Innovative Company Research - Tripadvisor

Note: This was originally submitted as a research paper as part of a Boston University Metropolitan College graduate-level course in Innovation with Professor Kathleen Park.

Abstract

This research paper analyzes Tripadvisor, one of the major disruptive innovations in the travel industry over the past twenty years. The paper uses various sources to determine that Founder Steve Kaufer used principles and processes consistent with those outlined in The Innovator’s Method to build and grow Tripadvisor. The paper looks at Tripadvisor’s recent struggles related to COVID-19 and declining revenues from hotels and proposes potential avenues for innovation. Finally, the paper concludes that though Tripadvisor faces challenges, it has the leadership, tools, resources and values to continue to successfully innovate

Introduction

In 2000, Steve Kaufer used principles consistent with The Innovator’s Method to create Tripadvisor, a major disruptive innovation that would change the travel industry. Tripadvisor succeeded because it fundamentally tied customers to value, and because it embraces experimentation and change. Today, Tripadvisor faces major challenges, but the company and its founder have the right values to continue to succeed.

Founding innovations

Tripadvisor’s founding innovation is that it helps people plan their trips by providing them with real reviews about travel destinations. Prior to Tripadvisor, there was nowhere to get honest feedback.

As a solution, Tripadvisor meets the criteria outlined in The Innovator’s Method. From a functional perspective, Tripadvisor provides people with honest reviews. From a social perspective, Tripadvisor is driven by user produced content and provides a sense of connection. Finally, from an emotional perspective, Tripadvisor excites users through anticipation and association with travel, and users re-experience emotions through posts.

True to The Innovator’s DNA, Kaufer experimented with different business models. After failed attempts to sell Tripadvisor as a service to businesses, Kaufer pivoted, opened his website up to customers and set up a pay for click model for travel proprietors (May, 2019). Leveraging the pay for click model was an example of Kaufer networking to find a solution from elsewhere.

Experimentation also led to another foundational discovery. Focused on critical review aggregation at the time, Tripadvisor allowed users to post their own reviews to the site as an experiment. They observed that users gravitated toward reviews from other users. As a result, they focused exclusively on user content (Kintsler, 2018).

As a business model innovation, Tripadvisor is dependent upon user-created content to drive site traffic and produce revenue via advertising. Users create content for free, and all parties benefit. Research shows that 85% of people will purchase something after they read online reviews (Teixeira, 2016), and positive Tripadvisor reviews have shown a positive impact on booking, hotel management and intent to book (Garrido-Moreno, Garcia-Morales, Lcocket & King, 2018).

With 800 million consumer reviews on approximately 8.4 million places (Hoover’s, 2020), Tripadvisor is the world’s largest online review community for travelers and has changed travel and the travel industry (Garrido-Moreno et al, 2018).

Tripadvisor has remained focused on its customers and experimentation. Customer forums are leveraged for guidance on product development (Kintsler, 2018), and development efforts are guided by in-depth customer data, experimentation and prototyping (ex-employee, personal communication, June 3, 2020).

Potential innovation directions

In 2018, Tripadvisor redesigned their website, creating more curated and personalized experiences and enhancing its social media aspect (Hoover’s, 2020). With 75% of people considering a reviewer’s travel experience as crucial and 65% comparing the similarity of travel between reviewers and themselves (Chang and Chen, 2019), providing easier connections between like-minded travelers is designed to boost customer engagement and is consistent with industry trends.

Over time, Tripadvisor changed and evolved from search engine to social media site to end-to-end service ecosystem (Alaimo, C., Kalliniko, J. & Valderrama, E., 2019). Today, Tripadvisor is incrementally innovating in an increasingly competitive space and confronting the major challenges that large organizations face in innovation (Kirsner, 2018).

In addition, the environmental uncertainty produced by COVID-19 has caused major market contraction and stagnation in travel that will last through the summer (Keanes, 2020) and potentially much longer. Losing 70% of its value since September 2019 (Duprey, 2020), Tripadvisor faces an unprecedented challenge.

Tripadvisor should look to Intuit as a guide. Tripadvisor has maintained a strong process for successful innovation, and Intuit showed that a large company can inspire innovation by dedicating itself to process and culture (Dyer & Furr, 2014).

Tripadvisor’s aim should be to inspire new innovations that address the biggest pain point currently facing travel - the international pandemic. While they have integrated pandemic information into their platform, they should think bigger and push for bold innovation.

With office work and education successfully transitioning online, there is opportunity for virtual reality travel and/or travel content produced specifically for home consumption, opening partnership opportunities with streaming channels. These would be disruptive innovations, especially with limited new entertainment on the horizon, and would potentially open opportunities for new revenue streams.

There is also an opportunity to enable local, outdoor travel for stir crazy populations. This too could potentially enable new revenue streams (e.g., sports wear).

These types of innovations would better address current customer pain and also have the added benefit of detangling Tripadvisor’s revenue from the flailing hotel industry, which accounts for 70% of their current revenue (Hoover’s, 2020) and was declining year over year before the pandemic (“Why TripAdvisor’s stock fell”, 2020).

Innovation Capital and Innovation leadership perspective at Tripadvisor

Steve Kaufer had a simple vision that set the grand challenge for Tripadvisor. Kaufer possessed the three different kinds of capital described in Innovation Capital:

● Human capital - Kaufer’s shows forward thinking through his vision, persuasion through his ability to get early support, and problem solving skills by building the site and uncovering the business model.

● Social Capital - Kaufer had connections to funding and talent.

● Reputation Capital - Kaufer was a successful product developer prior to Tripadvisor.

As a leader, Kaufer acted as chief experimenter, encouraging experimentation, emphasizing speed and change and experimenting himself. With no travel industry experience prior to founding Tripadvisor, Kaufer also showed the tenacity to develop broad expertise.

Kaufer set the stage, and for the past 20 years, Tripadvisor has been a leader in travel, ultimately benefiting from the virtuous cycle of innovation leadership. Vision and early successes drew talent, which led to a great product. The great product drew customers, and the cycle repeats. Tripadvisor revenues have grown steadily with over $1.5 Billion in revenue in 2019. (Hoover’s 2020).

Conclusion

As a major disruptor, Tripadvisor is now a considerable force in travel. Focus on customers, experimentation and data are embedded in the culture, which sustains innovation.

The travel industry has suffered tremendously from the environmental uncertainty caused by the COVID-19 pandemic, and this has directly impacted Tripadvisor. With travel demand decimated, Tripadvisor has cut staff by 25% and furloughed 22% of staff (Maffei, 2020).

However, Tripadvisor has the resources and tools to overcome this crisis. By properly applying those tools and pushing for bold innovations, Tripadvisor could use this crisis to diversify its revenue streams, which would make it less vulnerable in the future. The company and its leader are constantly changing and evolving, and it will be interesting to see if Tripadvisor can broaden its approach to innovation like Intuit, or if they continue focusing on incremental innovations. That decision will impact how the company fares during and after the current pandemic.

References

Alaimo, C., Kalliniko, J. and Valderrama, E. (2019, October 21). Platforms as service ecosystems: Lessons from social media. Journal of Information Technology. Retrieved June 4, 2020 from: https://journals-sagepub- com.ezproxy.bu.edu/doi/full/10.1177/0268396219881462

Chang, Wei-Lun and Chen, Yi-Pei. (2019). Way too sentimental? a credible model for online reviews. Information Systems Frontiers. Vol.21(2), pp.453-468. Retrieved May 29, 2020 from: https://link-springer-com.ezproxy.bu.edu/article/10.1007/s10796-017-9757-z

Christiansen, C., Dyer, J., and Gregerson, H. (2011). The Innovator’s DNA. Boston: Harvard Business Review Press.

Duprey, R. (2020, June 1). Why TripAdvisor's Stock Is Up 10% Today. NASDAQ. Retrieved June 5, 2020 from: https://www.nasdaq.com/articles/why-tripadvisors-stock-is-up-10-today-2020-06-01

Dyer, J. and Furr, N. (2014). The Innovator’s Method. Boston: Harvard Business Review Press.

Dyer, J., Furr, N. and Lefrandt, C. (2019). Innovation Capital: How to Compete and Win Like the World’s Best Innovative Leaders. Boston. Harvard Business Review Press.

Garrido-Moreno, A, Garcia-Morales, Vj, Lockett, N and King, S. (2018, September). The missing link: Creating value with Social Media use in hotels. International Journal Of Hospitality Management. Vol.75. Pp.94-104. Retrieved May 20, 2020 from: https://www-sciencedirect-com.ezproxy.bu.edu/science/article/pii/S0278431916301670#bib0335

Hoover’s Inc. (2020). Tripadvsior: Company profile. Hoover’s Company Records - In-Depth Records. Retrieved June 4, 2020 from Nexis Uni database.

Keates, Nancy. (2020, April 23). For would be travelers, this is the summer of wait and see. Wall Street Journal. Retrieved June 6, 2020 from: https://www.wsj.com/articles/for-would-be-travelers-this-is-the-summer-of-wait-and-see-11587678043?mod=searchresults&page=1&pos=3

Kintsler, L. (2018, August 18). How Tripadvisor changed travel. The Guardian. Retrieved May 28, 2020 from: https://www.theguardian.com/news/2018/aug/17/how-tripadvisor-changed-travel

Kirsner, S. (2018, July 30). The Biggest Obstacles to Innovation in Large Companies. Harvard Business Journal.

Maffei, L. (2020, May 8). Tripadvisor furloughs 850 employees after multiple rounds of layoffs. Masslive.Retrieved May 28, 2020 from: https://www.masslive.com/business/2020/05/tripadvisor-furloughs-850-employees-after-multiple-rounds-of-layoffs.html?outputType=amp

May, K. (2019, December 5). How I Got Here, episode 15 - Steve Kaufer of Tripadvisor. Phocuswire. Episode 15 Retrieved May 28, 2020 from: https://www.phocuswire.com/How-I-Got-Here-Steve-Kaufer

Teixeira, Thales. (2016, September 19). For the hotel business it’s TripAdvisor or bust. HBR Presents. Retrieved June 6, 2020 from: https://hbr.org/podcast/2016/09/for-the-hotel-business-its-tripadvisor-or-bust

Why TripAdvisor’s stock fell over 50% in the last 4 years. (2020, February 26). Forbes. Retrieved June 6, 2020 from: https://www.forbes.com/sites/greatspeculations/2020/02/25/why-tripadvisors-stock-fell-over-50-in-the-last-4-years/#5e6d58883f4d