Terry Jones on starting Travelocity.com and innovation

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

In this interview, he talks about what inspired him to start his business, where the best ideas come from, how employees can build 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 certainly was. Around 1988, Max Hopper, the CIO of American Airlines, ordered that we put the SABER system (which automates travel agencies) on online networks such as AOL and CompuServe. It gained a small following (and only worked with travel agents), but in 1995 the travel agents (who could see the future) wanted it gone. Max objected, saying instead, “Give it to Terry. We’ll hide it in IT (where I did the operations) and anyway he was a travel agent, he can figure out what to do with it. Instead of To hide it, I put it on the Internet and freed us from the design shackles of AOL and Compuserve, and it grew like weeds.

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

Where do the best ideas come from in a company?

I think they can come from anywhere these days because everyone has transparent access to almost all company information. But in my experience, the best ideas come from the bottom up. They come from the customer service representative, the programmer, the lineman, those who deal with the product on a daily basis. And today, great ideas are increasingly coming from customers, on brand rave sites and through social networks.

At Travelocity, the flight calling (where we tell you when your flight is late) came from a customer service representative. The Fare Watcher email (where we tell you when a rate has dropped) comes from a programmer. The key is that the leader encourages these ideas, makes sure that middle management doesn’t kill them, and is okay with failing. Most experiments fail, and that’s okay, as long as you get another at bat.

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

It is clear that an employee with a large fan base can extend the brand and influence of the company 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 many times over if its employees work in this way. I also hear that internal social networks are doing great things in fostering innovation and collaboration.

Should companies hire more internally or externally? What’s the best way to attract the best talent?

The answer depends on the desired result. If you’re building a team to innovate around a new product, I strongly urge you to hire from the inside out. Hire people who are not like you, people who will challenge you. Make sure you bring in young, inexperienced people who can challenge the “We’ve always done it this way” crowd.

Attracting talent also has to do with the desired result. Hiring people to work in a 9-5 in the same environment every day is one thing. If you want people to work on a new idea, the main thing is to inspire them. Sure, it’s great if you can offer stock options (but that’s hard for non-startups), but if you’re competitive in pay/benefits, it’s all about excite them and be excited about it. I also learned from watching Paul English, our wonderful CTO at Kayak.com, that he focuses on hiring ‘rockstar’ programmers. Rock stars like to hang out with rock stars and then you get a fantastically productive and energetic team.

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

My next book is about The Business of Innovation. It includes 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, but a series of short, easy-to-digest steps for creating, selecting, and implementing ideas that can spark a fire in your business, big or small.

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

Dan Schawbel is the managing partner of Millennial Branding, a Gen Y research and management consulting firm. He is also the No. 1 international bestselling author of Me 2.0 and was named to the Inc. in 2010. Magazine 30 Under 30 List. Subscribe to his updates at Facebook.com/DanSchawbel.

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