Innovation Theory and its Application in Airbnb

Running Head: INNOVATION THEORY 0
Innovation Theory
Report
Student Name
2/19/2019

INNOVATION THEORY 1
Table of Contents
1. Introduction.............................................................................................................................................2
2. Innovation theory example......................................................................................................................2
2.1 Example.............................................................................................................................................2
2.2 Process and principles of innovation theory......................................................................................3
2.3 Evaluation..........................................................................................................................................6
3. Application of theory in Airbnb...............................................................................................................7
3.1 Background of the company..............................................................................................................7
3.2 Past and present of the company......................................................................................................7
3.3 Future Recommendations.................................................................................................................8
4. Conclusion...............................................................................................................................................9
5. References.............................................................................................................................................10
6. Appendices............................................................................................................................................12
Appendix I..............................................................................................................................................12
Appendix II.............................................................................................................................................13

INNOVATION THEORY 2
1. Introduction
Innovation is a process of transforming an idea, information, and creative thought into the
more effective product, services, and processes that generate value for which people will pay
(Dawson & Andriopoulos, 2008).
Innovation= Creativeness + Commercialization
Innovation is essential for the growth and success of an organization or business. It became an
important part of the survival of business to innovate by knowing the needs and requirements
of the customers than only they will gain competitive advantage. The organization needs a
proper arrangement to encourage innovative things on the premises by disrupting the
traditional business model to gain new market and network.
Disruptive innovation is a process of dissolving the current or existing market and developing or
creating a new market on the basis of the innovative and unique approaches. When any smaller
company with their limited resources challenges the incumbent business by to innovate a
product or services which never existed before leads to disruption in the industry (Christensen,
et al., 2015). Diffusion of innovation is related to the concept that explains how, why and at
what rate ideas are spreading and affecting the business productivity. Once an innovation is
done, the next step is to spread that from innovator to people, which come under diffusion. It
failed sometimes because that does not reach to most of the people due to competition from
innovators, weakness in the innovation and lack of awareness (Rogers, 2010).
The concept of innovation and implication of its theories can be seen in the businesses who
adopt new technology, trends and business model for boosting the innovativeness in the
market. The report consists of process, principles, and evaluation of innovation theories and its
application in Airbnb organization. The concept of disruptive innovation is used to consider
Airbnb’s business model, which is based on innovation in modern internet technology with cost
saving. Despite that, the report contains the potential of the company to disrupt the traditional
market of the accommodation sector, and impact of Airbnb on destinations whether positive or
negative.
2. Innovation theory example
2.1 Example
Diffusion Innovation Theory

INNOVATION THEORY 3
Innovation and its effect can be seen through the implication of these two theories. Diffusion of
innovation explains how a product or services spread and gain momentum in the market.
Adoption of the product is the result of this theory, it means a person is not using the product
that they previously used and accept or replace it with innovation (Tidd, 2010).
Disruptive Innovation Theory
Disruption is a change in the market due to any innovation in the technological aspect or in any
other field. Disruptive innovation is done when new product or services launched in the existing
market at lower cost and performs better which disrupt or replace the existing product and
transforms the industry. Nowadays this theory is broadly used or often applied to many
situations where a new technology disrupts the existing business and challenge the status quo.
The firms that proved to be disruptively started by successfully targeting the segments that
were not considered by the incumbent and gaining position by delivering more functionality
that is suitable at a lower price (Johnson, 2015).
When a small company successfully challenges the incumbent business by offering product and
services to a niche market, that was previously ignored by the giant businesses is called
disruption. Appendix II illustrates the disruptive pattern, the new product or services is not
always better than the already existing product but the smaller company continues to develop
its offering with better functionality at a lower price which appeals to more customers. After
that, the demand for small company product expands beyond the initial niche customers to a
large share of buyers.
2.2 Process and principles of innovation theory
Diffusion Innovation Theory
There are four main elements of this theory or a process that encourages the spread of a new
idea (Piperopoulos, 2012).
 The Innovation: An idea to spread among the people, first step is to know the target
audience for presenting the innovation than determining their needs and usefulness and
accordingly new product should be developed.
 Communication: Channel for spreading the idea to the public is an essential step. To
transfer message from one person to other communication channel is used, new ideas
are spread to the people with help of mass media it helps in developing and changing
the attitude of the person regarding the new innovation.
 Time: An element, which is important to take decision when innovation should be done.
The innovation-decision process is a mental process, which involves accepting, or
rejecting of the idea by the public, there might be chances of failure of an idea if not