When all the hotels in San Francisco were fully booked ahead of a design conference, two roommates saw an opportunity.
Brian Chesky and Joe Gebbia offered the delegates an airbed and breakfast and a unique networking experience in their three-room apartment.
The experiment was a success and now seventeen years later Airbnb is an international brand and the sharing economy is a successful business model.
The growth of the new sharing economy has intrigued Zahra Kashanizadeh and her fellow authors. The learning points from the growth of Airbnb are captured in their paper ‘The dynamics of new sharing economy ventures strategies and ecosystem legitimacy.’
Growth of the sharing economy
In the paper, Zahra explains that the sharing economy is a relatively new phenomena that entered public awareness a decade ago with the rise of Uber and Airbnb.
It can be defined as “a socioeconomic system enabling an intermediated set of exchanges of goods and services between individuals and organisations which aim to increase efficiency and optimisation of utilised resources in society”.
The authors explain that such enterprises use digital platforms to reach their customers, but may struggle to establish the legitimacy needed to attract a critical mass of users and complementors.
“As both users and complementors are unfamiliar with the platform concept they may be unwilling to commit until others have engaged with the service, but the concept needs sufficient people on both sides to make it work,” says Zahra in the paper.
Using the case-study of Airbnb, the authors identified a number of ways this can be overcome.
Targeting an unmet market need
Airbnb achieved this first hurdle by identifying and fulfilling unmet need in a market niche. To start with they concentrated on conferences, but gained a boost with the global economic crisis of 2008, giving residents an opportunity to earn extra money by sharing their homes and providing authenticity-seeking travellers low-cost accommodation and a new experience.
Good reviews on the platform gave confidence to first-time users and hosts, and this helped the organisation to scale.
Establishing a dominant position in a broader market
Legitimacy can also be earned by brand values. In 2009, Airbnb extended beyond rooms to apartments, houses and vacation rentals. As most of the hosts were in New York, the founders of Airbnb travelled to the east coast and stayed with some hosts to gain the user experience. After identifying sticking points, they coached the hosts on how to improve the visitor experience and as a result their listings became more attractive.
Creating good foundations helped the business to grow.
Maintaining competitive differentiators
Once the business had gained market traction, it began to grow virally within a network of travellers attracted by the concept of low-cost accommodation and unique experiences.
The founders responded promptly to negative publicity over reports of vandalism by introducing new services:
- 24/7 hotline for customer support
- host guarantee and insurance to rectify issues
- use of Facebook reviews to verify experiences and the introduction of Airbnb stories to inspire journeys.
Later it used a similar tactic in response to regulatory battles with municipalities – launching a Friendly Buildings Programme.
Creating superior value for customers
The founders also adopted standards that are more familiar in hotels, such as:
- cleaning services to provide a hotel-like experience
- emergency safety card with local services and names of trusted friends
- free first aid kits and smoke and carbon dioxide detectors for hosts
- virtual keys and key safes
- ‘Business Travel Ready’ with workspaces
Leveraging brand values
Airbnb used different tactics in response to cultural differences. In Germany it acquired a clone that already had a presence in Europe, while in China it launched a Chinese brand Aibiying (welcome each other with love).
Up and cross selling
The company launched a number of initiatives aimed at extending the travel experience – partnerships with coffee shops to offer ‘Airbnb local lounges’, personalised local travel guides – and expansion into different types of accommodation and differentiated categories to attract more affluent travellers.
In summary
Airbnb positioned itself as a global, open and progressive platform with the aim of providing a sense of belonging and inclusivity. This strong brand identify enabled it to differentiate itself from incumbents.
Furthermore, by maintaining its customer perspective it was able to adapt and improve its offering to overcome conflicts and maintain market advantage.
A process model for shaping and maintaining a digital sharing platform’s strategy and identify
Building on their findings the authors have constructed a model that emphasises the contextual dynamics of a new venture’s evolution including its potential strategic responses to challenge.
For more information about the research and the model please see the full paper, which was published within a Special Issue of R&D Management:
The dynamics of new sharing economy ventures strategies and ecosystem legitimacy: the case of Airbnb, Zahra Kashanizadeh, Saeed Khanagha , Andreas Alexiou and Henk Volberda.
