Navigating Down-Times with Focus and Decoding Airbnb’s Success
In a recent conversation between Brian Chesky, CEO of Airbnb, and Jason Calacanis (disclaimer: I invested in four different companies with Jason), they discussed the challenges of staying focused on product development and company growth during challenging times.
This post summarizes the key insights from their conversation and offers advice for startups (and companies alike), navigating the current waters.
Prioritize Product Development
Brian emphasizes the importance of prioritizing product development and marketing, even in challenging times. He mentioned how Johnny Ive, former Chief Design Officer at Apple, advised him during the pandemic that cutting costs alone wouldn’t lead to growth. It is essential to stay focused on building and improving products to drive success.
Initially, this change faced resistance from the team, who were not accustomed to tight collaboration and strict deadlines.
However, by persistently emphasizing the need for quality and cohesion, Chesky eventually fostered a culture that allowed Airbnb to innovate and stay competitive in the long run, helping them navigate through the uncertain times brought on by the pandemic.
Maintain a Cohesive Roadmap
Airbnb uses a single, integrated roadmap for the entire company, which helps maintain focus and streamline efforts. This approach ensures that all teams are working towards a common goal and minimizes confusion or misaligned priorities.
Most every other company is divisional, or subdivisional. At Airbnb, the entire company is on one single roadmap.
In other words (and I can’t emphasize this enough): Prioritizing product development in times of declining revenues is crucial!
Embrace Quality Over Quantity in the Development Process
When it comes to product development, Brian advocates for a focused, hands-on approach that emphasizes quality over quantity. By reviewing every project personally and setting high standards, he fosters a culture of excellence and ensures that the company only ships top-quality products and features.
To streamline the development process, Chesky implemented a program management function that involved reviewing all projects at regular intervals, ranging from weekly to quarterly.
This approach ensured progress tracking and adhered to a single deadline for all shipments. Initially, the team resisted this change as they were uncomfortable with the collaboration requirements and perceived micromanagement. Nevertheless, over time, Chesky’s dedication to fostering a culture of quality and playing the role of an editor or orchestra conductor paid off.
As a result, the company began shipping products more quickly, leading to a remarkable 340 upgrades and innovations over three years.
Product Cycles in May and November
Chesky’s approach to product releases involves two major release cycles each year — one in May and the other in November. This strategy allows the company to combine the best practices from both software and hardware development. This also ensures a well-coordinated release of new features, upgrades, and innovations.
We’ve changed our internal approach to product release cycles towards this approach because by focusing on two significant releases per year, a product orientated venture can maintain a clear roadmap and allocate resources effectively while also providing an experience for users who can anticipate and adapt to these biannual updates.
This approach has proven successful for Airbnb, as it enables them to stay agile, innovative, and responsive to the ever-evolving needs of their users and the market.
Shared Consciousness for Decission making
One key to Airbnb’s success is the strong connection between the management and the rest of the team. Brian describes the company’s leadership as a “shared consciousness” that works together on decision-making and problem-solving. This close-knit approach facilitates efficient communication and helps the company stay nimble during challenging times.
He emphasizes the importance of maintaining a close connection with the top 30–40 people in the company, creating a shared consciousness for decision-making. Instead of pushing decisions down the hierarchy or making them alone, he engages in constant conversation with a core group. This collaborative approach replaces traditional strategy reviews with a more iterative process called “Living with a strategy.” Rather than relying on periodic deep dives, the team discusses critical topics every week until they find a resolution.
Chesky believes that this unique way of working has been successful for Airbnb. While a more decentralized, bottom-up approach with wide employee discretion can be effective for smaller companies, it can lead to chaos in larger organizations. By adopting a more centralized and collaborative decision-making process, Chesky aims to avoid the pitfalls that have troubled other large companies.
Agile Management Process
The collaborative decision-making process and constant communication with a core group borrows aspects from “participative management” or “democratic leadership.”
In this style, founders or company leaders involve employees or team members in the decision-making process, promoting collaboration and fostering a sense of ownership and engagement.
The iterative process of discussing critical topics every week until a resolution is found, called “Living with a strategy,” can be likened to elements of “agile management.”
Agile management emphasizes flexibility, collaboration, and iterative progress towards goals, which can lead to more effective decision-making and adaptation to change.
When hearing the conversation, I was surprised that Chesky’s approach borrows from multiple management styles. Ultimatively, it results in a unique hybrid that has proven successful for Airbnb.
Highly efficient Structure
It feels like he primarily spends his time reviewing work and hiring people, rather than focusing on corporate matters. He explained in his conversation with Jason Calacanis that once Airbnb’s organizational structure was effectively designed, the company became highly efficient.
And so what I do is I spend most of my time just reviewing work and hiring people. So I review all these different things. And I don’t really spend a lot of time on corporate matters anymore.
With a (relatively) lean workforce of 5,300 employees, Airbnb generated an $3.5 billion in free cash flow last year. This is a lot!
This efficiency is demonstrated by the company’s ability to convert $0.42 of every dollar into free cash flow, a figure that surpasses even tech giants like Google and Apple.
While Airbnb may not match these companies in terms of absolute profit, its streamlined operations and focus on core business activities contribute to its remarkable efficiency. I wonder what this focus will do with the company’s numbers five years from now.
Simplify and Educate Through Marketing
Airbnb’s marketing approach revolves around simplicity and education. By focusing on a few global campaigns and communicating in a clear, straightforward manner, the company can effectively convey its message to customers. As Brian explains,
If you can’t explain something simply, you don’t understand it.
Chesky’s approach to marketing campaigns is a focus on global campaigns. He believes that marketing should serve as education, communicating ideas in the most straightforward way possible, as if speaking to an eight-year-old.
Drawing inspiration from Steve Jobs, the importance of clear and concise communication to accommodate the busy lives of customers is Airbnb’s mantra. They focus on creating a few well-crafted global campaigns rather than multiple local ones, ensuring their message is consistent and easily digestible across different countries. Because it’s a cross border business.
Conclusion
Navigating challenging times requires startups and companies to stay focused on the right priorities. By
- maintaining a cohesive roadmap,
- emphasizing quality over quantity,
- going lean,
- staying connected with the team, and
- simplifying marketing,
…businesses can weather uncertainty. The insights from Brian Chesky and Jason Calacanis offered my personally some food for thought and, this is my hope, some guidance for entrepreneurs and business leaders looking to stay resilient.
