Space Hotels, LTD —Part 1
A Fictional Business Case Study
Space Hotels, LTD. (SHL) was the number two hotel chain in the country. However number three and number four were always at its heels, trying to knock it down from its 2nd place. In other words the competition was something fierce.
The best ideas are common property.
—Seneca, Epistles (5 BC – 65 AD)
SHL was a classical hierarchical and pyramidal organization which concentrated power at the top. Although they had competent and dedicated employees, ideas that did not conform to those from top management, seldom went anywhere. The most common excuse given was to say that those ideas were not in sync with industry’s “best practices.”
SHL’s top management was always preoccupied with their number one competitor and market leader, GLOBAL HOTELS. They were particularly keen in finding out any new products and services which GLOBAL HOTELS might have in their pipeline; simply to imitate them. Moreover, they did not pay any attention whatsoever to their smaller competitors: Boasting that their own market share would shield them from any sudden disruption.
Our story begins with Ms. June Spacewalker; a very efficient and loyal call center operator. The call center accounted over 65% of SHL’s revenues; so it was, critical to the bottom line. Call center operators had to be trained for a long period of time, in order to master a complex IT legacy computer system; which SHL had written and maintained, over the years.
One morning, June was booking a luxurious hotel room and out of the blue the customer said:
—Could you please make sure that there is pink toilet paper in the bathroom?
Taken aback by this odd request, she replied:
—I’m sorry sir, but I have no way to put this into the computer.
The customer insisted:
—I am willing to pay real money, as long I can have pink toilet paper in the room!
Lastly, June told him:
—Sir, I cannot promise you anything but I’ll see what I can do. Thank you for doing business with Space Hotels and enjoy your stay wit us.
Throughout the rest week June took at least a dozen similar calls. It was startling to hear these customers clamoring for pink toilet paper. Diligently, June went to John Mars, her young supervisor, and told him the story. She suggested that the company could earn extra income by providing pink toilet paper as a new featured service. Lastly she told John:
—I know that IT is really busy with more important things, but, if we could get them listen we would have a winner here.
John did not really believe her; after all, she had been with the company for so long, who knew what was really happening. Nevertheless he said:
—June, let me look into it. Thanks for the heads-up and keep up the good work.
John supervised 32 call center operators and sure enough he started getting similar reports from them. Thinking that this could help with his next job review, he went to Bill Orbit; his manager. However, he didn’t just want to pass the information along and up the ladder; he was determined to put his two cents in and to show that he was on the ball. John said:
—Hey Bill, do you have minute? I don’t know if you are aware, but my people have been getting a lot of calls from motivated customers which are almost demanding, that we provide them with green toilet paper in their hotel rooms.
In turn Bill went to Linda Stardust, who was the director of the 1100-strong call center operations. He too put a little spin on his story. Bill said:
—Linda you and I have known each other for a long time. I know that we may not make our numbers this year
—Yes Bill, this is putting a lot of pressure on me, especially since I am getting heat from upstairs
—Well, I have been getting some reports that several of our customers are requesting that we provide them with boxes of lavender tissue paper.
Bill got Linda’s attention so she asked him for more. Bill continued:
—I was thinking that maybe we could package these requests as a new service and perhaps this could help us with our current jam.
SPACE HOTELS started losing bookings to its third place competitor HUNGRY HOTELS, even during their peak season.
A few months later and based on the recommendations from the VP of marketing, the executive team agreed that IT was going to modify their legacy systems. Call center operators would then be able to offer their brand spanking new product: Rainbow colored napkins. Furthermore, they were going to spend more money on operator training and a marketing campaign. They would target their repeat customers via their Space Hotel News magazine.
It took them over six months to turn over the project to production. Everybody was celebrating and congratulating themselves. For once, they argued, they had been more innovative and responsive than GLOBAL HOTELS.
But as you might have guessed it, SHL started losing bookings to its third place competitor HUNGRY HOTELS, INC. (HHI) This happened, even during their peak season. A process of finger-pointing, recrimination and even layoffs of call center operators ensued.
In the mean time, HHI displaced SHL, becoming the 2nd market player. It turns out that a lowly HHI custodian employee had worked in the paper mill plant that actually produced the so called pink toilet paper.
One evening while on duty, the custodian and HHI’s CEO were riding the elevator together. He got up the nerve to speak to the CEO and told him that he heard about study that the paper mill company had commissioned. The rumors, he continued, clearly stated that pink toiled paper could cure cancer. Why not have HHI offer it to their customers?
Intrigued by such an idea, the CEO had his team quietly investigate this out. It appears that there was some truth to it. Furthermore, they polled the market and performed some focus groups, and they saw a clear trend. So without hesitation, they went on to deliver product to market first, and in full force. In turn, the custodian received a well deserved bonus that year.