Arne Sorensen became CEO of Marriott International in 2012—the company’s first leader from outside of the Marriott family. In 2016, Marriott acquired rival Starwood Hotels and Resorts for $13 billion, creating the world’s biggest lodging company.

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This interview is from our CEOs on Innovation report, in the Fall 2017 issue of Innovation Leader magazine.

The comments below are excerpted from a conversation Sorensen had with Innovation Leader members at a June 2017 event at the company’s headquarters in Bethesda, Md.

Integrate, Don’t Separate

I think in years past, we didn’t necessarily use the word “innovation.” We used a sort of skunkworks team, a strategic planning team, or some group of folks who came out of consultancies. We’d say, “We want you to go off and come up with the brilliant ideas that are going to take us to a promised land in the future.”

I think our experience at Marriott was, that was not a good approach.

To separate the strategic thinking, the big thinking, the change thinking—in today’s words, the innovation thinking—from folks who are responsible for running the business actually made them less effective. It also made it too easy to reject the ideas, because they were coming from outside. They were coming from some place that wasn’t really part of running the business.

We got rid of it because Mr. Marriott has this point of view…[that] all of us need to be engaged in a constant effort to say, “OK, what are the new ideas?” It’s not [only] my responsibility as CEO. In fact, just the opposite. If you were dependent on one executive for coming up with the bright new ideas for the future, most companies would fail.

Instead [we focus on], where are the experiments being done, how do you make sure you find those experiments, how do you elevate them so [you] can figure out which ones are succeeding and which ones are not? How do you get enough conversation going so you can decide which one of those many experiments are worth pushing out faster?

Arne_Sorenson

Marriott CEO Arne Sorensen

We have an advantage in some respects. We have about 6,000 hotels, and in a sense we can look at each hotel as a living lab. Now, each hotel is not going to solve what we’re doing with the global loyalty program for example, because they’re not set up to do that. But they can experiment around food and beverage, or they can experiment around service initiatives, or they can experiment around mobile services in a hotel. Or, they can come up with ideas about a different approach to the front desk.

How do you tap into those living labs and say, “What’s working and what’s not working?” How do you [give] permission in the organization, to say, “You’ve got the power to go experiment, and then we can figure out which experiments are working”?

If people are going to have permission to innovate, they have to have permission to fail. Otherwise, they’re taking no risk.

That is the challenge for any big company—we are big organizations, and nobody wants to fail. [Everyone] wants to be the one who has rolled out the successful idea. Which means that too many ideas that seem to be on the edge can get nipped early. Or if it survives, they get analyzed to death. They get structured to death so that somebody can roll it out and say, “I know when the rollout happens it won’t fail.”

You’ve heard of the Heavenly Bed from Westin? Starwood, which is now part of Marriott, came out with the Heavenly Bed, in 1999. It was the most basic, brilliant idea, which causes everybody in the hotel industry to say, “What on Earth were we thinking?” We sell a night’s sleep, but we weren’t focused on any aspect of the bed, other than making sure it was indestructible. It’s slept in all the time, and we wanted to make sure the mattresses lasted forever, that the sheets lasted forever. Remember those old floral bedspreads? They were indestructible. So, here this brilliant idea [of the Heavenly Bed] comes up. The rumor is that at Marriott somebody had that idea, and it got killed in the organization.

Somebody said, “No, no, no. We want indestructible beds.” The organization essentially prevented that idea from bubbling up. Now, Westin rolls out Heavenly Bed. Marriott comes up with our own new bed frame within two years [of that]. Barry Sternlicht, he’s still [CEO] at Starwood, calls me, and he says two things. “Your bed’s better,” and, “It’s in more of your hotels than it is in Westin hotels.” That was the execution; you can in fact catch up. We didn’t innovate that idea. But we rolled it out quickly and much more completely. We spent about $40 million of our own money to incentivize the owners, who pay for bedding, to get the beds out quickly.

Moving Into a New Headquarters

We’ve been in this building since the 1970s. We are in a soul-sucking suburban office park, which is 100 percent dependent on the automobile. A big chunk of our workforce says, “That’s not the relationship I want to have with the place I go to work.” We were aided in the fact that the lease here is expiring, and it would cost as much to renovate this building as to build a new building from scratch.

So why wouldn’t you go build something which will not be walnut paneling, gilded, and all the rest of it? But it will be space which has floor-to-ceiling windows, because we all love natural light. It will have spaces where we can work with each other. It’ll have all the places that we all now have been taught that we need to have, which is an espresso bar at every turn, and a place to have cocktails at the end of the day. You can get there by public transit. It’ll be an experience which is so much better than this one. We’re going to have a hotel at the headquarters building. One floor will be nothing but sample rooms, so you can try every one of the nice beds.

Tech Changes Ahead

Frequently, we think about technology first when we think about innovation. There’s a little bit of a danger in that, because it’s not only technology [that drives innovation.] We will, in every hotel room, have a big, smart TV. Smart, in the sense that it will connect with the device that you have with you, so that your content can be played on that 55-inch TV in your room [and be] highly intuitive.

We will have technology that allows you to influence your relationship with the hotel, with your phone. That means clearly opening your door, and not needing a key. It means being able to communicate with the hotel with your own phone, as opposed to the phone that’s by your bed.

There is a broad trend, which is driven by all of our desire for authenticity, towards a much more locally-intense experience. I want to know when I wake up in Washington, D.C., without going out and looking out the window, that I’m in Washington, D.C. How do you pull that through in food and beverage? How do you pull that through in the design of the guest room? Washington, D.C. and Baltimore may not be that different, but Washington, D.C. and Paris ought to be dramatically different. For a big company, that’s a harder thing to do. It really means you’ve got much more variety. You have to let go. We’d be buried in cost if we tried to drive all of that out of [headquarters] and say, “Here’s the model for this city, here’s the model for this one, and here’s the model for this one.”

How I’m Changing My Approach

One [way I’m trying to change is] to be less of a control freak. This is still something I’m learning. There are times when I will see [that] we’ve publicly announced something which I’m reading about for the first time in the press. My reaction five years ago would have been, “Why the hell didn’t I know about that?” Today it is, “Yeah, that’s interesting. Let’s see what happens.”

I think that’s not just something that I need to learn. I think it’s something that the headquarters team needs to learn, or the experts in a discipline who say, “I run the loyalty program. Therefore, everything that the loyalty program does, I want to control.” That’s a trap.

Unraveling the Conglomerate

Our 90-year experience was to go from being in one business, which was restaurants, to being a conglomerate, where we were in a dozen businesses and where the question from the investment community was, “What new business are you going to get into next?”

[More recently,] we have been all about going back to one business, which is the hotel business.

We had gotten into cruise ships, senior living, food distribution, theme parks, timeshare, corporate housing, cafeteria management in hospitals and universities, the toll road business. By and large, we would say we weren’t good at any of those. We exited them pretty well. …We got into senior living because we thought it was both hospitality and real estate development management. Well, it turned out it was healthcare. People are regularly dying in your facilities. Not because of bad service or bad management, but because they were at the end or their lives.

We weren’t passionate about it. You have to be passionate about taking care of seniors, or you’re not going to do what you need to do. If you’ve got a whole bunch of hotel people sitting in a room talking about the business plan for a senior living community, you’re not going to bring the kind of passion that you need to have. We’ve gone back to this super-concentration on one business, which is all we’re in today.

An adjacency, which we’ve added recently, would be experiences. We have decided [that] we want to be able not just to sell you a room, but we want to be able to arrange in advance for you whatever experience you want in that market. “I want a unique tour of Washington where I go see where all the scandals have occurred in the last 50 years.” Or, “I read about a chef in Washington, José Andrés. Can I go to his kitchen in the morning and have a private cooking lesson?” How do you set those things up in advance? We’ve made an investment [in the startup PlacePass], which allows them to try and drive as much of that as possible. We were doing some of that on our own, but I think it’s much more attractive to me to say, “OK, let’s find somebody who’s going to be passionate about that. Let’s make an investment and do a partnership with them.”

Thinking About the Next 90 Years

The pace of change is extraordinary, and that is frightening, but also incredibly energizing. We have in Airbnb a notorious disruptor in our business—probably not as impactful as people might think, but a big company. Every single company has got folks out there that are saying, “I want to invent the platform that’s going to disrupt that business, that product, with something else.”

They’re popping up everywhere. We do spend time sitting together and saying, “All right, where’s the threat coming over the horizon. What are we going to do about it?” Whether we’ll make the right decisions or not—I won’t necessarily guarantee that we will—but I think we’re set up for it.

I think there’s one thing that Marriott is really blessed by, which is an extraordinary long-term focus. We have long tenure here. I’ve been here 21 years, and I’m still viewed as an outsider, sort of a mid-career arrival. We have folks who have grown up here, who say, “I’m thinking not just about this quarter, or this year, or this year’s budget, but I’m thinking about how do we make Marriott successful for the next 90 years.” That, culturally, is a big advantage.