Strategic Summary
Airbnb is one of the largest marketplaces in the hospitality and travel industry. The company provides an online platform for people to rent short-term lodging or lease a vast array of accommodation facilities, such as hotel rooms and beds, homestay, and apartment and vacation rentals. The organization was founded in 2008 and has its headquarters in San Francisco, California (Airbnb, n.d.). Airbnb has a list of accommodation facilities in 191 countries and 65,000 cities. The firm does not own any lodging space; its main agenda is to connect the clients with the hospitality corporations all over the world. Airbnb makes its profits on a sharing and collaborative consumption mechanism. The host sets the cost of lodging and Airbnb gets a commission that is proportional to the price point. The online platforms take two forms: mobile application and website. Whereas the application is compatible with iOS, Android, TV OS, and watch OS, the site can be accessed from anywhere as long as there is an internet connection. This means that the company has the capacity capacity to capture a br broad oad target market. As a result, Penn and Wihbey (2016) affirm, “Airbnb has exceeded 10 million guest-stays since its launch
and now has more than half a million properties listed.” It is due to the flexibility of its services which can be used from any locality worldwide. The company’s business
value proposition is based on convenience, customization, the on-demand business nature, affordability, unique stay experience, and home insurance. The corporation’s biggest competitors are HomeAway, Watch Out, and TripAdvisor
(Taylor, 2016). Although the companies have a similar target market, the business models are different. Airbnb has the most innovative strategy given that it is the youngest and has managed to pose a threat to these giant firms. firm s. Nevertheless, each organization has its strengths that separate it from the others. However, while the other
companies try to capitalize on the websites, Airbnb has taken a new approach of utilizing mobile applications. This is perhaps the most innovative element in the industry which captures everyone who owns a smartphone. Airbnb’s software is in the
top ten most innovative mobile applications in the world according to Business Insider (Heath, 2015). This is as a result of its ability to enable a client to locate the most affordable accommodation facility anywhere in the world. Competitive Advantage Airbnb’s value proposition enables it to have a competitive advantage over other
organizations in the hospitality and travel industry. This aspect can be evaluated using the Michael Porter’s framework. According to Porter, “Internet-based companies dramatically reduce the variable costs associated with an operation” (Anon., 2014).
Traditionally, the clients had to employ travel agents to get the destination of their choice. However, with Airbnb, customers can now identify the most suitable location through the available listings where the price is also indicated. Thus, through their innovative online platforms, the company reduces the transaction costs which in turn influences the amount spent on operations. The competitive advantage framework by Porter highlights three variables: focus, differentiation, and cost leadership (Anon., n.d.). All these factors parallel the aforementioned elements of value proposition at Airbnb. When it comes to cost leadership, Airbnb gets its advantage from the low cost of operation. The corporation is referred to as a “cybermediary.” Such a company
benefits from innovation economies of scale, global reach, and a small cost structure (Anon., 2014). This system can only be achieved in a situation when there is a large volume of transactions at low prices. The business entity does this by not having physical lodgings but rather availing accommodation to people who need it. Although
the mobile application is free to download, hosts are charged 3 percent of the price indicated for them to appear on the list. Furthermore, in addition to the 3 percent, the company gets between 6 to 12 percent from the clients who seek accommodation in a particular facility. This strategy generated $1 billion in revenues for the organization in the 2013 fiscal year (Thomas, 2013). Therefore, the cost advantage is perhaps the biggest element that separates Airbnb from its competitors. Differentiation requires uniqueness and availability of features that are valuable to the clients (Porter, 1985). Airbnb has various distinct advantages over its competitors in the hospitality industry. Unlike its hotel counterparts who have constraints on the increasing variable costs, Airbnb has the capacity to offer expensive listings around the globe at a price more than that of engineers and additional servers. The company’s
website has several features that allow guests to navigate intuitively through the diverse accommodation facilities available. The clients can filter the listings according to what is most favorable for them. These elements have proven to be valuable to customers given the huge number of people who use them and thus generating revenue for the company. According to Porter’s competitive advantage framework, focus involves the
segmenting the market and targeting the most viable by tailoring services (Porter, 1985). Airbnb does this by identifying the behavioral patterns of the clients based on their activities on the website or mobile application. According to the Northwestern Business Review, “This behavioral information gives the company the opportunity to
make inventive suggestions about the future travel plans of its clients in ways that brand hotels” (Anon., 2014). This element of customizing the services gives rise to the concept of “sticky information.” The ideology presents information to people who do
not know what they want unless it is displayed to them. In this light, Airbnb is not only a platform that provides information but also a service provider. Innovation at Airbnb
The most dominant type of invention at Airbnb is service innovation. The company provides services that were nonexistent in the traditional hospitality industry. The organization utilizes modern technology to both develop and propagate its services to the target audience. Service provision was the main agenda while developing the mobile application and website to be accessed by potential clients. When the company was started, it offered air bed and breakfast and thus the name Airbnb (Chesbrough, 2016). This means that the firm was initially product-oriented. However, upon realizing that the services have a more lucrative market, it shifted its attention to finding suitable and affordable accommodation instead of providing air mattresses and f ood. Looking at their platforms, there is no product being advertised other than listings of hotels and other emerging resources such as vehicles and vacation amenities. When a client opens the site or application, some criteria that require the number of beds, price, dates, location, and other possible amenities enables him/her to find exactly what he/she wants. Upon identifying the property, the guest can rent or lease it via the application or site. Both platforms prompt the users to rate their experience and the owner property rates the client. In this way, the company provides services services to both the facility and the customer. The future users will select a property based on the ratings of the property by previous guests while the property managers will accept the clients depending on their scores. This mechanism juxtaposes user innovation with the service delivery mechanism used by Airbnb. All the types of innovation are intertwined in the firm’s business model. This is
exemplified by the way they complement one another from the developmental stage
to the output. The company has outsourced the services of other firms and individuals in the development of their online platforms. This parallels an open/crowdsourcing type of innovation that has allowed the corporation to get accolades for both its site and application. The aspect of tailoring the services to the needs of a client requires their input. Therefore, the company utilizes user innovation to satisfy the guests to the ne plus ultra. Service innovation is the final product that emerges from the efforts of both crowdsourcing and user involvement. It is considered the dominant type because it is the only one that directly generates income to the corporation.
Organization and Management of Innovation
Airbnb business model is based on the sharing economy mechanism that enables it to generate its income. This approach gives rise to the stages that lead to the eventual desired outcome. These phases are the assimilation of the new mechanism that deviates from the traditional one, developing an understanding of the model to the consumers, and establishing a prototypical exemplar (Mikhalkina & Laure, 2015, p. 1). These phases parallel the ideology of an iconic business model whose fundamental component is innovation. The traditional link between the guests and the hospitality facilities was the vast pool of travel agents located in the hotels. That meant that the client had to identify a travel agent in the place they went to visit and pay for their services. The greatest demerit of that traditional methodology was that it was not trustworthy. Currently, through innovation, Airbnb has gained the trust of travelers, and this is an essential component of customer loyalty. Through the customization of services, the firm has acquired the clients that are identified by the online platforms, and thus they feel like they are part of the business entity.
Perhaps the most challenging aspect of a business is entering the market without constraints. For Airbnb, the problem was to make the people to accept their business model. That would only be achieved if the internal environment was conversant with the technology for it to be propagated efficiently. For the entire workforce to understand the new technology, the company involved all the employees in the development and design of the website and application. Airbnb ventured into online activities when Facebook was at its peak. The corporation used this guerilla promotional strategy to capture the fast-growing social media audience. Though that approach, the company was able to complete the second organizational phase of training both the workers and the target market. Through the iconic corporate model, Airbnb has managed to become a prototypical exemplar that has been adopted by upcoming businesses that generate income through collaborative sharing. Collaboration at Airbnb occurs in not only income distribution but also the internal model of managing innovation. Over the last six years Airbnb has been i n the industry, it has succeeded in disrupting the market immensely. Initially, the company was product-oriented, but it shifted gears to service delivery. This means that the activities undertaken by the enterprise today did not fall within the spectrum of its original entrepreneurship idea. Given that the concepts that made the t he organization successful came after it was started, the company’s innovation is as a result of entrepreneurship
that required the input of all the employees. Consequently, everybody is responsible for managing the technology used. The difference is in the tasks allocated which range from development, human resource, information technology to marketing. m arketing. The most interesting part of the Airbnb’s innovation management model is that it involves the clients. The customers are placed at the very heart of the firm’s vision and
are expected to give feedback after using the application or website. The response
may take the form of improvement ideas which enable the company to grow faster in terms of technology that satisfies guests to the ne plus ultra. This aspect of incorporating client involvement is inflated by the empowering and transparent tra nsparent culture envisioned to support innovation and creativity. The executives at Airbnb are expected to advocate for this working structure and take an active role in the innovation programs. This requires listening and making suggestions about the state-of-the-art ideas presented to them.
Conclusion
Airbnb is perhaps one of the most innovative companies in the hotel and travel industry. The firm provides services that aid in accessing for accommodation and travel facilities. Airbnb’s value proposition enables it to have a competitive advantage
over other organizations in the tourism industry. This aspect can be evaluated using the Michael Porter’s framework which includes focus, differentiation, and cost
leadership. The most dominant type of invention at Airbnb is service innovation. The company provides services that were nonexistent in the traditional hospitality industry. However, the organization utilizes three types of innovation – user, service, and crowdsourcing – which complement one another. When it comes to organization and management of the technology, there is collaboration amongst all involved parties including the employees, top management, and the clients.
