The best product idea on paper might not lead to the best product in reality.
Products that make it to market and become great do so because of timing and strategic fit to the companies who made them.
Regardless, much of their ‘greatness’ gets cemented long after launch.
A user-centred approach to designing products doesn’t guarantee that customers will love them. It just means the customer has been thought about in the process more than they might have been. It contributes to the quality and relevance of the product but it doesn’t guarantee success.
Not everyone in a company is making user-centred decisions all the time. The products that do make it to market are shaped by several thousand small decisions. Each one of those decisions influenced by the context in which they were created. Products are often unique to the company making them.
The day-in and day-out decisions that each and every employee makes about ‘what’s right to do’ for a particular product encompasses more than just the customer.
It includes the obvious external factors such as competition. But also less explicit factors such as:
- Internal competition between projects pitching for resources. Unsurprisingly, not every product idea makes it to market
- Decisions around what constitutes employee success and strategic career moves. What’s good for product success in the long term might not be good for a particular employee’s personal ambitions
- The existing product line which makes the company money already. This provides a benchmark for expectations; particular when assessing new products in terms of ROI. Investing in the existing business is almost always less risky (at point of assessment) than investing in a new product.
It’s hard to separate out these influencing factors. They’re often ingrained in company culture. Which means no product that actually launches is ever truly ‘user-centric’.
This may be true for a large, established business but if a business is new, these incentives don’t necessarily exist yet. The new business simply has to survive. The best chance of survival being to focus on one central thesis about a customer job-to-be-done, technology or market and attempt to create something of value which is unique.
For a more mature business, doing these kind of new and different things is hard and less appealing than doing what a business is already considered ‘good at’. It’s a tension that every company faces when considering ‘what to do next’.
It’s fair to say Airbnb are no longer a ‘startup’. It’s been 10 years since they shipped their first product. Along the way, it’s arguably become a /great/ product. Here’s why:
- It took a contrarian viewpoint which in the end turned out to be right. Put another way, a large part of society changed its mind about something - paying money to stay in a strangers spare room.
- It wrapped it up into an idea so compelling it extended to nearly every country on the planet.
- It figured out how to do something previously impractical (if not impossible at scale): coordinate two strangers in a safe and trust worthy way without direct involvement as the third party 99.9% of the time.
- It did this via the internet which meant the product could scale exponentially due to near zero marginal costs. An extra room listed cost Airbnb a negligible amount of money.
- It did all this whilst taking one of the biggest liabilities off the books of an accommodation service; property
The incentives influencing the Airbnb founding team at the time would have been nothing more than ‘figure out how to make it work, or go back to the day job’.
A lot would’ve been realised along the way, but one thing is for sure: there wasn’t anything ‘less hard’ Airbnb could fall back on to keep their company afloat in the short term. It took them several years before it looked like they had product-market fit.
It’s highly unlikely an established company would’ve persevered with such an idea. This isn’t to say employees of established companies are somehow less talented or capable. It’s to say the gravitational pull to retreat to the well-understood ground of the existing business would’ve been too strong. Resources would’ve been diverted back to safer activities to sustain the existing business rather than risk it all on a moon shot.
Which is why, 10 years on from launching their first ‘Homes’ product, it’s interesting to observe the types of decisions Airbnb are making about their latest products.
2016 saw the launch of “Experiences”. And a few weeks ago saw ‘Plus’ and ‘Beyond’ announced.
Contrasting the two feels like two different ‘sides’ of the product decision making debate won.
From a designer’s perspective, ’Experiences’ feels like the purest of products. It’s almost as if the customer experience map went up on the wall and a big empty space between ‘check in’ and ‘check out’ was staring the design team back in the face. It was obvious. Of course Airbnb should do this! It’s user-centric! It’s the natural extension from their core business; with the clear trajectory to ‘serve the end-to-end experience’.
It sounds great. And it has a lot of potential. But being the best user-centred product idea is not always the right thing for a business. For Airbnb, this venture with ‘Experiences’ will involve the development of new competencies rather purely leveraging existing ones. In-person services are quite different to providing accommodation. There’s some overlap undoubtedly but still some notable differences. It may form part of the same customer experience but it’s addressing a different customer job-to-be-done (‘something to do whilst travelling’ as opposed to ‘somewhere to stay whilst travelling’)
Also, this service is a new kind of service. It’s original. It’s not something which has entered the mainstream. And there’s no ‘market leader’ as such in this marketplace for ‘experiences’ whilst travelling. It addresses a customer job-to-be-done for which the current solutions that get hired aren’t considered to be ‘competitors’. It’s a startup within a (perhaps not so much more) startup. Its the hard new thing which could feel the pull of the existing, ‘less hard’ incumbent, successful business.
Contrast this with “Plus” and “Beyond” and we’re looking at a very different offering.
As extensions to their current “Homes’ business, it’s more like the MBAs won the arguments this time. It’s not unfair to say that these products might have been conceived by looking at the balance sheet rather than the customer experience map.
This doesn’t mean either product is the right or wrong choice. It does mean they are born from a different set of incentives however.
When a company begins to improve their products by adding more ‘features’, the strategy is one which attempts to capture more value through price increases. Goals will likely include:
- Increase total revenue per booking, in order to;
- Increase margins per booking
- Increase total addressable market overall with a broader range of offerings (e.g. based on price)
This makes sense for a company that is a marketplace and doesn’t own the supply. It’s doesn’t cost them anymore to raise prices. It relies on hosts to do that for them.
Some of these goals are natural for the stage of the company and make sense from a non-financial point of view. These likely include:
- Expand to become truly mainstream and address reservations the late-majority may still have about quality, specifically. To many, Airbnb is still a weird idea. Higher-end listings will go some way to counter this.
- Create a brand halo effect by hero-ing higher-end lstings to generate perceived value around the lower-end listings. The Airbnb brand wants to be associated with family-friendly, luxury villas with quirky twists rather than that cheap-but-convenient back street studio apartment 3 minutes walk from London St Pancras.
- Aligning incentives with hosts. Airbnb are incentivising Hosts to improve their listings to achieve ‘plus’ status to earn more money. Hosts (I imagine) wouldn’t mind earning more money. As a result, Airbnb gets more hosts aiming for plus status; and they get higher quality listings to associate with their brand.
Some of the hidden outcomes of this strategy might include:
- It brings Airbnb more in-line with hotels (certainly on a price basis) and brings them closer to being direct competition. The original success of Airbnb was that they were significantly cheaper. Price wasn’t the compelling brand idea we all bought in to, but it was a huge lever that got us all to at least try Airbnb for the first time. The value for money equation was unmatchable by hotels as the supply costs were so low for Airbnb. As a customer trying to get a job done (find a place to stay when travelling), the value for money on offer created a large enough chasm between Airbnb and Hotels such that Airbnb wasn’t just another comparable solution in a long list of hotel brands. They were more apples and oranges.
- The attractive profits of the high end of the market takes attention away from the lower end of the market. An entry point for disruptive innovation (much like Airbnb’s original strategy and product they launched with.) As these larger profits start to emerge, stakeholders and investors will want to see more of them. Which will influence product strategy to remain focussed on the high-end of the market.
Customers or markets
Airbnb Plus and Airbnb Beyond feel to be born from a set of market-driven product decisions. Ones which have come from observing people/customers as a ‘market’ to deduce how a product should be. It may be that their executional details will have been created from the typical user-centred design practises; but the core strategy to go after the high-end would have been decided long before that.
Making decisions from a zoomed-in perspective, focussing on customers trying to get jobs done versus zoomed-out ‘market trend’ observations yield very different types of products. The former is purer in it’s intentions. It acknowledges how people behave on an individual level, whereas the latter tries to deduce individual behaviour from a crowd.
‘Plus’ and ‘Beyond’ were presented with the usual Brian Chesky charm and exquisitely delivered with all the brand polish we’ve come to expect from the company.
Perhaps this is just the natural course for the 10 year old “Homes” product. Perhaps market share battles are unavoidable even for network-effect marketplace disruptors such as Airbnb. And perhaps, its the thing a company which is expected to IPO is ‘supposed to do’.