Michael Bruce knew his industry was archaic.
Bruce, CEO of a traditional UK real estate company, found that no one was exactly happy with the process of selling a house. The traditional model meant that home sellers paid 6% to agents who maintained full control over a slow listing / selling process.
The inflated real estate storefronts remained largely unused by agents, never used by clients, with the expense passed on to the seller. The seller also experienced less than complete transparency, agonizing expectations at many stages of the process, and a general lack of control over what has remained one of the most stressful life experiences in existence.
Meanwhile, other industries were using the technology to advance or even revolutionize the consumer experience. Michael and his brother Kenny wondered if it was time to Uberize this tired industry?
Yes, and four years later Purplebricks has catapulted to $ 200 million in sales, is the UK’s largest home-selling business and Australia’s third-largest, and has now landed in seven US states, where the rate of conversion of interested sellers into actual listings is the highest of any country.
The model is decidedly disruptive. Sellers visit the Purplebricks.com website and hire a highly qualified real estate agent who will get a lump sum (away from the typical 6% commission) and put the house on the market within an hour of the disclosure. Sellers have much more control over the process, and can organize their own presentations, get immediate feedback (including knowing instantly if they’ve made a sale), and communicate directly with potential buyers – all of which takes the ‘middle ground’ out of the way. “Man” agent.
So what does the agent get out of it? They receive leads, many of them, collected through the company’s website. This means that 85% of the agent’s time is freed up to provide better service to more clients than they would otherwise have obtained (further reinforced by the territorial exclusivity granted to them). So although they only get a lump sum, agents earn more money in the end. An “everyone wins” disruption.
But Bruce didn’t always feel like he won. The founder and CEO told me about his difficulties raising funds. He thinks the doors to fundraising only opened after he went all-in and invested everything he had. Investors liked what he invested in, but they liked the fact that he had invested so much of his own money and clearly had a lot more to lose than them. This told investors no one would work harder than Bruce to make the idea work.
Bruce also had to take a major leap of faith when he initially built the Purplebricks rig. He’s not a technologist, so he had to wait nervously over a year for people with specific knowledge to deliver technology he hoped would provide the experience he wanted home sellers to have.
The founder also wondered if he would ever be able to get the best real estate agents, the kind who shared Purplebricks values to provide great service and big savings to the seller, and who wanted to be part of a disturbance.
Bruce took on all of these challenges, motivated by the fact that he knew he had a disruption that would lead to a better experience in something that mattered.
So how can you do the same? The CEO shared these three principles for any entrepreneur who wants to find an industry to reinvent.
1. Find the friction.
Disruption occurs when real problems with real pain points are resolved with real solutions. It may seem obvious, but far too many entrepreneurs fail to first consider the urgent need they are filling. They spend time creating the market for the solution they have, rather than creating a solution for an existing problem in the market. And you understand the depth and breadth of the problem at hand when you follow the second principle.
2. Connect with people who have the problem.
Bruce said he spent two years deeply understanding everything people love and hate about the home selling process. This included all relevant stakeholders, including sellers, buyers and agents. The deep understanding even led to an idea for publicity – advertisements that featured Purplebricks as solving the “commissry,” the misery for everyone involved that comes with paying a high commission.
3. Look for latecomers.
A telltale sign of an industry ripe for disruption is that the category is lagging behind in technology advancements in other categories. The ridesharing industry has been transformed by Uber technology, as has Airbnb for rental properties, and now Purplebricks for selling homes.
Can you find an industry that has operated the same way for far too long, without the help of technology that could provide a much better experience? If so, and one and two apply, you may have found your market to reinvent.