MLSs are plagued by a seemingly intractable problem: their legacy customers. This is the existing broker ‘member’ or ‘participant/subscriber’ base. The problem finally crystallized for me during Brad Inman’s keynote at the CMLS 2009 conference in Lake Tahoe at the end of last month. Brad was explaining why start-up companies innovate faster than ‘legacy companies’ – his premise is that innovating faster is essential. He gave four reasons why legacy companies do not innovate; to each one, I’ve attached a paraphrased common complaint by MLS executives:

Denial: “These new technologies and tools are cool, but the current needs of our existing customers are what matter.”

Legacy technologies: “We have to maintain these systems because they are what our current customers are used to.”

Funding challenges: “We can’t raise/spend/invest the money of our current customers based on our ideas about what might happen in the future.”

Resistance to partnering: “Company X provides an interesting opportunity for partnership, but our brokers would be very upset if we worked with it.”

Can’t just do whatever they want: “Our brokers would get very upset if we did that.”

Start-up companies do not face these challenges, because they do not have legacy customers. In fact, they often don’t have any customers. They often get money from investors who are sold on a vision and (maybe) a business plan. But real estate brokers and agents (and sometimes especially the ones on MLS boards of directors) don’t want MLSs to ‘level the playing field,’ invest in research and development, build reserves to take advantage of development opportunities, raise dues (because that would be very unpopular, especially in a market like this), or try lots of new things out (because many of them are likely to fail). They want the MLS (and REALTOR® associations) to be “run like a business,” but then they hog-tie their managers to prevent exactly that.

Of course, the MLS cannot ignore or greatly antagonize its existing, legacy customers, as they are paying the bills. But as someone at CMLS said:

If Apple had continued to view itself as a computer and operating-system developer competing with Microsoft and Intel, we would not have the iPod or the iPhone.

Apple redefined its market and its competition by innovating (and in the process, it picked up share in PC and operating system sales). It’s also true that not all innovation is useful innovation (as Greg Robertson recently pointed out). So coming up with whacky and fun ideas is not in and of itself a way to deliver more value to MLS subscribers.

So, my question is, how do MLSs emancipate innovation from the legacy customers? Do they have to have subsidiaries to be innovation engines (like the national, California, and Florida associations have done)? Are there general strategies that MLS and association executives can use to build confidence in the volunteer leaders and members and gain support for investments in innovation? If you have a strategy that works, I’d like to hear about it. (I’m not really interested in one-off tales of a successful innovation – I want to know how you have created a culture of innovation.) If you are a broker and think MLSs should not ‘waste their time’ trying to ‘level the playing field,’ I’d like to hear from you, too.