The theory of disruptive innovation, introduced by Clayton M. Christensen, has long been a guiding start to so many companies such as Intel or Salesforce.com. However, nowadays the core concepts of this theory is misunderstood. Many leaders, researchers and entrepreneurs use the term of disruptive innovation wrongly. They tend to use to describe any innovation, which has shaken up the current state of the market, or any business model (Christensen, 2015). In this post I am trying to answer the question, whether Airbnb could be considered as a disruptive innovation.
Airbnb is a platform and hospitality service, which on the one hand allows owners to lease their houses, apartments, etc. and on the other hand enables renters or tourists to rent those properties for long- and short-term as well. Important attribute is, that Airbnb does not own any building, accommodation or house, but provides the platform, which enables the owners and the renters to connect with each other. Airbnb was founded in 2008, and started growing rapidly. This new internet-based business model and its rapid growth make Airbnb a to be examine through the lens of disruptive innovation theory (Guttentag, 2013).
Disruptive innovation theory describes innovations, which underperforms in primary dimensions – the most important attributes of a product or service – however, outperform in any other attributes compered to incumbents. (Sood, and Tellis, 2011) In other words, disruption happens when a small company with fewer resources is able to win the incumbent’s customers. Answering three main questions can help to understand if an innovation could be considered as disruptive, according to this theory.
First question what needs to be answered is, if the innovation is targeting fringe market. This means that sometimes incumbent tend to overlook segments, due to their high profit orientation. If an innovation is disruptive, it targets one of those segments and provides less good product or service, for example weaker quality and lower price. In case of Airbnb it did not happen. Airbnb has never targeted low-end market or new markets, but instead try to attract the mass market’s customers. Secondly, as mentioned above, the disruptive innovation needs to underperform on the attributes that mainstream customers value, but overperform in other attributes. (Taracki PPT, 2017) If we consider Airbnb, the company offered and still offers high quality service. It enables users to find easier and faster accommodations. Every user is able to find the perfect place, which satisfies he/her needs in a more convenient way. Therefore, it does not fit to Airbnb that it offered a service, which was considered inferior by the mass market and later improved the quality to satisfy the needs of that segment. Finally, if we consider an innovation as disruptive, according to Christensen, it has a huge potential to improve in those main attributes. However, Airbnb’s website and service is working very well. Of course, there are always opportunities, and parts that can be improved, but overall the quality is catches up the mainstream market’s standards as well.
Overall, it is easy to say that innovation’s, which grow fast and changed the whole completion and the industry with a new business model, for example are disruptive innovation. However, there is strict definition and attributes that describe what innovations could be considered as disruptive. According to those, Airbnb is not a disruptive innovation.
Sources:
- Daniel Guttentag (2013), Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector
- Clayton M. Christensen, Michael E. Raynor, and Rory McDonald (2015), What Is Disruptive Innovation?
- Murat Tarakci (2017), Strategy of Innovation – Session 3 presentation
