This essay is part of my last semester assignment on Innovation and Knowledge Economy class. Our task was to write an essay based on the theory in our group discussion, which in my case, was a paper about the development of wind turbine technology using Bricolage in Denmark vs Breakthrough in US. I decided to write about the Bricolage theory in the case of AirBNB, and try to make connection to resource seeking theory and growth stages.
The early business development process is always intriguing to be observed. There have been lots of discussion on the procedure of starting a business, from how they obtain their idea (Hossain and Simula, 2017; Moon and Han, 2016; Heinonen et al., 2011), how they validate their idea (Keh et al., 2002; Kim, 2001; Der Foo et al., 2005), and how they commit to revolve their idea into a profitable business (Bird, 1988; Gerber, 2009).
One of the challenges in starting a business is managing resource. Previous research has shown how bricolage approach is being applied by entrepreneur to produce resource in penurious environment (Baker and Nelson, 2005), technological innovation in developing market (Ravishankar, 2016), and also in developing food recipe (Beckett, 2016).
Besides bricolage, resource-seeking also emerge as an alternative practice in managing resource (Baker et al., 2003). However, even though it has been described that business will abandon bricolage once it has established or when the transition process is complete (Baker and Nelson, 2005), it is still not clear in which growth stage those occasion will happen and whether business will completely abandon bricolage and fully implement resource-seeking approach.
In this essay, we try to fill those gap by connecting the bricolage approach (Baker and Nelson, 2005) and resource seeking approach (Baker et al., 2003) to 5 stages of business growth (Churchill and Lewis, 1983) using Airbnb as the study case. We will explore how Airbnb were adopting Bricolage and resource seeking approach from 2008 when they started the company until 2013 when they have expanded their market worldwide.
The essay proceeds as follows: in the first section, the theory and literature related to each of the theoretical approach will be briefly described. Then, both bricolage and resource seeking approach will be encapsulated in the five stages of business growth to explain which approach is suitable for each stage. Next, we will discuss how these concepts will be applied to the development of Airbnb and we will give conclusion at the end of the essay.
The bricolage concept was introduced by a France Philosopher, Levi-Strauss (1968) in his book The Savage Mind to differentiate between a Bricoleur and an Engineer. A bricoleur is someone who has a set of skills, or ideas, or physical artifacts that will be advantageous in case he/she needs them while an engineer is someone who like to acquire resource when he/she faces a challenge.
Baker and Nelson (2005) explained 3 characteristic of bricolage. The first, making do, means that bricoleurs always “making do” with whatever they own. They refuse to surrender with the limitation in the environment to find the solution of their problem. The second, combination of resources for new purposes, means that bricoleurs try to find a solution by combining their own resources that most of the time, find a new purpose which they were not designed to do in the first place. The third, resource at hand, means that bricoleurs already acquire a set of skills, ideas, or physical artifacts that will be beneficial whenever they need to apply it.
In relation to how bricolage relate to entrepreneurship, Baker and Nelson (2005) suggested that bricolage is an option that could be chosen by an entrepreneur to face a challenge in a penurious environment. Bricolage can be implemented in three different domains, such as inputs (physical, labor, skills), customer/markets, and institutional and regulatory environment. Then, an entrepreneur may choose between parallel bricolage that employ bricolage in several domains or selective bricolage that practice bricolage in a particular domain. Parallel bricolage usually hinders companies’ growth while selective bricolage supports companies’ growth.
Figure 1 Bricolage Approach to Entrepreneurship (Baker & Nelson, 2005)
Baker et al. (2003) defined resource seeking as a strategy which company apply to reduce dependency by looking for a new resource provider. This theory was build based on the mechanism that organization’s vulnerability comes from their dependence on single provider. Therefore, the solution is to build an organization which is not only has one provider, but instead multiple provider (Pfeffer & Salancik, 1978).
Moreover, Baker and Nelson also explained that companies apply resource seeking a challenge in a penurious environment, “When faced with a penurious environment, firms have at least three alternatives. First, many firms respond to environmental constraints by seeking to acquire externally the appropriate levels and types of resources that the new challenges appear to demand” (Baker et al., 2003). However, the application of resource seeking is more likely when they have the resource that is needed to acquire the new resource, compared to when they only have limited resource in hand. Even though it does not mean that companies who have exceeded resource always choose resource seeking instead of bricolage.
Growth is a complicated process which not only occurred to small firm, but also experienced by more mature firm (Smallbone et al., 1995). There are several ways to measure the growth of startup, from number of employee, amount of revenue, and in the case of IT startup, growth could also be measured by number of user.
When a business grows, it will deal with new situation that they have not experienced before. The way they react to those will determine whether they will succeed or not. Several capabilities are considered to be important for a business owner to grow their business, which are the abilities to network in their sector at an early stage, to assimilate experience and opportunity, to reflect on past strategy, to recognize mistakes, to access resources, and to bring in external members as part of the “entrepreneurial team” (Deakins and Freel, 1998).
According to Churchill and Lewis (1983), there are 5 stages of growth in a business: existence, survival, success, take-off, and resource maturity. In the first stage, existence, the business will have problems of obtaining customer and delivering the product. If the business fails to capture customer until the capital of startup exhausted, they will be forced to close the business. The next stage is survival in which the business has to maintain the revenue and expenses. They have to acquire enough customer to keep the business operating. After that, the business will enter success stage where the problem lies in deciding whether to keep the company stable or to exploit more opportunity to achieve higher growth. If the company decides to pursue growth, they will arrive in the fourth stage, take-off, where they have to think about how to grow rapidly and find the financial source for the growth. The last stage in the company’s growth is resource maturity. In this stage, the company has to find a technique to control the financial gain that was earned from high growth and to maintain the flexibility and entrepreneurial spirit as the number of employees getting bigger.
We are using data from an article about the Growth Story of Airbnb on Growthhackers.com (Brown n.d). Growthhackers.com is a trustworthy site that provide a lot of information about the history of startup. Particularly in Airbnb story, they use references from news, interview, or conference section from reputable news company such as FastCompany and Techcrunch. They also collect reference from Airbnb blog, press release, and company policy.
Airbnb is a startup company that was founded in 2008 by two designers, Brian Chesky & Joe Gebbia and one programmer, Nathan Blecharczyk. (Crunchbase, 2016). They currently have more than 2 million listing within 34.000 cities in 192 countries and around 500.000 people were staying in their listing daily as of May 2015. In this part, we will discuss how Airbnb applied bricolage and resource-seeking approach during their 5 stages growth.
During the existence stage, the founders of Airbnb engaged in bricolage practice by developing their own website to offer their just-built lodging space, targeting the participant of a design conference that was held in their town. Three people were coming as their first customer and they began receiving email from people around the world asking when the site will be available in their cities.
During the survival stage, the founders of Airbnb were doing Bricolage in terms of selling their own-designed special edition cereal that gave them $30,000 capital. For marketing, as they did not have enough money to advertise their product, they created a bot program that would allow people to share their list from Airbnb to Craigslist easily and vice versa. This bot program was proven to be an effective marketing strategy as they brought a lot of user with almost zero cost.
Another Bricolage practice that they did was taking photos for the listed house by themselves instead of hiring professional photographer. They did it after realizing that the quality of photos that were captured by hosts were not good, thus potential guest couldn’t see clearly the house that they were going to use.
In doing Bricolage, Airbnb was becoming more innovative by developing practices that have not been done before (Davidsson and Steffens, 2002). Before Airbnb, no company has ever thought of creating a bot on craigslist to acquire user, taking photo of their customer themselves instead of hiring photographer, and selling special edition cereal.
Beside practicing Bricolage, during the survival stage the founders of Airbnb were also started to do resource seeking. Because both of its original founders were designer, they decided to invite their former roommate, Nathan Blecharczyk to join Airbnb as a programmer. Another resource seeking that they performed was rebranding the cereal they bought instead of creating their own cereal. They also received $20.000 seed-funding during this stage from Y Combinator.
Like most of IT startup, Airbnb was built to grow as big as possible. Therefore, their choice was certain when they have achieved success in several cities, which is to expand their service to as many places as possible.
During this stage, Airbnb’s resource seeking method was executed by creating Airbnb program that was launched in summer of 2010. At first, they only hired around 20 photographers but the program turned out to be very successful. By 2012, this number has grown to 2,000 photographers taking photos at 13,000 listings in six continents. The reason behind Airbnb’s decision of organizing the program was achieving time and cost effective and efficient compared to the ideas of capturing photographs by themselves or employing countless people to take photographs of the listing which were located in different places.
In 2011, Airbnb was facing a trust issue when one of their users posted on a blog about a bad experience of renting listing in Airbnb. The host’s apartment was ransacked by her renter and Airbnb did not attempt to help her in any way. As the outcome of this incident, Airbnb’s resource seeking was partnering with Lloyds of London to expand their guarantee program that cover every booking with $1 million as host guarantee.
Aside from partnering with Lloyds of London, earlier that year, Airbnb applied bricolage approach to introduce a new feature aiming to tackle the trust issue called Social Connection. This feature helped guests to know any of their friends who had stayed or befriended with the host. When launched these feature, they had combined resources that they owned, by utilizing 16 million connections among current Airbnb members, something that they did not plan to use initially.
At the same year, Airbnb is doing another resource-seeking by acquiring their competitors in UK and Germany, Accoleo and Crashpadder. This decision allowed them to expand their network to Europe quickly with access to Accoleo and Crashpadder resource. In terms of hiring people, in October 2013 Airbnb brought on Scott Raymond, co-founder and CTO of Gowalla that was acquired by Facebook to join Airbnb’s mobile team. They also invite Chip Conley, an expert in hospitality industry to assist them as the Head of Global Hospitality.
Based on our discussion above, it is evident that Airbnb were applying both bricolage and resource-seeking approach during their development process. The bricolage approach was mostly utilized during the existence and survival stages. However, as they arrived to success stage, they were starting to use more resource seeking approach compared to bricolage, because the resource seeking approach, such as acquiring other companies and hiring people with the capabilities that they had not owned, enabled them to grow faster.
Nonetheless, they did not completely abandoned bricolage as they were still practicing bricolage in developing their features, for instance social connection. This result is still relevant with Baker and Nelson (2016) idea that once a business has established, the idea of bricolage will be rejected, because even though Airbnb does not completely abandoned bricolage, they are moving towards applying more resource-seeking approach compared to bricolage.
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