Spinning the Compass Flywheel for the Future

When I was interviewing at Compass, I was struck by how simple yet powerful the mission statement was: help everyone find their place in the world. Despite the important role the Real Estate industry plays in helping people find their home, the Real Estate brokerage model has not benefited from the advances in technology and innovation like other industries have.

Compass’ goal is to change that. We are combining the best people with the best technology to build the first modern real estate platform to ensure that both our customers (real estate agents) and their clients have an efficient and delightful experience finding their place in the world. The result is a unified real estate platform that everyone — Buyers, Sellers and Real Estate Agents — benefit from.

As Compass looks into the future, the natural question is what’s next? During our quarterly All Employee Team Meeting a few months ago, our CEO Robert Reffkin unveiled the Compass Flywheel, the core strategy for Compass’ future. While celebrating our growth and achievements, we also looked into the future to see where Compass is headed.

First thing’s first — what, exactly, is a Flywheel? And why is this Flywheel key for Compass as we build an end-to-end real estate platform?

The Flywheel is a pretty common business concept, which originated in this book. Don’t worry, this post keeps things relatively simple and isn’t full of buzzwords (however, if you want a more in-depth understanding of the Flywheel without reading a whole book, I recommend taking a look at this link). Mechanically, a Flywheel is a device that spins when a certain amount of force is applied to the wheel, as shown in the GIF below. Outside factors or forces can slow or speed up the Flywheel.

Source: https://giphy.com/gifs/animation-gYTs34KTrKOm4

Every company that revolutionizes an industry through technology has adopted the Flywheel growth model in some shape or form — Amazon, Uber, Netflix, Airbnb, just to name a few. Let’s use the streaming industry (Netflix, Hulu, Amazon Prime, etc.) to showcase the effectiveness of the Flywheel model. For a typical streaming company, popular inventory (i.e. content like TV shows or movies) leads to more users, which leads to more revenue, which then allows for further investment in more inventory, which increases the user base. This continuous cycle propels the Flywheel to keep spinning.

Business strategy, in addition to outside factors, can speed up or slow the Flywheel’s spin, which directly impacts the company’s growth. The streaming example, while a bit oversimplified, showcases its impact. For example, when a streaming company adds a popular new piece of inventory like a TV show, their user base increases, which propels the Flywheel. On the other hand, when a popular piece of inventory like a TV show is removed, the user base will decrease, slowing down the Flywheel’s spin.

While what spins the Flywheel in the Real Estate industry is different than what spins the Flywheel in the streaming industry, the mechanism is the same.

Now, let’s dive into the Compass Flywheel:

Source: the actual Flywheel presented at our All Employee Team Meeting!

So what does this all mean? For Compass there are four fundamental components of the Flywheel: Inventory, Buyer Experience, Buyer Traffic and Sellers and Agents.

Let’s start with Sellers and Agents, who bring in our Inventory (real estate properties to buy, rent or sell). Having more Inventory gives buyers more options to explore, creating a better Buyer Experience. A great Buyer Experience leads to greater demand, increasing Buyer Traffic on Compass’ applications and products. The more Buyer Traffic we get, the more Sellers and Agents we attract due to the demand for Compass’ inventory. As we get more Sellers and Agents, we are able to increase our Inventory- spinning the Flywheel.

While these four fundamental components of Compass’ strategy begin to spin the Flywheel, we are constantly innovating to find ways to spin it even faster. Software Investments are a key to speed up the spin of the Flywheel. Software Investments lead to Improved Efficiency and the introduction of Value Enhancing Products like Compass Concierge, Compass Bridge Loans, Compass Coming Soon. Improved Efficiency and Value Enhancing Products spin the Flywheel by providing the Best Price for Sellers and Agents in Less Time and Less Hassle. Once again, this in turn allows us to increase the Inventory- spinning the Flywheel.

As a technology company, Software Investments made possible by our Product & Engineering teams are key to spinning the Flywheel:

• Our Real Estate Data & Inventory team builds the platform that ingests and processes large amounts of listing data that Compass receives, ensuring that it is available for Compass’ cutting-edge tools. This directly impacts the amount of Inventory on our platform.
• Our Compass Experience team is building the foundations for a cutting edge consumer experience, allowing us to have a better Buyer Experience to increase the Buyer Traffic. This is all made possible by the work of our Search team, allowing both consumers and agents to utilize our platform in an effective way.
• Our cutting edge applications built by our Marketing Center, Collections and Insights teams attract top Agents to Compass. Our CRM team further attracts top agents and allows them to harness our technology to help their clients. All of these tools build confidence for Sellers to list their properties with a Compass agent on our platform.
• And all of this wouldn’t be possible without the key support of our Technical Infrastructure and Growth Infrastructure teams, providing the backbone for our operations to ensure that the Flywheel continues to spin.

Since the beginning, we have combined the best technology with the best people — allowing us to build the core foundation to create the Flywheel for the future. As Compass continues to grow, and as we continue to invest in new technology, we will be able to speed up the Flywheel even further. If this sounds fun to you, why not join us :)