of an alternative brokerage model that will "Uberize" the real estate industry by offering a completely new A to Z consumer and financial experience. There are now several entities in the market that are making those kinds of noises.

In a strategic design scenario the brokerage, under the oversight of its design chief, creates a vision, master plan, and blueprint that addresses every aspect of the firm's operations three or four years out. Most firms will attempt to implement this change process over a twenty-four month period. One of the key tactics here is to ensure that each action item undertaken will fit precisely into the ultimate overall strategic design. During this period a change in any of the elements will require an adjustment in all of them in order to allow the entire design to work as a productive and profitable system. In the piecemeal approach each of the individual segments may be absolutely perfect but if they cannot come together as a relatively flawless system they will not be management or accountable. This is why the industry at this point in time is so vulnerable to an ultimate disruption scenario. Existing systems that reflect, "how we have always done it" are neither flexible or nor defendable in the face of disruption.

The third requirement that must be met has to do with the fact that in most cases strategic design project also requires major changes in the corporate culture. Many brokerages have, over the past decade, spent fortunes purchasing new technologies. Unfortunately they have found that new technologies laid over legacy cultures are neither effective nor generate an acceptable return on investment. Sometimes a successful strategic design process is more evolutionary than revolutionary. Experts like Mauro Porcini, PepsiCo's Chief Design Officer suggest this culturalization process involves several stages.

  • Those responsible for the strategic design process must never forget the "dark day of the innovator." Investing the time and effort to create innovation through disruption and design frequently creates a situation in which the rest of the team is unable or unwilling to either recognize or celebrate the genius of the innovations being introduced. Self-confidence and faith are a must.
  • It is not unusual for significant players within the brokerage to suggest that the status quo is working just fine and that the suggested disruption will never work. These issues must be addressed head on often with terminations and new hires.
  • Even when the significant players are on board with the strategic design process there will be lesser players in the brokerage environment who will openly or secretly reject and attempt to sabotage the new design. The brokerage's boomer generation agent contingent is often a nexus for this level of "opposition."
  • When the brokerage environment appears to have reached a critical level of support for the strategic design, it is often still necessary to move the process forward by playing the "trust me" card.
  • Although the members of the team may appear to be, at least tentatively, in place and supporting the process, it is still important to have embedded a number of "quick start" elements that will demonstrate early success and confidence in the program.
  • Finally, there is a moment in time when the process turns the corner and ownership of the innovations becomes more or less universal. It is at this point in time those who have been dragging their feet suddenly want to offer suggestions relative to how the innovations might be made even more effective. This is known as the "confusing day of the innovator."


Strategic design has become a key feature in many leading business entities. It offers a proven methodology for meeting the threats and realizing the opportunities of disruptive innovations. This is yet another example of the age-old axiom that the perfect defense is an optimum offense.