Case Study: Should a Hotel Giant Eliminate Some Brands and Refocus?

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The business-casual dress code had Troy Freeman stumped. As the longtime CEO of Otto Hotels & Resorts, now the second-largest lodging company in the world, he’d packed for hundreds of work trips before, but suits were his go-to. Without them as an option, he was having a much harder time.

His flight was leaving first thing in the morning for Carmel, where he would meet his newly expanded executive team for an offsite to discuss the company’s portfolio strategy. The facilitator, Caroline Dvorjak , was a marketing professor and a seasoned consultant.

Otto had just finished a $9 billion acquisition of Beekman Hotels, which meant it now had nearly 4,800 hotels and just over a million rooms in 100 countries. Like most of the big hoteliers, however, Otto owned few of those properties; instead it franchised and managed them, with the bulk of the real estate owned by

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CEOs Should Think Like Founders, Not Just Managers

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In 2001 the list of companies with the highest market caps was dominated by blue chips. General Electric, Microsoft, ExxonMobil, Walmart, and CitiGroup — all were businesses led by managers who were experts in efficiency and optimization and who grew their businesses by making them work better than they had previously.

Fast forward to the present, and the list looks strikingly different. Apple, Alphabet, Microsoft, Amazon, and Berkshire Hathaway now top the list, with Alibaba, Facebook, and Tencent close behind. They are for the most part young firms led by founders and their teams, bold leaders who continually prioritize new growth over efficiencies to their core businesses.

Many things have happened in the intervening years to contribute to this shift, but the signal is undeniable. The market now rewards the long-term vision and continual investment in new growth represented by these younger enterprises.

Large enterprises have been responding to these developments for some

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Your Strategy Should Be a Hypothesis You Constantly Adjust

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The widely accepted view that strategy and execution are separable activities sets companies up for failure in a fast-paced world.

One of us (Paul) is a strategy scholar and economist; the other (Amy) studies organizational behavior and operations management. We came together to consider why strategy so often breaks down in the execution stage. While conducting research on recent dramatic cases of strategic failure in different industries, involving vastly different business models and strategies, we discovered a common pattern: What started as small gaps in execution spiraled into business failures when initial strategies were not altered based on new information provided by experience. These companies’ strategies were viewed by their top executives as analytically sound; performance gaps were blamed on execution.

Take the notable failure at Wells Fargo last year. Executives formulated a distinctive strategy of cross-selling, which had much to recommend it. Selling additional products to current customers

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Good Strategy Execution Requires Balancing 4 Tensions

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Putting strategy into practice is notoriously difficult. In our experience, the primary obstacle to strategy execution is a failure to balance the inherent tensions that characterize any major execution effort. Successful strategy execution calls for skillful orchestration of sometimes opposing forces and competing needs. In particular, there are four core tensions that leaders need to balance.

Tension #1: An inspiring end-state versus challenging targets

A vision of an inspirational ”end state” is essential for getting people to commitment to change: a simple narrative that articulates not only why change is necessary but also what life will look and feel like once change is successfully implemented.

However, aggressive “mid-state” targets are also required to provide direction and to challenge people to give their all. Among workers, an inspiring end state without challenging targets will likely elicit the response, “I will give this a go, and we can see where we land.”

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Closing the Strategy-Execution Gap Means Focusing on What Employees Think, Not What They Do

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When you embark on a new strategic journey to sustain and grow your organization in an uncertain world, what do you prioritize? If you’re like most of the leaders we know, you start with organizational structure and processes.

This would be a mistake.

In 2016 we asked 80 senior executives from 20 countries and 25 industries where they focus their attention throughout strategic execution. Their responses overwhelmingly prioritized redefining organizational structures, realigning decision authorities (governance), and reinventing processes.

We then asked what, in their experience, were the biggest barriers to long-term execution — and 76% cited employee interaction. In other words, people failing to work together to make change happen.

This research confirms that when it comes to strategy execution, there is a knowing-doing gap. Executives know the barriers to long-term success are a lack of interaction and collaboration, yet they focus on structure, authority, and process. We set

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10 Guiding Principles for Closing the Gap Between Strategy Design and Delivery – SPONSOR CONTENT FROM BRIGHTLINE

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How Our Company Connected Our Strategy to Sustainability Goals

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In a recent survey, Bain & Company found that just 2% of companies are successful in achieving their sustainability goals. While this can be disheartening, it doesn’t have to be this way.

The company I lead, Ingersoll Rand, is a 146-year-old organization that over the past few years integrated sustainability and business strategy to anticipate and address major global trends, most prominently climate change. Our Climate Commitment is one way we help solve the unsustainable demand for energy resources and its impact on the environment.

As a company, we understood that our legacy extends beyond just the next few years—as we lead long-term value creation and positive societal impact within our industries, we build a legacy for the next century and beyond.

However, like many of the companies surveyed by Bain, we were unsure how to connect our strategic vision around sustainability with meaningful operational changes.

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Close the Gap Between Designing and Delivering a Strategy That Works – SPONSOR CONTENT FROM BRIGHTLINE

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Strategy has little value until it is implemented. In a world where disruption can happen overnight, moving rapidly from strategy design to delivery is critical. Yet too many companies go only halfway, putting their best resources into design — and in effect ending up treating delivery as an afterthought.

As a result, strategies fail, customers leave, key talent is lost, and financial performance suffers.

To understand why many organizations fail to bridge the gap between strategy design and delivery, the Economist Intelligence Unit (EIU), supported by the Brightline Initiative, recently undertook a global multi-sector survey of 500 senior executives from companies with annual revenues of $1 billion or more.

Netflix and Why the Future of Streaming Looks Like Old-School TV

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Netflix hit the industry with some bombshell moves this month. First, it announced that it plans to spend $8 billion on original content next year (including on 80 new movies). This is far more than any other online player. Obviously, this is great news for its 100 million-odd customers worldwide.

What isn’t so great for customers is the other news. Netflix will raise the price of its standard plan by a dollar a month and its premium plan by two dollars a month. With these increases it is slowly edging toward the $15-a-month plan offered by its competitor HBO.

This means Netflix isn’t just your Blockbuster replacement anymore. Makers of original content — including the likes of Disney — are moving away from Netflix. Instead, Netflix looks like an old-school TV network; if one had to predict what the industry will look like in five years, one might say

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A Short Guide to Strategy for Entrepreneurs

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It sometimes appears that the traditional rules of business are being upended by today’s mega-trends of multisided platforms, big data, machine learning and AI, crowdsourcing, the internet of things (IoT), and more. These trends have transformed the world of business immeasurably. But they have certainly not repealed the timeless rules of strategy.

Yet for too many entrepreneurs, especially those steeped in tech and devoted to product, strategy often seems to be an afterthought. Experiment and create a great product, the thinking goes, then scale, and then figure out the business model once you’ve succeeded. It’s true that nothing beats having a compelling product that customers badly want. However, while good products and good “shopkeeping” are surely good business, they are no substitute for clear-minded strategy.

Savvy entrepreneurs and business founders might come across any number of tool kits and frameworks — from jobs to be done to business model canvases to

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Evolving our investment strategy

This is a long post (1,900 words). For those of you who are time poor here’s the tltr:

  • Forward Partners operates a focused investment strategy because it helps us make better investment decisions and provide better support to our companies
  • A good focus area for us is one that can generate 50+ deals and where we can build some generalised expertise that helps with our decision making and value add
  • Until now we have focused on marketplaces and next generation ecommerce
  • Recently we evaluated lots of options and did a deep dive on Applied AI before selecting it as our next area of focus

For the three and a half years that we’ve been going, Forward Partners has operated a focused investment strategy. We observed that small transactions of all types are increasingly moving online and backed the companies that were helping to accelerate that trend. That meant lots of

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6 Digital Strategies, and Why Some Work Better than Others

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Digital technology has been roiling markets and disrupting companies for more than two decades, but despite that lengthy history, incumbents are still struggling to enact and deliver on digital transformations. The first challenge is disruption; digitization is enabling new, disruptive models that aggressively compete with legacy models, putting material pressure on incumbents’ revenue and profit growth. As incumbents fight back with their own digital strategies, our research shows that they often trigger a second wave of competition, closer to the notion of Schumpeterian imitation where incumbents start themselves to innovate, sometimes aggressively, against the threat of entrants slashing yet more revenue and profit growth. We estimate that on average, both waves of digital competition has taken out half of the annual revenue growth and one third of the growth in earnings from incumbents that have failed to respond to digital. The second challenge is that, even when companies do launch
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What Should an Apple Car Be?

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Tim Cook recently confirmed that Apple is working on ‘autonomous systems.’ As usual with Apple, details are sparse, but it’s likely that autonomous cars are part of this. Apple is so great at connectivity, aesthetics, and entertainment that any vehicle they develop will incorporate these as table stakes. With that in mind, I can see three potential scenarios for how Apple might play in the autonomous car market. The first scenario is to enter cars as a Trojan horse to sell more iPhones. It’s the most conservative play–and a nod to the fact that Apple’s revenues are 60% driven by iPhones. Elon Musk has already said he thinks of Tesla as a ‘sophisticated computer on wheels.’ One could imagine an Apple car that is a Tesla-like product—one with comparable speed, self-driving technology, aesthetics, and features–but is so seamlessly integrated with the Apple ecosystem and requires a new
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Is Your Supply Chain Ready for a NAFTA Overhaul?

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NAFTA is headed for a renegotiation. Changes could range from adjustments to the rules of origin for product content, and more-stringent labor standards, to the extreme of withdrawal and a return to World Trade Organization most-favored-nation tariffs. These shifts will have important implications for the supply chain and profitability of U.S.-based companies. However, there is a high level of uncertainty about the ultimate outcome and consequences for companies, in part because the effect could be offset or aggravated by how currency rates adjust. Notably, the proposed “border adjustment” that is part of a tax reform package Congress is debating could cause the U.S. dollar to appreciate relative to other currencies. Under the plan, companies would not be able to deduct the cost of imports from their revenue, a move that today enables them to lower their overall tax burden. At the same time, exports and other foreign
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How Can Companies Compete with Amazon? Netflix Has the Answer

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Amazon’s grand ambition was on display last week with the news that it will acquire Whole Foods for $13.7 billion dollars. The move raised the question faced first by booksellers, then the rest of retail, and now seemingly everyone: How can you compete with the retail giant? Amazon doesn’t just want to be the place where you do your online shopping. It wants to be where you watch TV, how you interact with your home, the infrastructure behind your favorite websites — even the place that you do whatever offline shopping is left after its e-commerce behemoth is done gobbling up brick-and-mortar retail. In this way, Amazon is a company well suited for its era, as Neil Irwin pointed out last week in the New York Times. Today’s economy, he notes, is “replete with winner-take-all effects and huge advantages that accrue to the biggest and best-run organizations, to
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Value-Based Care Alone Won’t Reduce Health Spending and Improve Patient Outcomes

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Despite spending twice what other developed nations spend on a per capita basis for health care, the United States has a longstanding trend of having lower life expectancy, greater prevalence of chronic disease, and overall poorer health outcomes. One proposed solution for this is to change the payment model of our health care system from the predominant fee-for-service (FFS) model, which reimburses services regardless of outcome, to a value-based model in which outcomes are reimbursed. Our experience at the Nemours Children’s Health System suggests that value-based care (VBC) is necessary to significantly improve health outcomes and to lower costs for children with chronic illness and complex medical conditions. We have found that a VBC approach can decrease the direct costs of care for a group of children with a chronic condition. However, transitioning to a VBC approach involves added infrastructure, training costs, and complexity of delivering care in an environment
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What U.S. CEOs Can Learn from GM’s India Failure

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General Motors, once the world’s largest car maker, has decided to stop selling vehicles in India by the end of 2017, since it considers its India operation to be not profitable. The company re-entered a liberalizing India in 1994, after abandoning the country in 1954. Like its American compatriot Ford Motor Company, GM’s market share in India has always been in the single digits, but recently Ford has reported rising monthly sales of 36% in India. A few years ago cosmetics company Mary Kay also exited India, blaming local issues for its problems. While India now claims to attract more foreign direct investment than China, American companies have not been as visible as European and East Asian players. Is there something wrong with the India opportunity, or are American companies being unnecessarily restrained about the world’s fastest-growing major economy? We think it is the latter, and that it is correctable with
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Does VC Fund Differentiation Matter?

I’ve met and emailed with many pre-seed and seed GPs in the past year. Over sushi last night with two of them, who are also long-time friends, one of them asked me “Brad, how do you think we are differentiated?” This generated a rant from me that went something like this.
There are over 500 seed funds in the market right now. Maybe there’s a thousand. Many of them are angels raising a VC fund. Others are entrepreneurs / operators raising a VC fund. A few are existing VCs who are starting a new firm. I don’t even know what differentiation means anymore as it all blurs together. The operators say we know how to run businesses and help the CEOs that way. The angels say look at the deals we’ve done and the networks we have. Everyone describes the expertise they have around whatever the current hot new
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Does VC Fund Differentiation Matter?

I’ve met and emailed with many pre-seed and seed GPs in the past year. Over sushi last night with two of them, who are also long-time friends, one of them asked me “Brad, how do you think we are differentiated?” This generated a rant from me that went something like this.
There are over 500 seed funds in the market right now. Maybe there’s a thousand. Many of them are angels raising a VC fund. Others are entrepreneurs / operators raising a VC fund. A few are existing VCs who are starting a new firm. I don’t even know what differentiation means anymore as it all blurs together. The operators say we know how to run businesses and help the CEOs that way. The angels say look at the deals we’ve done and the networks we have. Everyone describes the expertise they have around whatever the current hot new
Continue reading "Does VC Fund Differentiation Matter?"