Lessons from Uber & Airbnb: Leverage Outside Resources

Airbnb, with only 8 years in business, was valued at $25.5B, eclipsing Marriott ($21B) and Hilton ($25B). Onlookers marveled as Airbnb, with one-tenth the staff, achieved such breakthrough results without owning any real estate. By leveraging the unused guest bedrooms of its hosts, Airbnb is a poster child example of an economic phenomenon described in the book Platform Revolution.

What makes this example so compelling is the way in which platform-based businesses like Airbnb create value. In the traditional structure, Marriott and Hilton centrally own and manage their own properties. This, of course requires serious management oversight. It also means they are less scalable. Consider how much longer it takes for Hilton to bring a new property online. They have to research, acquire, develop and manage that property. This requires time and money.

A platform business, by contrast, matches producers (hosts in Airbnb’s case) with consumers (guests) and provides a digital interface through which value is created and delivered. In a recent Commanding Business interview with Geoff Parker, one of the authors of Platform Revolution, we discussed the defining characteristics of platform businesses and how managers can find opportunities to adopt these strategies in established businesses. Geoff’s advice was to look at the assets and activities that are commonplace within an industry and question whether they could be leveraged from external sources.

The Uber Phenomenon

To illustrate how labor can be decentralized, consider Uber, with a mind-blowing valuation of approximately $63B. In a traditionally structured taxi cab transportation company, a central dispatching office receives calls from riders and directs drivers for pickup. In Uber’s case, the platform enables drivers and riders to coordinate directly, which renders the effort of a central dispatching office superfluous. Uber no longer bears the burden (or the cost) of dispatching drivers. Instead, it orchestrates the activities of drivers and riders and that enables them to scale at a much faster rate.

Geoff points out that the platform revolution isn’t necessarily a new phenomenon, but instead a trend that has been accelerated by globalization, ubiquitous connectivity and the abundance of software frameworks that reduce the cost of developing a platform. The technologies that makeup platforms are more accessible to innovative businesses now more than ever.

Learn More

Listen to the full interview with Geoff Parker on our podcast, Commanding Business

Interested in discussing whether a digital product or platform could disrupt your industry?