Disruptive Innovation — Airbnb: Is it still a good model after 2020?
What is disruptive innovation?
Clayton Christensen, the late Harvard Business School professor, was the first scholar to develop the theory of disruptive innovation in 1980s. Since then this theory has been widely used by Silicon Valley to build the tech industry. He and his colleague wrote a Harvard Business Review article in December 2015 to review the application and relevance of this theory.
An example of disruptive innovation is peer-to-peer (P2P) commerce, with Airbnb as the prime example. The company’s platform allows direct booking from visitors to stay at a spare room or an entire apartment from qualified hosts. Previously, travelers had to go through centralized companies like hotel chains to book an overnight stay. But through Airbnb’s P2P website and app, individuals could easily list cozy accommodations, promote their offerings and chat directly with potential visitors.
Airbnb began as low-end accommodation, by renting airbeds to visitors of the 2008 Democratic National Convention who couldn’t find hotel rooms. But it now offers a range of options, from low-end rooms to luxury villas.
The sharing economy for accommodations has become a substitute for a standard hotel and thus poses a real threat to traditional hotels. As a result, chains like Hyatt, InterContinental and Wyndham have to rethink their offerings, and many have even invested in Airbnb-like companies to get a share of the action.
Then … 2020 happened!
Airbnb has been hit hard with the 2020 COVID-19 pandemic. According to NPR, in the early stages of the lockdown, Airbnb was in a freefall: it lost 80 percent of its business and laid off a quarter of its staff. Airbnb was set to go public in 2020, however, it was forced to adapt to extreme external factors.
The company has partnered with former U.S Surgeon General to train hosts on new cleaning protocols. Furthermore, Airbnb has set aside $250 million to help hosts with cancellation fees. These measures represents Airbnb to focus on its core business — the vacation rental model.
Airbnb data during the pandemic indicate travelers are choosing to stay in rentals for longer periods of time than in the past, up to a month. Chesky, the CEO of the company said they will focus on these listings. He appeared hopeful in Zoom chat with hosts as he said the company will recover from the “new normal” reality of working from home.
Given the unprecedented circumstances, Airbnb has not directed its attention to further exploration and innovation. The company is heavily data-driven, which can lead to both sustaining and disruptive innovation. Airbnb has not joined the rank of the incumbent, it is yet to be seen if it can come up with more disruptive solutions.
Resources:
- Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard Business Review, 93(12), 44–53.
- Raz, G. (2020, August 13). How I Built Resilience: Brian Chesky of Airbnb : How I Built This with Guy Raz. NPR.org. https://www.npr.org/2020/08/12/901768355/how-i-built-resilience-brian-chesky-of-airbnb
- $250M to support hosts impacted by cancellations — Resource Centre. (2020, July 21). Airbnb.com; Airbnb. https://www.airbnb.com/resources/hosting-homes/a/250m-to-support-hosts-impacted-by-cancellations-165
