Resilience, Focus and the Broader Perspective: The Case of Airbnb
The pandemic has affected the economies of most countries around the world. Both scholars and practitioners have been thinking about how entrepreneurs have been navigating this “shock” to system. Much of the narrative has been about pivoting.
The idea is that leaders need to be flexible, learn quickly and swiftly adapt to the new environment. This is, of course, a valid argument, which management research has been studying for a while. And through past months we saw a lot of great examples about pivoting. (I wrote about an inspiring story about pivoting here on Lead Read Today earlier this year.)
However, there is perhaps another, less explored path to resilience in the face of extreme uncertainty —and it might be the opposite of flexibility. When the environment changes rapidly, a possible strategy is sometimes to be “rigid,” stay committed to the original mission and stubbornly continue along the same route.
This might be a possible interpretation of the latest chapter of the story of Airbnb. This company went through a lot of trouble when the pandemic “froze” traveling in most of the world — but managed to rapidly overcome the challenge and ended the year with a remarkable success. The home-rental firm led by Brian Chesky went public on December 10 with a target price of $68 per share and closed the first trading day at $144.71. (At time of writing, its price is $165.88.)
Airbnb was born during another crisis — the founding team started building the home-rental platform in late 2007. They joined a well-known accelerator program, Y Combinator, in 2009. In a recent post, Paul Graham discusses the initial steps of the startup, emphasizing the motivation the team had in pursuing their vision. Their idea was rather novel at the time: offering hospitality through a platform business model connecting two “sides”: guests and hosts. (The platform business model is now a common strategy in many sectors, and the management research has studied it extensively, as summarized in this review article by Rietveld and Schilling.)
After some experimentation around some of the features, Airbnb quickly focused on the core product many of us have used over the years. After a decade of extraordinary performance, early this year the company started planning its IPO.
But then, what seemed a localized, limited outbreak became a pandemic. Suddenly, Airbnb received cancellation requests for over a billion dollars — that drop in revenues could have been a potentially fatal hit for the company, and for many of the hosts.
Chesky had to step up and react.
Rather than seeking alternative strategic directions, as other companies did, Airbnb refocused their business and chose to stay committed to the original strategy. To do so, as he nicely discusses in a conversation with Eric Ries, Chesky had to support both sides of the platform. First, he suspended the standard cancellation policies and allowed guests to cancel their reservations without losing money. And then, to avoid that this would harm the other side, he offered a subsidy to the hosts.
While working with their users, Airbnb paid attention to other stakeholders. Besides offering support for healthcare workers, they made an effort to support their employees. Like most other companies during this period, Airbnb had to lay off a sizable fraction of its workforce. This was a difficult decision, but the company made a strong attempt to facilitate the transition for its departing employees. Along with support in terms of pay, equity and health insurance, they made an effort to help them find new jobs — through their own recruiting team, the alumni network and even the managers’ direct connections.
While it is hard to say to what extent these initiatives were effective, it is interesting to note how the company did not just focus on limiting the damages to their own business but took a broader perspective. This is consistent with much of the recent research in strategic management — for example, a recent piece by Jay Barney— that emphasizes the importance of stakeholders.
Naturally, this is just one story, and perhaps it is an outlier. But there might be some interesting insights here. When there is a “shock” to the system, firms need to be resilient. A classic recipe is often about flexibility and change. However, commitment and focus, while seeking to alleviate the damages, might be an alternative route.
And that approach might work best if it involves not just users or shareholders, but all stakeholders.
Here at Lead Read Today, we endeavor to take an objective (rational, scientific) approach to analyzing leaders and leadership. All opinion pieces will be reviewed for appropriateness, and the opinions shared are solely of the author and not representative of The Ohio State University or any of its affiliates.