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Industry Disruption / Disruptive Innovation

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Vigilante

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From Wikipedia :
In business, a disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances.[2]

What is industry disruption? My answer came from here:
What’s disruption? It’s what highways and trucks did to railroads, what online streaming video is doing right now to DVD rentals and traditional network television, what typewriters did to pens, what word processing did to typewriters, and what mp3 files and iPods did to the music industry. It’s what email did to the post office. It’s what the web search did to public libraries. It’s what the Amazon Kindle did to book sales.
What Does it Mean to Disrupt an Industry?

I personally was at Best Buy as a buyer when they disrupted the consumer electronics industry by switching from commissioned sales to non-commissioned sales. It turned the entire retail industry on it's axis. Best Buy at the time referred to it as Concept II. And, they knew at the time they already had to be working on Concept III as people fast follow copied their Concept II.

If you are a student of entrepreneurship (and I am not talking about the type that simply imports a sticker from Alibaba and puts it on eBay) then you should be studying Disruptive Innovation. That is where the commandment of NEED meets SCALE. To disrupt a market, you have to be the first market mover on your Concept II.

Theranos (fraudulently) raised billions by offering a (fake) value proposition of Disruptive Innovation. KMART failed because they failed to innovate and adapt with their own Concept II. Carvana would be a great example of a company that shows promise of changing an entire industry. Is the business you are working on capable of being disruptive, or is it "me too?"

What examples do you have?

What got me thinking about this was a video I saw this morning :

 

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What AirBnB did to the hotel industry. What Uber did to the taxi industry. What Tesla is doing to the car industry. What Google will do to the gaming industry with Stadia.
 

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Still waiting for the RE industry to be disrupted, the 6% commission of your house price to agents is probably the most ridiculous "tradition" ever accepted. For many agents, the idea of "marketing" is to drop it in the MLS and sit back and wait while not answering your phone...
 

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Still waiting for the RE industry to be disrupted, the 6% commission of your house price to agents is probably the most ridiculous "tradition" ever accepted. For many agents, the idea of "marketing" is to drop it in the MLS and sit back and wait while not answering your phone...
I think it already is.

Websites for buying property like iproperty and propertyguru (in my country) are popping up all over the place.

I have seen some of them, and they provide some avenues for the folks to do most of their own work to research the places and the t & c.

Even then, I have had friends who manhandled the agent to drop their commission rates after they saw they were doing most of the work themselves, especially when it came to settling the details of the S&P. So, I think it might not really need a severe disruption..just some due diligence and negotiating?
 

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Still waiting for the RE industry to be disrupted, the 6% commission of your house price to agents is probably the most ridiculous "tradition" ever accepted. For many agents, the idea of "marketing" is to drop it in the MLS and sit back and wait while not answering your phone...
While there are some companies trying to make headway I saw this yesterday:

The lawyers who took on Big Tobacco are aiming at Realtors and their 6% fee

Honestly might be the quicker path to change in the RE market.

On Vig’s OP, one thing that irritates me greatly is this massive uptick of “startups” that label themselves “disruptive”. Whether they are trying to fool potential customers or simply convince themselves...that I don’t know.

My humble opinion is we don’t truly know if a company is disruptive until many years or possibly decades down the road. Apple, Google, Facebook, Netflix etc 100% yes, they have withstood the test of time and have been handsomely rewarded with stupid balance sheets and income statements. Another one that comes to mind for me is Keurig.


The likes of Tesla, Uber, WeWork while undoubtedly some of the most innovative of our time still have some work to ensure long term success and the consistent (or in some cases, any) profits that have eluded them. And yes, I’m aware Tesla had two profitable quarters but 2019 Q1 is not looking so hot.

The true disruption is not the idea, my 4 year old can come up with disruptive ideas, it is the idea combined with the sustained execution.
 
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Still waiting for the RE industry to be disrupted, the 6% commission of your house price to agents is probably the most ridiculous "tradition" ever accepted. For many agents, the idea of "marketing" is to drop it in the MLS and sit back and wait while not answering your phone...
I have always been perplexed by the REI agent value proposition. Agents routinely convince sellers to drop prices in $10,000 increments, because

An agent that sells a house at $500,000 there are $30,000 in commissions involved
An agent that sella s house more rapidly at $480,000 there are $28,800 in commissions

So there is a negligible decline in commissions at 6% with a $20,000 "loss" to the homeowner/seller. Seller loses, agent wins by seller dropping the price.

There's only one real estate agent's advice in the United States I trust, and she happens to be a forum member. I think the RE industry is beyond corrupt.

I was required to give my best offer on the last house we purchased, supposedly up against a last minute offer from a mystery party that appeared at the last minute. I think the whole thing was a scam, but that's another story for another day.
 

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My humble opinion is we don’t truly know if a company is disruptive until many years or possibly decades down the road. Apple, Google, Facebook, Netflix etc 100% yes, they have withstood the test of time and have been handsomely rewarded with stupid balance sheets and income statements. Another one that comes to mind for me is Keurig.


The likes of Tesla, Uber, WeWork while undoubtedly some of the most innovative of our time still have some work to ensure long term success and the consistent (or in some cases, any) profits that have eluded them. And yes, I’m aware Tesla had two profitable quarters but 2019 Q1 is not looking so hot.
I'm going to disagree with you on this point. Disruption is independent of profit. It's about market share.

The companies you listed are the trailblazer companies, which means that they have a higher chance of failure. However, those companies have completely changed market expectations and forced everyone in the industry to adapt.

If Uber goes bankrupt, we aren't going back to the traditional taxi model. No one wants that. Someone else will come along and figure out a way to make the concept profitable. WeWork and Tesla are a different because they don't have the same market share, but they are forcing the traditional market to adapt.
 

MTEE1985

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I'm going to disagree with you on this point. Disruption is independent of profit. It's about market share.

The companies you listed are the trailblazer companies, which means that they have a higher chance of failure. However, those companies have completely changed market expectations and forced everyone in the industry to adapt.

If Uber goes bankrupt, we aren't going back to the traditional taxi model. No one wants that. Someone else will come along and figure out a way to make the concept profitable. WeWork and Tesla are a different because they don't have the same market share, but they are forcing the traditional market to adapt.
100% agree. Though that market share in theory should translate to profit if the business model is sustainable and more importantly they continue to innovate.

I was looking at this more from the historical lens in trying to stress the combination of execution over the just the idea itself.

Xerox inventing the first PC, Kodak inventing digital photography, Yahoo failing to buy both Facebook and Google when the opportunities arose. Motorola pioneering cell phones and countless other examples. I would imagine @Vigilante has some Circuit City stories. All innovators who changed their industry and had huge market share. Now though, less and less of the population will even know these companies existed and they will cease to be remembered as disruptive.
 

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I have always been perplexed by the REI agent value proposition. Agents routinely convince sellers to drop prices in $10,000 increments, because

An agent that sells a house at $500,000 there are $30,000 in commissions involved
An agent that sella s house more rapidly at $480,000 there are $28,800 in commissions

So there is a negligible decline in commissions at 6% with a $20,000 "loss" to the homeowner/seller. Seller loses, agent wins by seller dropping the price.

There's only one real estate agent's advice in the United States I trust, and she happens to be a forum member. I think the RE industry is beyond corrupt.

I was required to give my best offer on the last house we purchased, supposedly up against a last minute offer from a mystery party that appeared at the last minute. I think the whole thing was a scam, but that's another story for another day.
Would it be better to walk away in that scenario, assuming you had a back up option? Then they have to show their hand.
 
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Would it be better to walk away in that scenario, assuming you had a back up option? Then they have to show their hand.
Unless somebody involved has fallen in love with the house
 

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Still waiting for the RE industry to be disrupted, the 6% commission of your house price to agents is probably the most ridiculous "tradition" ever accepted. For many agents, the idea of "marketing" is to drop it in the MLS and sit back and wait while not answering your phone...
I think some of it may actually be in the works? "iBuyers" Opendoor, Zillow making moves...

These startups make selling your house as easy as possible

How tech companies want to change the way you buy and sell a home

They used a word in this article you can appreciate..."disruption".
 

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I’ve been asking myself how I replace my product and make myself invalid since I started working on it.

Awesome thread @Vigilante

Figure out how to put ourselves out of business before someone else figures it out.
 

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Still waiting for the RE industry to be disrupted, the 6% commission of your house price to agents is probably the most ridiculous "tradition" ever accepted. For many agents, the idea of "marketing" is to drop it in the MLS and sit back and wait while not answering your phone...
One solution is that sellers stop falling for the bullshit marketing that real estate agents use. Top listing agents market themselves as uniquely able to get a house sold, and that is all bullshit. It's all fluff. Anyone who is paying 6% is a sucker.

An honest real estate broker will admit that 99% of getting a house sold is "MLS and a sign in the yard". I spent about 15 years in real estate brokerage management, in companies that I owned.
 

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Valhalla

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One solution is that sellers stop falling for the bullshit marketing that real estate agents use. Top listing agents market themselves as uniquely able to get a house sold, and that is all bullshit. It's all fluff. Anyone who is paying 6% is a sucker.

An honest real estate broker will admit that 99% of getting a house sold is "MLS and a sign in the yard". I spent about 15 years in real estate brokerage management, in companies that I owned.
You can tell they're starting to get nervous/desperate from the realtor TV ads in Canada using fear tactics depicting a couple moving into a house with a rock festival or sewage facility in their backyard or something because they didn't use an agent.
 

AllenCrawley

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Here's a huge disrupter right now in retail.

Faire (formerly indigo-fair)

They recently received $100M in funding. (https://www.crunchbase.com/organization/indigo-fair#section-overview)

From their website, "Faire is on a mission to revolutionize the way retailers shop for their stores. We take all the pain out of buying for store owners. Retailers can come to Faire to find unique and exciting products from thousands of makers all in one place. We have also created the first wholesale marketplace to offer free returns. Our goal is to make every item in your store a bestseller."

Who are they disrupting?
  1. Trade shows
  2. Showrooms
  3. Sales agencies
  4. Road reps
Why retailers are flocking to Faire:
  • Retailers can find and buy unique products for their stores in one place without attending trade shows and showrooms.
  • They can purchase products on NET60 payment terms.
  • Free shipping on first order.
  • Free returns within 60 days of first order.
Why brands/makers are signing up on Faire:
  • Over 25K retailers shopping on Faire 24/7.
  • Effortless sales. Faire handles orders end-to-end, from marketing to payment collection to post-order support.
  • Receive payment immediately.
  • Free and easy to get started. Faire even sets up your profile for you.
  • No showroom fees.
---> Faire is causing such a stir that major showrooms and rep agencies are no longer taking on new lines if they are already on Faire. There is a bit of a panic in this industry.
 

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rhonda duffy in ATL went with an upfront listing fee and a very small percent when sold ...... did really well
 

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amp0193

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---> Faire is causing such a stir that major showrooms and rep agencies are no longer taking on new lines if they are already on Faire. There is a bit of a panic in this industry.
Well overdue.

It's been a couple of years before dealing with showrooms/reps... but the whole thing felt so antiquated. I really couldn't believe how business was being done.

I've been waiting for this disruption. Faire looks awesome!
 

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I highly recommend reading all of Clayton Christensen's books; they're excellent.

One thing I've noticed is that people conflate causing a ruckus/head on competition with "disruption".

Disruption was initially a term coined to describe a new technology which was cheaper to create but worse in performance than what was currently widely in use. Disruption describes how this technology then goes on to get improved to the point where it displaces the old technology.

This is what PCs did to mainframes for example.

Uber in this framework may not be a purely "disruptive" company - it's more a "sustaining innovation". It is in direct competition with the existing taxi networks, which explains why there are so many protests against the company and so many payouts.

I think the distinction is important because being disruptive is actually about avoiding competition, capturing all the value/money and avoiding all the uproar usually associated with direct competition.
 

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