How Design Thinking Transformed Airbnb from a Failing Startup to a Billion Dollar Business (2023)

In 2009, Airbnb was close to going bust. Like so many startups, they had launched but barely anyone noticed. The company’s revenue was flatlined at $200 per week. Split between three young founders living in San Francisco, this meant near indefinite losses on zero growth. As everyone knows, venture investors look for companies that show hockey stick graphs, and according to co-founder Joe Gebbia, his company had a horizontal drumstick graph. The team was forced to max out their credit cards.

At the time, Airbnb was part of Y Combinator. One afternoon, the team was poring over their search results for New York City listings with Paul Graham, trying to figure out what wasn’t working, why they weren’t growing. After spending time on the site using the product, Gebbia had a realization. “We noticed a pattern. There's some similarity between all these 40 listings. The similarity is that the photos sucked. The photos were not great photos. People were using their camera phones or using their images from classified sites. It actually wasn't a surprise that people weren't booking rooms because you couldn't even really see what it is that you were paying for.”

Graham tossed out a completely non-scalable and non-technical solution to the problem: travel to New York, rent a camera, spend some time with customers listing properties, and replace the amateur photography with beautiful high-resolution pictures. The three-man team grabbed the next flight to New York and upgraded all the amateur photos to beautiful images. There wasn’t any data to back this decision originally. They just went and did it. A week later, the results were in: improving the pictures doubled the weekly revenue to $400 per week. This was the first financial improvement that the company had seen in over eight months. They knew they were onto something.

(Video) How design thinking transformed Airbnb from failing startup to billion-dollar business

This was the turning point for the company. Gebbia shared that the team initially believed that everything they did had to be ‘scalable.’ It was only when they gave themselves permission to experiment with non-scalable changes to the business that they climbed out of what they called the ‘trough of sorrow.’

“We had this Silicon Valley mentality that you had to solve problems in a scalable way because that's the beauty of code. Right? You can write one line of code that can solve a problem for one customer, 10,000 or 10 million. For the first year of the business, we sat behind our computer screens trying to code our way through problems. We believed this was the dogma of how you're supposed to solve problems in Silicon Valley. It wasn't until our first session with Paul Graham at Y Combinator where we basically… the first time someone gave us permission to do things that don't scale, and it was in that moment, and I'll never forget it because it changed the trajectory of the business”

Gebbia’s experience with upgrading photographs proved that code alone can’t solve every problem that customers have. While computers are powerful, there’s only so much that software alone can achieve. Silicon Valley entrepreneurs tend to become comfortable in their roles as keyboard jockeys. However, going out to meet customers in the real world is almost always the best way to wrangle their problems and come up with clever solutions.

(Video) Design Thinking Case study of Airbnb

Gebbia went on to share how an early design school experience also shaped his thinking about customer development, “If we were working on a medical device, we would go out into the world. We would go talk with all of the stakeholders, all of the users of that product, doctors, nurses, patients and then we would have that epiphany moment where we would lay down in the bed in the hospital. We'd have the device applied to us, and we would sit there and feel exactly what it felt like to be the patient, and it was in that moment where you start to go aha, that's really uncomfortable. There's probably a better way to do this.” This experience pushed Gebbia to make ‘being a patient’ a core value of their design team.

The desire to always be the patient is immediately felt by all new team members. “Everybody takes a trip in their first or second week in the company and then they document it. We have some structured questions that they answer and then they actually share back to the entire company. It's incredibly important that everyone in the company knows that we believe in this so much, we're going to pay for you to go take a trip on your first week.”

While Airbnb is data driven, they don’t let data push them around. Instead of developing reactively to metrics, the team often starts with a creative hypothesis, implements a change, reviews how it impacts the business and then repeats that process.

(Video) Inspiring advise from Airbnb co founder

Gebbia shares, "I'm not sure how useful data is if you don't have meaningful scale to test it against. It may be misleading. The way that we do things is that if we have an idea for something, we now kind of build it into the culture of this idea that it is okay to do something that doesn't scale. You go be a pirate, venture into the world and get a little test nugget, and come back and tell us the story that you found."

Individual team members at Airbnb make small bets on new features, and then measure if there’s a meaningful return on the bet. If there’s a payoff, they send more pirates in that direction. This structure encourages employees to take measured, productive risks on behalf of the company that can lead to the development of major new features. It allows Airbnb to move quickly and continually find new opportunities.

We’re trying to create an environment where people can see a glimmer of something and basically throw dynamite on it and blow it up to become something bigger than anyone could have ever imagined.

(Video) Design Thinking explained through Airbnb

As part of the onboarding process at Airbnb, the company encourages new employees to ship new features on their first day at the company. It earns them their sea legs and shows that great ideas can come from anywhere. This approach yields results in unexpected ways. For example, one Airbnb designer was assigned what seemed like the small task of reevaluating the “star” function. In the original Airbnb product, users could ‘star’ properties to add them to a wish list — a basic feature. Gebbia recounts the story:

“Our new designer comes back and says I have it. I go what do you mean you have it? You only spent the day on it. He goes, well, I think the stars are the kinds of things you see in utility-driven experiences. He explained our service is so aspirational. Why don't we tap into that? He goes I'm going to change that to a heart. I go, wow, okay. It's interesting, and we can ship it so we did. When we ship it, we put code in it so we can track it and see how behavior changed.”

Sure enough, the simple change from a star to a heart increased engagement by over 30%. In short, let people be pirates, ship stuff and try new things.

(Video) Airbnb Case Study

When you’re building product at a startup you’re always moving a million miles an hour. It’s tough. You need to ship. Gebbia tries to balance this reality with the need to think in new ways by constantly pushing his team to think bigger. He notes, “Anytime somebody comes to me with something, my first instinct when I look at it is to think bigger. That's my instinctual piece of advice. Think bigger. Whatever it is, blow it out of proportion and see where that takes you. Come back to me when you've thought about that times 100. Show me what that looks like."

FAQs

How did design thinking help Airbnb? ›

They used a design thinking process to get at the heart of where they were going wrong. As part of the design thinking project, they looked at the properties posted on their New York City site through the customers' eyes and had a powerful realization: All of the photos of the properties were, well, really bad.

What acted as a key to success for Airbnb? ›

One main reason why individuals rent an Airbnb property is that it's more cost-effective than staying at a hotel. Pricing the listing reasonably can also increase the likelihood of guests posting a good review, which in turn creates a multiplier effect that's crucial to running a successful property.

What problem or opportunity was identified by the founder that led to the ideation process of Airbnb? ›

Airbnb founders Brian Chesky and Joe Gebbia just moved from New York. Without employment, they were having trouble paying their rent and were looking for a way to earn some extra cash.

What is design thinking process? ›

Design thinking is a non-linear, iterative process that teams use to understand users, challenge assumptions, redefine problems and create innovative solutions to prototype and test. Involving five phases—Empathize, Define, Ideate, Prototype and Test—it is most useful to tackle problems that are ill-defined or unknown.

How does design thinking benefit a business? ›

With design thinking skills comes the ability to develop product innovations that add value to customers' lives and drive revenue for your firm. Because design thinking is so user-centric, innovative products, by definition, add value to customers' lives.

What are the 3 most important elements of design thinking? ›

There are five key elements of the Design Thinking process:
  • Human-centered. If you don't understand the person who will be using the thing you're trying to create, it simply won't work. ...
  • Creative and playful. ...
  • Iterative. ...
  • Collaborative. ...
  • Prototype driven.
2 Nov 2020

What strategy did Airbnb use? ›

Airbnb's founders did not pitch their service as a cheaper alternative to hotels. Instead, they rooted everything in the unique experience of learning to live like locals — even when you're away from home. Airbnb's goal for guests is to enrich travel by providing accommodations with character.

What strategies does Airbnb use? ›

For more general customers, Airbnb utilizes traditional marketing tactics alongside promoting digital and social media advertisements. Much of their social media presence also revolves around sharing user-generated content.

Why is Airbnb business model successful? ›

The success of Airbnb's business model is based on a resource-light cost structure. It found an innovative way to partner with owners of idle assets (empty rooms) and help them monetize those assets via their matchmaking platform.

What problems can be solved with design thinking? ›

Design thinking, a creative problem-solving approach, can be used to tackle some of government's most thorny issues—from retaining valuable employees and predicting the impact of new policies to creating new valuable products and services.

How did Airbnb grow so fast? ›

Airbnb has humanized travel and created greater connection and community through better stays. As Airbnb's platform grew, the company continued to focus on delivering top-notch host and guest bookings to an expanding user base while looking to improve personalized interactions and provide greater convenience.

What is the purpose of design thinking and why it is important? ›

While design thinking is an ideology based on designers' workflows for mapping out stages of design, its purpose is to provide all professionals with a standardized innovation process to develop creative solutions to problems—design-related or not.

What are the 5 stages of design thinking? ›

The Five Phases of Design Thinking

The short form of the design thinking process can be articulated in five steps or phases: empathize, define, ideate, prototype and test. Let's briefly explore each of these phases in relation to a practical design process.

What is the main objective of design thinking? ›

Design Thinking approaches problems from a human perspective, with the objective of designing innovative and desirable products, services or experiences that reflect all three aspects.

How can design thinking help business startups? ›

Design thinking provides a simple way to hone in on exactly what the problems are—often discovering a different way of thinking about them—while also providing insights and data that are critical to building appropriate solutions that make a business money.

What are some ways you could improve your business idea using design thinking tools? ›

#10 Ways to Use Design Thinking for Driving Business
  • Create a roadmap for the Future.
  • Identify the Right Problem.
  • Team Collaboration & innovation.
  • Deep Understanding of Customers.
  • Stay ahead of Competition.
  • Get more opportunities.
  • Clarity in Meetings.
  • Improve Customer Experience.
18 Dec 2017

What are the 4 D's of design thinking? ›

Design Thinking methodology involves FOUR distinct stages – Discover, Define, Develop and Deliver. Collectively, this is known as the 4D Framework.

What are the 7 elements of great design? ›

The elements of design are the fundamental aspects of any visual design which include shape, color, space, form, line, value, and texture.

What are the 4 pillars of design thinking? ›

Let us recall the four pillars of Design Thinking: Understand by asking people; Explore by finding patterns; Prototype by making tangible; Evaluate by always iterating.

What are the challenges faced by Airbnb? ›

The biggest problems Airbnb Hosts deal with? The most common problems vacation rental hosts deal with are regulations, local laws, parties, excessive turnovers, unmanageable guests, not knowing your market and finding better guests.

What key factors may determine the success or failure of Airbnb? ›

The most important factor of the success of Airbnb is the free market concept. It' s prices are much lower than many other options available in the market. And the best part is that company has no physical real estate to balance. It works on the concept of demand and supply.

What gives Airbnb a competitive advantage? ›

One advantage for Airbnb is the almost limitless availability of places to stay on its platform (currently totaling around 7 million). This can help the company capture more demand and outperform other travel stocks over the long term.

How can I improve my Airbnb business model? ›

Top 5 Unexpected Ways to Increase Airbnb Revenue
  1. Rent Out Extra Space. One simple way to increase your Airbnb revenue is to make use of any extra space that you may have in your property. ...
  2. Rent Out Extra Parking. ...
  3. Make Use of a Large Yard. ...
  4. Offer Add-On Services. ...
  5. Become an Airbnb Consultant.

What are the major goals for Airbnb? ›

“Airbnb's mission is to create a world where anyone can belong anywhere, and we are focused on creating an end-to-end travel platform that will handle every part of your trip.” The mission statement demonstrates its impact on the lives of the customers.

Does Airbnb use a differentiation strategy? ›

In Airbnb's case, its strategy is a mix of three strategies, these are a focused low-cost provider, a focused differentiation strategy and a broad differentiation strategy.

How did technology effect the Airbnb business model? ›

Airbnb has benefited from the growing network since the incremental cost of an additional listing is functionally zero, with revenues flowing directly to their bottom-line[7]. Airbnb facilitates the exchange between hosts and guests through their website and mobile app.

Is Airbnb a successful startup company? ›

Since then it has progressed through all rounds of funding and managed to raise billions from venture capital firms all around the world. These include over five hundred million dollars from Google Capital. Today Airbnb is a highly successful privately held company which makes billions every year.

Will Airbnb be successful in the future? ›

For the first quarter of 2022, Airbnb expects its revenue to rise 59%-67% year over year. Analysts expect its revenue to rise 32% for the full year.

How can design thinking help in solving problems and innovation? ›

Design thinking is a process for solving problems by prioritizing the consumer's needs above all else. It relies on observing, with empathy, how people interact with their environments, and employs an iterative, hands-on approach to creating innovative solutions.

What is an example of a problem in design thinking? ›

Design thinking problem statements can take multiple forms. For example: (User) needs a way to (outcome) because (driver) (Audience) wants (outcome), so we will deliver (product) to achieve (result) 'How might we' statements.

How do you write a problem statement for design thinking? ›

A good problem statement is a clearly-defined understanding of the user and their core problem. The problem statement should avoid proposing a firm solution in the beginning, which should be uncovered through research and iterative design exploration.

Why do you think Airbnb is very popular today? ›

Airbnb is also popular because it allows people to save money on their travel accommodations. Hotels can be expensive, especially if you are traveling with a family or group of friends. Airbnb offers a variety of different price points, so you can find a place that fits your budget.

How does Airbnb improve customer experience? ›

Using bots and live agents, the company offers 24/7 support by phone, email, social media, and in-app messaging. According to Zendesk, who supports Airbnb, the company gets over 7 million customer service tickets in a year.

How design thinking helped Airbnb turnaround its business? ›

This unusual solution that saved Airbnb was 'Design Thinking', a design practice which valued the user experience above everything else. This case provides an insight to Design Thinking and the various techniques involved like brainstorming, body storming, prototyping, and testing to arrive at a solution to a problem.

How do you use design thinking to strategy? ›

The Stages of Design Thinking Applied to Strategic Planning

By applying Immersion, Analysis, Ideation, Prototyping and Implementation, it is possible to understand the context, analyze it, generate ideas and test them, observing their impact before implementing them.

What is the most important skill of a design thinking? ›

Journey mapping is a crucial skill for anyone interested in design thinking. It should be informed by user research and will itself inform ideation and prototyping.

What are the three main steps in the design thinking process? ›

The Three Phases of Design Thinking: Immersion, Ideation and Prototyping. The Design Thinking approach have changed the way thousands of companies think (and do) innovation. Start your transformation from 3 basic standards: Immersion, Ideation and Prototyping.

What are the 6 mindsets required for design thinking? ›

To illustrate these themes further, we have broken them down into the following six key steps: frame a question, gather inspiration, generate ideas, make ideas tangible, test to learn, and share the story.

What is design thinking explain with example? ›

Design thinking is a non-linear, iterative process that teams use to understand users, challenge assumptions, redefine problems and create innovative solutions to prototype and test. Involving five phases—Empathize, Define, Ideate, Prototype and Test—it is most useful to tackle problems that are ill-defined or unknown.

What is the conclusion of design thinking? ›

Design thinking not only helps to come up with innovative solutions, but also helps to address the exact problems faced by the customer and target the customer's requirements in the best possible manner.

Does Airbnb have a design system? ›

Our design language system provides our product teams a starting point to create amazing user experiences with more efficiency than ever before. As we scale the business and design/engineering headcount, the system helps define the foundation of Airbnb design and allows us to solve complex user problems.

What strategy does Airbnb? ›

Online Community of Travelers & Hosts

It is a testimony to the airbnb global marketing strategy and the way the firm has established an online community of travelers and hosts. This community is responsible for connecting with each other and finding potential homestays and hotels in and around a person's vacation spot.

What is Airbnb design system called? ›

Articles & Resources about DLS

Creating the Airbnb Design Language System (DLS) AMA: Karri Saarinen, Designer - Creating Design Systems at Airbnb.

How do you design on Airbnb? ›

  1. Designed for Comfort. Firstly, you want your guests to feel as though the space has been thoughtfully designed with their needs in mind. ...
  2. Don't Be Afraid To Go Bold. ...
  3. Dress Up The Windows. ...
  4. Style With Flowers and Greenery. ...
  5. Embrace The Small Spaces. ...
  6. Make It Instagrammable. ...
  7. Avoid Boring White Walls. ...
  8. Mix Up Textures and Budgets.
31 Oct 2018

What inspired the idea for Airbnb? ›

In 2007, Joe and I were roommates in San Francisco, and we were trying to figure out how to pay our rent. That weekend, a design conference was coming to San Francisco and hotels were sold out, so we inflated three airbeds and turned our apartment into an Airbed & Breakfast.

What will be the future of Airbnb? ›

For the first quarter of 2022, Airbnb expects its revenue to rise 59%-67% year over year. Analysts expect its revenue to rise 32% for the full year.

Videos

1. Airbnb Rebrand Case Study
(DesignStudio London)
2. Design Thinking: Take off like Airbnb or brace for failure - Episode 6
(Design WakeUp)
3. How Airbnb designs for trust | Joe Gebbia
(TED)
4. Design Thinking: Airbnb and the Customer Experience
(BottomUp Skills)
5. The real story about how Airbnb was founded - Nathan Blecharczyk Co-founder Airbnb - Startup Success
(The Business Channel)
6. Airbnb - How Brian Chesky Changed an Industry
(Five Minute Billionaire)
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