Starwood Hotels Preferred Guest photo on its website suggesting patrons follow the program on Twitter, Facebook, and Instagram for more benefits. Coincidentally after a chest-thumping interview by its senior vice president of marketing on Starwood’s progressive mobile technology, a customer complaint to the NY Times embarrassing the the company was followed by the CEO’s resignation, apparently unrelated but symptomatic of Starwood’s woes.
Three weeks ago, in this space, I mentioned that McKinsey & Co.’s online newsletter had a an interview with the senior Vice President of Starwood Resorts’ marketing and loyalty programs. He sounded like Michael Saylor in “The Mobile Wave” suggesting that the hotel and hospitality industry, his in particular, was revamping its benefits program for its premium customers, i.e. those who stayed the most nights a year. These went from “anytime check-ins” to “keyless entries” to having a Cobb Salad and Coke waiting in their rooms upon arrival or, if they wanted a late workout, keeping the gym open, or if needed, making sure the business center remained open and available.
Sounded great to me and worthy of mention in class.
A week later, the New York Times consumer reporter, known in print as “The Haggler” reported the frustrations of a Starwood premium customer’s account being frozen for “suspicious activity” but who could never get anyone at Starwood to respond. “The Haggler” got Starwood to re-open the account but the hotel wouldn’t do anything else for the valued loyalty customer. Not a good operational sign. As they say in finance, “one bad quarter is usually followed by another.”
Then, two weeks later, it was announced that Starwood’s CEO Frits van Paaschen had abruptly resigned and been replaced a temporary Starwood executive until a permanent CEO could be found. I got to wondering what the impetus was behind the McKinsey & Co. interview and the disconnect between the marketing executive’s bravado and the real state of affairs was going on personified by the loyalty customer stuck in voice mail hell trying to get his account unfrozen.
Evidently the resignation was over a bigger operational issue–Mr. van Paaschen, who held the top job since 2007, came under pressure for failing to increase the number of hotels in the Starwood system through franchise or management agreements as quickly as the company wanted, said Chairman Bruce Duncan.
But van Paaschen was a fan of technology, according to analysts, typified his marketing vp’s braggadocio. Under van Paaschen’s reign, Starwood was the first major lodging company to test using a mobile phone as a room key. Evidently, the keyless room key, Cobb Salad, and coke for patrons weren’t enough to save his job.
Mr. van Paasschen had no hospitality experience but came to the top job with a marketing background. He was head of the Coors unit at Molson Coors Brewing Co. Starwood will now search for a hospitality-experienced CEO candidate as a result.
Optum’s logo and mission–“Healthier isn’t just a feeling for us. It’s a mission.”
Then in another lecture talking about the medical strides in using Big Data, the Mayo Clinic’s partnership with Optum was mentioned as part of the healthcare business disruption of streamlining critical care surgeries with actual health claims experience. The Mayo Clinic was partnering with Optum Health organization’s 20 years of health claim data so the Mayo Clinic could compare costs, treatments, and outcomes with its own clinical experience and determine best practices. In other words, what works and what doesn’t work so well. And what cost-benefits can be attached to each major health event and its treatment outcome using Big Data to provide the insights?
Again, sounded great to me and worthy of mention and showing the video of Mayo Clinic CEO Dr. James Noseworthy in class.
Then this week, the Haggler reports that a claim for therapy to Optum was denied because of an incorrect code, but the insurance company refused to divulge the correct one, or much of anything at all to the claimant or his psychologist. A review of a Consumer Affairs website shows more than 500 reviews of Optum, “most of them scathing” in the words of the Haggler. In the end, the correct code was found and entered but with no apology.
How is the Mayo Clinic going to accurately and efficiently learn about 20 years’ of Optum’s claims experience when it can’t handle one claim that was incorrectly coded? How many others are there?
And a week before that, we discussed GM’s system failure in identifying and properly addressing a malfunctioning ignition part that cost over two dozen lives of people who drove the cars and thought they were safe. Everyone at the top of the company said they had no idea there was an ignition problem but that they would order a study and fix it.
What’s the lesson here for the three companies (and others)?
Fixing one system error is not enough. Ideal system design starts from scratch and asks the question, what would we do if the system we’re using and trying to fix didn’t exist anymore? That brings us to business disruption and the innovator’s dilemma.