Innovation and New Service Development in Tourism

1. 1 Innovation and New Service Development in Tourism Larry Dwyer and Deborah Edwards

2. 2 Types of Innovation

3. 3 INFLUENCE OF MEGATRENDS ON TOURISM

4. Firm innovation behavior varies by industry sector. Some industry sectors are capital intensive, making them cautious about innovations that require large capital investments Type of innovation that firms pursue also depends on whether their industry is: emerging (radical innovation is more likely) or is mature (incremental innovation is more likely) The hostility of the environment influences innovativeness Firms operating in highly competitive (hostile) markets - likely to be more successful innovators by increasing new product introductions through incremental innovation 4 Influences on Innovation

5. The type of customers that firms serve also influences the type of innovation they undertake. Firms that sell consumer products generally serve a larger number of customers directly or through distributors than firms that sell products or services directly to other businesses They also must devote more time and attention to market research and advertising and generally have more difficulty getting timely and accurate feedback from their customers 5 Influences on Innovation

6. Different types of innovation are important at different points in a product�s life cycle 6 Importance of Life Cycle

7. 7 Differences between Products and Services

8. Imitatability and opportunities for �bundling� Services can be combined into customized packages compared with product features Differentiates services from products making them more difficult to imitate by competitors � increases competitive advantage. Integration of an external factor During preparation of a service, an external factor, an object or a subject will be involved in the process, e.g., car in a car rental contract Need for synchronous contact between customer and service supplier Often there is a simultaneous production and consumption of a service. Customers may participate in production because the service preparation and the service delivery are identical 8 Products Vs Services

9. Products and services can be viewed as layers because many products have services embedded in them and vice versa A single layer can be a physical product that is exchanged for payment. The relationship between buyer and seller starts and ends with the sale Multiple layers would be services that consist of dialogues between service providers and clients, e.g., consultation or travel information 9 Products Vs Services

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11. 11 Stage-gate Process for New Service Development

12. Customer needs are the most important driver of NSD An important reason for failure among firms focusing on developing new services is an inadequate assessment of customer needs and problems 12 Importance of Customers

13. Understanding customer needs is only part of the problem Once the raw ideas are generated, it is important to categorize and assemble them based on their similarities. These needs must be organised and prioritized 13 Organising Needs

14. Firm decides how important these needs are to the firm�s (current or potential) customers. This understanding will help the firm to select the needs that it will target If the customer base is small, interviews and focus groups will be best Otherwise, a quantitative approach (e.g., survey) is more appropriate. 14 Prioritising Needs

15. Sometimes a product is the answer, sometimes a service, and sometimes a product/service combination Firms need an effective process to generate ideas and transform them into new services which replace or create activities up and down the value chain 15 Generating and Screening New Service Ideas

16. The quality of idea generation and screening can be enhanced by inclusivity Innovation requires support by management, employee involvement, and open communication among different functional areas (e.g., production, process design, IT, service delivery and marketing) 16 An Open Culture

17. 17 Cultural Attributes of Successful Innovative firms

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19. SME have smaller top management teams but less functional diversity in experience Owner-managed SME often favor placing family members in senior management positions over hiring outside professional manager poor management decisions generational transition problems SME also have less developed HRM practices disadvantage for reaching the labor pool leads to poor recruiting and less access to materials and financial resources SME may be weak in technical or marketing capability because of the number and quality of their professional personnel 19 Special problems for tourism SME�s

20. Question of senior management�s motivation to invest resources in training, provision of research journals, travel to conferences, and giving them challenging assignments Limited financial resources to invest in innovations that are expensive to develop, require long development cycles, and long payback periods. Difficulty spreading R&D expenses over large sales volumes and spreading the risk of failure across multiple projects. This tends to make them more cautious about innovation than larger enterprises SME often have an inadequate knowledge of competitors and their products. Have little time to scan their environment regularly to monitor their competitors 20 Special problems for tourism SME�s

21. SME may compensate for lack of resources by partnering or networking with customers, suppliers or competitors SME can form cross-functional teams more easily than large enterprises as professional specialization is less complete; and less risk of a disconnect between levels due to bureaucracy, delays, and miscommunication Employees of SME interact more often with their counterparts and may have shared or swapped tasks. Gives team members a clearer idea of their respective contributions to the NPD/NSD process. The downside of less specialization is difficulty in keeping up with the latest knowledge in a given specialty 21 Overcoming the barriers

22. NPD Vs NSD NPD and NSD essential to avoid strategic drift NSD is a neglected area of tourism research Importance of Customer Needs in NSD Importance of Firm Culture in NSD Special problems for Tourism SME 22 Conclusions

23. Develop a suitable NSD model for Tourism Explore activities that best promote successful NSD in tourism firms Explore role of culture in tourism NSD 23 Our Research Agenda