Stanford Graduate School of Business Professor Hayagreeva Rao explains why innovation is about more than just new technology
In 1987, Chip Conley, MBA '84, made an unusual business decision: he bought a rent-by-the-hour hotel in San Francisco's Tenderloin district. But instead of running it for its past clientele, he asked his employees what new customer segment they should go after. The question generated a mixed bag of ideas, so Conley asked each person to come back in several days with a magazine that he or she thought would be read by the hotel's potential future customers. When six of seven came back with Rolling Stone, Conley relaunched the hotel for a clientele of hip musicians and their followers. Later, he would create, and then sell, Joie de Vivre, a chain of 40 boutique hotels for more than a billion dollars. The original themes for other hotels in his chain were based on magazines such as The New Yorker, Wired, Outdoor, and Elle.
In a weeklong class for 60 executives last year, Rao and colleague Bob Sutton, a Stanford engineering professor, applied Ideo's approach to the airline industry. They outfitted teams of five executives from diverse companies with video cameras and sent them to San Francisco International Airport where they were to observe customers of JetBlue Airlines and come up with ideas for improving customer value at a reasonable cost.
This piece originally appeared in Stanford Business Insights from Stanford Graduate School of Business. To receive business ideas and insights from Stanford GSB click here: (To sign up: https://www.gsb.stanford.edu/insights/about/emails)