By Mark Keith
Following the 2008 global financial crisis, one Chinese businessman observed, “With the best and brightest from the top business schools and advice from top consulting firms, the Western companies still didn’t see the crash coming”. Actually, some did, but simply knowing makes no difference. Those who suspected the looming financial disaster took no action. Knowledge is meaningless if no action occurs as a result of “knowing”. A good example is when, in mid-career, employees earn MBA degrees with honors for career advancement. It makes no tangible difference and adds no real value to the company if those graduates return to “business as usual” principles.
The way we work, as corporate leaders, utilizes a winning formula we developed early in our careers. In hospitality management, this may include exercising authority, giving instructions, follow-up, and having an eye for detail. This management positioning will get things done, get you noticed and promoted, and that formula for success seems to be the way to climb the career ladder as a valued company executive.
Toward the top of the hierarchy within a hotel company, things change. Now, the manager needs to get things done through and with people who are not subordinates; they are business partners, owners, suppliers, and competitors who need more than authoritarian guidance. With the wrong leadership tactics, you’ll discover your peers may respond negatively, making a collaboration more like a confrontation. You’ve seen owner-operator relationships deteriorate when one or the other crosses the line into aggression or bullying. Authoritarian hierarchies – and they’re found in every company – do not encourage change, innovation or even management ideas from younger, newer executives. The righteousness of authority suppresses input from below.
Sébastien Bazin, CEO of AccorHotels knows all this and more. He was the keynote speaker at HICAP (Hotel Investment Conference Asia Pacific) 2016, and said his job within his company of more than 240,000 hoteliers with 4,100 sites is to awaken a “sleeping giant”. If you missed his speech, you can view the 10-minute YouTube presentation that captures his insights.
Corporate Giants Move Slowly
Harvard’s Rosabeth Moss Kanter analysed the mega-corporate environment in her book, When Giants Learn to Dance. As early as 1989, she suggested large corporate “giants” should look to replace their bureaucratic environments with faster, focused, friendlier, and flexible business plans.
Almost three decades later, Sébastien Bazin says the giants of the hospitality industry are not yet dancing; they are asleep. However, he seems to be in step with the music. He offers a perspective from the 1960s to 2000, a period when a handful of global hotel companies competed with each other in an industry with a steady demand at 5% and a supply growth of 2%.
By the millennium, the music had changed. Digital innovators and OTAs (online travel agents) targeted a piece of the hotel pie. Next came the metasearch (internet searches that use another search engine’s data to produce their own results) innovators such as Trip Advisor, followed by the introductions of service apartments like Airbnb, that created a new service niche and effectively closed the gap between supply and demand.
Online innovators have grabbed a massive 25% of the hotel industry, and Bazin predicts that this will rise to 45% in 5-7 years. How could they do this right under the noses of the hotel industry? Did someone notice – and do nothing? The explanation, according to Bazin, includes certain dynamics:
- Most of the “creators” are under 35 years of age.
- They create from scratch, without a legacy holding them back.
- They utilize newer, better technology and invested more resources.
- They see their audience as global first; they don’t “start small and grow”.
- Their organizational structure is flat and therefore unlike the tiered, pyramid organization charts of the hotel industry.
- The digital players hold their clients up-close and personal, with weekly – even daily – communication and follow-up; hotels are brand- and product-centric with touch points focused on the guests inside the hotel.
Knowing Change is Needed – and Doing it
AccorHotels noticed the problem and are now taking action. They have created a shadow board of directors from the company’s best and brightest 25-30 year-olds. They have the same access to information as the “real” board of directors and now, corporate decisions are made after the shadow board reviews proposals.
Sébastian Bazin asserts that breakthroughs in the hotel industry come from newcomers, “upstarts” who disrupt the status quo. That kind of dramatic innovation rarely comes from long-timers in established companies. Many companies seek talent that will “fit in”. Those new managers settle into a comfort zone of safe tweaks and modest growth, so they survive and perform predictably within a status-quo culture.
How can these well-established companies create performance breakthroughs, or are such innovations forever the exclusive domain of outsiders and newcomers? How can established companies achieve dramatic and exciting top- and bottom-line growth? These days it seems many flagship companies avoid confronting the issues, and in doing so become ripe for acquisition. In the changing of ownership, they do transform but only in order to fit in with the culture of the new parent company.
You Can Change Your Name – or Change the Game
Your company can realize a transformation without the trauma of an ownership change. However, you must be prepared to go through an equally daunting transformation of the corporate culture. This requires the transformation of every employee in order to give up the collective deference to legacy, outdated values and self-imposed constraints that are the barriers to innovation and dramatic growth. Because the transformation of a company depends on the transformation of every employee it is a challenge few companies have the courage to undertake. Individual mindsets need to change in order to develop a new strategy for business operations. Without it, your business plan’s design will be limited to the horizon limits of your own corporate culture – that same mindset that is losing ground in a competitive market.
It’s understandable: Within the company, management leaders’ individual winning formulas got them where they are today; they are reluctant to change what worked for them. Be warned: Some managers may sabotage, discredit, and undermine new notions before they’re explored.
If you put a plan in place for a new corporate direction – a new company strategy – without change at every level of operation, you’ll realize what business philosopher Peter Drucker once observed: “Culture eats strategy for breakfast.” Your giant will yawn, roll over, and go back to sleep.
