Using Big Data: BEYOND THE PROFIT & LOSS



Image of wheels and cogs with text 'Big Data' on the biggest wheel.


Using broad, deep data to improve your business

Big data has become a big topic. Businesses of all kinds are using more and more data to assist in making decisions and using AI (Artificial Intelligence) tools to help make sense of the piles of information that accumulate in front of every business executive. Realty execs are faced with the challenge of both determining what data matters to them and how they can get their hands on it. The last question, of course, is how to use it to implement smarter decision-making.

It’s not as if realty leaders haven’t been using data to run their businesses. Sources such as Profit and Loss Statements and Balance Sheets are, of course, important. But they’ve also increased their use of tools like Broker Metrics, to measure market share and changes in competition. Most also measure agent productivity, core service capture rates and online lead conversion. Each plays a significant role in helping brokerage leaders make better-informed decisions.

The data is there. In fact, it’s everywhere. The challenge is to assemble it in such a way as to answer big questions. Here are a few that most executives in our industry would like to know:

  • Who are the best future agents? Is it possible to build a tool that increases my success rate?
  • At what point in an agent’s career is he or she most likely to consider moving to another realty firm? Is there a way to pinpoint this?
  • Is there a way to identify the best future management talent?
  • How can I build a commission and fee program that will yield the best results both short term and long term for the brokerage?

And there are likely many more questions that leaders would like answered. For real estate sales associates, there are other questions:

  • Is there a system of predictive analytics for sellers and buyers of homes? Who is buying and selling in the near term and how do I reach them?
  • Where is the most efficient place to spend my marketing dollars? Is it with the portals, social media sites, direct mail, or any of the other dozens of channels I could use to reach consumers?
  • What are the most effective ways to invest in building a team? 

The good news is that there are data scientists appearing in our industry who are already building such tools. We previewed one recently that would enable agents to far more accurately pinpoint sellers. There are existing firms offering much the same in the way of agent tools. We also know that brokerage-oriented software firms are coming out with their own new tools to help brokerage leaders answer some of those questions we posed above.

What’s the Biggest Challenge?

That is not the biggest challenge, however. Much like in the real-world story of Moneyball, the data was always there. It was all around baseball executives. It took real imagination for Billy Beane and Paul DePodesta to take the data and convert it into a way to run a baseball organization. The same is true for realty leaders. 

The data is all there. It will take some imagination to organize it in ways that it can be used. More than that, it will take the courage of these leaders to take this new knowledge and use it to reorganize their businesses based on what that data tells them. This will take incredible fortitude. That is the biggest challenge of them all.

I recall having Paul DePodesta, the data guy who started the transformation of major league baseball, at our Gathering of Eagles some years ago. Among the most interesting things he shared was that when he and Billy Beane started working together, they came up with something called The Naïve Principal. He said that it was simply asking the question, “if we weren’t doing things the way we are doing them, how would we be doing them?” Profound, right?

I foresee that both existing brokerage firms and new start-ups will be asking that question and using data to drive their decisions rather than do it the way it’s always been done. While there are dozens of start-ups with lower costs for agents, those who are partnering with teams in new kinds of relationships and those offering to buy homes directly from homeowners, I believe that agents will remain an integral part of the fabric of helping consumers buy and sell their homes. I do believe that brokerage firms, both existing and new, will need to take advantage of the information around them and organize it to make great decisions for their businesses should they want to prosper in the future. 


 

This article originally appeared in the November 2017 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2017.

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