Would you like for your property management business to be uncontested in its chosen market? Fiona Blayney brings to life W Chan Kim and R Mauborgne’s book, Blue Ocean Strategy, and their associated philosophies on how to leave behind your property management competition.
According to the Small Business Association of Australia (2012), 70 to 80 per cent of small businesses fail within the first 12 months. Five years later, only 10 to 15 per cent of the remainder will remain. Whether you are a business owner or an employee, the impact of a failed business has a cascading effect, and those effects are not only financial. No one wants to be a part of a failed business or a business that is not reaching its full potential.
So when was the last time you stopped to consider why some businesses thrive, others barely survive, and 70 to 80 per cent find themselves back on the shelf of another failed adventure every year?
Perhaps it wasn’t so much a bad idea destined for failure, nor was it a poorly executed business plan; it may not even be a lack of funding or energy. Is there some credence to the notion that there were just too many competitors in the market place?
Imagine creating a business where you offered the same service, at the same rate as your competition. Imagine a business where you and/or your team were unable to articulate what was different, and I mean truly different, between you and others in your market. Consider how close to impossible it would be for a prospective consumer to see or experience the difference between service providers, in a market where the service providers didn’t know what was different themselves! Imagine measuring the difference of a business by way of the colour of their signs, the location of their office, and the relationship with your team! Welcome to the ‘Red Ocean’ – the majority of Australian Property Management businesses.
A ‘Red Ocean’ Business
Picture a metaphoric ‘blood bath’ where businesses compete over the same group of customers, circling clients like a shark circles fish, waiting to attack for its daily meal. The fastest shark that day wins.
A business working in the ‘Red Ocean’ accepts that the market has already been pre-determined based on existing business structures. The focus is on increasing marketing expenditure to raise awareness, yet the return on investment drops. A ‘Red Ocean’ company considers its business strategy is to divide an existing market and literally build a business from their ability to ‘steal’ clients away from others in their market, exploiting existing demand. New initiatives are limited, and where they do exist, they are such that the client perceives low value or benefit.
Ultimately a ‘Red Ocean’ Business competes either from the position of cost (the business operates a low cost offering) which may result in little profit due to high operating costs, or on differentiation ( being a service that no other business offers) which may result in limited client numbers.
A ‘Blue Ocean’ Business
Take yourself to a clearer location, an ocean that is crystal blue in colour, an ocean where you are the only one there. You are in a new, uncontested market; you are in the ‘Blue Ocean’. A ‘Blue Ocean’ business is one that either has a unique offering, an offering that no other competitor has, or an offering that a client wants and which they can provide at a relatively low cost. The client perceives a value for the service and there is no need for ‘bells and whistles’.
The ‘Blue Ocean’ business ignores the competition, and focuses on the consumer – what does the consumer really want, what are they prepared to pay for the service and how can the company make itself truly different.
Ultimately a ‘Blue Ocean’ business competes from both the position of cost and differentiation, being a cost-effective, unique service.
‘Blue Ocean’ Property Management
In a market where elements of service are governed by legislation in the relevant state, be that requirements of the landlord to the tenant, the tenant to the landlord and the agent over all parties, how can a business move into a ‘Blue Ocean’? How does an existing business reinvent
its offering? How do we provide value, maximise profits, and create the right people structure?
While there are many elements that go into the construction of the ‘Blue Ocean’, there are some simple actions you can take to dilute the red.
Four Actions Framework – Constructing Buyer Value
Over the past 12 months I have reviewed many businesses and their service offering, and even in the creation of our newest business venture, Real+, I have been challenged over the concept of “What do clients really want?” – that is, what value do they attach to our service? Along the way as we were creating Real + there were a myriad of possibilities that would push costs up, reduce returns and be of limited value to the client relative to the expense. Working through the Four Actions Framework with relevance for your business is an ideal place to start in order to uncover wastage and discover opportunity.
1. Reduce What elements of your business or service could you reduce well below that of the industry standards? Consider the service of Property Management – are there currently services being provided that could be done with less time, knowledge, skill, and focus? Is there a cheaper way of providing the service?
2. Create Think about other industries, some of which are not property related. What services may be of benefit to your clients that have never been provided before? What could you create that a client would see value in and be willing to pay for, or which would reduce your cost, or increase productivity?
3. Raise Consider the service offering of the industry right now. What could be done to an extent that is far greater than anything that the market has seen thus far? Can you outpace your competitors with a service that raises you far above the standard?
4. Eliminate In many businesses and industries there are services that can be eradicated. No one would miss them if they were gone, but they remain simply because ‘that’s the way it was always done’. What can you remove from your service?
Complementary Service Offerings
When picturing the ‘traditional’ real estate business, we visualise two core areas: residential sales and property management, an approach that is very ‘Red Ocean’. Consider turning a nicer shade of blue by thinking about the complementary service offerings, which could make up a total client solution.
In recent times you may have had cause to review your company website. In doing so the technologically-minded business is no longer simply taking a walk through their website; they are reviewing a whole online strategy. The ‘Red Ocean’ website provider fights to maintain your site – perhaps they have done the design and are hosting it too. The ‘Blue Ocean’ website provider has morphed into an ‘online digital manager’, providing complementary services across an entire platform. These may include web design (static and mobile), creation, hosting, management, social media interaction, search engine optimisation, smart phone application, and much more.
In the world of the traditional real estate business, have you considered offering complementary services? Alternatively, is there a problem for your clients that you may be able to influence, or can you uncover a solution, a solution that may be through a new product initiative, or a partnership with an external provider?
On a daily basis we experience a surge of new products and services into existing markets. At the same time new markets are being created, almost simultaneously with the businesses built to service them. Whether you are a new venture or an existing business, you have a choice as to which ocean you swim in each day, and many a ‘Blue Ocean’ has turned red over time. Keep an eye on the colour of yours.
I hope to see you in the ‘Blue Ocean’. Come on in, the water’s fine!