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Larry Dwyer and Deborah Edwards

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Process Innovation

Innovation to enhance the capability of production processes or supply chain

operations (e.g., increase reliability or reduce cost).

Product Innovation

Introduction of new functions, enhanced performance, or add features to existingproducts

Innovation of this type is generally incremental.

Underlying technology can be new to the firm, but is unlikely to be new to the world.

Marketing Innovation

Includes use of new channels of distribution and new advertising approaches for

selling current or new products.

Firms can expand revenues by selling current products in new markets or by

expanding existing product lines into new segments of existing markets

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Influences on Innovation

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The type of customers that firms serve alsoinfluences the type of innovation they undertake.

Firms that sell consumer products generally serve a

larger number of customers directly or throughdistributors than firms that sell products orservices directly to other businesses

They also must devote more time and attention to

market research and advertising and generally havemore difficulty getting timely and accuratefeedback from their customers

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Influences on Innovation

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Different types of innovation are

important at different points in aproducts life cycle

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Importance of Life Cycle

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this

characteristic

bestdifferentiates

products from

services

a pure service

also does not

transfer theownership of

a tangible

item to the

customer

services tend

to be

heterogeneous;i.e. they are

customized to

the specific

needs of the

recipient

Services are

usually created

as they areused, while

products can

be made ahead

of time and

held in

inventory or

distribution

supply chain

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Differences between Products andServices

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Services can be combined into customized packages compared with

product features

Differentiates services from products making them more difficult toimitate by competitors increases competitive advantage.

During preparation of a service, an external factor, an object or a subjectwill be involved in the process, e.g., car in a car rental contract

Often there is a simultaneous production and consumption of a service.Customers may participate in production because the service preparationand the service delivery are identical

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Products Vs Services

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Products and services can be viewed as layersbecause many products have services embedded inthem and vice versa

A single layer can be a physical product that isexchanged for payment. The relationship betweenbuyer and seller starts and ends with the sale

Multiple layers would be services that consist ofdialogues between service providers and clients, e.g.,consultation or travel information

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Products Vs Services

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FocusEnergies

ImmerseYourself in

YourCustomers

Customers

Gate

Gate Gate

Gate Gate

Strategy,Organisation,

Culture fit

Design service/ productsolution

Markettest/launch

Evaluation /feedback into

NSD

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Customer needs are the most importantdriver of NSD

An important reason for failure amongfirms focusing on developing new services

is an inadequate assessment of customerneeds and problems

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Importance of Customers

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Understanding customer needs is onlypart of the problem

Once the raw ideas are generated, it isimportant to categorize and assemblethem based on their similarities.

These needs must be organised andprioritized

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Organising Needs

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Firm decides how important these needsare to the firms (current or potential)customers.

This understanding will help the firm toselect 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.

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Prioritising Needs

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Sometimes a product is the answer,sometimes a service, and sometimes aproduct/service combination

Firms need an effective process togenerate ideas and transform them into

new services which replace or createactivities up and down the value chain

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Generating and Screening New ServiceIdeas

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The quality of idea generation and screening canbe enhanced by inclusivity

Innovation requires support by management,employee involvement, and open communicationamong different functional areas (e.g.,production, process design, IT, service delivery

and marketing)

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An Open Culture

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Cultural Attributes of Successful Innovative firms

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SME have smaller top management teams but less functional diversityin 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

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Special problems for tourism SMEs

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Question of senior managements motivation to invest resources intraining, provision of research journals, travel to conferences, andgiving them challenging assignments

Limited financial resources to invest in innovations that are expensive

to develop, require long development cycles, and long paybackperiods.

Difficulty spreading R&D expenses over large sales volumes andspreading the risk of failure across multiple projects. This tends tomake them more cautious about innovation than larger enterprises

SME often have an inadequate knowledge of competitors and theirproducts. Have little time to scan their environment regularly tomonitor their competitors

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Special problems for tourism SMEs

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SME may compensate for lack of resources by partneringor networking with customers, suppliers or competitors

SME can form cross-functional teams more easily thanlarge enterprises as professional specialization is lesscomplete; and less risk of a disconnect between levelsdue to bureaucracy, delays, and miscommunication

Employees of SME interact more often with theircounterparts and may have shared or swapped tasks.Gives team members a clearer idea of their respectivecontributions to the NPD/NSD process. The downside of less specialization is difficulty in keeping up with

the latest knowledge in a given specialty

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Overcoming the barriers

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NPD Vs NSD

NPD and NSD essential to avoid strategicdrift

NSD is a neglected area of tourismresearch

Importance of Customer Needs in NSD

Importance of Firm Culture in NSD

Special problems for Tourism SME

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Conclusions

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Develop a suitable NSD model for Tourism

Explore activities that best promotesuccessful NSD in tourism firms

Explore role of culture in tourism NSD

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Our Research Agenda