Airbnb is a company that was founded in 2008. It allows people to discover new places by finding hosts that have available spaces in their homes or unique accommodation, book a stay during their preferred travel dates and then travel to different destinations. The hospitality sector is a fast growing one with technological advances, companies have to be innovative to adapt to change and survive. Innovation can be defined as the successful exploitation of an idea. It is the process in which inventions are formed and brought to common usage. Innovation is the cornerstone of successful organisations in a constantly changing market. Innovation is important to companies because it can aid them to respond to competition, businesses would need to predict the future to create products and services that meet the consumers’ needs. This report aims to use three frameworks to examine how Airbnb manage and shape innovation. The first framework it will look at is the mechanistic versus the organic by Burns and Stalker, this focuses on how Airbnb use their workspace and culture to promote an organic mode. The second is timing to the market, this explores the accommodation sharing market and how Airbnb have used their timing entering this market to manage their innovation. Lastly it will look at the role of users in the innovation process, this explores ways in which Airbnb use their users to be innovative and control the type of innovation.
Mechanistic versus Organic
According to Burns and Stalker the mechanistic mode “appeared to be appropriate to an enterprise operating under relatively stable conditions”, whilst the organic mode “appeared to be required for conditions of change” (Conway and Steward, 2009). This is one of the reasons why the organic mode of organizing is often linked with organisations that are innovative and adaptive. The two models are represented at the two ends of a spectrum. For the mechanistic mode, individuals work on their own and this is identified by hierarchy and bureaucracy with each individual being specialized in their role, it tends to be more predictable and rigid (Lunenburg, 2012). This can create functional isolation therefore successful innovation may be hindered. On the other hand, the organic mode encourages network structure integration, boundary spanning and role fluidity (Conway and Steward, 2009). In the organic mode, it is more difficult to distinguish formal from informal because the company does not have a flat structure but the organization relies more on its culture to guarantee cooperation. Following Burns and Stalkers definitions Airbnb may be seen to be an organization that is organic. They use the physical structure of the headquarters to shape and manage innovation, an example of this would be boundary spanning (Marrone, 2010). Airbnb have laid out their work space in a way that every section looks like a holiday destination, they have camping site meeting rooms that encourages lateral communication within the organization. It allows different functions and teams to have informal meetings and this may result in the transfer of tactic of uncodified knowledge. Unlike the mechanistic mode, Airbnb do not have people working on their own, they pair up different departments so they can work together for successful innovation. An example of this would be the engineering team and the design team working together (Airbnb.co.uk, 2018), Airbnb have created a culture and a workspace that allows the design team to be creative because they are in an environment that allows them to be relaxed and have the environment that encourages serendipity. They also have rooms where they can have informal meeting with the engineering team to create broad and innovative ideas. Another example of boundary spanning is in the phone room. The phone room is laid out in a way that employees are encouraged to stand because there and no seats so when people are in the phone room the can walk around and be integrated with others from different departments, for Airbnb this means that knowledge is dispersed throughout the company and its not seen as concentrated at the top. Although Airbnb is a company that is tilted more towards the organic mode it doesn’t propose “unstructured chaos” (Conway and Steward, 2009). this means that it is not free of bureaucracy and managerial control. It adopts certain mechanistic mode characteristics that allow a structure to remain but it is in a way that boundaries are established and employees can work within these boundaries in a creative way. For example, Airbnb teams come up with the ideas and then report to the managers this is so that they have the freedom to create what they want but this freedom is controlled, if boundaries would not be set then the teams may lose focus and this may result delays that would affect Airbnb’s performance. Not all department within. Airbnb need to be in an organic mode for example the finance department, they need to have more structure because if they are in an organic environment they can easily make mistakes that may be costly to the company. Finding a balance between the organic and mechanistic mode is a way that Airbnb use to manage, shape and control their innovation.
Timing to market
As an organisation, the timing of entering the market is very important. A premature entry may mean underdeveloped organisations or products will have an adverse result whilst a delay in the entry may mean that other companies enter you and gain advantage such as the market share (Kalish and Lilien, 1986). There is a key distinction between companies that have the aim of entering the market first and to lead that the sector this is known as first the market for leadership and companies that will wait to follow as soon as the market has grown large enough that the economies of scale can be gained or cost minimization (Conway and Steward, 2009). Before Airbnb there was Couchsurfing and Homeaway, they are businesses that allow guests to share living spaces with people who have space in their homes. Airbnb was a late mover into the market this is known as a defender strategy according to Miles and Snow (Conway and Steward, 2009), the aim of this strategy is to allow the first mover and followers to make mistakes so they can learn from it and enter the market with an improved product that would have improved innovation in the later stages of the life cycle. As a late mover Airbnb were able to gain an advantage by learning from the mistakes of for example Couchsurf in many ways. Firstly, Airbnb were able to improve their “search” for guests, on Couchsurf a customer would enter their city of choice then contact the hosts and have to wait for a reply. Airbnb spotted that this process was longer for the customers so they developed their app to show the customers the accommodation that is available between the dates that they have selected. Following the hosts contacting the customer on Couchsurf there would still be uncertainty because there are no fees for booking so the hosts could change their mind at any time because of “unforeseen circumstances” however Airbnb added a fee so that just like a hotel booking there would a confirmation allowing a better customer experience. Secondly on Couchsurf guests would have to stay on the hosts couch or on a temporary arrangement however Airbnb have been able to allow guests to choose whether they would like to share or have an apartment to themselves, this allows them to reach a wider audience than Couchsurf. Airbnb were able to manage innovation through being a late mover into the market, they entered the market once the demand had grown. This allowed them to gain economies of scale and have a cost advantage over the other companies, their ability to save costs meant that they were able to spend more on research and development to invest in ventures that would attract more customers and give them a better customer experience.
The role of users in the innovation process
The user can
be identified as a key element in the innovation process. Organisations can use consumers in a number of ways, they can use the user as a source of ideas. This is when organisations gather information from feedback on products or services. Organisations can be given feedback on their products and what could be done to make it better by customers, this way is more classic and allows only a one-way communication and makes the user more reactive (Conway and Steward, 2009). Other ways include continuous interaction with user, the user as co-developer, the user as innovator and the user as entrepreneur. The involvement of users in the formative stages is very important and can have an impact on commercial success. The information gathered by organisations is put together and used at the rough criteria list the product or service should meet, however organisations need to be careful because products or service demand can be misled by the user information depending on what type of user it is. The type of user information can differ between different markets, for example focus groups and gatherings my work well in markets where there is a fast change in consumer products and services wealth using engineers or scientist with user experience may work well for goods that are intended for other organisations. Airbnb have taken advantage of the role of users by creating Airbnb Open. This is an annual convention hosted by Airbnb that include workshop Keynote presentations and festive celebrations. At this convention, user can improve their knowledge of Airbnb’s platform as well as connect with others, feedback can be shared in an informal way and attendees are encouraged to share ideas on how their experience can be improved feedback can be shared in an informal way and sit and giving on how their experience can (Airbnb Open, 2018). These conventions are held in different locations so that their user information is appropriate to each target market. Airbnb can shape innovation by taking advantage of the role of the users an example of this was the Airbnb Open in Los Angeles in 2017, over 7000 members of the community from 100 countries were present and they stayed locally (McMillin, 2017). The convention was spread across for historic venues the idea was that as members move through the locations they may bump into each other and therefore encouraging serendipitous encounters. Many attendees were seen enjoying the local bars and restaurants for lead users that are innovative these encounters may be very stimulating because in the workshops that follow they may bring up the idea of Airbnb collaborating with your local bars shops and restaurants and even locals to provide better guided tour package experience when visiting other countries. This allows Airbnb to have a base for options to explore when thinking about how to improve their technology to provide services that meet customers’ needs better. During that open while attendees were between events they could also go on brain dates this would prove to be beneficial to Airbnb because they can allow users to test products and give feedback in an informal setting. Airbnb can use to this open as a tool for innovation this is through setting scenes as in the holiday format for example attendees could get fruit from the vintage truck this is a reminder of when they were on holiday or where they would like to go on holiday and this allows Airbnb to fill the gaps in the market by using the users demands as a rough criteria for innovation.
Conclusion
This essay has examined how Airbnb manage and shape innovation using three frameworks. It has provided insight into how mechanistic and organic modes can affect innovation. Buns and Stalker emphases the negative impact of bureaucratic and managerial control in the mechanistic mode can hinder innovation. Airbnb requires modes at different stages therefore they should embrace both mechanistic and organic modes simultaneously. The mechanistic mode may be required towards the end of innovation so the more technical aspects like the engineering team with the logistics, this mode will increase their efficiency whilst uncertainty resolving would need a more organic mode. This will be required during the early stages such as the research and the development stage. It then explored the advantages Airbnb gained by moving later into the market and this has allowed them to manage innovation. Although they may have struggled due to the competition from pioneers in the beginning, Airbnb have used the mistakes pioneer Couchsurch and followers such as Homeaway made to improve and manage their innovation. Lastly it looks at the way Airbnb use their users to manage and control their innovation. To increase their success, they encourage and stimulate users through Airbnb Open, this allows them to seek out lead users and use them to explore new ventures or improve current features. In order for Airbnb to manage and shape innovation appropriately they need to be very selective in the type of user they use to manage innovation because if they do not use a lead user they may end up losing out. The lead users are innovative and advanced thinkers that provide innovation that could give Airbnb a competitive advantage, if they are not used then Airbnb may find themselves being misled and providing services that are not appropriate for their users.