Innovation Strategy in 8 Steps

Deconstruct a breakthrough innovation from the hotel industry. Learn by example to build your own innovation strategy, step by step.

Eight Simple Steps

In my prior post to Aspire Higher, I outlined how three elements of the Growth Diamond translate into the eight steps you need to produce an informed, supported and robust innovation strategy.

Apple provided the earlier example, tracing the arc of the iPlatform innovation strategy that reinvigorated Steve Jobs’ empire.

Consider an earlier origin story – an equally indomitable entrepreneur in 19th century India. Few commercial titans have made greater global impact, or elevated more lives.

From Empire to Dynasty

In 1839, Jamsetji Tata was born to a Parsi family in Gujarat, India. He excelled in his schoolwork and helping at his father’s export business. After university in Bombay he traveled widely to establish new bases for his father, in Japan and China, then across Europe to the United States.

At the age of 29 “JNT” launched his own trading company, the kernel to become the Tata Group. He built cotton mills in Bombay, with uncommon efficiency and labor protections. His iron works became Tata Steel. He planned Bombay’s  hydroelectric power plants, later the Tata Power company.

After his death in 1904, his family retained control of the Tata Group and built it into a global conglomerate that by the early 21st century included more than 100 companies spanning textiles, steel, hydro power, chemicals, agricultural equipment, trucks, locomotives, and cement. Through the J.N. Tata Endowment (1892 – for Indian students to pursue higher education) the Tata family went on to become perhaps the most important private funder of technical education and scientific research in India.

Hospitality in an Inhospitable Empire

Late in his long career, Tata founded the Taj Mahal Palace, the first luxury hotel constructed in India, by India, for India.

He allegedly built the majestic Taj Hotel at the close of the 19th century after the British Empire’s premiere property refused him entrance. Despite his renown among India’s commercial titans, Watson’s Hotel restricted access to “whites only”. An alternate origin story asserts that the editor of The Times of India urged Tata to build a hotel “worthy of Bombay”.

Whatever wellspring of pride moved him, Tata acquired the jetty head on Mumbai’s western peninsula, commanding views over the Arabian Sea. He spared no expense to construct his “jewel of Bombay” with spiral-tipped turrets and prominent terrace windows cooled by the salt air. Watson’s rusting cast iron skeleton paled in comparison.

A century later the Taj Mahal Palace Hotel remains the pinnacle of the Taj Hotel group and proud legacy of the founding family.

From Top to Bottom

By 2013, when Tata Group’s third generation Chairman Emeritus Ratan Tata recruited Hyatt’s Rakesh Sarna to lead the hotels group, Taj properties boasted a vast portfolio. They no longer served only the most prestigious travelers. Today Taj serves the Indians who only a few years ago might never have imagined staying in a modern hotel.

Jamsetji Tata offered luxury for all who could afford it, regardless of race. His adopted grandson Ratan welcomed all guests, regardless of wealth.

To accomplish this feat, Tata turned to a fellow Indian, noted author and board management guru, the late professor CK Prahalad.

Coimbatore Krishnarao Prahlahad promoted a novel hypothesis. He claimed that the industry missed the enormous opportunity at the “bottom of the pyramid”. He cited leading indicators, such as the work of Grameen Bank providing microfinance to subsistence farmers in Bangladesh, and other ventures sprouting up in the developing world to serve an emerging consumer class.

His students and privileged executives at the University of Michigan heard Prahlahad anguish over the underserved masses. Western commercial interests, blinded to their needs, unconsciously promoted an entrenched cycle of generational poverty. The same systemic arrogance that proscribed Watson’s serving Indians lives on through economic models designed only to serve consumers through the middle of the pyramid.

Tata shared CK’s torment. He had no idea how to confront the challenge of reaching the underclasses. So he gave Prahlahad his chance to prove his theory.

In 2002, during the Taj group’s budgeting cycle, they invited Prahlahad to Mumbai to address their executive team.

The Twenty-Six Dollar Challenge

On his first visit, CK confessed that he found it difficult to enjoy the opulence of his suite at the Taj. Standing before the assembled executives in a grand ballroom, he politely asked the group for the average price of a night’s stay at the Taj.

They indicated $400. He barraged them with questions:

• “How many travelers does that serve?”
• “What percentage of overnight travelers through Mumbai might that represent?”
• “What do you suppose would be the average monthly income of the rest of those travelers?”
• “What is your monthly income?”
• “Could your family afford to stay at this magnificent hotel?”

CK drew a broad triangle. A centimeter from the top he bisected it, segregating a tiny peak from the mass of the pyramid. He hammered viciously at the dot.

“That is your target market! That speck at the top. The Taj Hotel serves approximately less than one half of one percent of the overnight travelers through Mumbai!”

“Who are the other 99.5% of Mumbai’s travelers? Get up. Look out the window across the plaza below.”

What do you see? Western tourists? Holiday merry makers? No. You see your countrymen. What about that fellow with the cart? What about that woman selling water? What about that tour guide? WHAT ABOUT OUR FELLOW INDIANS!”

He turned back to the triangle and circled the core.

“How much could the average overnight traveler in Mumbai pay for an overnight stay?”

“The answer is twenty-six dollars. Is it asking too much for Taj to provide a night’s lodging for twenty-six dollars?” 

The group quietly agreed. It was not too much to ask. But it was unprecedented. How could they possibly do it?

CK issued his challenge.

“Your job? Design accommodation to profitably offer a night’s stay for $26. And I don’t mean a hovel. Our people deserve decent lodging. I want to see a clean room, comfortable bed, private bath, food service and modern electronics. That is your mission. I will be back in six weeks to review your plans.

“Do not fail me. Do not fail yourselves. Do not fail them.”

Wildfire

CK left. Taj got to work.

Code-named ‘Wildfire’, Taj’s design team rallied around the challenge . They sweated the details. They sought input from staff at every level. And they went out into the streets.

In six weeks, they produced their innovation strategy, summarized in these eight steps.

1. DIAGNOSIS

2. INTENT

3. AMBITION

4. OPPORTUNITIES

5. INTEGRATION

6. ORGANIZATION

7. FOCUS

8. ROADMAP

Innovation Delivered

Six weeks later, CK returned. The team’s spokeswoman presented their plans.

First, she apologized. The group had tried to meet the challenge but had fallen short.

CK began to chastise the group. (If you’ve heard him, you know the man had a penchant to rant.) But before he could work up to full-tilt vitriol, the leader interjected politely.

“I’m sorry sir. We did reach $26 per night. But we also talked to customers. They told us that flat screen TVs would be an important amenity. Many also would like an air-conditioned fitness center. Adding those amenities, we can provide accommodation for $27.50.” 

They shared mock-ups of the model site. Drawings and spreadsheets presented a well-lit lobby and welcoming spaces, a common dining area, fitness center, laundry and double rooms with bath and – sure enough – flat screens in every room.

CK challenged their design. The numbers didn’t add up. How could Taj afford to operate profitably at $27.50? He reviewed the spreadsheet; he found the glaring error.

“You forgot labor costs! This estimate only accounts for one full time staff!”

The group smiled. CK had discovered their breakthrough.

Hotels traditionally organize around service models with high labor costs. Hierarchies manage functional chains of command (front desk, housekeeping, food service, etc.), a distinct division of labor across multiple shifts.

Motels, by contrast, like fast-food restaurants, design for self-service.

What if we enabled guests to have a hotel experience on a motel model?

Meet Ginger

Wildfire produced the Taj economy hotel chain “Ginger”, priced below 1,000 rupees for a double room. Ginger hotels now dot the map around India’s major cities.

When you visit a Ginger hotel, signage invites you to “Please Serve Yourself”. Don’t expect to be greeted by your host. In fact you seldom see anyone but fellow guests. If you look hard, you may find the one staffer onsite, part of a team who rotate on 8-hour shifts. Your friendly housekeeper cleans and replenishes common spaces at night, rooms during the day.

Check in at the automated kiosk, which issues your keycard. Select hot and cold meals from vending machines. Even without intending to, you find yourself greeting fellow travelers as a member of a community. By clever design, Ginger invites you to tidy up for your fellow guests.

Few of these concepts are new to the world. 40 years earlier, McDonald’s trays taught the world to dispose of their own waste. The difference was applying it to a hotel model, and designing with an elegant simplicity that made new behaviors feel completely natural.

Ginger’s first property launched in Bangalore in 2004. They expanded almost as fast as they could acquire property. Their now familiar orange banner welcomes guests at key junctures along rail and road.

Today Ginger proudly serves native intercity travelers across India. Within a decade they became both the largest and most profitable asset in the Taj portfolio.

Times change

Ginger was well underway to serve India’s domestic travelers when four years later, the Taj legacy woke to a surprise attack.

26 November, 2008 seemed an average Wednesday morning in Mumbai. It would later be recalled as 26/11. The Taj Hotel shone as brightly as ever, hosting 450 guests that morning. They first heard scuffling feet and muffled cries echo up the stairwells. Then gun shots cracked. Soon smoke choked the hallways and engulfed the central dome of the hotel.

Lashkar-e-Taiba, an Islamist terrorist group based in Pakistan, launched twelve coordinated shooting and bombing attacks across Mumbai. They charged into the Taj, an attack on the iconic symbol of India’s economic progress.

The chaos lasted four days. By the time the smoke cleared, the city of Mumbai counted 164 dead. The wounded tallied to 308 men, women and children.

Survivors tell remarkable stories of the heroic staff of the Taj hotel. At the first hints of trouble, staff ushered guests down service stairs to emergency exits. Repeatedly they plunged back in to help others. In the worst of times, the people of Taj showed the world what it means to serve.

The Taj Palace Hotel – originally a symbol of equality, also symbolized privilege. To aggrieved outsiders, Taj appeared as an indulgent vestige of western affluence. It presented a ripe target to those who would judge and act out in violence.

Ginger represents a new and different future. Ginger seeks to serve the common traveler. Ginger welcomes the bottom of the pyramid. Tata’s vision, CK Prahlahad’s ambition, and the Wildfire team’s dedication brought a new possibility to life for the people of India.

Welcome the Bottom of Your Pyramid

Ginger represents hospitality made better. The Taj Palace may have been a hotel worthy of Bombay. Ginger provided a hotel worthy of all India.

How might Tata’s lessons inform your own growth plans? Could your enterprise welcome the bottom of the pyramid? What kind of innovation strategy would “democratize” your offering? What opportunities would that open for your business?

Create the jewel in your own dynasty.

Make Better