In this latest episode of the How Would You Beat podcast, we looked at how companies can beat Airbnb. For a little bit of perspective, as of late May 2022, Airbnb has a market cap of about 73 billion compared to Marriott, one of the tourism industry’s biggest brands, which has about two-thirds at 51 billion. The discussion yielded interesting conversations around what “line of logic did Airbnb adopt to get to twice the size of an industry giant,” “what are the threats to platforms like Airbnb” and “how would you use Jobs-to-be-Done to beat Airbnb”?
Defining your customer segment with Jobs-to-be-Done
How did Marriott miss the opportunity that Airbnb seized? It could come down to market definition. If Marriott saw itself in the hotel market, then helping people rent out their homes would make no sense to them. It’s not Marriott’s business. They might have even thought--why would people looking for a hotel, rent a room in someone’s home instead?
But, what if you defined the market differently; what if you thought like the customer and used the customer’s goal, or their job-to-be-done to define the market? Then you’d probably define the market as travelers who are looking for accommodation. Of course, this is just one of many jobs-to-be-done for the hospitality sector, or the larger travel industry, with all its immense complexity and countless variables, but it's a good place to start.
Once you start thinking like your customer, you’re able to think outside the box - or in this case, outside the hotel. You’ll reason that hotels represent only one possible solution to the customer’s job of finding accommodation and might not even completely satisfy the customer’s unmet needs. For instance, hotels might not help travelers satisfy the needs of finding a culturally immersive, very authentic destination experience. Airbnb spoke directly to this travelers’ struggle with its “live like a local” theme. In doing so, they responded to an unmet need and managed to take share from hotels.
It is also important that the unmet market need exists and is apparent to customers before you try and force-fit a product. In this case, the market need existed long before Airbnb came into the picture, and the need was also measurable. Platforms like Airbnb could have measured how many people were seeking an authentic travel experience (that they did not necessarily get from hotels) and would have gotten a pretty accurate idea of the opportunity size or the market size with this unmet need. Clearly, there was a huge opportunity because of the demand for Airbnb and the growth that it has witnessed.
Expanding the scope of your market with Jobs-to-be-Done
The beauty of the Airbnb story is that they are getting several jobs done for various underserved market segments. There is the most obvious piece: they get the traveler’s job of finding accommodation done, but they also get the job done for homeowners looking to rent out extra space to generate additional income. If your business model can find an overlap with two customer segments where one becomes the supplier and the other comprises the demand, you are able to create a marketplace.
By finding this secondary market and capitalizing on the overlap of unmet needs, Airbnb is able to maintain tremendous agility. This is definitely where competitors of Airbnb have a setback and where software-based platforms like Airbnb have an advantage. Marriott has done due diligence by way of market segmentation: It had its own set of brands and added to it the ones that it acquired when it took over Starwood (the second-largest hotel chain and, therefore, a potential threat to Marriott as the largest). Marriott was definitely watching for threats and putting efforts into segmentation; it's not that it was ignoring either vital piece. However, Marriott - and other hotel-based competitors of Airbnb - cannot be agile because its product comprises heavy physical assets. There is no opportunity to conduct a sprint and change a building to meet evolving unmet needs. Airbnb, on the other hand, is software. Their business model allowed them to keep their investment light, and that affords them a higher degree of agility.
No physical assets also mean that Airbnb faces a lower degree of risk. With airplane seats and hotel rooms, you incur costs irrespective of whether the demand comes through in the end. Airbnb has effectively shrugged off this risk because of its business model. Other tourism and hospitality platforms like Airbnb, which are essentially software, have the same advantages.
That’s two sets of unmet needs met and a ton of benefits in the bag. Clearly, Airbnb said, “why stop there?” They saw an opportunity in the fact that the customer’s travel job has other struggles, such as finding ways to experience a destination. To develop the capability to respond to that customer struggle, they invested in an experience marketplace. With this acquisition, Airbnb was able to get another job done. When a traveler books a room in, say, Venice, Airbnb can give them help them line up activities and experiences. This minimizes potential threats from its competitors, and in the bargain, they are also getting the job done for the guides. They’ve created a second marketplace by serving a secondary job. They are getting a ton of jobs done for various segments, all on the same platform, and that’s why other platforms like Airbnb could definitely take a page out of how they look at customer segmentation and defining a market.
How would you use Jobs-to-be-Done to beat Airbnb?
A ton of companies plateau out because they struggle to expand on what was initially a good idea. The big questions are: can competitors of Airbnb develop an edge over it? What should platforms like Airbnb do when a disrupter comes along and starts taking market share?
The Jobs-to-be-Done approach says that if you find yourself behind the competition (or in a space where you are not sure how to pursue additional growth), all is not lost. You simply need to find a way to meet your customer's unmet needs better than your competition. Alternatively, you could identify additional unmet needs to target or even different jobs to target for the same segment.
So who - or what - can be a competitor to Airbnb? Let’s apply the Jobs-to-be-Done approach and zero in on the customer’s struggle.
- Focus on the customer needs instead of the product to identify unexpected competitors
People travel for cultural enrichment or for a new experience. So what’s the struggle they face that causes them not to travel? The associated cost could be a big obstacle. Time could be another one. Physical constraints could also be a factor. There’s a company called Heygo that solves all these struggles by doing virtual tours. The traveler witnesses the destination - or lives the experience - through the screen of another user who becomes the guide.
The metaverse is another avenue for virtual travel to gain ground. The metaverse can make it much simpler to “have an enriching cultural experience” as complex, eliminating some of the steps that make this job difficult today, such as traveling to the destination.
So what does a company like Airbnb do in such a situation? Partner up with an airline to offer discounted rates and therefore lean into its current solution of real-life experiences? Or should Airbnb build a virtual travel platform?
The key to answering these questions is to frame them through the lens of the customer’s job. There are interviewing and survey techniques we use at thrv that enable companies to identify the size of segments that struggle differently with the job. If Airbnb were to do this, they could quantify the willingness to pay of segments who struggle with the affordability and time constraints that are obstacles to using real-life travel as the solution to having an enriching cultural experience. If that segment is large enough to drive growth for Airbnb, they can pursue a strategy (building, partnering, or buying a solution) to get the job done for that segment without the cost and time commitment of traveling to a destination. If it’s not large enough and they don’t project it to be large enough, they can continue leaning into physical travel with confidence that they are pursuing a high-growth path.
- Face and tackle unmet customer needs beyond your capabilities
So what must platforms like Airbnb do when their competitors alleviate struggles that they cannot solve? They need to decide whether they want to build additional capabilities or buy the potential disruptor out. The latter solves the problem of figuring the game out because you can just let the disruptor play the hand it plays best - basically continue with its business as usual - while you rake in the profits.
- Don’t forget to watch your back
Remember that a potential disrupter might initially not be better than you. They will start out worse but will get better and better until they disrupt the market. Right now, virtual travel experiences might not be great, but they could get very realistic if they utilize 4K and 3D. They could take share from real-life travel experiences. If travel companies are able to see the disruption coming, they could be prepared for it by either acquiring the disrupter or developing additional capabilities. For instance, consider this: What if airlines had bought video conferencing platforms years ago when the VC platforms still had glitches and were not very high quality? Before the pandemic, getting on a plane to close a deal was a very frequently used solution. The pandemic forced salespeople to try video conferencing. It worked better than expected, and now instead of salespeople “hiring” an airline to get the job of a client meeting done, they use Zoom. Zoom now takes market share from airlines because of this. Recognizing non-traditional or indirect competitors can help you see opportunities and stave off surprising threats.
Using the JTBD approach, companies can look at their customer’s jobs independent of their solution. As a result, you won’t say, “I’m in the business of hotels.” You will focus on jobs-to-be-done that the hospitality sector serves. This will help you stay open to new solutions that can satisfy unmet needs in the job.. It effectively peels off your blinders and allows you to see how new solutions can create growth in customer segments you can’t serve well with your existing solutions.
At its very core, Jobs-to-be-Done is about empathy. This is “quantitative empathy” in action, where you measure your customer’s struggles and respond to them. Using Jobs-to-be-Done, you can identify threats and also unearth underserved segments that become avenues for business growth.
If you want to learn more about Jobs-to-be-Done innovation methods, visit us at thrv.com.