Friday, September 04, 2009

The Change Continues

The combination of technology, the economy and customer conditioning is what causes most if not all changes in business. Seth Godin wrote about this recently:

Where have all the agents gone?

Travel agents... gone.
Stock brokers... gone.
Real estate brokers... in trouble. Photographer's agents, too.
Literary agents?

The problem with being a helpful, efficient but largely anonymous middleman is pretty obvious. Someone can come along who is cheaper, faster and more efficient. And that someone might be the customer aided by a computer.

The airlines don't want to pay travel agents, because the travel agents were making more money on each flight than they were. Some house sellers hesitate to pay real estate brokers because they don't believe the 6% payment is an opportunity, they see it as a tax. Investors abandoned full service stock brokers because trading stocks directly is faster and more accurate than using the phone.

Middlemen add value when they bring taste or judgment or trust to bear on a transaction that isn't transparent. Literary agents are crucial when publishers believe that their choice of content is essential but have too many choices and too little time. But publishers don't trust every literary agent. They trust agents they believe in. Key point: anonymous agents are interchangeable and virtually worthless. Agents that don't do anything but help one side find the other side in a human approximation of Google aren't so helpful any more.

Think about how anonymous the typical real estate broker is. He will sell almost any house or represent almost any buyer. When selling a house, he has a fiduciary responsibility to represent that house to the best of his ability. Just like every other broker. The great real estate brokers do far more than this.

Travel agents still survive, but in a very different way than they used to. Now, the best ones are paid by the traveler, not the airline. The best ones provide a differentiated service that is worth paying for. Instead of being middlemen, then, they are the front men, the attraction, a key asset to the traveler.

To thrive in a world of self-service, agents have to hyperspecialize, have to stand for something, have to have the guts to say no far more than they say yes. No, you can't publish this book. No I won't represent you. No, don't take that flight. No, I won't sell this house, it's overpriced, list it yourself.

The second thing agents must do to make a smart transition is to consider who they are selling to. Should talent agents only sell to Hollywood? Literary agents only to book publishers? Should ad agencies specialize in Google Adwords, not just Super Bowl spots? When markets change, agents can lead the way, not follow along grudgingly.

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