Deconstruct a breakthrough innovation strategy step by step.Ampersand’s method helps teams to clarify their aspirations, align their efforts and pull the business forward to a more compelling future. This case example illustrates how your team could use this approach.
From Empire to DynastyFor context, permit a bit of history. In 1839, Jamsetji Tata was born in Gujarat, India under the British Raj. At 29 he launched the trading company that would become the Tata Group – a symbol of hospitality in an inhospitable empire. Tata went on to build the gleaming Taj Mahal Palace, the first luxury hotel constructed in India, by India, for India. (He felt compelled after being refused entrance. to the Watson’s Hotel restricted access to “whites only”. A century foreign travelers and wealthy Indians are drawn to the to the jewel on the Mumbai peninsula, the pinnacle of the Taj Hotel dynasty.
From Top to BottomA century later, Tata Group’s third generation Chairman Emeritus Ratan oversaw a vast portfolio. Taj Hotels no longer served only the most prestigious travelers.
To accomplish this feat, Tata turned to the late professor CK Prahalad. CK promoted a new hypothesis—industry missed an enormous opportunity at the “bottom of the pyramid”. He cited leading indicators, such as the early work of Grameen Bank. Tata invited Prahlahad to Mumbai to address their executive team.
The $26 ChallengePrahlahad kicked off by describing his own experience of waking up that morning at the Taj as “deeply disturbing.” A surprised murmer ran through the assembled executives. He asked them for the average price of a night’s stay at the Taj. They indicated $400. He pummeld 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?”
WildfireCode-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 eight steps.
Innovation DeliveredAs promised, Prahlahad returned exactly on the team’s deadline. A nervous spokeswoman presented Wildfire’s plans. First she apologized; they had tried to meet the challenge but fallen short. “I’m sorry sir. We thought we could reach $26 per night. But customers told us that flat screen TVs would be an important amenity. And an air-conditioned fitness center. That pushed us up to… $27.50.” CK grinned. The team 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.
But wait. The numbers didn’t add up. How could Taj afford to operate profitably at $27.50? CK pinned the spreadsheet with his index finger.
“You forgot labor costs! ”
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.