In the early 1970s two aging grocery store chains, Kroger and A&P, were faced with a brutal truth. Shoppers didn’t like their stores. They wanted bigger, brighter stores with a wider variety of items made on-site. Both market research and sales data clearly showed that customers were rejecting the cramped, dingy grocery stores of their parents and grandparents.
Management for both companies saw that the grocery business was undergoing a major transformation and realized that their chains faced an uncertain future. But how they responded to the need for change sent them on radically different paths.
Kroger, an 82-year-old regional chain, chose to eliminate, remodel, or replace every single one of its stores. The transformation was costly in terms of both cash flow and disruption to personnel, but management saw it through.
A&P, then 111 years old and the largest grocery retailer in the U.S., when faced with the same challenge decided to live by the slogan of their late CEO, “You can’t argue with a hundred years of success.” Instead of giving customers what they wanted, they tried to attract them by cutting prices. This ultimately put the company into a slow spiral of decline.
Today, Kroger is the country’s largest supermarket chain by revenue ($103 billion in 2014) and second only to Walmart in retail. A&P, after decades of steady contraction marked by buyouts and bankruptcies, closed its last grocery store in 2015.
When market conditions change and businesses don’t also adapt to them, they begin to fail. It’s a simple principle right out of Business Management 101. But even when everyone agrees change is the only viable solution, it can be so difficult and so disruptive, many businesses simply avoid it.
The radical path Kroger chose was expensive, difficult, and came with no guarantees. Few organizations would have chosen that degree of change, let alone seen it through. Yet without it, Kroger would most likely have shared the fate of A&P.
Change can be just as difficult for people as for organizations, often for the same reason.
Every individual has things about themselves they’d like to change. Around New Year’s Day, people produce lists of goals for exercising, saving money, getting organized, and furthering their careers. But for most, these goals will be abandoned after a few weeks, only to show up on their resolution list the next year.
The same thing happens in business.
Fresh off the enthusiasm of a conference or after talking to a consultant, business owners invest heavily to establish a new initiative that promises to increase productivity, profitability, and the level customer satisfaction. Yet rarely do these efforts yield lasting results. Soon things return to “the way we’ve always done it” and everyone pretends the initiative never happened.
Change is hard. Yet in an industry like real estate, which is going through a major transformation, brokerages and companies that don’t respond will meet the fate of A&P.
While no business sector remains static, real estate especially is going through a series of upheavals brought about by both internal and external factors.
A change in market dynamics. The housing bubble of 2008 set in motion a series of changes in how homes are bought and sold. Where financing was once easy, now cash is king. Yet in many regions, it’s a seller’s market with a return to pre-crash price increases. Both factors are threatening to squeeze out the much-needed segment of first-time buyers. When affordable housing becomes a crisis, sweeping legislation is soon to follow.
The customer expects more. Real estate has gone from being a necessary but unexciting part of life to being the centerpiece of a dozen popular reality shows. Agents now deal with clients who’ve watched scores of deals completed on TV. Regardless of the accuracy of what they’re seeing, customers now come with a bigger set of expectations.
Additionally, much more real-time information is available online—from neighborhood profile sites to consumer-focused real estate blogs to Zestimate. Where the agent once controlled the information, now clients can find out anything they want to know about an individual property or area.
Explosion in technology. The new information technology has made it so much easier to do a deal. Out-of-state buyers can tour a house from their agent’s iPad, go online to view the area and comparables from any angle, and sign documents on their smartphones while they’re on a ski lift. But it also brings challenges for the real estate professional.
Each generation uses technology differently. Baby Boomers are happy to interact on Facebook while Millennials think the world’s leading social platform is as dated as a fax machine. A good agent doesn’t just need to know how to use all the apps. They also need to know how each generation likes to use them.
Additionally, prospective clients have multiple ways to reach out to an agent 24-hours a day. That’s great for picking up new listings. But it’s not always easy for an agent to meet their expectation of an immediate response.
Even when brokers see a clear way forward to adapt to and even anticipate a changing business environment, it’s tough to bring everyone else along. Especially, when being independent-minded is a necessary trait in a high performing agent.
Just how hard is it for people to break old business habits? Management expert Keith Ferrazzi discovered it can be as challenging as trying to go sober. Comparing successful change management programs across a wide variety of situations, Ferrazzi and his research team discovered striking parallels with the 12 Step program of Alcoholics Anonymous (AA).
Reporting their results in the Harvard Business Review, they found that in both cases change came about as a deliberate, ongoing process with constant support and reinforcement. The most important factor for successful, lasting change is when people believe they have no other viable choice.
In their book Switch: How To Change Things When Change Is Hard authors Chip Heath and Dan Heath examine the internal dynamic that thwarts this seemingly simple alignment of emotion and will.
Using the analogy of an elephant being directed where he should go by his rider, they noted that the rider (the intellect) appears to be the party in control. But in reality, the elephant (the emotions) has the final say. The rider can spend hours analyzing the best route, but the elephant just takes his favorite path. This emotional component is true for both individuals and organizations.
Management consultants W. Chan Kim and Renee Mauborgne agree. While the first step to successful change is cognitive, it won’t succeed until there’s real motivation. “Workers have to want to make the change.”
Everyone who studies change management concurs it’s a difficult process. But there is hope. A broker can purposefully create an environment that will ensure a successful transformation.
Politicians often campaign on the sweeping changes they’ll make with the stroke of a pen. But business owners know that significant transformations are not that easy. It’s not that top-down change is impossible. It just needs to be nurtured, supported, and ultimately, led.
Here are a few essential steps to take:
Have a proven plan. It’s important to have a plan that is clearly understood by everyone in the business. But it’s even more important to have one that they are convinced will work.
When agents and staff acknowledge that the plan they’re being asked to follow has been successful for other organizations, they will have more confidence and a better chance of buy-in. A good manager will present evidence at each step that the brokerage under transformation is on the same track as another brokerage that used the plan to succeed.
Replace old habits with new ones. A key component that successful change initiatives and AA have in common is the realization that even small habits can lead you back to the old behavior. So brokers trying to implement change should look for ways to replace the activities associated with the old way of doing things with new ones. This isn’t to say that change can’t be incremental, but it’s important to make a fresh start.
Acknowledge small wins. The trick to getting the elephant to go where the rider wants is to get the elephant to want to go there. If the rider can get him to take one step in the right direction and immediately reward him with a peanut, the positive reinforcement will make him want to take further steps in that direction.
The same works for people. When a manager or broker publicly acknowledges and rewards even the smallest steps in the right direction, the change begins to gain momentum. And soon more and more people will buy in.
Peer pressure and support work. A broker cannot change the way an office works on his or her own. To succeed they must first get their most influential agents on board. The others will follow. Mr. Kim and Ms. Mauborgne even advocate appointing a “consigliere”-a highly respected insider who knows who’s fighting the change and what needs to be done to build coalitions to bring everyone along.
Change is difficult to maintain. The health clubs that are crowded in early January and nearly empty by Valentine’s Day attest to that. However, personal and business inertia should not be looked at as an insurmountable obstacle. Instead, it should be something to be taken into account.
The broker who has a plan to deal with initial resistance and setbacks is the one who will succeed in the rapidly changing real estate environment.
The person leading the change must show complete confidence that it will succeed, personally using the new technology and procedures and being transparent about challenges on the learning curve.
Many brokerages are responding to the challenge of a changing environment like A&P did—with head-in-the-sand denial. They will continue to work in the way that’s most comfortable to them. But the brokerages that want to survive and thrive will follow the path of Kroger, embracing transformation because they believe they have no