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 to capture a broad 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 companys business

value proposition is based on convenience, customization, the on-demand business

nature, affordability, unique stay experience, and home insurance.

The corporations 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. 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. Airbnbs 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

Airbnbs 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 Porters 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 companys

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 Porters 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 food. 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 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 firms 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 in 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 organization successful

came after it was started, the companys 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.

The most interesting part of the Airbnbs innovation management model is that it

involves the clients. The customers are placed at the very heart of the firms 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 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. Airbnbs value proposition enables it to have a competitive advantage

over other organizations in the tourism industry. This aspect can be evaluated using

the Michael Porters 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.