From Disruption to Collision: The New Competitive Dynamics
In the age of AI, traditional businesses across the economy are being attacked by highly scalable data-driven companies whose operating models leverage network effects to deliver value.
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Disruption 2020
Image courtesy of Oliver Burston/theispot.com
Airbnb is colliding with traditional hotel companies like Marriott International and Hilton. In just over a decade, the online lodging marketplace has assembled an inventory of more than 7 million rooms — six times as much lodging capacity as Marriott managed to accumulate over 60-plus years. In terms of U.S. consumer spending, Airbnb overtook Hilton in 2018 and is on track to move ahead of Marriott.1
Although Airbnb serves similar consumer needs, it is a completely different kind of company. Marriott and Hilton own and manage properties, with tens of thousands of employees in separate organizations devoted to enabling and delivering customer experiences. And whereas the two traditional lodging companies are made up of clusters of different groups and brands, with siloed business units and functions equipped with their own information technology, data, and organizational structures, Airbnb takes a radically different approach: Its core function is to match users to hosts who have unique homes or rooms to rent on a daily basis, via its platform. In the process, Airbnb accumulates customer data, mining it for insights and to produce predictive models to inform key decisions. It is often able to give its customers a superior experience, with far fewer employees, than its hotel-industry competitors.
Airbnb is representative of a wave of new organizations that are built on an integrated digital foundation. Every time we search Google, buy from Alibaba or Amazon, or get a ride from Lyft, the same phenomenon occurs. Rather than relying on traditional business processes operated by workers, managers, process engineers, supervisors, and customer service representatives, these companies deliver value through software and algorithms. Although humans design the systems, the computers do the work: producing search results, setting prices, identifying and recommending products, or selecting a driver. This reality defines a new kind of digital company, with data and AI at the core and human labor pushed to the edge.
References (11)
1. R. Molla, “American Consumers Spent More on Airbnb Than on Hilton Last Year,” Vox, March 25, 2019, www.vox.com.
2. For an outline of the challenges faced by traditional corporations, see A.D. Chandler, Jr., “Scale and Scope: The Dynamics of Industrial Capitalism” (Cambridge, Massachusetts: Belknap Press, 1990).
Comment (1)
Kevin Shute