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Other Articles from The Villager

Market disruption is inevitable in the age of innovation – but how do you manage it?

13/12/2017
by Thomas Müller
Business

Airbnb has disrupted the local Namibian hospitality market, much like it did in other countries. It created a new market and proposition that did not previously exist. There’s absolutely nothing wrong with what they did. Instead of fearing them, the Namibian hospitality industry should embrace them. Consider how these new developments can assist other businesses in achieving their goals. The digital revolution brings opportunities for entrepreneurs and small businesses, opportunities they would never have had even 10 years ago. The digital revolution is not the problem, the reluctance to change is the problem as it has been throughout the ages.

Let’s start by creating an overly simplified scenario. Jack and Jill have guesthouses next door to each other. Both do very well in the current market. Peter, one of their other neighbours, opens a guesthouse too. His guesthouse offers lower rates and is more modern. Both Jack and Jill lose 50% of their occupancy to Peter’s new venture.

Jack decides to do renovations to improve his sales. It works, and Jack’s sales are back up. Jill believes she needn’t spend money if her model has worked well so far. Rick, another neighbour, realises their location has potential and joins Airbnb. Jack, Jill and Peter lose some business to Rick. Jack hires a marketing agency to improve his strategy and online presence. It works, and Jack soon exceeds his previous sales. Rick gets a website and does a bit of marketing and his occupancy goes back to what it was previously. Jill still thinks she will be fine and business will come back eventually.

The Namibia Tourism Board announces that Airbnb users have to register their properties as an accommodation establishment. Jill is overjoyed and gets her staff members to protest outside Rick’s house for two days until the NTB approaches him about registration. Rick’s Airbnb account is closed for two months while he sorts out his logistical issues. Jill waits for business to go up, but nothing happens. All Rick’s would-be customers go to Jack and Peter’s establishments due to their strong brand identities. Rick eventually gets back into business and, shortly afterwards, Jill goes out of business.

Some business operators simply can’t afford to drastically change their way of doing business, especially if they don’t have the knowledge or expertise. This is understandable, but go back to basics – what set you apart from your competitors initially? Would you objectively choose your own company above your competitors? If so, why? You need to leverage this and then, through very simple and effective steps forward, get back your competitive advantage. Plus, you need to know and understand your customers and their needs, desires and wants.

Keep in mind, “if you do what you always did, you get what you always got”. This is certainly the case when people aren’t open to changing their business model. While the world and business around them is undergoing a paradigm change, they stick to their status quo.

The Hospitality and Tourism Industry is in flux, there’s huge growth as globally more tourists are discovering the magic that is ‘The Land of the Brave.’ However, to fully benefit, a business needs to be fast, agile and able to adapt accordingly and change its go-to market, business model. As well as tweaking the way it engages and acquires new and returning business.

This does not mean that there shouldn’t be regulations in place to establish fair and level competition. Airbnb has created a completely new market, encouraging homeowners to rent out their rooms in competition with established hospitality businesses. It is obvious that those private operators have to be compliant with the regulations, adhering to fire & safety guidelines, getting registered, accredited, pay tax and levies like any other market player in the hospitality industry.

Just as the taxi sector was up in arms when Uber started, AirBnB needs to comply with the country’s existing laws and regulations. Uber drivers should have a valid driver's licence, roadworthy vehicle and comply with any laws regarding transporting people for money.

Considering the rapid rate at which the industry is changing, growing and new technology is arriving constantly, it is important to remain relevant. Do this by keeping up with trends and embracing new ideas. If a disruptive entity enters the market, don’t be afraid to follow their lead, perhaps even improve on it.

See what makes them successful and learn from that. Find your Unique Value Proposition, build on it and find ways to combine it with current trends. Most importantly, if anything happens to slow down the disruptive entity’s success, don’t get your pitchforks and chase them out of town. Look at how you can prevent similar issues or solve their problem for yourself. Obstacles present opportunities, not dead ends.