Scenario (excerpt from audio above)

You are going to San Francisco for a conference and you need a place to stay
All the hotels on your radar are booked out and the ones that are available are either very high-end or a bit too shady!
In this situation, you’d either have to shell out extra cash or compromise on your safety.
Well, thankfully, you don’t have to do that. You could just get an Airbnb, an airbed and breakfast.
Airbnb lets you choose from hundreds of local houses for your stay.
This gives you a local experience of the region at cheap prices. So you live like a local; where you feel comfortable!

How does Airbnb do this? In an industry with cut-throat margins where competitors are striving to get profits, how does Airbnb continue to grow? How are they so innovative?

Our team analyzed Airbnb’s innovation strategy to understand how the company sustains its ability to capture the market and create a strong pull from customers.

I have tried to keep the content lightweight and easy-to-read. Let me know if you’d like to read the detailed version.

Let’s take a look at Airbnb’s foundations and current strategies.

The Past

Airbnb was conceived in 2007 when two roommates started renting out their living room to conference visitors in San Francisco. They provided guests with an airbed and breakfast (roll credits) for $80 per night.

At that time, the concept of renting out someone’s house was a thing that the industry had not seen before. It created a new section within the accommodation industry. It was something refreshing

… something like …

The Blue Ocean

According to the blue ocean strategy, a company needs to Eliminate, Reduce, Raise, and Create factors compared to the industry standards. And that’s what Airbnb did!

Airbnb’s business model was developed on being a low-cost solution for a low-value customer. And using the concept of ‘Sharing Economy’, they created a newfound supply of income for the hosts. This led to a simultaneous rise in demand and supply of accommodation.

Disrupting the industry

They provided a service that was lower than the market standards and over time, they improved the quality-of-service which the mature market could not cope up with.

In this asset heavy industry where competitors were bogged down with owning and maintaining real estate, Airbnb owned just the intellectual property and leveraged the assets of their hosts to gain market share.

Barriers to Innovation

Barrier: Safety – how could guests be safe in strangers’ homes?
Solution: Risk scoring of properties, watchlist and background checks, safety workshops with hosts; secure payments and account protection.

Barrier: Trust – how to know we are getting a good place? what if renters damage the property?
Solution: Used professional photos to inspire trust – to show that places weren’t dumps and had verified addresses; user profile verification, insurance options.

Barrier: Regulations – cities imposing bans on short term rentals.
Solution: positioned as a ‘platform to connect’ hosts with visitors, agreement putting host responsible for tax payments.

Barrier: Cultural Shift – how to get people comfortable with living in someone’s house?
Solution: intensive marketing campaigns branding as a local experience and ‘Belong Anywhere’.

Belong Anywhere

That’s how Airbnb is getting people to associate with the cultural shift

We saw how Airbnb started out, a robust strategy with a good market fit. It takes a lot more, though, to continue budding this innovative spirit. You need the right people.

The Present

If you have the right people, they will do great things for you. Right? Well, it is not so easy. What matters more than the people is your culture. You need to provide your organization with the right culture to grow and share.

Innovation, in itself never comes from one person or one idea. Innovation comes from the collision of diverse ideas. It is not thinking outside the box. It is more like thinking in multiple boxes at the same time.

This kind of mindset buds ideas. Ideas that are formed with knowledge. Knowledge from people working across divisions or departments. And the main reason why most “innovative” companies have open and shared workspaces. And that’s how Airbnb works.

Organizational Structure

Airbnb has created a strong culture of community and collaboration. They have setup an organizational structure to maximize networking within the organization. The managers exist not to lead but to facilitate information and act to remove obstacles for the team.

Transnational Innovation

As they grew and moved into countries globally, Airbnb adopted the culture in those countries and adapted their strategy accordingly. Thus, they locally leveraged their innovation strategy and spread the learnings across all markets. That is truly transnational.

Airbnb has kept their information and knowledge free-flowing. They host community meetups to learn from their hosts and also use it as a repository to share this accrued knowledge.

Research Culture

‘Bulldozing‘ is when a feedback from researchers seem to decimate whatever product has been built. When researchers point out what is not working, it is definitely a good feedback, but how is it helping the product teams?

Instead, Airbnb makes the researchers work directly with product team throughout development and not just for testing. That is when it is easier to build something and test if it works. Researchers still tell what isn’t working and ‘bulldozing’, but now it is at the right time.

When it comes at the right time “bulldozing” is a good thing. It doesn’t flatten the building, it flattens the ground on which we build.

Airbnb’s Judd Antin, From the Ground Up

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As Airbnb is prepping to go public with a much anticipated IPO, what would its future strategy look like?

The Future

Being a prime example of how to organize your culture and keep employees as close as family, Airbnb needs to increase the transparency between guests and hosts. At this moment, there are still a lot of issues with respect to broken promises and broken hearts apartments. Customers are facing problems from the likes of incorrect pictures to hiked prices.

If it hits an IPO, it will need to keep its trust ratings high and have a ton of tricks up its innovation pipeline.

Sustaining Innovation

With their extreme growth, Airbnb’s company size has also grown a lot. When new managers come in, they are not imbued into Airbnb’s culture and this adds a layer of bureaucratic barrier to innovation. The ‘managers’ need to be trained from grassroots to be ‘facilitators’ instead.

As with every new innovation, the first-mover advantage only lasts as long. Competitors (both hotels and new tech companies) are nibbling off market share from Airbnb. And that’s not even the problem! This competition is not based on quality. It is based on cost, which is never good for the market! (as it results into a race to the bottom)

Airbnb might soon have to come out with new product line offerings to maintain their lead. And for this they have to do what Airbnb does best; that’s not by striving for growth but constantly learning from the market. That’s when they will truly be able to “Belong Anywhere.“