New Business Concepts Brewing -- Pay Attention

To the Barricades... "The Age of Progress is over." So begins Gary Hamel's new book, Leading the Revolution, in which he urges companies to develop new business concepts. Indeed, he argues that's the only way to guarantee your survival. And the only way to develop new business concepts, which are non-linear by definition, is to look at completely different industries and marketplaces. The book includes a fun section on exercises to stimulate your thinking. Imagine 10 things that customers would never say about your company or your industry. For example, "Airlines treats customers with dignity and respect." (That's an easy one.) Now create a business model that addresses this issue. Hence, Virgin Airlines.

So what would clients never say about commercial real estate? "Relocating my office is fun. ... My lease is easy to understand. ... Brokerage commissions are too low." Nope, you're not gonna hear these any time soon. That's why I smiled when I read the New York Times article, "Real Estate Commissions Endure a Web Assault" (Aug 20, 2000). Focused on the residential market, it outlined the various efforts to reduce commissions -- definitely a new business concept. According to the article, "People in the industry estimate that the typical transaction involves 50 to 60 people, including buyers, brokers, bankers, clerks, appraisers and sellers. The Internet could reduce that number, speeding a process that can now take months." As a result, Peter Sealey, a professor at UC Berkeley's Haas Business School, believes that the "commission structure and the number of real estate agents are going to be cut in half." Whoa.

That's the theory. But the reality is that developing a new "business concept" for commercial real estate is really difficult. And it's not just because of resistance of entrenched intermediaries. I think people somehow are inherently part of such a complex process. Listen to what one Dispatch subscriber wrote me recently. "Do you think any of the RE services models will actually succeed? I've been reading your Dispatches for the past several months and have taken a few of the e-business web pages for a ride. I have yet to find a model that does not, in the end, rely on traditional channels and experienced people. The missing ingredient that cannot be virtually manufactured is information reliability and the 'trust factor.'" ... Full Disclosure: I do believe that the Internet is a BIG deal and that it WILL dramatically affect the real estate transaction process in the future. But it's far from clear exactly how and when. What do you think? Send e-mail to me at ppike@pikenet.com.

PikeNet Expo... The Early-Bird rate of $795 expires at the end of the week (Sep 15). So save money by registering online. Here's the latest Schedule.

--Peter Pike