# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

# INNOVATION IN REAL ESTATE BUSINESS MODELLING: AN AUSTRALIAN PERSPECTIVE

**Dr. LINDA K. CHARTRES**

**RMIT University, Melbourne, Australia**

## ABSTRACT

This research paper focuses on unveiling the application of innovation within the Australian
residential real estate sector by examining business modelling strategies adopted by the independent
residential real estate organisations.  Qualitative case study analysis is used as a vehicle to collect
pertinent information from selected business models adopted by independent real estate organisations
found in operation throughout Australia. Operational strategy with emphasis on resource acquisition
and allocation is analysed to expose the extent to which these real estate organisations use innovative
practices in business strategy.  The findings bring to light two important points for consideration. In
the first instance the independent real estate organisations seek out “unique” business structure to
achieve competitive advantage. Secondly it is the application of operational freedom within the
organisational context which lends them an ability to act fast on innovative practices without having
to deal with operational constraints such as layers of management for example.

**Keywords** –*Real Estate*, *Resource Strategy, Open Strategy, Open Innovation, Technology, Change*
*Management*

## INTRODUCTION

Real estate is succinctly described as a “multifaceted, multidimensional, and substantial segment of
the economy” (Roulac 1996, pp. 323) as well as “an important, if not the most important, storage of
wealth in the economy” (Crowe et al. 2013, pp. 6). Thus as a significant backbone of the modern
economy it is responsible for contributing approximately A$9.9 billion in revenue and A$4.2 billion
in wages thus providing a significant contribution towards Australian employment (IBISWorld
2015a). Moreover it is suggested that many households in Australia have a propensity to hold wealth
in property as property owners with or without mortgage as opposed to equities (Headey et al. 2004).

As a service industry it encompasses many sectors including residential real estate, commercial and
industrial real estate to name a few. Organisations within the real estate industry engage in various
functions aimed at supporting its transactional nature which revolves around buyers and sellers.
Whilst all sector participants provide a contribution towards the real estate transaction process, it is
largely the sale and purchase of a home which can be regarded as the “single-most-important, and
most expensive, household transaction for an individual, or a family” (Dunlap et al. 1988 pp. 177).
Thus from the industry’s perspective, the residential real estate market is well positioned as a subject
of study in a service-based context.

Real estate is a service driven sector; generally composed of small to medium enterprises, reliant on
geographic dispersion to capture their respective market share and expand their local presence, and
with relatively low entry barriers, it provides a strong springboard for entrepreneurship. As such
franchising  is  widely  adopted  by  the  industry  and  there  are  3,500  enterprises  with  20,000
establishments reported to be operating within Australia with the highest percentage of these situated
on the eastern seaboard (IBISWorld 2012).

Additionally whilst most real estate agency services have remained relatively the same over a long
period of time, IBISWorld (2015b) reports that outsourcing of corporate real estate activities such as
financial analysis, leasing, property management, acquisition and development, as well as disposition
(Ali 2007) is adopted by many real estate agency operators thus enabling the real estate agency

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

operators to operate within a niche market. In the same manner a growing trend towards outsourcing
of professional real estate services such as marketing, management, valuation, and provision of
professional advice in relation to investment, use or development of real estate (D’Arcy 2003) signals
a focus shift of operational resources to core capabilities. In a broader context still, the users of real
estate such as government agencies and various other related organisations now also subscribe to
outsourcing their real estate activities with an aim to reduce operating costs, limit their overexposure
to financial and operational risks brought on by extending beyond core capabilities, and thus improve
overall efficiencies.

Reports collated by Real Estate Business (REB), an acclaimed website for delivering news and
information for Australian residential real estate industry, highlight the most common business
models adopted by the real estate organisations currently present within the industry. Franchised
group includes franchises and cooperative agency networks whereupon the latter are considered as
franchised in terms of Australian franchise legislation whilst non-franchised group consists of
independent agency networks, boutique networks, and joint venture networks.  Thus in order to best
represent this study, this paper  aims to address the implications of innovation and technology on
resource strategy adopted by select franchised and non-franchised real estate organisations currently
operating within Australia.

The paper commences with a brief background of the Australian real estate industry sector setting the
scene for the  literature review. Application of innovation and technology in resource strategy is
addressed with specific focus placed on concepts of open strategy and innovation. Next, methodology
used to conduct this study is outlined followed by the findings gained from the case studies chosen to
represent this study. Lastly, the findings are discussed in reference to the literature review to arrive at
the concluding words.

## BACKGROUND

Real estate can be regarded as a relatively traditional industry sector which is mostly populated with
small to medium sized non-franchised and franchised organisations. It is the established franchised
organisations which account for large enterprise networks with national presence and some even with
international presence, for example L. J. Hooker, Ray White, and Raine & Horne. It is these
franchised networks which are regarded as Australian real estate franchise agency industry’s main
players according to IBISWorld research (2012, 2015) accounting for the highest percentage of
market share.

As franchises built on a traditional franchise model whereby the operational strategy is focussed on
network growth through recruitment of new franchisees in geographically dispersed locations, the
operational strength emanates from the durability of internal systems developed for the franchisees.
To this effect a traditional franchised operation invests heavily in internal resource accumulation
where the accumulated resources are used to develop and implement its own internal systems such as
training  programmes  for  agents  as  well  as  organisational  functions  such  as  technology  and
recruitment. Thus by adopting such a relatively insular operational outlook, a franchise is able to
provide a substantial offering to potential franchisees and thus rapidly expand its network.

The literature suggests that structural changes occurring within the real estate industry are directly
responsible for influencing the real estate agency market. This is supported by the recent survey
conducted by Real Estate Business (REB 2012) which shows evidence of structural changes taking
place in the market by highlighting the divergence in development and uptake of business models
which vary substantially  from the standard format of franchising, currently regarded as a preferred
choice of a format for the independent agencies. By placing a greater weight on the notion of sharing
resources without losing independence, trade name and brand, as well as operating procedures and
systems is found to be ultimately affecting the product mix, the agency arrangements, and the legal
liability of the real estate agencies and thus leading the way for innovative redevelopment and
revision of standard business models.

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

There is a growing body of evidence to suggest that real estate industry is fast becoming a
“technology-based” industry (R. Hedditch 2015 pers. comm., 15 Jan).  This is suggested on the
pretext that the industry is exhibiting a divergence from the traditional  view where ownership and
control are the main key indicators of strategic success. Instead a growing body of the industry’s stake
holders are now seeing potential value to the organisation brought on by acquisition of external
resources which are not owned by the organisation in question, but where these resources none the
less create value for the organisation in question. Chesbrough & Appleyard (2007) suggest that these
external resources tend to be volunteer contributors, innovation communities and ecosystems and
other surrounding networks.

Hedditch thus explains that whereby the traditional Australian real estate business landscape consisted
of dominant franchises and less dominant independent operators, the onset of technology and
innovation has seen many independent organisations become operationally sufficient as franchises.
The emphasis today appears to evolve around strengthening the organisational knowledge base
through indirect ownership of resources and operational flexibility.  Thus independent organisations
are surging ahead with forming alliances and partnerships with other similar organisations and thus
shifting the competition focus to external sources. Indeed they are instrumental in forming external
networks where they can source innovative ideas and thus improve their performance.

## LITERTAURE REVIEW

Recent research into resource strategy points to resource acquisition in strategic markets and internal
resource accumulation as basis for more in-depth research into the resource-based view (Maritan &
Peteraf 2011). Building on this, Sirmon et al. (2011) focus on the role of managers’ actions in
effectively structuring and leveraging organisational resources through areas of scope of the
organisation, its position within its life-cycle, and levels of the organisation. Furthermore the
entrepreneurial landscape is mentioned as a potential area of research in terms of the linkage between
different environmental contexts, access to resources, and recognition of opportunities by the
entrepreneurs as well as how entrepreneurs adapt to dynamic environmental contexts (Shane &
Venkataraman 2000).

Moreover organisational focus on strategic resources is shown to be directly responsible for extending
the resource-based view towards a knowledge-based view  of the organisation. This theoretical
perspective sheds light on the knowledge as the most important intangible resource of the organisation
as how the organisation acquires, transfers and uses knowledge directly impacts on the organisational
performance and its competitive stance within the industry (Spender & Grant 1996). In essence it is
the organisation’s propensity to assimilate the knowledge into the organisation which lies at the core
of knowledge-based view. Thus organisations should theoretically rely on the access to the flow of
knowledge as well as their own stock of knowledge as “the basis for their absorptive capacity”
(DeCarolis & Deeds 1999, cf. Erden et al. 2012, pp. 2777).

Building on this, Chesbrough & Appleyard (2007) provide a divergent outlook on strategy. Whilst the
traditional strategy focuses on internal ownership and control of resources, there is much scope in
extending the outlook on strategy to encompass the potential value of external resources which are not
directly owned by the organisation however can create substantial value for the organisation by
examining the sustainability of business models. They do this by analysing the implications for
competitive advantage by way of assessing the effects of innovation, ecosystems, and  networks on
organisational strategy. They argue that traditional business strategy adopted by organisations to date
has led the organisations to behave defensively in the market place by constructing barriers to
competition rather than promoting openness. In the light of technological advances, organisations are
now beginning to experiment with novel business models “by focusing on harnessing collective
creativity through open innovation” (Chesbrough & Appleyard 2007, pp. 57). Thus they argue that
this approach calls for a totally revised approach to strategy which they call “open” strategy, where
the principles of traditional business strategy are balanced by the innovation.

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

Nelson & Winter (1982) state that an organisation’s internal capabilities are grounded within
evolutionary economics whereby the evolutionary economics view entails that organisations which
possess an inherent ability to remain innovative are able to develop organisational capabilities
consisting of competencies and routines. They further state that possession of these capabilities or
bundles of resources results in enhanced organisational performance which enables organisations to
remain competitive in ever-changing market conditions.

The concept of open innovation is not a new theory as the intrinsic need for in-sourcing of external
knowledge has been floated by researchers as early as late 1980’s (Gibbons et al. 1994,  Von Hippel
1988). Indeed organisations channel the knowledge harnessed from external sources across different
internal structures and as such external knowledge plays an integral part in optimising in-house
innovation (Chesbrough 2003).

Organisations  thus  may engage in two different types of open innovation, namely inbound open
innovation and outbound open innovation (Chesbrough & Crowther 2006). In the case of inbound
open innovation an organisation in-sources external knowledge in addition to its bank of internal
knowledge. On the other hand in the case of outbound open innovation an organisation relies on its
internal banks of knowledge and looks to external organisations as more suitable sources of
commercialising certain functions or technologies.

For an organisation to be able to identify new knowledge pertinent to organisational innovation it does
not need to possess complex technical knowledge. It is adequate for an organisation to possess
internal related knowledge at the user level including knowledge regarding evolving business trends
(Arbussa & Coenders 2007). They further contend that absorptive capacity allows an organisation to
consolidate more complex external knowledge into its own knowledge bank of knowledge however
this can be done in a sequential manner as shown by Zahra & George (2002) or by implementing
alternate routes as suggested by Todorova & Durisin (2007).

Anand et al. (1998) argue that advances in IT have facilitated the organisational capacity for memory
and the ability to capture and integrate specific knowledge by rendering it relatively easy to codify,
store, communicate, assimilate and retrieve. O’Keefe (2002) argues that the need for accurate and
timely information resources to support individuals within the organisation to carry out their specific
tasks is becoming excessively important to integrate within the organisation to facilitate
organisational learning capacity. This is of utmost importance in a real estate agency as the fluidity of
transference of knowledge is essential to keep abreast of the current data and thus provide an expected
level of service to the public. Individual salespeople rely heavily on the array of knowledge
disseminated from different sources to provide an accurate pricing assessment of real estate for
example. Similarly real estate agency principals require knowledge from a range of sources to
accurately assist in their decision making processes.

It is argued that information technology is instrumental in facilitating the innovation process. On a
purely individual level, this argument stems from the basis that “information technology moderates
many aspects of the process of bringing new problem-solving ideas into use given that it determines
the way the information is stored, transmitted, communicated, processed and acted upon (Dewett &
Jones  2001,  pp.  326). On  an  organisational  level,  information  technology  is  affecting  the
organisational forms and thus facilitating innovative processes within the organisational forms via
knowledge leveraging (Venkataraman 1994). It is argued that this type of an arrangement can lead to
“development of cross-functional synergies which may result in competitive advantage in the form of
product or service differentiation” (cf. Dewett & Jones 2001, pp. 327). As such organisational forms
which are able to adopt such arrangements are regarded as being more flexible. In light of this,
flexibility in the organisational form is viewed as an advantage as it promotes a fast response to
innovative processes which enables them to compete more effectively in changing environments
brought on by economic volatility such as globalisation, uncertainty and changes in labour and
consumer sectors (Halal 1989).

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

## METHODOLOGY

The aim of this paper is to  undertake a qualitative analysis through adoption of the case study
approach whereby each case study chosen represents an organisation operating under a specific type
of business model found in operation within the Australian real estate agency industry. The
organisational models are divided into two groups; franchised and non-franchised.  Table 1 explains
the organisational models.

**Table 1: Organisational Models**

|  | Organisational Models | Business Modelling Structure |
| --- | --- | --- |
| FRANCHISED | Franchise Agency (F) | Franchises are bound by franchise contracts where the parties to the contract are referred to as franchisors and franchisees. Franchisor is responsible for provision of the brand and system for use by the franchisees, and the franchisees pay a fee to the franchisor for the use of the brand and the systems. |
| FRANCHISED | Cooperative Agency (CO) | Cooperative agency is bound by a licence agreement and the parties to the agreement are referred to as a licensor and a licensee. A cooperative business arrangement is composed of licensees which are all independently owned and operated real estate agencies unified by a specific service provided by the licensor, for example technology and marketing. |
| FRANCHISED - NON | Joint Venture Agency (JV) | Joint venture agency mimics boutique agency however the difference between the two business models is in the level of ownership of the main owner/operator. In this business modelling scenario, the main owner/operator has at least 51 per cent share in each unit, with the remainder of the shares individually owned by the operator of each unit. |
| FRANCHISED - NON | Boutique Agency (B) | Boutique agency is essentially a large independent real estate organisation owned by a single owner/operator whereby and each unit under within the agency network is run by a manager. Boutique agencies generally have a high number of multiple units across one state or several. |
| FRANCHISED - NON | Independent Agency (IA) | Independent agency comprises of independent real estate organisations or independents as they are commonly known within the Australian real estate industry sector and these agencies are fully owned by an individual operator. Each one of these organisations belong to a specialised network which allows for uniformity within the network through adopting a structure based on, for example, sharing effective business support systems which enables growth of market share, profit performance, and team performance whilst allowing for each organisation to maintain its independence in the market place. |

Data is acquired by means of a semi-structured interview technique. As the research project is
principally centred on  the operational areas of strategy within the organisational context, each
respondent organisation is represented by an individual who is directly involved in the operational
aspects of the organisation. Individuals in these roles are most likely to be in the position to shed
inside knowledge on operations such as Franchisor/Licensor or CEO as often it is these individuals

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## 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

who can in fact be responsible for founding of organisation. As such they are ostensibly privy in many
respects to witness the expansion or in some case even contraction of the organisational network they
represent and the affiliated organisations within the network.  Questions used for the interviews are
displayed in Appendix on page 15. Figure 1 maps out the franchised and non-franchised respondents
selected for this research.

**Figure 1: Map of Case Studies**

CASE STUDIES

FRANCHISED

Case Study 1: FRANCHISE
CEO

Case Study 2: CO-OPERATIVE
SECRETARY/ DIRECTOR

Case Study 3: FRANCHISE SPECIALIST
DIRECTOR

NON-FRANCHISED

Case Study 4: JOINT VENTURE (BRANCHISE)
DIRECTOR

Case Study 5: BOUTIQUE
CEO

Case Study 6: INDIVIDUAL AGENCY
DIRECTOR

Each interview is conducted at the participating organisation’s office. The interviews are audio-taped,
transcribed and then put through a rigorous analysis based on extraction of qualitative themes
emanating from the data. The themes are coded in Nvivo software to assist with developing an
analytical strategy involving identification of key themes within each case followed by looking for
common themes transcending the cases.

## FINDINGS

## Resource Strategy

The findings from the case studies show that the respondent organisations utilise a number of resource
strategies within their operational scope. For example franchise respondent (F) states that franchises
form alliances with other businesses in the initial stages of growth when the capital resources are
constrained and then revert to utilising their own capital when the growth reaches the point where
capital is no longer constrained so that they can accumulate resources internally. Thus there is a
propensity to accumulate resources internally so that the franchisor can retain full control of systems
and operations within the network so that the resource strategy is always fully aligned with the overall
business strategy.

In contrast to this, independent agency respondent  (IA)  discloses that their strategy is to generally
acquire resources from external resource markets. The joint venture respondent  (JV)  reveals that
whilst their resource strategy is similar to the independent agency respondent, their point of difference
lies in having a greater ability to centralise most of their operations internally which allows them to
eventually bring in external sources which were previously outsourced.

When it comes to acquiring resources essential for achieving and sustaining competitive advantage, it
is evident from the findings that the majority of respondent organisations list managerial resources at
the very top of the list. In addition to recruiting good agents, the cooperative agency respondent (CO)

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

asserts that the biggest resource constraint they face is capital. Their strategy thus involves looking at
alternate ways to generate capital necessary for survival of the organisational network.

## Technology & Innovation

The case study findings suggest that in a real estate agency sense technology plays a dual role. Thus
whilst technology is seen by all respondent organisations as an important part in facilitating efficiency
of the communication process between the organisation and the general public by enabling timeliness
and quality of the organisational output with the public’s search for a suitable product match, it also
acts as somewhat of a deterrent to the main focus of the real estate business which in essence is
focused on the relationship building between different internal and external stakeholders such as
property managers and landlords, sales agents and vendors and buyers. Real estate agency practice is
thus not seen as a thriving hub of technology even though it often resembles one; rather it is seen as a
service which provides accommodation solutions for the public.

To this effect, innovative practices in combination with application of new technology are suggested
to be significant in organisational pursuit of competitive advantage in the market place. Described by
respondent organisations as two separate and distinct concepts whereby innovation is purported to be
a change of all manner of things such as processes, mindset, style of management or even habit,
technology is merely seen as an enabler or a tool to perform organisational functions faster rather than
better as succinctly summarised by the joint venture agency respondent. In an industry such as real
estate the focus is on people and as such it is the development and sustainability of relationships
between the real estate agents and the customers which is believed by the respondents to be at the
forefront of innovation.

Additionally all respondent organisations  are in agreement that uptake and implementation of new
technology is associated with the quality and ability of the managerial talent within an organisation to
use the pool of knowledge effectively within and across the organisation to provide solution to
problems and to facilitate decision-making processes which are essential for achieving competitive
advantage. In the instances where the organisations have a clear technology strategy, new knowledge
is carefully disseminated according to the best and most appropriate use for their market place.
However the process of knowledge utilisation is more often than not fraught with challenges whereby
in some instances the knowledge is not funnelled down the network chain in a timely manner as a
result of poor internal communication strategy. In other instances the organisation is lacking in
strategic practices to effectively deal with newly acquired knowledge and the integration of new
knowledge is thus not utilised at all.

Cooperative agency respondent  (CO)  explains that innovation emanates from the entrepreneurial
industry leaders who are not necessarily intent on changing the real estate experience. Rather their
intent is to develop alternate business models with a structure which supports operational flexibility.
They further suggest that adopting alternate business modelling is the way of the real estate industry
future rather than standardisation and uniformity offered by a franchise model.  For organisations such
as boutique agency  (B)  and independent agency (IA) which are active in acquiring resources from
strategically placed external resource markets, the pool of knowledge is often vast and as such the
organisation must possess the capabilities to disseminate the vast pool of knowledge and to
strategically apply what is most relevant for its immediate market. These organisations are thus able
to apply operational flexibility to use their network to source out the best service providers according
to their internal set up as well as their customer base.  The operational flexibility additionally allows
for quick and fast decision-making process and thus greater adaptability to the market forces. Indeed
operational flexibility is viewed by non-franchised organisations as a great positive as it enables an
independent agency to compete effectively in ever changing environment affected by economic
volatility. To this effect independent agency respondent  (IA) explains that as an independent agency
the freedom of operational flexibility allows for a fast uptake of innovative practices and it is the
strength of the managerial capacity inherent within the agencies and strategic alliances with other

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

likeminded agencies within their network which is greatly responsible for successful uptake and
implementation of innovative practices.

Respondent organisational agencies state a number of important factors required for competitive
advantage in their respective marketplaces. For example factors such as retention of key managerial
staff, business profile diversification, and provision of exceptional service are said  to be the key
elements in franchise agencies achieving the competitive advantage according to the specialist
franchise consultant.

On the other hand non-franchised organisations such as independent agency, boutique, and joint
venture agency explain that it is their unique business model which enables them to be proactive in
seeking out new practices which can make their businesses stand out from their competitors as well as
more commonly known factors such as the strength of the brand, market share, and internal systems
relied on by larger organisations such as franchises and cooperatives. Thus the operational freedom
which emanates from being an independent operator is highly attractive to many small operators as it
lends them an ability to act fast on innovative practices without having to deal with the constraints
placed upon them by layers of management.

## DISCUSSION

Technology is shown to be at the forefront of organisational strategy. Hence from an innovation point
of view it is most likely to be the singular biggest factor requiring time, scope and investment.   The
case study findings thus confirm that technology is instrumental in facilitating the innovation process.
This argument largely originates from the basis that technology improves many aspects of old
processes by bringing new problem-solving ideas into use through effective means of storing,
transmitting, communicating, processing and performing the new knowledge (Dewett & Jones 2001).

Innovation is thus suggested to be promoted by the managerial ability to creatively utilise the bank of
knowledge for problem-solving and decision making which is instrumental in creating competitive
advantage  (Leavy  1998)  rather  than  merely  the  application  of  new  technological  practices.
Furthermore the case study findings suggest that organisation’s ability to utilise innovative practices
in combination with its bank of accumulated knowledge, leads to either development or improvement
of products and service and assists in creation and implementation of new ways for doing business
(Nelson and Winter 1982). Thus the way organisations acquire, assimilate and transform new
knowledge leads to the consideration of other more complex concepts such as open innovation.

To this end the cooperative business model displays a tendency to engage in inbound open innovation
strategy however in the case of this model this leaning is mostly due to aiding the preservation of the
marketing and technology strategy which underpin its business model rather than the brand itself as is
the case with a franchise.  Correspondingly the boutique agency business model exhibits a trend
towards inbound open innovation as it is modelled on the basis that it does not exhibit any capital
constraints thus enabling the organisation to freely accumulate its internal bank of resources.

The joint venture business model on the other hand exhibits signs of engaging in both inbound and
outbound open innovation. As its structure is loosely based on the franchise model, the inclination
exists to centralise internal operations to a great degree. In the same manner, its strategy varies to that
of a franchise on the account that a franchise generally adopts a growth strategy whilst joint venture
business model instead looks to combination of resources which result in a positive cash flow.

When analysing the organisational structure of respondent organisations, there is an indication that
size of organisation is related to the concept of open innovation. For example the findings show that
respondent organisations engaging in inbound open innovation strategy are medium to large
organisational networks, whilst those engaging in outbound open innovation strategy are small to
medium organisations.

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

In more recent times the literature suggests that traditional business strategy adopted by organisations
has resulted in organisations behaving defensively in the market place by constructing barriers to
competition rather than promoting openness (Chesbrough & Appleyard 2007). This notion is largely
substantiated by the case study findings which show that the Australian real estate organisations such
as franchises and cooperatives by virtue of their business modelling do not allow for openness.
Instead they show proclivity to grow their organisational networks by defining and protecting their
market territories through extensive promotion of brand standardisation across the network. Where a
traditional franchise’s strategy involves protection of the entire brand inclusive of the trademark and
the operational systems, a cooperative promotes standardisation to a lesser extent whereby the degree
of their standardisation across the network is limited to the portion of the operational system such as
marketing and technology which incorporate the notion of the brand.

Additionally as the franchise business modelling is essentially geared towards growth and expansion
through recruitment of franchisees, as the organisational network expands the resource bank is
constantly replenished by capital injections from franchisees and licensees in the case of a
cooperative. The capital injections generally consist of royalty fees in the case of a franchise and set
fees in the case of a cooperative. In a perfect world constant capital boosts tend to accumulate which
enables these organisations to foster internal resource accumulation which can be argued to facilitate
barriers to competition. Whilst this may be the case in a perfect world, the findings show that despite
these constant capital boosts, some organisations still struggle as is the case with a cooperative.

Instead non-franchised business models such as boutique, joint venture and independent agency show
divergence in their approach to strategy as suggested by Chesbrough & Appleyard (2007). Indeed
these business models show a disposition towards experimenting with different concepts which can
yield competitive advantage for the organisation in question. Furthermore in the light of technological
advances, the case  study  findings  show that  these  non-franchised  business  models  are  now
experimenting with novel business model structures by essentially altering internal ownership
structures which promote operational flexibility and greater operational control as well as shifting the
operational focus to constraining organisational creativity through engaging in open innovation as
proposed by Chesbrough & Appleyard (2007). Thus it is argued that these approaches are challenging
the traditional business strategy and giving rise to a revised approach to strategy which they call
“open” strategy, where the principles of traditional business strategy are fundamentally balanced by
the innovation.

## CONCLUSION

The findings provide evidence that non-franchised organisations are innovating through forming
partnerships where the type and mix of ownership is highlighted in the operational  strategy. For
example where there was a burgeoning need to comply with the franchisor’s set of operating
guidelines there is now instead a decreasing need for compliance with the franchisor and an increasing
need to maintain independence while still benefitting from an operational alliance with a network of
organisations. Similarly there is less of an emphasis placed on the traditional notion of stability
created through conformity and uniformity and a much greater emphasis placed on innovation from
different strategic markets to gain essential knowledge for expansion and growth.

Thus non-franchised organisations are shown to be benefitting from applying operational flexibility to
use their respective networks to seek out the best service providers or suppliers in accordance with
their internal set up as well as their immediate customer base.   As such operational flexibility is
enabling quick and fast decision-making process by the business owners and provides these
organisations with a greater potential to adapt to market forces.

Additionally presence of innovation within non-franchised business models is seen in the potential to
harness managerial capabilities which facilitate innovation across the organisation on a large scale
attesting to the notion that technology is responsible for redefining the traditional business model by
altering work performance, use of knowledge and calculation of cost of business. To this effect it can

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

$$
23^{\mathrm{RD}}
$$

be argued that these novel approaches to business modelling have brought about a change in
awareness of how Australian organisations can create and use knowledge which plays a big role in
strategic decision making.  Additionally it can be said that innovation emanating from developing new
business models in combination with innovation brought on by technological advances is impacting
on the operational strategy of both franchised and non-franchised organisations populating the
Australian real estate industry.

In conclusion, this research carries enormous implications for real estate agency practice. Whilst the
nature of the industry remains constant whereby real estate agencies continue to adopt real estate
services such as leasing and management, valuations and property sales, the way real estate agencies
deliver these services into the market place is shifting. Thus identifying the role technology and
innovation play in the business strategy highlights the urgent need for the real estate agencies to
preserve their role in the real estate transaction.

## REFERENCES

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE

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# 23RD ANNUAL PACIFIC-RIM REAL ESTATE SOCIETY CONFERENCE SYDNEY, NSW, AUSTRALIA, JANUARY 15-18 2017

**APPENDIX**

| Themes | Questions |
| --- | --- |
| Resource Strategy | 1(a) The survey findings show that acquisition and maintenance of resources necessary for operational mobility are of importance to Australian real estate stakeholders. 1(b) Where do real estate organisations acquire resources from? 1(c) How does this relate to the notion of “best practice” within the industry? |
| Response to Change | 2(a) Innovation and technology are shown as significant factors in operational strategy employed by real estate organisations. 2(b) How successfully do you believe real estate organisations deal with the changes brought about by these factors? |
| Innovation and Technology | 3(a) In terms of new information technology and innovative practices, do you believe real estate organisations synthesise new knowledge internally? 3(b) If so, do you feel that it is done at max capacity? |
| Competitive Dynamics | What type of strategy do real estate organisations employ to achieve competitive advantage? Is this within “best practice”? |