The secret to disrupting old industries like Hollywood, venture capital, and commercial real estate has been an accumulation of many small tweaks to culture and business models.
Our team recently came across an episode of Andreesen Horowitz’s a16z podcast titled New Upstarts in an Old Industry. It’s an interview with Ben Horowitz, co-founder and general partner at venture capital firm Andreesen Horowitz, and Michael Ovitz, co-founder of Hollywood talent agency Creative Arts Agency (CAA).
Horowitz and Ovitz discuss the similarities in how they each started their industry-changing firms. I was particularly interested in the parallels between how Ovitz built CAA in Hollywood and our own journey at T3 in commercial real estate.
CAA and T3 Advisors both came from industries built from long-standing traditions and big, powerful corporations. And both companies aimed to disrupt those traditions to better serve their clients. Below are my three takeaways on disrupting old industries.
If you were an artist before 1975 looking to publish, produce, or perform, your fate was largely in the hands of a small number of studios and networks. “Anything that you would read, or see, or hear was controlled by under 25 companies around the world,” explained Ovitz. CAA’s approach to “package” actors, directors, and literary clients flipped the “power equation by amassing so much talent the buyers couldn’t go around [CAA].”
Ovitz explains, “We decided that we would give a unique and ultra-deep service to creative people. We coupled that with an enormous amount of guidance and career advice that was incredibly direct.”
In the podcast, Horowitz pinpoints what I believe we’re doing at T3 when he described the CAA story: “We [in venture capital] come from tech, where you can turn something over because the technology changes, but this was not a technology story. It was one of organizational design culture.”
Traditionally in commercial real estate, tenants looking to lease office space have, similarly, been at the mercy of a small number of landlords and brokerage firms (these brokerage firms often represented both the landlords and the tenants, causing a conflict of interest). We started T3 nearly 18 years ago to focus solely on corporate real estate users and their unique needs—in many ways, putting the power back in the hands of the tenant.
Disrupting a long-standing industry starts with changing the long-standing internal culture that runs it. At CAA, those culture shifts were a composite of many small things, like:
Ovitz compares these points of differentiation to a pointillist painting:
If you look at a square inch of a pointillist painting, you see a bunch of dots. You look at two square inches, you see a few more dots, three, four, five, and all of a sudden, maybe at six or eight square inches, you start to see a picture. So we tried to look at our business like a pointillist painting: how many points of differentiation are there that create a full picture?
Within the culture there are just all these little things. There’s no one thing that you can say, ‘My God, you guys called everybody a partner, that’s really a game changer.’ It’s a composite of looking at a pointillist picture.
When we started T3 in 2001, we structured the firm to encourage teamwork and information-sharing. Unlike traditional real estate firms, we share profits across the entire company so that a win for one is a win for all. We don’t negatively sell against our competition, and we base our hiring and firing on our core values. These may seem like small things, but when added together, we’ve seen how these shifts have led to better outcomes and experiences for both our clients and employees.
A strong culture also requires constant monitoring and accountability to it from the leadership team. Horowitz says:
“You have to pay attention to it [culture]. You have to observe the behaviors, put in mechanisms, turn things this way or that way. And some things don’t work anymore. Some things you were wrong about. That’s an evolving process. A perfect culture is a culture in constant flux and growth.”
At CAA, the firm shifted the negotiating leverage from the studios to the creative talent. Ovitz says they also coupled traditional service with “putting the talent back in the driver’s seat because they’d been taken out of the driver’s seat.” The firm altered the entertainment business model in other ways, like:
Real estate is generally seen as a cost- and time-intensive burden for companies. But the business model we’ve built at T3 has helped companies actually use real estate as a tool to create a more successful business.
Beyond our profit-sharing model and ability to invest in long-term relationships (some startups from our early years have grown into some of our largest clients), our holistic approach to real estate advisory means that our firm’s success doesn’t wholly rely on landlord commissions.
Our team also combats the traditional perceptions of brokers by being valuable, trustworthy partners who do much more than manage transactions. We ask questions beyond square footage and headcount requirements to ensure a space will align with the company’s cultural, financial, operational, and other business goals. Using our vetted and vast global network of partners, we pair companies with the best internal and external resources—helping them manage everything from location strategy, government incentives, and portfolio diagnostics to workplace experience.
Working to disrupt a long-standing industry has been no walk in the park, but I’m humbled to share some of the same core values and strategies as CAA and Andreesen Horowitz. We each recognized where our industries could improve, made many small changes in our internal company cultures, and evolved our business models—all to better serve our clients.