Escape the Competition and Own the Market!
Let’s start off today’s episode with a quote from author, Seth Godin. Actually, it’s not so much a quote as it is one of his daily blog posts, a blog that he has been putting out a daily post in since 2008. Yes, you heard that correctly. Seth Godin has been posting a daily blog post since August 8th, 2008. For the mathematically challenged, that’s almost 5000 consecutive days of blogging, sometimes twice per day. I believe he has over 13,000 blog posts, many of which come from his 20 plus years of blogging. But the phenomenal part of the story is the 4873 consecutive days of daily blog posts. That was just a little aside for all the writers and content producers out their struggling to write and produce content. He basically just says, if you want to write a daily blog, you simply have to write daily. If you’ve ever read his blog posts you’ll see that they’re not 1000 word posts. Many of them are less than 200 words, he just does it every day. Nevertheless, the quote I want to share from Seth Godin is this, “There’s no such thing as a niche that’s too small if the people care enough. If you think you need a bigger market, you’re actually saying that the market you already have doesn’t need you/depend on you/talk about you enough. You might not need a bigger niche. You might only need to produce more value for those you already serve.”
What he’s talking about, in my opinion, are two primary things: one is specialization, and the other is creating value, two things I love to talk about. And, while you know I’m always good to wax on about adding value, what I really want to wax on today about is the specialization part. Some time ago, I did a podcast called ‘Master of None’ wherein I talked about whether or not I believe appraisers, well, people in all industries really, should be what we referred to as generalists or specialists. In that episode, I also gave a little mantra that I think helps to remember the advice, which is to ‘generalize internally, but specialize externally’. What that phrase means is to study on and learn everything you can about anything and everything. Why not? If you’re like me and love learning, make learning and researching things part of your daily routine. However, being a generalist when it comes to business, career, entrepreneurship, and income, in my opinion, as well as much of the data, is not the best thing to do if you want to stand out from crowd, earn the highest dollars per hour that you possibly can, have little to no competition, and become known for some kind of specialty. If you want to be as successful as you can possibly be in your area of expertise, the recommendation is to be the most well-known, most value added, and most highly regarded specialist in that field. What I am also going to talk about in this episode, and it’s along the lines of specialization, is the power of creating your own category. I’ll explain what that means, and some things to consider if you want to venture down this path, and also why I believe it’s in your best interest, especially as a real estate appraiser, maybe even a Realtor, to consider it.
Let’s first talk about what it means to be a category creator, and then we can chat about some ways you might go about doing this. What I’m referring to when I say ‘category’ is the category of business or industry you work in. If you’re in the real estate industry, and you’re on the sales or brokerage side of things. We could call that the traditional real estate sale model or category. If you work for a traditional brokerage, you have a cubicle, maybe an office if you’re a producer, you have some kind of commission split structure with your broker, you’ve got some tools and training, if you’re lucky, and you have what you believe is some kind of unique selling proposition over brokerage XYZ down the street. That’s the traditional real estate sales category that everyone is used to and all of you in the world compete against, for the most part. We’ll talk about category disruptors, or category creators in a few minutes. If you were in the VCR tape rental business 10 years ago, that’s essentially the business category you worked in. You were in the general entertainment business, and more specifically, the personal video rental category. People came to the store, wandered around the outside wall scanning the new releases, grabbed a bucket of microwave popcorn and a jumbo bag of Twizzlers or box of Sweetarts, and that was your Friday or Saturday night. If you were in the athletic equipment sales business, that was the overall category. You sold some weightlifting equipment, some treadmills, and some stationary bikes. If you’re in the real estate appraisal business, that’s the overall category of business you work in. You get an order, you process it, do some research, pull some comps, set up an appointment to visit the house, drive out there to measure it up, make a sketch, take some pics, drive back home or to the office, sit down at the computer, open your software and begin assembling all the component parts of that process into a reasonably coherent appraisal that will pass the minimal standards of both the computer system and any human components that might be looking at the report. That’s the category, the traditional model, and the process, more or less.
Every business has a category that it fits into in some way. If you sell cars, you likely work for a dealership of some kind that either buys cars from auction or gets cars from the manufacturer to sell at whatever price, margin, and tactic you choose. That’s the category of auto sales and distribution. Manufacturer to dealer to consumer, boom!, business category. If you decided to get into any one of those businesses, you likely then chose from a few different business models available to you. You chose the traditional model that you learned or saw out in the market, and then tried to put your little unique spin on it. Blockbuster had a model, Hollywood Video had a model, Family Video had a model, and they were all more or less the same. You walked in, scanned the wall, picked some movies to rent, went home, forgot to return them, and then paid ridiculous late fees once you did finally return the tape. And, by the way, if you forgot to rewind the damn thing, you were dinged another $2 for that stupid mistake. If you didn’t want to pay the late fees, you either got a relative to create a new account for you, or you just went to the other video store and did the same thing until you were late fee’d out of there. That was the category, and that was the model. Each one of those businesses had what I refer to as a binary market option available to them: be the market winner, either because of better marketing, better service, cheaper fees, or better selection. The market winner is considered the winner because they have the largest market share. The other option is to try and be the best. The best in any category has the best, highest quality product and/or service, even if they don’t have the biggest market share. Most appraisers fall into this last category, at least in their own minds, because that’s what they tend to promote and market. “Hey, we’re the best, choose me because I have the most experience, I have lots of 3 and 4 letter designations after my name, I speak in lots of 8- and 16-word phrases that you likely won’t understand, and I’ve been doing this for 15, 20, or 53 years!”
The problem with being part of a traditional business model in an established industry or category is that to be the dominant market player, the winner, or to be the best, the one with the best product or service even if not the most market share, is that both of those business models and both of those players are essentially always playing not to lose. Being the winner, or being the best, means they’re both only as good as their best defense against any competitors coming after the market share or coming with a better product and/or service. If this is you, you’re constantly having to defend your territory and your place in the market lest somebody better come along and begin to take away you market share, or worse, your title as the ‘best’. In either of those binary choices, you only remain in your leadership position until somebody comes along and replaces you. This is one of the reasons, by the way, that very few certified appraisers out there are willing to take on a trainee and become a supervisor. They don’t have the mental or scheduling bandwidth to handle dealing with a trainee, they don’t have the confidence to share their knowledge, and/or they don’t want somebody better than them coming along and essentially running them out of business. The best way to ensure one’s reign as king or queen of a business category is to make sure no new entrants can come in and take over. That’s what’s been happening, to a large degree, over the past 20 years or so. At least since the rise of the AMC when the larger appraisal firms began to go under or disband into a massive market of mercenaries all hunting for food for their dinner, and with it went the efficiencies, the stability, the training, and the market leadership of the larger appraisal firm.
Winner or best, those were the two options available to most. However, there always has been, and always will be, a third category knows as the category creator or differentiator. The category creator is the business who decided they didn’t want to play the traditional game that everyone else was playing so they set out to create a unique product, a unique service, and eventually even a whole new business and market category with virtually no competition. Why was there no competition? Because nobody else was doing what they were doing. Maybe you’ve already thought of some of these category creators and have an idea of where I’m going with all of this. If not, I’ll help. I mentioned Blockbuster earlier and you all hopefully know that Blockbuster as a market leader no longer exists. They filed for bankruptcy back in 2010 and for several big reasons. No, they didn’t go out of business because Netflix put them out of business, that would be the wrong way to frame the issue. Blockbuster went bankrupt because being not just the market leader, but the absolute market dominator, they were forced to defend their territory instead of innovating. Their business model, and profits, were largely based on penalizing their customers with late fees. So, although we all really enjoyed that Friday and Saturday night ritual of going to the video rental store to pick out some movies, there was another company that was in the process of creating a whole new business model and category called rental by subscription. There were no penalties, no late fees, and no snotty teenager checking you out at the register. Just put DVDs in your queue on the computer and then check your mailbox in a few days. What that eventually lead to, of course, was the streaming revolution once internet speeds could handle the process. A whole new category for a whole new consumer. They created the category and, therefore, had no competition.
You’ve heard of Tesla, the electric car company. Category creator and category dominator. Right out of the gate Tesla decided not to play in the traditional car dealership model. They wanted to control the car making process, as well as the car buying experience. You can’t go to a Subaru dealership and buy a Tesla. You have two options: order it online or go to a Tesla only dealership that is owned by the company. They are what is called a direct-to-consumer business model. In addition, they control the service of the vehicles, and they have their own proprietary charging stations and network. New business category with little to no competition. Of course, today they are starting to get some more competition in the electric car market, but they’re pretty far ahead of the game because they created the category they’re playing in. They, in essence, get to make the rules that all other entrants into the market have to play in to compete. In the traditional real estate brokerage models, there is ReMax, there’s Berkshire Hathaway Home Services, there’s Century 21, and a few others. Are there differences with each one? Sure, they all have their own unique selling proposition but, for the most part, are all competing for agents and market share. Then Keller Williams and Exit Realty come along with a commission sharing and recruiting bonus model and the game is changed. New category, new players, new rules. Now you can be an average agent, but a great recruiter, and make additional commissions off of all of your recruits. Fast forward to more recently and you now have a new category creator with EXP realty. No brick-and-mortar offices, everything is virtual. Add on to that the recruiting incentives model, along with the option to own stock in the company and you have a whole new category.
The category creator gets to make the rules because there’s no competition. They’re not trying to squeeze all of the juice of the old business model, they’re not trying to defend old territory, they’re not stuck defending an old model just because that’s what they’ve always done. They’re more creative, more agile, and far more differentiated in the market because they created a whole new category and way of doing business. Think of Xerox when it comes to old, established, stuck business models and categories that are dying. Xerox for the longest time was the market leader in making copies, sending faxes, and big corporate style printer/copy machines. They’re still a multi-billion dollar company, but if you were to say the name Xerox, most people would say, “are they even still around?” Yeah, they are! But they’re in a dying category that is being replaced by digital. They’re just trying to squeeze every last dollar out the old model and category. Xerox didn’t design it’s new category, others did that for them. The new category is paperless offices and businesses that need online cloud storage of all those digital documents, not file folders, copy machines, and file cabinets. Xerox might have tried to redesign itself into a digital storage company like Amazon web services, or maybe the first Dropbox, but they didn’t. They got stuck defending their dying business model.
Friends, colleagues, business owners, and fellow category creators, you can either invest in protecting the past, compete over the old way of doing things in any business or industry, or you could ask some really important questions of the way you do business today and see if there is a way for you to create a whole new way of doing business, maybe even a whole new category in that business. You don’t have to be the next Silicon Valley startup to do this, by the way. You could continue working in your traditional business model while you start to revamp how you do business. Along the way you might see an opportunity to do things in a way that nobody is doing them and, when you decide go to market in that new, underserved way, you’ve potentially created a whole new category of business. That’s what we did with the Real Value Group 12 years ago when we decided to become an education company that also does appraisals. It was a completely new category of our business that nobody else was doing. We created it, we mastered it, we own it still today, and we don’t worry about trying to protect the old way of doing business because we don’t need to. We let all of the other independent appraisers in our market essentially go to market the old-fashioned way. We let them fight over the leftover market share and invest in maintaining and protecting the old ways of doing things simply because they don’t want to change.
Those willing to be creative, to think and do things a bit differently are the ones who introduce the world to new and unique ways of doing things. They introduce the world to new ways of living, of being, of seeing, of working, and of experiencing the world. They speak differently, they dream differently, and they play the game differently. The category designers are people and companies who change the world from the way it is currently, to the way they believe it should be. They do that by solving problems that people didn’t even know they had until they saw the solution. Henry Ford knew if he asked people what they wanted they would’ve said a faster horse, so he didn’t ask. He introduced them to the horseless carriage, later to be known as the automobile. You could order any color you wanted as long as it was black! Sometimes category designers simply reimagine an existing problem and find radically different ways to solve that problem. Nobody wants to pay $4 or $5 for a cup of coffee, but they’ll pay that and more for something called a Venti or a Grande. Those two things just sound worth the money. A whole new category of a coffee drinking experience. Expanding on the coffee example, can you guess what the new category design is now? Instead of the traditional brewed pot of coffee in our homes, what do many of us now have? We have Keurig and Nespresso machines. I have both of those and love them. You don’t need to make a whole pot of coffee anymore, you can brew one single cup, and in over 100 varieties and flavors. A whole new category with Keurig and Nespresso setting the rules. No competition out of the gate, and very little even after more than a decade.
Here’s the question I implore you to ask yourself, as well your colleagues: “What new and different future can we invest in that would fundamentally change the trajectory of our industry, our business, and our future?” Further, “am I clinging to a past business model, a dying industry category, and a way of being simply because it’s comfortable, it’s known to me, and I’m afraid of change?” I didn’t say the appraisal industry is dying, so please don’t send me any hate mail. I simply asked you to ask yourself the important questions of what you could or should be doing to potentially create a way of doing business for yourself and your clients that would fundamentally change the world in that industry, and then to ask if you believe you’re doing things the way they’ve always been done. If you answer ‘yes’ to the last question, then you have to push further and ask yourself why. Is it because you don’t actually see anything changing in the industry? Is it because you do see some of the changes happening, but don’t know what to do? Is it because you’re simply stuck and don’t want to change? Or is it because you truly think things will remain the way they are for many years in the future?
Until next week, my friends, I’m out…