digital disruption

One reason digital disruption hasn't made much of a dent in housing up to now is that its capital, time, and talent-intensive upfront investment requirement makes housing a high barrier-to-entry space.

Airbnb has begun to erode a high-and-mighty view--albeit mostly on the hospitality flank of housing's broadest spectrum of business models--that it just costs too much, or rather exposes too much present and future value for digital to disrupt analog residential construction business models.

Here, from Harvard Business Review contributor and co-leader of Russell Reynolds Associates’ Digital Transformation Practice and Consumer Digital and Media Practice Rhys Grossman is a look at what 2,000 C-level executives say about the susceptibility of their respective industries and business communities to breakthrough disruptive innovations in their fields.

Grossman writes of a "perfect storm" among the industries most prone to technology-enabled disruptive business models, my own sector, media, being at the top of the list.

First, low barriers to entry into these sectors lead to more agile competition. Secondly, they have large legacy business models which often generate the majority of their revenue. These organizations, therefore, have embedded cultural and organizational challenges when it comes to changing at the pace required.

So, maybe it is too high a cost-of-entry hurdle for housing, and especially, residential development, design, home sales, and construction to yield itself to disruption. But, if ever there were a sector that has "large legacy business models" as the foundational capital and investment underpinnings of operations, it's home building.

One out of two ain't bad.

Besides, much of our belief that home building, being local, being seated in generations of people buying, renting, selling, leasing, and living in homes largely the way they have, at least since the start of the industrial era, will essentially be the business it has always been is simply that, a belief.

We believe that the underlying needs our housing and new home industry communities serve are timeless--safety, hygiene, privacy, security, comfort, affordability, and a base of growth for our households. Until those needs and values change, why would the way we're meeting them--with generations-old, established business, manufacturing, and operational practices--need to change?

But, then look at how we see smarter and smarter use of marketing and customer knowledge base systems and services "matching" people with properties, not so different than digital dating sites. Conventional marketing, advertising, promotion, sponsorship tactics may retain the fond value of vinyl in the music industry, for comparison's sake. But, as go forward strategic building blocks, they're quickly becoming outdated.

We know that homes--as people use and live their lives in them--will need to become progressively more adaptive, in both real-time and over-time, and more integrated as to how they use, reuse, and generate finite resources such as energy, air, water, etc.

In light of the pace of change in how these needs express themselves, the likelihood that the "high barrier to entry" roadblock continues to thwart disruptive business models is slim.

What we do know is that the drivers of profitability, purpose, and technology will impel organizations--even ones long and powerfully established in the space--to take a start-up approach to both the challenges and opportunities.

And we know that our HIVE conversation is coming together around working with home building and the housing ecosystem's applied brilliance on tactics and strategies aimed at disruptive innovation.