This document discusses the importance of human and community development for the success of platform businesses. It uses the case of Airbnb to illustrate how culture and human needs shape outcomes. Initially, Airbnb leaders focused on technology and economics over cultural issues. In 2013, Airbnb hired Chip Conley, who had experience applying Maslow's hierarchy of needs to develop employee culture. Conley was tasked with creating a leadership system to support Airbnb's vast host and guest communities as the company scaled its operations globally. The document argues that effectively managing a platform's culture is key to its long-term viability.

1. Culture Design:
Dr. James F. Moore
IRC4HR
July 13, 2017
How Human and Community
Development Are EssenFal to the
Success or Failure of PlaLorm
Businesses

2. IntroducFon
• Several of us at IRC4HR have been struck by the importance of the human and
community development challenges of plaLorm businesses. We have been
studying these maQers, holding discussions with experts, as well as sponsoring
research. I want to parFcularly thank my own colleagues Dr. Jodi Starkman and Hal
Burlingame, both of IRC4HR.
• Our partnership with MIT’s IniFaFve on the Digital Economy has provided
parFcularly useful insights into the state of the art in such businesses, and into the
thinking and advanced research by affiliates and friends of the IniFaFve.
• On the following pages are some early thoughts regarding these human
challenges. As plaLorm businesses conFnue to proliferate and scale well into the
hundreds of millions of members each, we believe these issues of what for the
moment we are calling plaLorm “culture design” are becoming profoundly
important.
•
• We hope most of all to put these maQers firmly on the table for discussion, and to
suggest lines for future research and pracFce. Your comments and suggesFons are
needed and hearFly invited! Jim@jamesfmoore.com
1 Dr. James F. Moore, IRC4HR July 13, 2017

3. “PlaLorm businesses bring together producers and consumers in high-value
exchanges. Their chief assets are informaFon and interacFons, which
together are also the source of the value they create and their compeFFve
advantage.”
Marshall Van Alstyne, Geoffrey Parker, Sangeet Chourdary
Harvard Business Review, April 2016
What are “plaLorm businesses”? They range from Facebook, which just
passed two billion members, to Fassen, a small ride service compeFng with
Uber and Lyf—which of course in turn are also plaLorm businesses.
In general, plaLorm businesses connect people through digital networks—and
then life takes over.
They have powerful economics based on their ability to facilitate mulF-way
commercial exchanges, as noted above.
PlaLorm businesses have equally vital social characterisFcs and
demands. These cultural factors have a powerful influence on
success or failure, and on the economic performance achieved.
2 Dr. James F. Moore, IRC4HR July 13, 2017

4. Analysts ofen argue that the network effects that plaLorm businesses
establish become insurmountable. However, history shows that network-
based advantages can be overcome by rivals.
• FaceBook defeated MySpace.
• Google defeated Yahoo, Yahoo/Bing, and Yahoo/Google.
• Apple 2007 defeated Nokia and Blackberry.
• Apple 2017 earns largest share to total smartphone profits.
How did these winners win?
Hypothesis: The winners were (and are) beQer supporters of human development,
beQer at saFsfying the full pyramid of human needs, and beQer at culFvaFng
communiFes and culture
3 Dr. James F. Moore, IRC4HR July 13, 2017

5. Human communiFes thrive on some plaLorms, if cultural factors are
managed well and complemented by features
• FaceBook: beQer features (e.g. daFng status) and a culture iniFally associated with
Ivy League UniversiFes
• Google: beQer features (e.g. beQer search results, beQer email), email by
invitaFon and associated with exclusiveness and techie presFge
• Apple 2007: beQer features (e.g. iTunes on iPhone) and cool, brash, “think
different” brand
• Apple 2017 earns most profits because customers aspire to the creaFve, successful
image of Apple users, an image and experience supported by extensive adverFsing,
immersive stores, content, and personal myth-making
4 Dr. James F. Moore, IRC4HR July 13, 2017

6. That “culture rules” is not surprising to marketers and brand managers. What
is different today are the complexiFes of plaLorm interacFon, at large scale,
with mulFple populaFons, and constant change
MarkeFng brand
management
MarkeFng and extended
human design, human
resources and cultural
challenges, as well as brand
management
5 Dr. James F. Moore, IRC4HR July 13, 2017

7. How do we lead culture development on plaLorms?
How do we integrate brand management and culture?
These human ecosystems consFtute the largest human resource
populaFons ever assembled. How do we lead these populaFons and
effecFvely shape their dynamic growth and change?
6 Dr. James F. Moore, IRC4HR July 13, 2017

8. Cases and culture
• At this stage in the study of human and community development and plaLorms,
cases are very instrucFve.
• On the following pages, consider a case that can be seen as representaFve of how
culture and the human need for meaning are at the center of how this plaLorm
business has grown.
7 Dr. James F. Moore, IRC4HR July 13, 2017

9. The Case of Airbnb
Founded 2008, private company
“Whether an apartment for a night, a castle for a week, or a villa for a month, Airbnb
connects people to unique travel experiences, at any price point, in more than
65,000 ciFes and 191 countries.”
Source: About us. Airbnb.com
8 Dr. James F. Moore, IRC4HR July 13, 2017

10. Airbnb leaders were iniFally preoccupied with managing technology and
economics
• As Airbnb grew from 2008 into 2013, it did not have a much of any comprehensive
strategy
– As CEO Brian Chesky told Fast Company in 2014
• “We launched our 2012 plan in June of that year. [6 months into the year]
• “There was no 2011 plan.” [Chesky laughs]
• The 2013 plan had more strategies than Chesky could keep track of. “it’s really hard
to keep your focus.”
• Unmanaged human and cultural issues were becoming more apparent
– PotenFal behavioral problems with hosts, guests and communiFes were not being
addressed proacFvely and prevenFvely. The potenFal for problems to compound and
cause damage was growing with the size of the network.
– Among potenFal customers, the company’s image was associated with “couch surfing”
but a much larger potenFal market was coming into view, with a wider range of guests,
with broad range of desires for lodging
Source: Inside Airbnb’s Grand Hotel Plans, Fast Company, March 17, 2014
9 Dr. James F. Moore, IRC4HR July 13, 2017

11. Design-for-culture:
the Airbnb challenge
• How do you create a hospitality service to scale to match the global hotel
networks, and maintain quality and consistency? How do you accomplish this
without invesFng in equivalent, and expensive, human resource development?
• How do you do this while respecFng and building on your enormous diversity of
situaFons and people?
• You would like to encourage the hosts and customers together to conFnually self-
create a healthy company culture. But how do you do that? And do it worldwide?
Airbnb needed a system for managing the culture of their
vast plaLorm business. But what system?
10 Dr. James F. Moore, IRC4HR July 13, 2017

12. • Chip Conley had been the CEO of a network of hotels who, in his words, had
faced the challenge of “making work meaningful for people who clean toilets for
a living”
He had a management system—albeit for
hotels—and had even wriQen a book
about it
Source: Chip Conley, Peak: How Great Companies Get Their Mojo from Maslow, 2007, Jossey-Bass, San Francisco
Chip Conley had elements of such a system
• He had successfully led Joie de Vivre, the largest hotel network in San
Francisco, disFnguished by the uniqueness of each its 52 hotels

13. Conley’s system was based on Abraham Maslow’s and Victor Frankel’s studies
of how people find meaning in their lives
Conley’s insight was that work life in a hotel network, and by extension on a
digital plaLorm, can be designed and led so as to support each person’s quest
for personal meaning and a full life. A full life is understood in terms of
Maslow’s pyramid, above.
Sources: Hierarchy of Needs. Abraham Maslow (1954). Mo#va#on and personality. New York, NY: Harper.
Vktor Frankl (1946). Man’s Search for Meaning. Boston, MA: Beacon Press
Maslow’s hierarchy of human needs
12 Dr. James F. Moore, IRC4HR July 13, 2017

14. (Self-ActualizaFon)
(Physiological & Safety)
(Social/Belonging & Esteem)
Conley adapted Maslow’s insights to create what might be called culture
development systems based on versions of Maslow’s pyramid adapted to
employees, customers, and investors.
Source: Chip Conley, Peak: How Great Companies Get Their Mojo from Maslow, 2007, Jossey-Bass, San Francisco
13 Dr. James F. Moore, IRC4HR July 13, 2017

15. Maslow’s ideas, especially about the need for meaningful work, were used to
develop a Human Resources management approach for employees
(Physiological & Safety)
• Three levels of needs were
systemaFcally addressed through
human resources processes:
• PromoFng inspiraFon through
highlighFng meaningful life
experiences
• Fostering loyalty through community-
building iniFaFves and personal
recogniFon pracFces
• Achieving a base level of moFvaFon
through fairness in pay, evaluaFon,
promoFon and access to opportuniFes
Source: Chip Conley, Peak: How Great Companies Get Their Mojo from Maslow, 2007, Jossey-Bass, San Francisco 14 Dr. James F. Moore, IRC4HR July 13, 2017

16. Now fast-forward to 2013. Airbnb hired Conley to a new posiFon as leader of
Strategy & Global Hospitality
• ReporFng directly to Chesky, the CEO, and responsible for the
experience and culture of both hosts and guests
• This hire was accompanied by a broadening of Airbnb’s strategic
aspiraFons
– “Airbnb will become nothing less than a full-blown
hospitality brand, one that delivers a seamless end-to-end
experience when its customers travel.”
– “Airbnb will win by delivering local experiences chock-full of
personality and idiosyncrasies, all supported by the best
hospitality its hosts can deliver.”
Source: Inside Airbnb’s Grand Hotel Plans, Fast Company, March 17, 2014
Conley’s challenge was to develop a leadership system
that supports hosts and guests and contributes to
scaling the network safely and effecFvely
15 Dr. James F. Moore, IRC4HR July 13, 2017

17. Conley set out to apply what he learned in hotels to Airbnb’s massive online
community of hosts and guests
Source: Airbnb hires Joie de Vivre’s Chip Conley as Head of Hospitality, Forbes, Sept 17, 2013
16 Dr. James F. Moore, IRC4HR July 13, 2017

18. SystemaFcally improve the operaFonal foundaFon for the cultural experience
• Improve plaLorm basics, for example by
simplifying booking and encouraging instant
confirmaFon.
• Set foundaFon standards to insure consistent
service, including honesty in lisFngs,
photographs of professional quality
whenever possible, consistent basic
ameniFes and cleanliness.
• Help incubate new services, most important
being third-party cleaning services for hosts.
• SystemaFcally listen and study host and
guest experiences and feedback. Make
Fmely, effecFve and transparent responses
to problems and opportuniFes.
Source: Inside Airbnb’s Grand Hotel Plans, Fast Company, March 17, 2014
17 Dr. James F. Moore, IRC4HR July 13, 2017

19. Develop host communiFes
• Community-building throughout the
network.
• Online tools provided to local hosts create
communiFes to help each other succeed.
• Summit meeFngs of hosts and company
leaders in each of the far-flung parts of
the Airbnb world.
• Conley himself present at these events;
extensive travel to meet with members
around the world.
Source: Inside Airbnb’s Grand Hotel Plans, Fast Company, March 17, 2014
18 Dr. James F. Moore, IRC4HR July 13, 2017

20. Reframe host and guest idenFty
• Emphasize helping guests be inspired and have joyful
experiences and make emoFonal connecFons to special
people and places.
• Market iniFaFves to promote travel as a valuable
element of each person’s life. Discover new people and
places! Expand your horizons.
• Encouraged hosts to develop their skills as facilitators of
the total guest travel experience.
• Create new experience-based services. Affordable,
hours-long mini experiences in which local people
provide special opportuniFes for guests, for example
ranging from going backstage at an opera, to taking a
guided nature walk through hidden parks. DramaFc
maxi experiences such as safaris and mountain climbing
expediFons.
Source: Inside Airbnb’s Grand Hotel Plans, Fast Company, March 17, 2014
19 Dr. James F. Moore, IRC4HR July 13, 2017

21. Airbnb conFnued to scale, with 2017 total lisFngs greater than any hotel
network
Source: Airbnb and Hotel Performance, STR, 2017. str.com
It seems implausible that Airbnb could have conFnued to scale smoothly without
having intensely developed its organizaFonal culture. ConvenFonal hotel network
compeFtors invest massively in culture by way of training and oversight, and believe
this investment is absolutely central to their conFnued success.
20 Dr. James F. Moore, IRC4HR July 13, 2017

22. To see the impact of culture on growth, it is instrucFve to compare Airbnb
with its most similar plaLorm-based compeFtor, HomeAway
Airbnb has the predicted economics of plaLorm-based businesses with exponenFal
revenue growth. In March of 2017 it announced it had reached EBTDA profitability in
Q2 2016 and expected to conFnue to be profitable ongoing. It also raised a new $1
Billion investment round at a valuaFon of $31 Billion.
HomeAway has the linear revenue growth of a typical acquisiFon strategy, as it bought
23 compeFtor in ten years. In 2015 it was acquired by Expedia for $3.9 billion.
Sources: HomeAway deal strengthens Expedia’s strategic posiFon in online travel, Euromonitor, 12/4/2015
CNBC Airbnb just closed a $1 billion round and became profitable in 2016, CNBC Tech (online) March 9, 2017 21 Dr. James F. Moore, IRC4HR July 13, 2017

23. With an aQracFve and healthy plaLorm culture, exponenFal growth is a
structural consequence of the member aQracFon model
22 Dr. James F. Moore, IRC4HR July 13, 2017

24. With an unappealing, unhealthy or neglected plaLorm culture, growth is
limited to paid-for recruiFng with an uncertain yield. Churn erodes current
membership. Investors may pursue growth by acquisiFon as a more reliable
use of funds, and never address the cultural problem
23 Dr. James F. Moore, IRC4HR July 13, 2017

25. Unable to achieve organic growth, HomeAway made 23 acquisiFons between
2005 and 2015. Despite these moves, HomeAway was increasingly threatened by
Airbnb, and on February 26, 2013 the board engaged Qatalyst Partners to explore
strategic alternaFves including combinaFons and/or sale of the company
Source: HomeAway, Wikipedia,
sourced July 10, 2017
24 Dr. James F. Moore, IRC4HR July 13, 2017

26. HomeAway realized that Airbnb had a beQer business model based on
transacFon fees rather than lisFngs, as was HomeAway’s model. HomeAway
began planning in 2013 to transiFon its model toward Airbnb’s
• However, the complexity of making the transiFon across mulFple disFnct
companies and plaLorms was daunFng.
• Over the next few years the board became increasingly concerned about what,
essenFally, were cultural issues facing any transiFon.
• Things came to a head at a board meeFng in October 2015
– The HomeAway board of directors noted at the top of a list of concerns that
“prior adjustments to HomeAway’s business model had resulted in
unexpected negaFve impacts on user experience and HomeAway’s business”
and refused to sign off on the next phase of the business model transiFon.
– The board moved forward aggressively toward selling the company.
25 Dr. James F. Moore, IRC4HR July 13, 2017

27. Several companies explored a bid, but only Expedia made an actual offer. Its final
offer was modest compared to HomeAway’s price history. It included $1 billion
cash, and the rest of the purchase in Expedia stock
Source: HomeAway stock price history. Google Finance, accessed July 10, 2017.
HomeAway November 16, 2015 S-4 “Background of the Offer and the Mergers” accessed from
Skif.com The Inside Story Behind Expedia’s Purchase of HomeAway, Dennis Schaal, November 16, 2015
$ 38.31 per share imputed value of
Expedia’s offer of “$10.15 in cash and
0.2065 of a share of Expedia
common stock per share of
HomeAway common stock”
26 Dr. James F. Moore, IRC4HR July 13, 2017

28. QuesFons raised by the Airbnb case
• What might have interfered with conFnued growth if Airbnb had not focused on
organizaFonal culture?
• By picking Chip Conley to guide its organizaFonal culture, what choice did Airbnb
make about its future? How might the result have been different it they had
recruited someone from Four Seasons, or from Thai Airlines? Or from Google or
Facebook?
• How would you summarize the cultural values that are being pursued by Airbnb as
described in the case?
• How do the cultural elements affect host and guest differently? Similarly?
• How might the core values influence the direcFon of future growth into new lines
of business. For example Airbnb is now offering a variety of day-long guided/
hosted special experiences, drawing on hosts’ special interests and access. How is
this consistent or inconsistent with the values?
27 Dr. James F. Moore, IRC4HR July 13, 2017

29. QuesFons for a CEO re PlaLorms and Culture
• What plaLorm business do you hope to scale exponenFally?
• What people does the plaLorm hope to serve?
• In order to achieve your objecFve, what cultural vision and values do you need to
develop among those people engaged with the plaLorm?
• What issues/pain are you facing now regarding the culture of your business?
• What challenges do you anFcipate as you scale and develop your plaLorm
business?
28 Dr. James F. Moore, IRC4HR July 13, 2017

30. How can a CEO organize to address these maQers?
• Dr. Jodi Starkman of IRC4HR has a useful starFng point that reflects the importance
of the issues at hand, and the way in which they transcend tradiFonal execuFve
roles such as Human Resources or MarkeFng.
• In some real sense, plaLorm businesses need chief culture or experience officers.
• Chip Conley, reporFng directly to the CEO, with a Ftle of Strategy and Global
Hospitality, suggests a model for the role, reporFng and capabiliFes required.
• One can appoint an execuFve in charge of the human dimension of the plaLorm
business, reporFng to the CEO.
• This person in turn might usefully have direct reports responsible for overseeing
the experience of each of the respecFve stakeholders on the plaLorm.
29 Dr. James F. Moore, IRC4HR July 13, 2017

31. Human-centered culture design of plaLorms & ecosystems
• A new discipline is being born, and it is vital for business leaders to understand it
and invest in leading it. “Culture design” is one way to characterize it.
• In a sense it is “human resources” writ large, encompassing work and organizaFon
design, recruitment, staffing, pay and benefits, as well as organizaFon
development and planned change.
• In another sense it is an extension of the fields of design, product design, user-
interacFon design, architecture and planning—as well as cultural anthropology,
sociology.
• The new discipline requires new ways of thinking appropriate to substanFal
quanFtaFve (scale) and qualitaFve differences (online culture, extremely
mulFnaFonal, effects of online and non-online interplay).
30 Dr. James F. Moore, IRC4HR July 13, 2017