Interview: Ex-Starwood CEO on the Essentials to Disrupting Any Industry

When former Starwood CEO Frits van Paasschen took to the stage at the Skift Global Forum in September, it was a bit of a surprise to many in the audience.

This wasn’t just because van Paasschen was a fairly late addition to the lineup, but also because so many in the travel industry had wondered what he’d been up to since leaving the hotel company he led for eight years from 2007 to 2015.

Well, now we have our answer, and it’s in book form.

Since resigning from Starwood in 2015, van Paasschen has been busy working on what would ultimately become The Disruptors’ Feast: How to Avoid Being Devoured in Today’s Rapidly Changing Global Economy.

“I was prompted to write the book because I felt that, from the vantage point that I had, as CEO of Starwood, I had a great way to observe the world and see what was happening, both from the standpoint of major trend lines that I think are shaping the world around us, but also some of the disruptive things that it’s causing,” van Paasschen said. “I felt that I had something to say about disruption and change, and frankly, that disruption is testing our ability, collectively and as individuals, as companies, as a society, to respond and adapt.”

So much has transpired since the travel industry last saw van Paasschen at the helm of Starwood.

Starwood Hotels, once one of the world’s largest hotel companies, was devoured by one of its competitors, Marriott International, in September. Airbnb, which began in 2008, is now valued at $30 billion — nearly the same market cap of the newly combined Marriott and Starwood. And the disruptions, not only in hospitality but in travel overall, continue.

For van Paasschen, working the book for more than a year was driven by a desire to share what he’d learned in his own role at Starwood.

“I suppose, underlying that was, to a certain extent, my own frustration in trying to address that disruption while I was at Starwood,” he said. “I didn’t want this to be and feel like an academic book, but something where anyone with curiosity or concern about what’s happening and changing could read it and come away with some useful lessons.”

Whether you’re an academic, hotelier, traveler, techie, or technophobe, there are multiple lessons to be gleaned from van Paasschen’s book. It’s a mix of intimate, personal stories, many of which detail his travels as Starwood CEO, as well as his work as CEO of Coors Brewing Co., and as an executive of global brands like Nike, Disney, and McKinsey & Co. And he’s not afraid to share those personal stories with the reader.

If there were anything in particular van Paasschen wishes he’d done differently during his time at Starwood, for instance, it’s this, he said: “I didn’t see the power of digital technology and change as clearly coming out of the [2008 financial] crisis as I wish I had. If you could rerun the past and create less dependence, from a hotel company perspective on the OTAs [online travel agencies], that would obviously be something that I would have loved to be able to do. I think seeing the rise of Airbnb before it became the extraordinary force of change that it is obviously would have served me well, or all of us well for that matter, too.”

He added, “I didn’t write the book from the standpoint of my having seen and predicted all of what happened ahead of time. In fact, it was as much about having learned about what I might have done differently, and the kinds of things, perhaps, I should have been thinking about even earlier.”

It’s that kind of approach to the past and the future that makes van Paasschen’s book both compelling and refreshing, and why fellow hoteliers and travel industry executives, in particular, will find so much value in the way he builds his case.

I’ll be honest: I’m generally not inclined to pick up business strategy books for reading material. But van Paasschen’s book made the topic approachable and inviting. If there were one caveat to the book it’d be that I wished he shared more stories about his time as Starwood CEO, if only to appeal to the hotel nerd in me.

Ultimately, The Disruptor’s Feast succeeds in being what van Paasschen described as a “wake-up call for people to recognize that the things that keep us from responding to disruption are pervasive in how we view the world.”

Just what those things are, and what the travel and hotel industries, in particular, should be paying attention to in an effort to avoid being devoured by disruption, inform some of the book’s biggest lessons. Here are just a few that we spoke to him about after reading the book:

1. Don’t Get Complacent

Just because things seem fine right now, that doesn’t mean they’ll stay that way. It’s a simple enough premise, but we don’t always think that way.

Van Paasschen gave the example of the financial crisis in 2008 as a sort of cautionary tale for deregulation and less government oversight of corporations.

“Think back to the financial crisis,” he said. “It had many root causes, but one of them was the sense that deregulation and letting the financial system operate without more oversight was a way to stimulate growth. If you had asked most people in 2005 or 2006, they probably would have told you that that reduction in oversight had been a good thing, but I think we all know, having watched the crisis, that what may appear to be a good thing in the short term isn’t necessarily good in the longer term.”

Given that many travel CEOs are wondering about a supposed “Trump Bump,” especially as it relates to corporate travel, it’s a timely lesson.

“One of the things I talk about in the book is the importance of understanding systems thinking and really getting deeper into the root causes for problems and potential problems down the road. The points and periods of apparent prosperity and stability may not be a foreshadowing of even more prosperity and stability but may, in fact, be a precursor to a much more difficult time.”

2. Think More Globally

Most industries are global. In the book, van Paasschen talks about he came to the decision to bring his Starwood executive teams to China and to Dubai for months at a time to have a better understanding of those markets, underscoring the importance of thinking and leading globally, rather than thinking in silos of domestic or international.

“I think one of the challenges that anybody in a leadership position has is getting messages across and making clear why you’re doing what you’re doing,” he said. “Certainly a big component of that is operating in markets outside of your home market. I think it’s so easy to underestimate the differences that go into being successful in different markets, and that doesn’t mean that everything has to be different.

“I suppose my message when it comes to global awareness is a bit like my message in thinking about disruption. It is, if you think you understand the nature and challenges of disruption or of operating globally, then you underestimated it. I think that only when you feel humbled by the challenge and constantly aware of it are you even close to appreciating what matters in trying to create a global organization.”

Having a more global perspective also applies to how organizations approach diversity within their own teams, too, he said. “You need to think about diversity across all kinds of dimensions, culture being one of them, but gender, too, in terms of a world view. I think there are so many different elements to that kind of diversity. I think that the human default setting is to go out and find people that look and sound like me, and as much as we try to create more diverse workplaces, I think that we fall well short. If you just look at gender, what is it? Three percent of CEOs, 10 percent of board members are women. So no, I don’t think we’re anywhere near as good at creating global diverse leadership teams in organizations as we should be. That remains not just a big challenge but a massive opportunity. I think there are benefits for companies that get it right.”

3. Cognitive Bias Is Enemy Number 1

What van Paasschen means by “cognitive bias” is this: “We tend to see the future as somehow an extension of what we’re seeing right now.”

Yes, of course, we can learn a lot from history and yes, sometimes history does, in a way, repeat itself, but the future isn’t pre-determined.

He added, “Of course, which makes perfect sense because we’re wired basically to look at our current experiences and use those as a way of imagining what’s in front of us. I think what’s so interesting about this time is that there will be changes that are really too hard for us to conceive and imagine right now. Frankly, I find that mostly really exciting and it’s an interesting time in history and a great time to be alive. But it also comes at a cost, which are some of the things that change and disruption bring, which are in some cases less positive.”

That doesn’t mean, however, that there are no underlying clues, or trend lines to follow to help get better-prepared for the inevitable change and disruption that lie ahead.

4. Nurture Innovation

It’s clear from the book that van Paasschen is a proponent of having a startup mentality and nurturing a culture of innovation, no matter how big or small an organization may be. Developing a sort of startup within a larger company is exactly what he did at Starwood when he wanted the company to pioneer the development of keyless entry: He had a small team based in New York City take the lead in developing the technology on its own.

To be more like a disruptor, companies need to act and behave like disruptors, he said. “The challenge we have isn’t just cognitive bias and our inability to see change as its emerging. The other challenge is that within any organization, there are people who feel like their job might be threatened by a change. There are base businesses that might go away with disruption that make it hard for incumbent companies to be their own disruptors. I think that creating a sense of agility by focusing on innovation, by understanding what it means to have rapid response or, as I talked about in the book, negative response time, is crucial.”

He added, “The thing I was most proud of for the organization and for the company was creating a culture where change and innovation were an integral part of how people thought and how they worked.”

When asked how he feels about Marriott’s $13.3 billion acquisition of Starwood and whether Marriott can sustain that Starwood’s culture of innovation, van Paasschen said, “I think that’s the challenge for Marriott leadership. I have a great deal of respect for the Marriott leadership team and what they’ve been able to create. They’ve shown an ability to adapt and create, and I think it remains to be seen whether they will make the company as agile and innovative as Starwood was. I give them a great deal of credit and have a lot of respect for their ability to do what they need to do.”

5. This Is the Next Big Opportunity in Travel

Asked about the next big thing in travel, van Paasschen said the fact that travel remains “anonymous, uncertain, and inconvenient” presents travel companies with a huge opportunity to become the next big disruptor.

“There are so many pain points along the way,” he said. “It therefore makes tons of sense for anyone, especially if you have a travel platform, to try to think of ways to take some of the friction and inconvenience and anonymity out of the process.”

So it’s no surprise to him, at least, that a disruptor like Airbnb would try their hand at fixing this problem with its new Trips product, and rumored entry into flights and other travel services.

“I completely understand what they’re trying to do,” van Paasschen said. “Whether they are best-positioned to do that and whether they execute well is something I think we’ll see. I’m not suggesting they aren’t or won’t be, but I don’t think it’s a foregone conclusion, either.”

If anyone does want to try to succeed in this space, however, van Paaschen says personalization is key. “I think the personalization of services and hospitality delivery is still nowhere where it needs to be,” he said. “I think there are different ways to address that need and that opportunity to deliver personalized, seamless services. I think that’s a trend that will continue.”

For hospitality, in particular, he said, “I think that there’s a real challenge and opportunity for people in all aspects of the hospitality business to create a sense of place that isn’t contrived. It really does need to feel like it’s authentic and that you’re getting a sense of local foods, local color, local experiences, and the many things that make travel, frankly, the wonderful thing that it is for all of us.”

6. There’s Still Power in Brands

Yes, 30 brands are a lot for one single hotel chain to have, and while the list of hotel and travel brands in the world seems nearly infinite, van Paasschen isn’t one to downplay the power that a good, successful brand can ultimately have.

“I think we live in a branded world, and I may be subject to my own form of cognitive bias, but it is hard to imagine a world where brands go away or even become less relevant,” van Paasschen said. “The point I was making in the book was if you go back to the early days of the formation of brands, and the idea of mass production and distribution or of large monolithic hotel chains and brands for that matter, to a time where brands could develop more personality, to where purpose and soul mattered, to delivering personalization. I don’t think brands go away.”

But the key to success for brands is in how they “take advantage in the positive way of what new technology can provide. If you look at brands like Apple and Google and Airbnb, I mean, these are extraordinary forces of change and a huge part of the business landscape,” van Paasschen said. “Ultimately, the test of any brand is whether it has enough followership and distinctiveness that it’s compelling to a base of travelers.”

And if van Paaschen could build his own hotel or travel brand, what would it be like? “A brand that creates a sense of place, a brand that brings design without necessarily great expense to the experience, a brand that uses technology in a seamless way so that I can get what I want when I want it where I want it, but that makes people available when the technology is frustrating me in some way,” he said. “A brand that I think that creates a workplace where people are excited and therefore are able to deliver on people’s very high expectations. I think there’s a recipe there and it’s also a bit of a holy grail that I think many brands are trying to reach.”

7. Business Can, and Should Be a Force for Good

Even though the title of van Paasschen’s book suggests established companies are in danger of being devoured by disruptors, and that this is a period of great change, there’s an underlying optimism that runs throughout, and a hopefulness that although disruption is inevitable, it doesn’t have to throw everyone off their game.

Take, for instance, the chapter devoted to addressing climate change. Unlike Scott Pruitt, President Trump’s nominee to lead the U.S. Environmental Protection Agency and a noted climate change denier, van Paaschen sees climate change as an example of disruption, and one we need to address immediately.

“I think in many respects, climate change is a great example of a different form of disruption, and frankly a great example of the kinds of challenges we all face in looking at any sort of disruption,” he said. “Talk about cognitive bias and denial, self-interest, the pressures and the difficulty in changing the way we work and act and behave in order to reduce our carbon footprint. I think in many respects it’s a case example of disruption at work. It’s not business disruption, it’s not digital disruption, but it’s an extraordinary form of change and I think that we are ill-equipped to cope with. I suppose on a personal level, I felt I couldn’t write a book about change and disruption without saying something about one of the most important threats to our prosperity.”

Another instance where van Paasschen hints at the power that organizations have to effect positive change is when he issues the warning, “do not equate economic growth with social progress.” In the book, he talks about the stark contrast between economic prosperity and social progress he discovered during his travels to Saudi Arabia and Nigeria.

“If there’s a more subtle message to the book, it’s that we have all have a responsibility … to choose companies, to choose brands, to choose products, to choose leaders that represent a force for the good,” he said. “I won’t make value judgments about U.S. politics in this discussion, but I think it is really incumbent upon all of us to understand what’s happening in the world, because frankly, the information is now available for us. The only excuse for not using that information I think goes back to our own motivations and discipline for using it.”

Yes, disruption — both good and bad — is here and it’s never going to go away.

“One of the things I mentioned at the close of the book was the extraordinary power of optimism and the human spirit and, when pressed, the ability to change and adapt,” van Paaschen said. “There’s one thing that I left Starwood with as a change in my world view, is that there are so many motivated passionate smart people in the world. My faith in humanity in my Starwood experience only became stronger based on the people that I saw and the people I was able to touch through the process of leading the company. This is why, in the close of the book, in spite of having said quite a few things about the challenges and the problems, I remain optimistic.”