Application of Diffusion Theory in Airbnb: Management Report

This report provides a comprehensive analysis of the diffusion of innovation theory and its application to Airbnb. It begins with an introduction to the theory, outlining its core principles, processes, and the five adopter categories (innovators, early adopters, early majority, late majority, and laggards). The report then discusses the advantages and disadvantages of the theory, highlighting its ability to categorize business activities but also its limitations in addressing financial resource requirements. A Canvas model analysis of Airbnb is included, identifying key factors such as partners, activities, resources, customer relationships, segments, and channels. The core of the report applies the theory to Airbnb, examining the company's background, its past and present stature in relation to innovation adoption, and its potential future trajectory based on the diffusion theory. The report concludes by summarizing the key findings and implications of the analysis, offering insights into Airbnb's strategic approach to innovation and its competitive advantage in the hospitality industry.

Running head: MANAGEMENT
Management
Name of the Student
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Table of Contents
1. Introduction..................................................................................................................................2
2. Theory..........................................................................................................................................2
3. Application of the theory.............................................................................................................7
3.1 Background of the company..................................................................................................7
3.2 Past and present stature of the company by the application of the theory.............................7
3.3 Possible future stature of the company considering the diffusion theory..............................9
4. Conclusion.................................................................................................................................11
Reference.......................................................................................................................................13

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1. Introduction
In the modern world, every organisation needs to be innovative so that it can continue to
develop its potential in the business. As stated by Berry and Berry (2018) innovation is important
so that every organisation can adapt with the changing needs of the customer as well as the
changes brought into market. The theory in focus is on the diffusion of innovation theory and its
applicaton in Airbnb.
The principle of the theory focuses on the five adopters that help organisations to gain a
competitive advantage in the business.
The process is based on the application of the adopters and analysing the manner in
which innovation can be influenced.
Jensen et al. (2016) pointed out that the advantage of the innovation provides to
organisations ranges from being competitive to gaining the trust of the customers along with its
loyalty.
The disadvantage of the theory is that the theory was developed to explicitly apply so that
new behaviours can be adopted. Along with this, the theory takes into consideration the
advantages that the business may have but fails to recognise the financial resources required for
innovation.
Canvas model helps in identifying the capabilities and the resources that an organisation
possesses. The analysis of the canvas model of Airbnb is provided.

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2. Theory
Definition
The diffusion of innovation theory is one of the oldest innovative theories that highlight
the journey of a product or service undertake in its life cycle. As stated by Christensen et al.
(2015) the theory can be linked with the product life cycle taking into account the different
stages that exist in the development and decline of a product. According to Biemans (2018),
adoption is the process that defines the choice of a person in terms of the different prospects and
application. The main concept of diffusion theory is to ensure that changes are made in a timely
and structured manner by taking into consideration the categories that affect the changes.
Principle and process
Innovators: According to Kogan et al. (2017), innovators are the people that want to be
the first to try out new products and services. Airbnb can put their hands in adopting innovative
tactics. The characteristics of the innovators are that these people are venturesome and are
interested in new ideas. As stated by DiMasi, Grabowski and Hansen (2016) the risks taken by
these people often accounts for the initial development of new ideas and its application in the
business world. The initial stage of the theory provides an understanding of the changes that
exists among the population and the manner in which Airbnb can embrace the changes.
Early adopters: At this stage the opinion of the leaders are respected and it is necessary
that the innovation takes in the form of enjoying leadership roles which can help in the
development of the innovative tactics and embrace the changes that may take place in an
organisation. As stated by Bain and Kleinknecht (2016) the changes made pertain to the ideas
that are developed and the manner in which it can be applied. However, one of the characteristic

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of this particular type of people is the fact that information sheet and how-to manuals need to be
implemented.
Early majority: The early majority adoption of Airbnb can be considered as leaders but
the adoption of new ideas in business accounts for an early development in the minds of the
people. As stated by Bernstein (2015) these people can be categorised as evidence based people
that categorise the development of innovation in business. It is necessary that the Airbnb display
a willingness to adapt to the changes in an environment mainly because the adaptation can bring
about a change in the development of the innovative tactics (Adams et al. 2016). The
effectiveness of the innovation can be based on the development of the innovative tactics that are
adopted Airbnb.
Late majority: This is characterised as being sceptical to the change that takes place. It is
necessary that the changes taking place in Airbnb remain due to innovation adopt an innovation
process that has been tried by a majority of the people. According to Kleinknecht (2016), the
strategies that are adopted in this particular innovative strategy appeal to the innovation that has
been adopted so that development of a perfect strategy can take place. Thus, the successful
adoption of the innovative strategies can be taken into account for understanding the strategies of
Airbnb (Nambisan et al. 2017).
Laggards: These are traditional and conservative. The adoption of innovation is
apprehensive and it can be hard to bring these people to adapt to the changes. Statistical
application of the innovative methods can be taken into account so that the customers of Airbnb
can be analysed (Vargo, Wieland and Akaka 2015). Therefore, the application of the diffusion of
innovation theory can help in the development of Airbnb.

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Advantages and disadvantages:
Advantage:
The advantage of diffusion of innovation theory is that every organisation can categorise
its business activities based on the factors that affect it. The theory can help in bringing about
rapid changes in an organisation as trial and error method of the innovative tactics adopted can
be considered while continuing with the development of the tactics. As stated by Bason (2018) it
is necessary that every organisation understand the application of strategies so that perfect
innovation can be taken into consideration. For Airbnb, the advantage is that it can gain a
competitive advantage by categorising the development such as stable social network connection
that is required for its dominance.
Disadvantage:
The disadvantage is that most of the principles associated with the theory were developed
to address new behaviours in an organisation. Hence, once rejected, it was difficult to bring
about the trust of the people on the theory. At the same time, the theory takes up a participatory
approach for the adoption of behaviours that pertain to resources available in an organisation
(DiMasi, Grabowski and Hansen 2016). For example, the key resources of Airbnb such as
architectural platform and listings can be categorised as one since individual resources can be
considered as factors that affect the development of the social support.
CANVAS Model

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The application of the CANVAS model helps business in identifying the factors that
affect its existence. Factors such as partners, activities, resources, customer relationships,
segments and channels are taken into account.
Figure 1: Canvas framework
(Source: Airbnb.co.in 2019)
As seen from the canvas framework, Airbnb possess rich resources that help in
the development of its practises in the business. The revenue stream defines the aim of the
company and the cost structure provides an idea about the manner in which Airbnb minimise the
cost of excessive production in the business (Airbnb.co.in 2019). The use of modern distribution
and promotion channels such as social media can be effective for Airbnb particularly since the
customer segmentation is done taking the relationship it possess with them (Airbnb.co.in 2019).

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3. Application of the theory
3.1 Background of the company
Airbnb is a privately held global company that provides hospitality services that are
accessible via mobile applications and websites. The members associated with the company can
use it to arrange or offer lodging facilities for tourists to have an experience (Airbnb.co.in 2019).
Airbnb is acts as a broker company and receives commissions for every booking made
(Airbnb.co.in 2019). The company was established in San Francisco, California on August 2008
(Airbnb.co.in 2019). It serves in a worldwide area with employees more than 3,100. The revenue
that the company generates is over $2.6 billion (Airbnb.co.in 2019).
The digitalisation of the company can be attributed to the fact that it provides a wide
scope of the use of internet and ensure that customers from all across the world can be
approached for the development of the company.
Airbnb is a privately owned company headed by Brain Chesky as the CEO of the
company. Despite being a private ownership, the company indulges in gaining corporate funding
from its investors.
3.2 Past and present stature of the company by the application of the theory
Airbnb can be considered as an organisation that has been established in the modern era.
Therefore, the application of the diffusion innovative theory in the organisation can be
considered as an early adaptor in the organisation (Airbnb.co.in 2019). However, a comparison
of the past and present can be considered to highlight the development and adoption of
innovation in the organisation. As pointed out by Parker and Van Alstyne (2017) in the past
innovation was more inclined to the development of the products and services provided. For

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example, in its early years of establishment, Airbnb focused on the development of the online
services that can help the company to reach out to potential customers (Airbnb.co.in 2019). It is
necessary that the customers understand the area of expertise provided in Airbnb.
As stated by Pisano (2015) the development of the innovative tactics need to be based on
the manner in which communication can be developed in an organisation. In the case of Airbnb,
the past performance of the organisation signifies the manner in which communication channels
helped in the development of the information in the business. Melissen (2016) stated that
external influences can help in the development of the characteristics of the innovative tactics
mainly because the innovation can provide advantage for the development of the large advantage
that are relevant to the current tools.
In the past, Airbnb had implemented the development of its services via the online
platform like digitalisation (Airbnb.co.in 2019). As stated by Manzini (2015) the development of
the online service in the past was usually considered as a challenge as people had been new in
the use of online and mobile applications. Trust issues existed that played a pivotal role in the
adoption of online payment and thus people had been apprehensive in trying to accept the
innovative concept applied by Airbnb initially.
However, in the present case scenario, Airbnb has developed a more comprehensive
approach towards the innovation process adopted and has managed to continue with the growth
of the innovative process (Airbnb.co.in 2019). For example, in the current situation, Airbnb
provides a comprehensive development of the online services so that every customer remains
satisfied. The development of the innovative practises can help Airbnb to ensure that external
and internal influences can help in the development of potential innovative practises for the

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future (Airbnb.co.in 2019). Airbnb can gain competitive advantage by ensuring that the tourists
enjoy their stay in the ambience (Airbnb.co.in 2019).
It can be said that Airbnb have managed to identify the people that take interest in the
development of the online facilities of the company. In order to complete with the development
of innovation, it is necessary that Airbnb understand the application of the diffusion of
innovation theory so that it can continue to develop its competitiveness in the modern world. As
stated by Kerr and Nanda (2015) the development of the companies can take into account the
compatibility and the complexity by which innovation and the tactics can be understood.
Observing the development of the innovative factors can help in improving the service of Airbnb
by ensuring that it provides people with the exact necessary items (Guttentag 2015).
The assessment of the past and present application of diffusion of innovative theory states
that in the early years of the development of the online portals and mobile applications, people
were sceptic about its use. However, with time, the development has taken place and people have
leaned to trust the online portals. As seen in the modern day, people use the mobile application to
book for lodgings, read or leave reviews, recommend and based on it they remain loyal to a
company (Richardson et al. 2016). According to, it is necessary that individual adopters gain an
idea about the changes and ensure that encouragement can be provided to the people for better
adoption of the theory.
3.3 Possible future stature of the company considering the diffusion theory
The application of innovative tactics can be attributed to its development in the future. As
stated by Lyytinen, Yoo and Boland Jr (2016) it is necessary that the innovative nature of
business for the development of the future prospect of an organisation so that competitive

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advantage can be gained and reputation will be kept intact. The reason for the application of
innovative tactics is that every company can understand the prospects that exist in the
management and development of changes in an organisation (Jensen et al. 2016). Hence, in this
regard, it can be said that an analysis of the future application of the diffusion theory can be
taken into account so that Airbnb could continue its growth in the competitive and modern
business.
In the future, it is expected that the development of technology can have a massive
impact on the development of innovative tactics in an organisation. As stated by Kerr and Nanda
(2015) it is necessary that the innovative tactics adopted in the future identify the needs along
with the capability of an organisation to change. However, in the case of Airbnb the application
of the diffusion theory of innovation can be analysed in order to understand the future prospects
of the company and the manner in which it can help in its growth and development in the future.
The application of diffusion of innovation process can help Airbnb to identify the major
respondents of its innovative tactics (Airbnb.co.in 2019). DiMasi et al. (2016) claimed that it is
necessary that the diffusion of innovation theory help in understanding the major characteristics
that define the changes in an organisation. For example, Airbnb can modify the use of mobile
application in terms of creating a social group so that the company can ensure more development
of the communication channels. According to Bason (2018), it is necessary that every product or
service be improved with the change in time. In the future, the mere use of mobile application
may not be enough for dragging the attention of the customers and ensure the growth of Airbnb.
It has been seen that the application of the theory pertains to the analysis of the external
and internal factors that dictate the existence of business. Hence, the use of a similar theory of

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innovation may provide Airbnb with a disadvantage mainly because the company cannot manage
with the new entrants in the market (Airbnb.co.in 2019). Another important considerate that need
to be taken by Airbnb in the future is the fact that it needs to identify the changes that are
supposed to take place in the organisation for the benefit (Airbnb.co.in 2019).
The innovation tactics and the application of diffusion theory of innovation can help
Airbnb to continue with the development of the mobile application (Airbnb.co.in 2019). The
wider application of the innovation the deeper impact it has on the development of the
knowledge of the customers. Every customer needs to be aware of the innovative process that
has been taken place and similar analysis of the majority of the people being apprehensive about
the acceptance of the innovative model can be taken into account. In the case of Airbnb, the
customers can be sceptical about any type of changes such as the adoption of property rental by
the means of credit card or mobile application (Airbnb.co.in 2019).
4. Conclusion
Therefore, conclusion in which innovative tactics can be applied on Airbnb so that it can
continue to develop its potentials in the market. It is necessary that a company like Airbnb
undertake the innovative process mainly because the aim needs to be in growing its reputation
and eliminating the competition from the business. The application of the diffusion of innovation
theory can help the company to identify the stages that exist and the categorisation of the
adopters that help in the application of the process.
Awareness about innovation and the decisions taken to apply the concept can be taken
into consideration so that appropriate application in business can be done. The benefits that
Airbnb derives from the application can be considered as a long-term benefit and its applicability