Competence-Based Innovation in Hospitality and Tourism

Harald Pechlaner, Elisa Innerhofer

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781472463968
• eBook ISBN: 9781317162902
• Topic: Business
• Subtopic: Business General
• Index: Business

Dr Pechlaner and Dr Innerhofer, the editors of Competence-Based Innovation in Hospitality and Tourism, argue that the industry operates within highly challenging and competitive environments. Changing environmental and market conditions continually force hotel businesses and service providers to offer their customers new and modified products and services, in order to remain competitive; those which respect value perceptions of markets and sustainable stakeholder reactions. This then raises the question of how innovations within this industry must be developed in order to achieve competitive differentiation.

The book demonstrates that the development and analysis of successful innovation strategies should integrate the resource-based view and its advancements, the competence-based view, as well as the dynamic capabilities approach and the relational view. Resource-based strategic management approaches view the firm as a bundle of resources and competences. They point to the importance of firm-specific resources and competences in explaining variations in competitive positions and performance differentiation between companies. The challenge of hospitality and tourism is to develop resources and competences that drive innovations.

This book will serve to advance the status quo of tourism research literature by combining innovation theories with network theories and tourism and destination development, by illustrating the development of cooperative competences and innovations in tourism and by showing, in a tailored way, how the challenge of the development of resources and competences that drive innovations in tourism can be managed.

Chapter 1

Introduction: Innovation in Tourism and Strategic Management Approaches

ELISA INNERHOFER and HARALD PECHLANER

Increased social and economic change, the conditions of turbulence under which organizations and businesses have to be successful and the increased competition put pressure on all industries, also on tourism businesses and destinations. Creativity and innovation are needed to stay in business and in a competitive position. The dynamics of the external environment require destinations and hotel businesses to react proactively, to continually improve and renew their products and services and to adapt to changing market conditions and customer requirements. In the light of the above, this chapter opens the discussion of innovation and the need of specific competences related to innovation in tourism.

The purpose of this introductory chapter is twofold: First, it presents the tourism product with its peculiarities and specific features. Second, it gives an introduction to the theoretical background, which constitutes the common thread/ground of the book. Strategic management theories provide the framework against which the chapters that follow illustrate a wide range of innovation in tourism. The following introduction should provide a guide to the 13 chapters of the volume. It closes with some observations regarding innovations in tourism and competences needed to manage those innovations.

Innovation in Tourism

Innovation and new service development are important strategic features to assure sustainable success of destinations and hospitality businesses. From a business perspective, innovation means modifications to existing offerings or the creation of new ones in order to stimulate performance and profits. Innovations are improvements and novel concepts that are valuable to existing and new customer segments and that facilitate differentiation, at least for a limited period of time (Brooker, 2014). The potential of differentiation through innovation mainly depends on two factors: Firstly, it is the ability of the innovator (for example, the tourism operator or the hotelier) to develop innovations whose development processes are difficult to follow and not transparent for the competitors. Secondly, it depends on the competitor’s ability to gain insights into successful innovations occurring in other tourism businesses and to copy the idea developed by innovators. The more difficult it is for competitors to understand and imitate new products and services, the longer innovation based on differentiation of the first mover lasts (Brooker, 2014). But, what distinguishes innovative firms from those which primarily follow market trends and competitors? Why are some destinations or tourism businesses more innovative than others, even if they are competing in the same industry?

In order to understand performance differences between destinations or tourism businesses achieved through innovation, the next section starts with the illustration of the composition of the tourism product and its complexity. The section following presents the approaches for analysing competitive advantages through innovation in tourism from a strategic management perspective.

The Complexity of the Tourist Product

An examination of the subject of innovation in tourism reveals that incremental innovations are the norm, while radical innovations are very rare (Peters and Pikkemaat, 2005). Innovations and innovation processes are very complex, especially in a service-dominated industry such as tourism. Besides the fact that services are intangible in nature and that the customer himself is involved in the production and implementation of services and thus strongly influences the quality of the service outcome (Corsten, 1985; Maleri, 1973; Hilke, 1989), it is the nature and composition of the tourism product which makes innovation highly complex. Products addressed to tourists are complex and heterogeneous (Bieger, 2000). The tourist product constitutes a combination of elements separated in time and space (Caccomo and Solonandrasana, 2001), often offered in the form of a package, including products, services and experience opportunities such as transportation, accommodation or leisure facilities (Smith, 1994; Middleton and Clarke, 2001). Several organizations and businesses are involved in bundling and packaging. They can be small and medium-sized enterprises, multinationals, hotel chains, tour operators, etc. The final tourism offer relies on the organizational complementarities and interdependences among actors and groups of actors involved in the development and planning of products and services (Tremblay, 1998; Aldebert, Dang and Longhi, 2011). Another characteristic feature of tourism is that goods are not produced and delivered to customers, but tourists have to organize their travels and to move to the resources (Maleri, 1973; Engelhardt, Kleinaltenkamp, and Reckenfelderbäumer, 1994; Innerhofer, 2012). While in many service processes the spatial proximity and synchronization of production and consumption can be avoided by using information and communications technologies, in the hospitality sector direct contact between provider and consumer is essential. Accommodation and hospitality services are tied to a specific location and reliant on the client’s willingness to move. This is what makes the factor ‘location’ a crucial production factor for tourism service providers (Innerhofer, 2012).

Contrary to the production of industrial services, touristic products are experience goods (Decelle, 2006; Weiermair, 2001). Thus, from the customers’ perspective innovation in tourism is perceived as a new psychological experience (Benkenstein, 2001). At the moment they purchase a service, like accommodation and board reservation, they act with uncertainty due to the intangible nature of most parts of the product. Services are performances, rather than objects, and cannot be seen, felt, tasted or touched in the same manner in which goods can be sensed. While goods are produced, sold and consumed, services are sold and then produced and consumed at the same time (Zeithamel, Parasuraman, and Berry, 1985). Their quality and utility are not known ex ante by consumers (Maleri, 1973; Tsai, Verma, and Schmidt, 2008; Aldebert, Dang and Longhi, 2011).

The special features of services in general and tourism services in particular increase the complexity of innovation processes. The critical point is the intangibility, from which challenges emerge for both customers and providers. Because of the risk customers must take when buying an outcome or an experience they cannot fully assess prior purchase, they are very sensitive to services that are highly innovative or completely new to the world. Service companies often provide a tangible representation of the service, incorporate physical clues or tightly relate the new service to the reputation or brand image (Brentani, 1991). Hotel businesses, for example, use the hotel infrastructure to make the service less abstract for the guest.

One of the main challenges service industries are confronted with is the protection of new ideas and innovations. Due to their intangibility, services cannot be protected through patents (Eiglier and Langeard, 1975). In tourism, product innovation is visible and can be imitated immediately. The same applies to the intangible parts of innovations, which can be experienced. Thus, innovation in tourism is unlikely to qualify for protection by intellectual property rights (Decelle, 2006). Decelle (2006) refers to this type of new knowledge as a ‘public good’. New services are usually developed more easily and quickly than new goods. Producing and launching does not involve high investments in raw materials or prototypes. That is not the least of the reasons why innovation processes are often ongoing instead of formally planned and managed processes (Brentani, 1991). Changes and improvements are mainly in response to changes in client needs or offerings launched by competitors (Rushton and Carson, 1991).

The lack of protection against imitation prevents tourism businesses from undertaking costly and time-consuming pioneering actions, since achieving competitive advantages in the long run seems highly difficult (Wind, 1982). Being the first to introduce new concepts within the sector in which a business operates does not necessarily result in better performances and higher profits than those of competitors.

However, innovations in tourism still occur and some tourism businesses perform better than others. Following the definition of Malerba (2002) and his dynamic view of sectors, the tourism industry is a sectoral system of innovation and production, in which a set of products are produced and a set of agents carry out market and non-market interactions. The agents are individuals and organizations with specific resources, competences, learning processes and organizational structures and they interact with each other through processes of communication, cooperation or exchange. The system, its agents and products are subject to dynamic changes and transformations, which lead to the improvement of existing products and services and to the development of innovations (Hall and Williams, 2008; Aldebert, Dang and Longhi, 2011). This definition refers to the dynamics of external environments as well as to the resources and competences of agents and their interactions and combination efforts, which characterize the internal environment. These two factors are the central reference points for the strategic management approaches introduced in the following section.

Strategic Management Approaches

Two essential paradigms of strategic management are the market-based view and the resource-based view. While the market-based approach pertains to the traditional understandings, the resource-based view began to emerge only in the 1980s/1990s and provides additional insights (Peteraf, 1993).

The essence of strategic management is the development and the maintenance of specific and strategically relevant assets and skills to achieve sustainable competitive advantages. In addition, the selection of strategic combinations and competitive markets is crucial (Aaker, 1989). According to the market-based view of strategic management, competitive advantage is related to external environments and market conditions, while the resource-based view relates a company’s above-average performance to its internal characteristics. Osterloh and Frost (1996) describe the market-oriented strategy as the idea of the fit, and the resource-oriented strategy as the idea of the stretch. The idea of the fit postulates that a company’s strengths and weaknesses have to be adjusted to the specific needs of customers, as well as to risks and opportunities of the environment. The idea of the stretch looks inside the company. Competences and resources should be stretched in order to exploit their potential and to obtain their maximum performance.

The market-based approach of strategic management takes a market-oriented view and assumes that a company’s success mainly depends on the industry structure and its competitive position. The source of the informational advantages necessary to develop a strategy leading to above-average performances is the firm’s competitive environment. Industry analysis is seen as a tool to develop competitive strategies (Porter, 1980; Henderson and Cockburn, 1994). Selecting the right industry and generic strategy within an industry is the key factor to success, because industry is the most significant predictor of a company’s performance (Montgomery and Porter, 1991). According to this understanding, success is a function of the attractiveness of the industry in which the company competes, and of its relative position in that industry (Porter, 1991).

Focusing on the market and the competing environment to explain competitive advantages and performance differences among competitors leads, however, to some restrictions. The market-based view refers to the question of where a company competes, the selection of the competitive arena and the overall market environment. Competing the right way and in the right arena can be profitable, but only for a limited period of time and rarely in the long run. The way a business competes can be imitated relatively easily. Furthermore, the methodologies for the collection of information through industry analysis are in the public domain. Various companies can apply the same publicly available methodologies to the analysis of the same environment and thus gain the same insights. In addition, the skills of environmental analysis can be bought from consulting firms, and thus possible competitive advantages will only be temporary (Barney, 1986).

In this case firms may try to turn inwardly and analyse the resources and competences they already control. These can be a source of competitive advantage, if they are used to develop strategies leading to above-average performances. While information on competitive characteristics of the environment may be available to various firms in the market, information on company-specific assets are controlled only by the company itself. This conclusion leads to the basic assumption of the resource-based view, which considers the resource base of companies as the source of sustainable competitive advantages and long-term, above-average performances (Aaker, 1989; Rumelt, 1984; Wernerfelt, 1984; Barney, 1986). Notable authors and their contributions, as well as influential forces in the development of the resourced-based view and its developments, are cited in the following sections.

THE RESOURCE-BASED VIEW AND ITS DEVELOPMENTS

The resource-based view postulates the notion that companies are fundamentally heterogeneous in terms of their resources and competences. Thus, the basic assumption is that resource and competence bundles underlying production are heterogeneous across companies, even if they belong to the same sector (Barney, 1991). Internal resources, competences and capabilities, which are distinctive and superior relative to those of competitors, can be the basis for competitive advantage. They may allow companies to produce more economically or to better satisfy customer requirements (Peteraf, 1993). These ideas are the basic principles of the resource-based view. The model has deepened the understanding as how resources are applied and combined, what makes competitive advantage sustainable and where company heterogeneity has its origin (Peteraf, 1993).

A strategically relevant asset or resource is something a company possesses such as a brand name, a good reputation, or even a special location, which is superior to the competition (Aaker, 1989). A skill or a competence is something that a company does better than competitors such as manufacturing, distributing or customer relationship management. The right combination of assets, resources, skills and competences can provide barriers to competitor thrusts (Aaker, 1989). But, in order to achieve sustainable competitive advantages the superior resources have to remain limited in supply, or the combination of these resources has to be opaque and thus inimitable by competitors (Peteraf, 1993; Foss 1997). Barney (1991) defines strategically relevant resources and competences as those which are valuable, rare, inimitable or not substitutable. Therefore, an asset which is homogeneous or can be easily bought and sold at an established price cannot be all that strategic (Barney, 1986). This assumption, called the ‘VRIN-framework’, is widely accepted in the literature.

The resource-based view of strategic management is the umbrella term for several sub-approaches. One of these approaches is the competence-based view (Freiling, 2001; Fischer, 2010), which sees the company as a bundle of tasks and knowledge (while the resource-based view defines the firm as a bundle of physical, organizati...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• Notes on the Editors
• Notes on Contributors
• Foreword by Dirk Glaesser
• 1 Introduction: Innovation in Tourism and Strategic Management Approaches
• Part I Innovation and Resource-based Approaches of Strategic Management
• Part II Innovation in the Hospitality Industry
• Part III Innovation in Destinations
• Index