“People don’t buy WHAT you do, they buy WHY you do it”
6 min read · Dec 10, 2014
Airbnb and Uber, the two darlings of the collaborative economy, both leverage the community for customers as well as suppliers. They are very similar, yet so very different. The difference is in how they embody their purpose to both their customers and their community. This notion may seem squishy but it is the foundation of long-term value (and valuation!).
First consider Airbnb in the context of its closest competitor — HomeAway. Yesterday Airbnb surpassed 1 million unique listings in just less than eight years. This is more than Hilton achieved in more than 95 years. Airbnb is currently valued at $13 billion. HomeAway offers the same fundamental value proposition, was founded three years earlier in 2005, has more listings, and yet is valued at $3 billion (10 billion less than Airbnb).
Why?
HomeAway rents rooms.
Airbnb offers belonging.
And Uber moves people with the tag line: “Where Lifestyle Meets Logistics”
What is the difference? Turns out — a lot.
Simon Sinek’s “Golden Circle” is an elegant framing that describes the important differences between activity, method and inspiration in considering how companies or brands communicate with you (If you are not familiar with Sinek’s theory, this TED talk is a great place to hear it directly from him).
In Sinek’s theory most companies tell you “what” they do. Some tell you “how” they do it. Few tell you “why”. The “what” is the activity in which they are engaged or what they do, i.e. “we offer low cost air travel” or “we make computers”. The “how” is their methodology or proprietary technology, i.e. “we leverage secondary hubs, maximize our occupancy and minimize our plane downtimes” or “we make technology elegant and intuitive”. The companies, that can tell you their source of inspiration, their driving purpose, or “why” they do it consistently, become the dominant market leaders. In Sinek’s theory the compelling pitch tells the “what” through the “why” first and then through the “how”.
“Only when the WHY is clear and when people believe what you believe can a true loyal relationship develop.[i]”
Leading brands or companies do not just tell you their why — they lead with it. Apple doesn’t tell you that they make computers or that those computers or devices are offered with technology that is elegant and intuitive—they lead with telling you that they Think Differently like in their famous 1998 commercial: Here’s To the Crazy Ones. Similarly, Southwest Airlines do not just tell you that they offer low cost air travel or that they are able to offer these low fares because they leverage secondary hubs, fill their planes to occupancy and turn around their planes faster than anyone else in the industry. They lead with customer service by boldly stating their purpose: to connect people to what’s important in their lives (they just happen to do it through air travel). This comes through clearly as a Southwest Airlines job application screens for these values first and skills second. This focus leads to superior performance, as the company or entity can retain the approach when the inevitable “what” and “how” changes. Evidence of this is in their performance. Apple is currently valued at $700 billion and has more cash on hand than the federal government. Southwest Airlines is the nation’s largest domestic carrier with both the best safety record and unprecedented 41 years of consecutive profitability. Airbnb is valued more than 4 times its closest competitor.
You see, a house is just a space, but a home is where you belong. And what makes this global community so special is that for the very first time, you can belong anywhere. That is the idea at the core of our company: belonging.
Brian Chesky, CEO and CoFounder, Airbnb
When you go on the Airbnb website the banner that greets you says “Welcome Home” with videos behind that show desirable, unique experiences. When their CEO Brian Chesky speaks publicly, he focuses on the desire to create community and spawn entrepreneurship. He rarely speaks about battling the hotel industry or regulation. He speaks with passion about what they are building up, not what they are tearing down. Airbnb recently hosted 1500 from forty countries to an event called Airbnb Open, designed to foster community and loyalty among their supplier-hosts. In it Chesky said Airbnb wants to replace transactions with relationships.
Airbnb gets it. They don’t own any of the 1,000,000 listings—they have no control over the offering. They have to nurture loyalty and inspire not only their customers but, perhaps more importantly, their supplier-hosts.
The Airbnb “what” is a room anywhere in the world, the “how” is not just the technology of their platform connecting customers and hosts but, more importantly, the trust and transparency of their 2-sided rating system. The “why” is belonging and community. They are so clear in the purpose of belonging that they launched a new customer and host customizable logo called “belo”.
The Collaborative Economy is an economic model where commonly available technologies enable people to get what they need from each other.
Jeremiah Owyang, Crowd Companies
These commonly available technology platforms that connect buyer and supplier, such as Airbnb (hospitality) and Uber (transportation), are in danger of being commoditized. Scale is certainly an advantage. Uber is betting on scale as it raises more and more capital, enters more and more markets, and picks more and more public fights with their nemesis — the taxi industry. The CEO of Uber, Travis Kalanik, has spoken occasionally about access and his desire, through Uber, to make transportation as ubiquitous as running water. The splash page of their website sums up their focus on “moving people”, essentially the “what”. Why may this matter?
Lately, Uber aligned with what they are tearing down rather than with what they are building up — namely, the taxi industry monopoly. This incites cab drivers against Uber drivers. Uber is a mobile phone application, and the driver can easily delete it and replace it with Lyft, Sidecar, or whatever is next.
Right now it appears Uber’s “why” is to dismantle and disrupt the taxicab monopoly by any means necessary. This mission clearly attracts the investors as they just raised another $1.2 billion for a $40 billion valuation. But what happens when it is no longer about scale? The “Why” in the collaborative economy is essential to establishing relationships not only with crowd customers but, more importantly, with crowd providers. Airbnb gets this — I am not sure Uber does.
Are you focused on developing and communicating your “what” or protecting your “how”? What is your “why”?
About Heather McGowan
“Leadership requires two things: a vision of the world that does not yet exist and the ability to communicate it.”― Simon Sinek, Start with Why
Heather helps higher education leaders find their “why” and shape their vision. She excels at crafting simple single frame visuals that help you communicate the vision while identifying, assessing and addressing challenges to realizing your goals. Heather also provides strategic visioning work (single frame visuals to represent problem statements and opportunity spaces) to corporate clients.
More information: www.futureislearning.com and www.heathermcgowan.net
Follow Heather on Twitter: https://twitter.com/heathermcgowan
[i] Simon Sinek, Start with Why
