Tourism: From Good to Great

Winning in The “New” Economy

Marriott Corporation – Global Sales Organisation, June 23, 2004

2

Rationale

"Strategic resilience is not about responding to a one time crisis…it's about continuously anticipating and adjusting to deep, secular trends that can permanently impair the earning power of a core business. It's about having the capacity to change before the case for change becomes desperately obvious."

Prof. Gary Hamel, December 2003

2004

3

Definition of Insanity

“Doing the same thing over again and expecting different results”

Doing the same thing over again whilst everything is changing around you”

2004

4

Roadmap

• What forces are turning the economic order upside down?

• How are customers changing?

• What new technologies might help?

• What’s the bigger picture or context?

• What are Marriott’s opportunities?

• My objective is to help you understand what’s really going on..

2004

5

Short History Lesson

Four aspects to every economic revolution

1. People – what do they yearn for?

2. Technological capabilities – what do they enable?

3. Worldview – how do we perceive the world and our role in it?

4. Organisation – how is value created and exchanged?

2004

6

Industrial Revolution # 1: 1750s

• People leaving ties of rural life; wanting to purchase “decencies” and better themselves

• Inventions – steam engine, spinning jenny

• World perceived as an orderly place -- the clockwork universe; fixed laws; everything in its place

• Factories, hourly paid work; cash, division of labour

• Emergence of capitalism; birth of empires

2004

7

Industrial Revolution # 2 1920s

• Mass market wanting to purchase luxuries like the automobile

• Communications technology; electricity• Business could be better organised by applying scientific

principles based on Newton, Darwin, Freud• Emergence of the assembly line; more specialisation;

mass markets; persuasive marketing• Pervasive, global spread of mass consumerism• Defeat of communism

2004

8

Consumer Revolution # 3

• People are now very different• Mammoth changes to technology• A very different worldview• New organisational structures• Leading to a “New” Economy

– Information– Knowledge– Network– Digital – Support

• 90% of our political leaders don’t “get it”• Do you?

2004

9

Four Forces Driving Change

Four aspects to every economic revolution

1. People – what do they yearn for?

2. Technological capabilities – what do they enable?

3. Worldview – how do we perceive the world and our role in it?

4. Organisation – how is value created and exchanged?

2004

10

Force 1: The Changing Consumer

• Are we really like our grandparents or great grandparents? Do we relate to our kids?

• Conformity is out, self expression is in• Are we consumers or individuals?

– If you time for only one clue this year, this is the one to get…we are not seats or eyeballs or end users or customers. We are human beings whose reach exceeds your grasp. Deal with it! From The Clue Train Manifesto

• We don’t need to be persuaded to consume! Consumption is what we do to survive!

• We simply want some support• We have changed – most commercial organisations

have not!

2004

11

Has Power Shifted to the Consumer?

• Yes, there has been some:– Commodisation– Reduction in brand values– Lower prices– Cannibalisation from intermediaries

• But consumers still very frustrated• Companies starving the front line – “transaction starvation”• Squeezing as much value out of a transaction – “transaction

inflation”• Pushing products, still product centric• Customers sit at the end of a long “value chain” like coins on a

shuffleboard, pushed along by accumulative supply forces

2004

12

Here’s the Problem

• In a transaction economy…value is seen as something companies create or add

• Companies are in control of production, positioning, promotion, pricing, placement (distribution)

• The aim, reduce transaction costs by – Getting bigger (the M & A phase)– Cutting costs (the re-engineering phase)– Up selling and cross selling (the partnership phase)– Improving quality (the TQM phase)– Convincing customers that a relationship existed (the CRM

phase)

• But supposing……

2004

13

Supposing….

• Value actually rests with each customer?

• Supposing each customer sits at the centre of an orbit, not the end of a chain?

• Supposing the role of the company is to enter into a dialogue or relationship so that..

• Value is released and exchanged through the act of support.

• We call this Dancing with the Customer!

2004

14

Dancing with the Customer

• Involves partners that share leadership• A dialogue of bodies; an exchange of energy • Both partners “sense and respond” to the movements of

the other• Requires a fresh, playful, experimental attitude to

business• Requires more loose, flexible, agile structures• You and your customers co-evolve and co-create

innovative solutions that support them in achieving their task

• It all starts with an intent, a fantasy, a purpose

2004

15

That’s Mostly in Their Heads!

INTENT/

FANTASY

EXPERIENCE

Physical Mental Emotional Spiritual

MEMORY

Stimulate

Enable/enrich

Mould / propagate

RETURN

RECOMMEND

Virtual

Virtual

Physical

2004

16

What Business Are You In?

• The body parking business?• The support business?• Enabling customers to complete a task?

What are Your Customer’s Seeking?• More than pampering• Meaning & Fulfilment• A sense of place• Encounters with people and places that are different

from home• Experience the extraordinary

2004

17

dream

plan

book

experience

reflect

share

return

Customer’s Intent

Experience Cycle

reject

The Cycle of Need

2004

18

Business Web Participants

Host Community

Providers

Suppliers

Agents

Channels

Partners

GUEST

2004

19

The Importance of Community

• Our customers are NOT the rational beings (buyings? ) that Adam Smith described – they’re highly emotional!

• Whom do our customers trust – in a world of spin?

• Whom do our customers turn to for advice and support?

• Each other!• What’s the best way to get customer feedback?• By listening in on peer to peer conversations

2004

20

The Importance of Community

“People in networked markets have figured out that they get better support from one another than vendors and are beginning to self organise faster than the companies that serve them”

Cluetrain Manifesto

The Rise of Emotive Networks

2004

21

The Blurring of Boundaries

• When customers are intent on achieving a task do they or should they care about your departmental boundaries and policies?

• Customers are more likely to think outside the box than companies are – they have more at stake and more flexibility

• Competition might come from unexpected quarters• Low cost airlines disrupted business for traditional

carriers• Might second home ownership disrupt your business?

2004

22

Coping with a Cheeky Consmer!

• Customisation

• Choice

• Completeness

• Content

• Control

• Convenience

• Cheap!

2004

23

Force # 2 – Enabling Technologies

• Connectivity

• Convergence

• Open Standards

• Web Services

• File Sharing & Grid Computing

• Nanotechnology

2004

24

Force # 2 – Enabling Technologies

Implications• Technology not the barrier to serving “cheeky

customers”!• Every supplier will have access to the kinds of

technology now proprietary to the likes of Expedia• Mammoth customisation, complex and rapid syndication

is now possible• No need to allocate inventory• Everyone can become an intermediary, aggregating and

syndicating services• We call it “the napsterisation of the travel industry” • Futuristic scenario…new property owner

2004

25

Force # 3 – New World Views

OUT WITH THE OLD IN WITH THE NEW Universe, company resembles a Machine to be re-engineered

Resembles a living, breathing organism constantly evolving

Independent Parts Interdependent relationships Predictable laws Chaos & Uncertainty Newton’s Physics Quantum physics, sub cellular biology Darwin’s competition Collaboration Hierarchies and value chains Networks Top down design & planning Bottom up experimentation Market as Mass Market as individuals Push Pull Value lies with company Value lies with the individual Transactional Supportive Win lose Win Win Financial assets determine wealth Relationships determine company value Product Centric Customer centric Industrial Sector Business Ecosystem

2004

26

Force # 4 – New Organisational Structure

Implications• Instead of a “sector” with a few vertically integrated

multinationals and huge numbers of independent suppliers

• Multiple, living, breathing business ecosystems interacting with and affected by many others

• All members engaged in converting the energy (value) latent in a customer’s intent

• Taking a Holistic view of the customer• Focus shifts from exploitation to support• Cannot act unilaterally• Collaborative federations are formed driven by the

customer’s profile and intent – their task

2004

27

Common Features

• Customer centric, task oriented– Couples seeking a short break at a resort– Small peer groups seeking action packed city

experience– Corporate travel managers seeking travel support for

an expanding sales team– Golf event

2004

28

Common Features

• Built on a technical infrastructure that enables them to – Identify, select and aggregate, at speed, relevant

services and appropriate content that..– Can be “mixed and matched” and mammothly

customised to meet the precise needs of each customer

– Syndication and distribution can be managed by marketing and sales personnel

– Delivered over every channel at every stage

2004

29

Leadership Opportunity

• Marriott in the perfect position to assume a leadership position in a domain that has to “move with the times”

• It can do this by showing both imagination and will and, most of all, by an understanding of what tomorrow’s customer will expect

• Lessons from eBay and Enron

• The technology is there

• Could you show the way?

2004

30

Thank You!

Anna Pollock, CEODestiCorp

anna@desticorp.com

www.desticorp.com

2004