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January 26, 2016updated 31 Aug 2016 9:38am

Path to disruption: how Airbnb became an iconic business model for start-ups

News: Report from Cass Business School reveals the three phases in Airbnb's transition from unknown start-up to a model for all to follow.

By Alexander Sword

An iconic business model emerges in three distinct steps, according to new research, with brands like Airbnb showing how the media gradually adjusts its perception of a disruptive brand to recognise it as something entirely new.

A Cass Business School PhD thesis entitled ‘Business Model Innovation: How Iconic Business Models Emerge‘ by Tatiana Mikhalkina and Laure Cabantous, reveals how the media first attempted to process Airbnb through analogies.

"In the first phase, the media tried to understand this new firm by assimilating it within an established categorization of firms based on the product/services they offered. Primarily, it attempted to define Airbnb by analogy with firms in the hospitality industry (hotels, hostels, etc.), as it delivers the same kind of services: renting rooms to travelers."

This first phase extended from 2009 to 2011. Comparing Airbnb to other companies in the hospitality industry represented 40 percent of the analogies made in 2009 and 38 percent in 2010.

However, the research notes that the media were not "entirely satisfied" with these analogies and often highlighted key differences between Airbnb and other hospitality firms: in particular, the fact that it doesn’t own its own rooms.

This drove the media discourse around Airbnb to the "second phase" in 2011, when the media recognised the legitimacy of Airbnb’s business model and began to elaborate in more detail on its key features.

The research found that in 2009, the media’s description of the business model included only five elements of it: connecting parties, cost-cutting for travellers, social value, special experience and trust. This increased to six elements in 2010, eight elements in 2011 and 2012 and nine elements in 2013.

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Rather than attempting to fit Airbnb into their understanding of existing industries, the media now developed an understanding of the company and its idiosyncrasies.

The final phase that the report identified was Airbnb’s model being recognised as a prototype for the sharing economy and used as the source analogy for other firms (what they were compared to) rather than the target analogy (what was compared to something else).

In 2009 Airbnb was used as the target analogy in 31 percent of the total number of coded fragments of text, and in 6 percent as a source analogy. By 2013 this had switched to 7 percent as a target and 13 percent as source. For example, DogVacay was described as the Airbnb for dogs and a similar claim was made about ParkatmyHouse in the world of parking spaces.

Airbnb was discussed increasingly as a threat to the traditional hospitality industry and discussed in terms of the regulatory environment.

The key to this final phase, the authors explain is that Airbnb as a firm was disassociated from Airbnb as a business model exemplar, "as if the iconic business model could now have a life of its own."

"Finally, as the media increasingly understood the specificities of Airbnb’s business model, it eventually recognized a new type of ‘peer-to-peer’ organization, which Airbnb exemplified."

 

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