Terry Jones on Starting Travelocity.com and Innovation

I recently spoke to Terry Jones, who is the founder of Travelocity.com, He led the company as President and was Chief Executive Officer from its founding until May 2002. Previously, Jones served as Chief Information Officer at Saber Inc. Jones is managing principal of Essential Ideas, a consultancy he co-founded to help companies in their transition to the digital economy. He serves as Chairman of the Board of Kayak.com, and is on the boards of Smart Destinations, Inc., Luxury Link and Rearden Commerce.

In this interview, he talks about what inspired him to start his company, where the best ideas originate from, how employees can extend corporate brands through social media, and more.

What inspired you to create Travelocity.com and looking back, what would you have done differently?

Many great innovations are what are called ‘adjacencies “, and Travelocity was certainly that. In about 1988, Max Hopper, the CIO at American Airlines directed that we put the SABER system (which automated travel agents) onto online networks like AOL and CompuServe. It garnered a small following (and only worked with travel agents) but by 1995 the travel agents (who could see the future) wanted it GONE. Max demurred and instead said, “give it to Terry. We will hide it in IT (where I was running operations) and anyway he was a travel agent he can figure out what to do with it. Instead of hiding it, I put it on the Internet and freed us from the design shackles of AOL and Compuserve. It grew like a weed.

As for doing something differently, I’d have built our own direct hotel business rather than partnering with Hotels.com for our prepaid low priced hotels. Although for a long time our deal made more money than Expedia was making, Wall St. felt that it was more important to have your own capacity in this area and discounted our value because we didn’t have it. No one knew how big prepaid hotels would be when they started, and we guessed wrong!

Where do the best ideas originate in a company?

I think they can originate anywhere today as everyone has transparent access to almost all of the companies information. But in my experience the best ideas come from the bottom. They come from the customer service agent, the programmer, the line worker, the ones who really deal with the product day to day. And more often today great ideas come from customers, on brand rave sites and through social networks.

At Travelocity, flight paging (where we tell you when your flight is late) came from a customer service agent. Fare watcher email (where we tell you when a fare has dropped) came from a programmer. The key is for the leader to encourage these ideas, make sure middle management doesn’t kill them, and be ok with failure. Most experiments fail, and that is ok, as long as you get another turn at bat.

Do you feel that employees can make a business impact using their own social networks? If so, how?

Clearly an employee with a great fan base can extend the companies brand and influence through social networks if they are seen as an honest broker and not a shill for the company. A company can increase its social influence by many times if its employees work in this fashion. I’m hearing as well that internal social networks are doing great things in fostering innovation and collaboration.

Should companies do more internal or external hiring? What’s the best way to attract the best talent?

The answer depends on the outcome desired. If you are building a team to innovate around a new product, I strongly urge hiring from the inside and the outside. Hire people who are not like you, people who will challenge you. Make sure to mix in young inexperienced people who can challenge the “We’ve always done it that way” crowd.

Attracting talent also has to do with the outcome desired. Hiring people to work in a 9-5 every day the same environment is one thing. If you want people to work on a new idea, it is mostly about inspiring them. Sure it is great if you can offer stock options (but that is hard for non-startups) but if you are competitive in salary / benefits, then it about exciting them and about being excited by them. I’ve also learned by watching Paul English, our terrific CTO at Kayak.com that he focuses on hiring ‘rock star’ programmers. Rock stars like to hang out with rock stars and then you get a fantastically productive and energized team.

What is the topic for your next book and what other projects are you currently working on?

My next book is on The Business of Innovation. It has real world examples from the many large companies and startups I’ve worked in, that readers can use to help them create a more innovative organization. This isn’t an academic exercise, rather it is a series of short, easily digestible steps for idea creation, selection and implementation that can light a fire under your company, large or small.

My other big project is continuing my work on helping companies build digital relationships with their customers. I’ve been lecturing and consulting for some time on how to think about customer relationships in a framework that spans all channels: store, phone, web, mobile, social … and helps companies focus on solutions over channels.

Dan Schawbel is the managing partner of Millennial Branding, a Gen Y research and management consulting firm. He is also the # 1 international bestselling author of Me 2.0 and was named to the Inc. Magazine 30 Under 30 list in 2010. Subscribe to his updates by lui at Facebook.com/DanSchawbel.

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