While everyone’s eye is on the TILA-RESPA ball, we’ve started talking about long-term changes that could be planned for now in light of such a business disruption from government regulation. Of course, keep going down that road, but I want to highlight something that the industry is about to experience very soon – technology disruption. It’s already happened in some industries, and starting to rapidly take shape in others. As a result, let’s focus the spotlight on a concept that can offset that kind of an interruption to industries and the businesses in them: digital transformation.
What is digital transformation?
So what exactly is digital transformation? Before you hop over to Google, I’ll save you the trip and provide the definition at Wikipedia that appears at the top of the search results list:
“Digital transformation refers to the changes associated with the application of digital technology in all aspects of human society. Digital transformation may be thought as the third stage of embracing digital technologies: digital competence → digital literacy → digital transformation. The latter stage means that digital usages inherently enable new types of innovation and creativity in a particular domain, rather than simply enhance and support the traditional methods.”
In the real estate industry, we’re basically at the very beginning of the definition for that latter stage, digital transformation. Where closings have been performed in any digital capacity, it’s primarily been to enhance or support the traditional paper trail and processes of the last several decades, not replace them. For the most part, digitally communicating and collaborating on workflows and production of final deliverables between the consumer and all parties involved (without exchanging a single piece of paper) seems like sci-fi that is now a dated and tired fiction.
The same Wikipedia article cites a 2011 report from Capgemini Consulting and the MIT Center for Digital Business titled Digital Transformation: A Roadmap for Billion-Dollar Organizations. Among the interesting data and global case studies is a figure titled Building blocks of the digital transformation, which illustrates the three key areas of enterprises that executives are digitally transforming:
1) Customer Experience
2) Operational Process
3) Business Model
We’ve already written a few posts regarding customer experience, including a post from last week where I discussed some interesting data that Google recently shared regarding homebuyers. For today, the example we’ll be discussing today pretty much touches on all three…
Real-world example: Netflix vs. Blockbuster
Perhaps the most easily understood example of a technology disruption that occurred, and a digital transformation that didn’t, is the battle between the Internet-centered Netflix and the brick-and-mortar Blockbuster.
Recently, Tony Robbins started a series of posts on his blog titled “7 Triggers of Business Crisis.” In the first post of this series, he talks about the technology disruption that Netflix caused in his first trigger, “A Change in Your Competition.” This excerpt from that post sums up the competitive showdown perfectly:
“Consider this: Last year, Netflix reported revenue of $4.37 billion—billion, with a B. The opening scene of this real-life-movie-in-the-making was shot in 2000 when the young Netflix tried to sell itself to Blockbuster for a mere $50 million at a time when Blockbuster was doing $4 billion per year.”
While Blockbuster was simply ignoring the dramatic shift in what we now know as three key areas of a digital transformation, Netflix was embracing change in those three areas, while blazing the path that would shut their main competitor down.
Remember the topic of a previous post regarding the seemingly ridiculous thought of a tech giant entering the mortgage space? It seems like such a stretch to many right now, but after recalling the Netflix example, nobody should count out the possibility of something like that.
Let’s start talking near future (the one that’s about to happen)
Shifting gears, let’s take a moment to think about the bigger picture of what will happen less than a year from now. On Aug. 1, 2015, the playing field in this industry is going to be competitively equalized to a great degree. In the very beginning, brand recognition is going to be the primary differentiator between lenders across the U.S. Shortly after, the millennial factor will kick in and force the next step in competitive evolution: customer/user experience. HOW consumers interact with your organization will be a serious factor as to whether or not you get their business.
And along the path of a digital transformation, you’ll be looking at the other areas of Operational Process and Business Model to keep pace with the faster digital marketplace. What does that look like to you right now? How many of you have thought about concepts like this within your organization?
Start thinking beyond TILA-RESPA now. And while you do, be sure to register for a free account at the TILA-RESPA Knowldege Center, where you can browse a knowledge base of articles and documents, or join conversations in the forums.
All information and views expressed or implied are provided without warranty and are only the opinion of Pavaso, Inc. Each participant should seek legal representation for legal interpretation of the ruling and the CFPB directly for final instruction and interpretation.The final rule can be found here.
