The Cycle Of Disruption
This article was written by Homie CEO Johnny Hanna.
Staggered across the highway from Homie billboards sit the pro-establishment signs. But these billboards, along with the other well-known brokerage firms like the photo shown above, aren’t likely to silence Homie’s message. In fact, the “look-at-us-not-at-them” response is an indication that Homie has moved on to the next stage in the cycle of disruption.
Disruption follows a cycle
“First they ignore you, then they laugh at you, then they fight you, then you win.”
- Attributed to Ghandi
This quote could easily have been talking about today’s tech companies. That’s because, whether it’s Tesla, Uber, Airbnb — or Homie, disrupting the status quo of a massive entrenched industry follows a cycle.
1. Newcomer builds a better mouse trap
Disruption begins when a newcomer builds technology that simplifies and automates processes previously carried out only by “experts” or regulated bodies. Using technology, the disrupter creates a peer-to-peer marketplace, which allows self-reliant consumers to meet each other and complete transactions. We no longer have to hail taxis, we simply punch our location into a mobile app and a car and driver appear. We can bypass hotels and book a room with a local. And we can purchase a Tesla without going through a dealership (in most states).
2. Industry ignores them
At first, the industry ignores the newcomer, leaving disruptive companies alone to innovate and create exciting new brands in a tired space. These new brands (and the marketplaces their business models create) don’t always fit within defined state regulations. Legislators didn’t plan on people renting out their extra bedroom for the night, nor did they plan on every vehicle having the ability to become a taxi.
So, the newcomer must figure out how to be compliant to old laws for old industries while still changing behavior. For example, in Utah current laws require car companies to work through dealerships, prohibiting companies like Tesla from selling directly to consumers. These laws don’t shut companies down, they slow them down and add costs to their bottom line, affecting the final price consumers have to pay. At times, tech companies like these simply choose to not work in that state if there is no compromise or if lobbyists keep regulations outdated through special interest groups.
3. Brand recognition grows
Most people can’t name a single taxi cab brand, but they can tell you the difference between Uber and Lyft. The Airbnb brand is as well-known now as the Marriott and Starwood Brands, and the iconic Tesla “T” logo mark is identifiable worldwide.
4. Industry bullies them
After an industry realizes that the newcomer is gaining market share, they shift from ignoring them to bullying them. It’s common to see big business suing the little guy in an attempt to stifle growth and innovation. When the new tech innovator doesn’t have the funds to fight the giant, the innovation is stopped in its tracks. Hence the saying, “If you can’t innovate, litigate!” It’s also common for these incumbents to try to create new laws to protect the “old way” of doing things.
5. Industry adapts and improve
Some disruptions have enough funding and enough consumer backing that the industry is forced to adapt in order to compete. When this happens, new marketplaces are created, new laws are passed and antiquated pricing models change. Uber and Lyft were allowed their own zone at the airport, for example, and taxi franchises that had held all the cards for over a hundred years were forced to innovate. At the same time, laws evolved requiring Airbnb to collect transitional room tax in accordance with local laws.
6. Consumers reap the benefits
When innovation succeeds, the consumer wins. They often enjoy a better experience, more options, more transparency and better pricing as a result of the innovation.
Can Homie disrupt the real estate industry?
Homie is well on its way to becoming a disruptive force in real estate. Here’s where we’re at in the cycle and what we hope to accomplish in the next couple of years.
1. Homie built technology to automate and streamline real estate transactions.
Homie created a digitally driven way for people to buy or sell a home directly, without having to pay agent commissions. A seller who lists on Homie pays a low flat fee and receives professional photography, a yard sign, attorney help with all paperwork, contracts and negotiations, and a dedicated team to see them through the process. Our homebuyers find their homes online and use Homie’s software to tour homes, make offers and complete the transaction. Buyers pay nothing and they receive all the help they need to make and negotiate their offer from Homie’s real estate attorneys.
2. Industry ignored us.
A quick look at our Facebook feed early on reveals that most real estate agents were confident Homie would just disappear — here today, gone tomorrow — and that we would not disrupt their claim to the 6% commission. Many real estate agents thought it would be enough to post fake one-star reviews on our Facebook page, but our clients quickly saw through that behavior and continued to list with us.
3. Homie brand recognition grew.
Within the real estate industry, most people can’t distinguish between existing brands. They can’t tell you the difference between a Remax, Berkshire Hathaway, or a Keller Williams agent.However, within a year of launch, Homie went from obscurity to becoming a household name in UT. Whether they’ve seen one of our billboards, seen us on the news, heard a radio ad or or seen us at home and garden shows or Parade of Homes, the majority of Utahns know someone who has used Homie or have used Homie themselves.
4. Real estate industry resisted with threats.
Within a year, Homie’s listings doubled, then tripled. Soon we had taken over a large percentage of the market place. We now list more homes in a single month than we did in the first six months combined. Industry resistance has set in and we’ve had five cease and desist letters from competitors. We have also seen multiple brokerages and agents combine together to target us and our partners with bad reviews, some even threatening to boycott us and our partners.
As seen in the initial photo headlining this article, the local realtor association and local brokerages have bought billboards, TV ads, and radio ads in direct response to our success.
5. It’s time for the industry to adapt and improve.
We believe consumers’ rights to buy and sell homes themselves will win out over this resistance. We expect to lead a top-to-bottom innovation in this industry, one that begins by eliminating agent commissions and that goes on to reduce mortgage costs and other transaction costs.
We have begun to see many agents lower their fees to compete with Homie. This is a sign the industry is adapting and improving to make it a more affordable option for consumers.
6. Home buyers and sellers win in the end.
Consumers are saving an average of $10,000 with Homie. We’ve seen families that have been underwater since the 2008 crash finally be able to get out of their home without taking a loss. We’ve had clients that have never had that much money in their bank account finally able to pay off other debt, go on vacations, and even use that money to put on a down payment for a new home. It’s been so rewarding to help families keep what they’ve earned as home prices have risen.
Buyers that use Homie also win. Since the seller isn’t being asked to pay agent fees, our buyers have more room for negotiation, which can save them thousands off the purchase price of the home. We are also about to announce a refund option so you can simply pocket the 3% commission or apply the savings to closing costs.
Our goal is to maximize transparency and eliminate unneeded costs (in addition to agent fees) as we help people through the entire closing process. We look forward to a cleaner, leaner process.
Homie’s future?
Look, I know that you are thinking, “Does this guy really think his company is the next Uber, Airbnb, or Tesla?” Homie is saving families $10,000 on average. Think about that. It’s life-changing to many. Homie is on its way to becoming an incredible company that I believe could someday be included in that list of disrupters.
The truth is that our growth has been incredible. The truth is that we are well funded by world class investors like Peter Thiel’s Valar Ventures and Kleiner Perkins who have a solid history of picking winners. The truth is that I believe we can do it because we have a rock star team who have built $100 million+ companies in their past.
The stars have aligned for us. We live in a tech-forward state that wants transparency and automation. Utah’s strong economy has helped sell homes quickly and for top dollar. We can’t take credit for either of those things.
What we can take credit for is saving Utahns $7.7 million in fees in just over a year. We take credit for offering our clients professional photography, legal assistance to help with all paperwork, accurate home valuations, a tour management system, and guidance all the way to close for just a few hundred dollars.
And we’re only getting started. There’s room for improved processes and even more automation as we live our internal core value of innovation. The result will be a better user experience for our clients and even more savings. We are currently at 45 employees and plan on hiring another 20 people in the coming months as we open new areas. Our model allows us to be centrally located here in Utah without having to hire in other states. It’s been a blast to take on a Goliath.
Our future is bright. Although we expect to encounter more obstacles as we grow, we look forward to hearing what our excited and satisfied clients have to say after listing with us. Join the conversation on our Facebook page, on our LinkedIn profile or comment below and let’s see just how disruptive we can get!
