A critical ingredient in our evolution has been a willingness to experiment. During the past seven decades, weve tried our hand at many new lines of businesses, always in search of fresh avenues for growth. Sometimes weve struck gold. Sometimes weve stumbled. Either way, weve tried to keep in mind one simple truth: Change is to business what oxygen is to life. In a word, vital.
Change can also be frightening and even paralysing. It brings with it the potential for error and embarrassment. One of the best lessons weve taken to heart over the years is that of not letting ourselves be crippled by mistakes. Instead, weve tried to learn something from them and move on.
This is where business can run into trouble in the preserving-change-amid-order area: allowing setbacks to make them too cautious, fearful, or just plain suspicious of experimentation and innovation. Order gets the upper hand, and before you know it, the only change being experienced is that of going out of business.
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Change, naturally, is easier to take if you are the one initiating it. But in business as in life you are not always in control. Competitors can be coming at you from all sides, forcing you to run to stay ahead. Or you are the one going after somebody else whos gotten out in front of you.
Both of those scenarios have certainly been true for us. Weve had another compelling impetus for change as well. As a public company, Marriott has had to be responsive to our shareholders. Our efforts to diversify and grow have been driven to an important (although not exclusive) degree by the need to show shareholders that we can produce results.
Actually, the companys earliest diversification came sixteen years before going public. The In-Flite airline catering division was launched in 1937 when my father noticed customers taking hot coffee and food to go from one of our Hot Shoppes near Washingtons airport. During the next fifty years, we built the division from the original contract with Rickennbackers Eastern Air Transport into a more than $1 billion business before selling it in 1989. Along the way, we grew in In-Flite by building flight kitchens ourselves and acquiring a number of independently owned kitchens and small catering companies. One of the most important things that In-Flite did for us was to diversify Marriott in international terms. Our first overseas operations was a flight kitchen in Caracas, Venezuela, acquired in 1966. At its height, In-Flite had kitchens in twenty countries.
The next diversification effort was more dramatic, because it took us beyond restaurants and catering. After nearly thirty years in the food business Hot Shoppes, In-Flite airline catering, and food service management Marriott launched into the lodging business with what we proudly dubbed the worlds largest motor hotel in January 1957, four years after the company went public.
It would be nice to claim that our first major diversification as a public company was no accident. In truth, our Twin Bridges motor hotel was mostly a stroke of good luck.
The site for Twin Bridges (now torn down) was just south of Washington DC, close to National Airport, the Pentagon, a bridge across the Potomac River, and other major transportation arteries. The location we selected was not by chance; my father loved to put his Hot Shoppes at busy intersections and when possible near bridges. He reasoned that highways might be relocated, but bridges never move.
The groundwork for Twin Bridges was laid when my dad opened a Hot Shoppe on Route 1 at the entrance to the 14th Street Bridge in 1936. In 1950, he purchased a large piece of land just across the highway, with an eye toward building a new central office, food preparation facility, and warehouse for the Hot Shoppes. But our executive vice president Milt Barlow told Dad that he thought the site had great commercial potential, Why not build a big motel?, he suggested. After all, 125,000 cars passed by the spot every day, the airport was close, the Pentagon next door, and downtown was only five minutes away. In short order, plans for a 365-room hotel were drawn up, and we entered the lodging business in 1957.
Success, of course, did not come immediately. In the 1950s, the hotel business tended to be seasonal: Twin Bridges would fill up with tourists in the spring and summer and empty out in the fall and winter. The same with Key Bridge, which we opened in 1959. It took us a little while to develop enough marketing muscle to bring in a steady stream of commercial business and small conventions to keep our rooms filled year-round.
Part of our good luck with Twin Bridges and Key Bridge was pure timing. Our lodging business was launched when the American hotel industry was still recovering from World War II. Lodging options for travellers consisted mainly of old city hotels built in the financial heyday of the 1920s or hundreds of tiny mom-and-pop motel operations. When we appeared on the landscape with Twin Bridges in 1957, we were just smart enough to know we had something fresh to offer and just naive enough to go at it with wide-eyed enthusiasm and energy of a bunch of kids who knew nothing about the business.
One thing our good timing brought us was a little breathing room to figure out just what the devil we were doing. (Remember room service and ice buckets?) When I look back, I have to laugh at how little we knew when we were starting out in lodging. In todays competitive environment, wed have been eaten alive!
Had I had my way, we would have plowed our energy into building the hotel division faster and sooner than we did. I felt confident that the future promised to be a bright one for new, aggressive hotel companies. The interstate highway system was growing, new office buildings dotted the suburbs, airports were popping up, and general post-war prosperity was licking up a tidal wave of business and leisure travel.
But Dad and Wall Street had other things in mind. At the time, my father was still dead-set against taking on the scale of debt required to build a lot of big hotels. Wall Street was crazy about conglomerates, analysts constantly wanting to know what new business we were getting into next. So in the early 1970s, we began looking around for additional avenues of growth.
Our next diversification effort was Marriott World Travel, a travel agency launched in 1971. The business played to several of Marriotts strengths and seemed to be a natural outgrowth of our existing businesses. We had a dozen hotels and would soon have three cruise ships and two theme parks. With leisure travel on the upswing, a travel agency seemed perfect for Marriott.
So what was the problem? Probably the most important sticking point was the displeasure of established travel agencies - many of whom could (and did) quickly stop sending clients to anything related to Marriott. In retrospect, we should have seen the potential for conflict. The original team in Marriott World Travel was also a bit too gung-ho for our own good: They committed Marriott to various initiatives and were not able to follow through. The change they were trying to implement was a little too precocious for the order to absorb. We gave the travel agency business a good effort, but exited in 1979.
The next diversification opportunity came in the shape of cruise ships, a business we got into in 1972. Sun Line provided our first major lesson about the dangers of getting into a completely unfamiliar business. Having diversified successfully and relatively painlessly into hotels fifteen year earlier, we felt confident that we could pull it off. After all, cruise ships were essentially just floating hotels, right? Wrong! Not only were they more complicated than we realised, but we made the error of letting ourselves get into partnerships in which we didnt have the controlling interest. Given our corporate culture based on systems and detail, it drove us crazy not to be calling the shots. It certainly didnt help matters that the Greek islands the main destination of our ships were plagued by the Cypriot war our second season! For obvious reasons, people do not generally enjoy cruising in a war zone. Before the war started, our ships were full; after the shooting began, cancellations poured in and we had to tie the ships up...at the peak of cruise season. Someone who is more superstitious than I am might say that the war was a bad omen for Sun Line. I will give us credit (or take blame) for being persistent. We spent fifteen years trying to make a go of it before getting out.
At the same moment we took on the Sun Line challenge, Marriott decided to get into the theme park business. Unlike cruise ships, our foray in theme parks was to be a ground up effort. We planned from the start to build them ourselves and not partner with anyone.
Theme parks took advantage of several of our strengths. We grew up in the food service business, were fanatical housekeepers, and were definitely family-oriented. For our two Great American theme parks, we picked high-traffic locations in the San Francisco Bay Area and midway between Milwaukee and Chicago. We slated openings to take advantage of the Bicentennial fervour of 1976.
Our first hard lesson came during construction. Building a park from scratch without any previous experience turned out to be both tricky and expensive. We had become experts at designing and big buildings, but small one-of-a-kind structures that had to conform to another category of building code temporarily threw us for a loop. We had never built a roller coaster, for example, eventually, we constructed six. As soon as they got a hang of it, Marriotts architecture and construction division did a terrific job. The buildings and the rides at both the parks were wonderful.
Our big mistake about theme parks lay not in recognising the amount of money and imagination required on the entertainment side of the picture. Adding new rides is extremely capital intensive; a single ride costs several million dollars. Really good rides the kind that bring people in by the droves also require an edgier kind of creative thinking that we had. After several years of doing well, but never feeling entirely comfortable with the business, we sold the properties at a profit and bowed out.
Cruise ships and theme parks were our biggest and most expensive diversification efforts of the 1970s, but not the only ones. One venture that I would gladly forget is our foray into home security systems. It only lasted three years from 1973 to 1976 and, fortunately, was little more than a blip on Marriotts radar screen. The business simply did not fit us.
The silver lining of our short- lived security enterprise is the lesson it taught; the importance of letting people develop new ideas. The idea itself didnt work for us, but we discovered that our organisation was flexible enough to give it a try and resilient enough not to let its failure get in the way of other ideas a fair shake. I call it preserving order amid change...and change amid order at its best.
You have probably noticed that in all the diversification efforts mentioned so far - with the exception of hotels - I have made a point that we discovered major, ultimately insurmountable, difficulties only after getting into the business.
Why have I highlighted that common thread? One of the most valuable lessons that we learned in all those ventures aside from the importance of taking risks and bouncing back when problems arise in a business, you need to know enough about the business to be able to fix them. Its that simple. If you dont understand the business in the first place, you cant fix it when it goes wrong. In fact you might not be able to figure out what the problem is!
In each of the cases Ive described, we were guilty to varying degrees of not having done enough homework before plunging in. As a result, we were surprised by the problems that might have been avoided or that would have alerted us to steer clear of the business altogether.
What we were experiencing was a growing pain common to businesses trying to extend beyond their original ideas. Our enthusiasm for innovation occasionally got ahead of our organisations ability to absorb and promote healthy experimentation. Among other things we were trying too many unfamiliar businesses simultaneously. What was missing at Marriott in the 1960s and 1970s was an organisational structure for analysing and managing change.
Our informal decision-making methods were in keeping with the companys traditional approach to growth. For the first thirty-odd years of our history, the primary strategic question that came up again and again and again was by and large picking the right location.
The location, location, location planning mindset was great for building our food and lodging divisions, but fell short of what we needed to analyse new, unfamiliar businesses. Looking back I see now that case-by-case approach was partly a reflection of our long-standing orientation (some would say bias) towards operations. Its human nature to favour what you know you can do well and shy away from what you dont like or havent mastered. In our case, it was our internal inclination to downplay non-operations activities in favour of the familiar task of making a restaurant or hotel work. We couldnt relate to abstract strategic planning exercise as well as we could to the tangible satisfaction of getting a facility built and filled with customers.n
The Spirit To Serve Marriotts Way
By J W Marriott Jr and Kathi Ann Brown
Published by Harper Collins
Distributed by IBD, New Delhi
Pages 201; Price: $13.75