Monday, January 14, 2008
Another view of Six Sigma and Innovation: Starwood Hotels: Rubbing Customers The Right Way
Massages and other unlikely Six Sigma ventures are winners at Starwood Hotels
Business Week OCTOBER 8, 2007
We discussed the choice of the right process to drive innovation in the following positings. I came down pretty hard on Six Sigma. Here is an example where Six Sigma played an important role in innovation.
At 3M, A Struggle Between Efficiency And Creativity -July 2, 2007
Have It Both Ways –June 18, 2007
"Ambidextrous" companies can handle incremental change and bold initiatives
In January, 2006, the Westin Chicago River North hotel was picked to pilot a project, dubbed Unwind, for the upscale hotel chain. The purpose: to think up a set of nightly activities that would draw guests out of their rooms and into the lobby where they could mingle, develop a greater loyalty to the hotel group, and maybe spend a little more money. Westin spied an opportunity after a study found that 34% of frequent travelers feel lonely away from home. The Unwind project led the Westin to develop dozens of activities, including massages, at the Chicago hotel.
Instead of hiring the usual ethnographers or consultants, Westin owner Starwood Hotels & Resorts Worldwide Inc. (HOT ) turned to Six Sigma, a management process known for reducing defects and increasing efficiency. It was a surprising move given Six Sigma's rap as a creativity killer. But under Geoffrey A. Ballotti, president of Starwood's North America Div., the company is using Six Sigma's strengths to promote innovation--and generate tens of millions in new revenue. Combining creativity and efficiency is a delicate managerial maneuver that few service companies can pull off.
Starwood succeeded, in large part, because it began with a culture of creativity before introducing the management tool. (Critical!!!) Design has long played a major role in the company, with noted architect David Rockwell designing its hip W Hotels brand back in the '90s.
Starwood gets a boost out of Six Sigma by using its techniques to dream up projects across the company. Massage is just one of hundreds of ventures done this way. This year's food and beverage engineering program, which rejiggers the choices on room-service and catering menus based on their popularity, has generated $20 million in extra revenue.
In 2006, programs developed under Six Sigma delivered more than $100 million in profit to its bottom line. As a result, the White Plains (N.Y.) company is one of the world's most profitable hotel operators: Its net margin is nearly 15%, higher than those of rivals Hilton Hotels Corp. (HLT ) and Marriott International Inc. (MAR ) "We have been driving our margin growth faster than our competitors," says Ballotti. "When people ask why, I point to Six Sigma."
The group that runs the effort is headed by Brian Mayer, who claims the quirky title of vice-president for Six Sigma, operation innovation, and room support. "I grew up in the hospitality industry," says Mayer, whose grandfather and father ran catering businesses. "The joke is that I was born in a chafing dish."
Since the program launched in 2001, Mayer's crew has trained 150 employees as "black belts" and more than 2,700 as "green belts" in the arts of Six Sigma. Based mostly at the hotels, black belts oversee the projects while green belts hammer out the details. The key to their success, says Mayer, is that instead of acting like "suits" imposing their will from "corporate," the Six Sigma specialists operate more like partners who help local hotels meet their own objectives. Indeed, almost 100% of the creative concepts come from in-house staff. And every project must be overseen by a hotel employee. "By focusing on their goals and budgets it enables us to become a partner in the operation," says Mayer.
The innovation process begins when hotel teams pitch Mayer's group on a new idea. "They fight for our resources," says Mayer. A Six Sigma Council composed of Ballotti and his 13 direct reports, including his senior vice-president for sales and marketing, then evaluates an idea's merit based on the division's priorities and the project's expected payoff. If the council approves a project, black belts and green belts are deployed like SWAT teams to the hotels to carry it out.
In the case of Unwind, a Six Sigma team in January, 2005, brainstormed with a group from the Westin Chicago River North Hotel that included the directors of rooms, food and beverages, and sales. In that meeting, the hotel's fitness director "came up and said: 'Why don't we do massage?'" says Peter Simoncelli, the hotel's general manager.
The team liked the idea and started to design the experience. First up was figuring out the logistics: getting the massage chairs, choosing the uniform of the masseuse, determining the best location for the table. In October, 2005, the hotel staged a dry run. The team quickly learned they had a problem: The guests wanted the complimentary massage to last longer than the hotel anticipated. "We had to come up with a diplomatic way of saying there is a limited amount of time in the massage chair," says Simoncelli. After completing the pilot in a few weeks, the Six Sigma team turned over the project to its hotel sponsor, in this case the rooms director. Last year the hotel introduced massage and found a nice surprise: Later on, the revenues from paid massages in the hotel spa hit an all-time high, rising 30% over the previous year.
After a prototype rolls out, green belts shift into analytics mode. (In the language of our Market Driven Growth process, testing the prototype is the inductive part of our analysis while the green belt work is the deductive component) They spend a lot of time with the E-Tool, a proprietary Web-based system that allows Starwood to monitor a slew of performance metrics to gauge the success or failure of a new project. E-Tool lets hotel managers rapidly spread and drive consistent execution of each project. That's no easy task at Starwood, which owns, manages, or franchises 800 hotels, and rolls out new projects to them every two weeks. Green belts enter every project into the E-Tool, which currently contains 3,000 to 4,000 items. The entries are detailed and include photographs and project descriptions as well as how-to instructions. The Unwind program alone produced 120 new activities--one for each Westin hotel, including traditional fire dancing in Fiji and Chinese watercolor painting in Beijing. "I probably will make 50% fewer mistakes than if I had rolled out a project myself," says Simoncelli.
Some projects lead to big cost savings and a healthier workplace. Consider a hotel safety effort that was made mandatory for all North American hotels. Starwood launched the initiative in early 2004 after executives noticed that workers' compensation claims were skyrocketing. A Six Sigma team researched the problem and discovered the biggest cause of accidents were slips and falls, and housekeepers often suffered from back strains. The team developed new work processes, including a stretching routine required for all housekeepers and new cleaning tools with longer handles. In the past three years, Starwood has slashed the number of workers' claims in half, and their cost has fallen 69%. (Classic 6 Sigma type project)
The latest effort is an initiative to drive down the company's energy costs. Thanks to a program that offers energy consumption tips, such as shutting off computers, Starwood estimates it will cut its power bill this year by about $11 million. Part of the program requires hotels to replace incandescent lights with compact fluorescent bulbs in 75% of their rooms. There was a lot of pushback from hotel staff who felt the new bulbs would not throw off such a pleasing light. But a Six Sigma group allayed those concerns by setting up a dozen rooms with different bulbs. "We had top leaders figuring out which one was best," says Ballotti. "The collective power of getting these folks together is just amazing." (Classic 6 Sigma type project)