Today’s lead user shows tomorrow’s mainstream tourist offering

NORDIC INNOVATION CENTRE

January 2011

Today’s lead user shows tomorrow’s

mainstream tourist offering

Editors: Einar Svansson, Eva Rikmann

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Participants

Denmark

Sofia Wean

Estonia

Eva Rikmann, Demirano Invest OÜ

Oyvind Juhlmand, G.E. Consulting

Iceland

Einar Svansson, Bifröst University

Arnar Sigurjónsson, Bifröst University

Latvia

Uldis Zalcmanis, BDA Consulting SIA

Norway

Christina Aas, Christina Aas Travel Services

Arne Sundt-Bjerck, Christina Aas Travel Services

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Title: Today’s lead user shows tomorrow’s mainstream tourist offering

Nordic Innovation Centre (NICe) project number: 08141

Authors: Einar Svansson, Christina Aas, Eva Rikmann

co-authors: Sofia Wean, Uldis Zalcmanis ,Oyvind Juhmand,

Institutions: Bifröst University, Demirano Invest, Christina Aas Travel Services, BDA

Consulting

Abstract:

The objective of the study is to shed some light and strategic view on how tourism

companies’ managers can make their companies more innovative as well as help to

understand the importance of involving users to generate new ideas and identify solutions.

The study presents a background to innovation, user driven innovation and the application of

lead users in tourism innovation. Theoretical perspective on recent trends in tourism and

open innovation systems are discussed to cover the academic aspects of the subject. The case

studies conducted in five selected Nordic area countries – Denmark, Estonia, Iceland, Latvia

and Norway, demonstrate different indications of user involvement in the innovation process

of the case companies. Various opportunities and constraints in the innovation process are

discussed – what are the industry specific aspects, how to collect feedback users, how to

identify and involve lead users.

Finally, the report presents the conclusions drawn based on available academic research and

conducted case studies and provides various recommendations to the tourism industry

companies, policy makers and researchers about how to better apply user-driven and lead

user methods and which areas would require further research.

Topic/NICe Focus Area: Innovation Policy

ISSN: Language: English Pages: 125

Key words: tourism, innovation, user driven innovation, lead users

Distributed by:

Nordic Innovation Centre

Stensberggata 25

NO-0170 Oslo

Norway

Contact person:

Eva Rikmann, Partner

Demirano Invest OÜ

Herne 8/9, Tallinn

Estonia

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EXECUTIVE SUMMARY

The research project “Today’s lead user shows tomorrow’s mainstream tourism offering”

illustrates the state of lead user involvement in the renown tourism companies of the five

selected Nordic area countries – Norway, Denmark, Iceland, Estonia and Latvia, and aims to

serve as a reference for other tourism companies.

Main objectives

The objective is to shed some light and strategic view on how managers can make their

companies more innovative as well as help to understand the importance of involving users to

generate new ideas and identify solutions. Can the lead user method turn out to be a usable

tool to create value, differentiation and to gain a competitive advantage?

The main objectives of the project are:

Examine the innovation process and innovation strategy of the case companies,

Study how the case companies and lead users interact in the innovation process,

Study the case companies attitude to lead users and user driven innovation,

Appraise the lead user and user innovators in the user driven innovation process

These objectives were met by clarifying the background and current standing of innovation

research in tourism industry through existing literature review and through in-depth

interviews with case companies and their lead users. The study shows the similarities and

differences between the case companies and the summary of finding is presented based on

Alam’s framework. The conclusions and recommendations were based on the findings of the

study.

Method

The method used for the study is based on a multiple case study research design, and its

findings are based on a qualitative research method using semi-structured interviews. The

researchers focused on international lead user literature and papers. Secondary data, both from

academic and non-academic sources, was collected and reviewed.

The primary data used is a form of qualitative research with cross-case comparison between

nine cases from five Nordic area countries selected. The majority of references in the analysis

were first hand interviews with managers and customers of the companies. Two known

models were used to map the innovation process and to analyze the involvement of users. The

models are the Alma’s framework presenting all case findings and the Innovation Wheel

model.

In each country a national reference groups, consisting of relevant industry actors, were

consulted to ensure that the study is related to the industry and that the case companies chosen

were pertinent for this project.

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Main findings and conclusions

The lead user concept has been tested extensively and confirmed as valid theory with

quantitative research data, but the focus has been on manufacturing industries and the services

industry still requires further study.

Tourism companies in general have a very close relationship with its customers and get very

direct feedback from them daily. This makes it quite easy for them to collect this input, but as

the research shows, then the input is not always collected systematically and not used to its

potential. The research team was not able to identify a perfect example of a tourism company

in the countries researched, applying the lead user or user-driven innovation methods in their

innovation strategies or processes, but there were a lot of evidence of user input and potential

for more systematic approach.

The cases illustrate in different ways how tourism companies can develop new outputs by

enforcing various user-driven innovation methods. Because tourism companies are close to its

customers in several ways they have a unique opportunity to bring in new types of

innovations in order to strengthen their position on the market. Different types of users were

identified in the process and their characteristics analyzed in detail. The opportunity for

receiving user feedback is widespread around the tourism companies’ operations, for example

via Internet or the staff ‘on the location’. Because the products and services are offered on site

it creates the opportunity for the companies to reach and receive commentary from the mass

of users, the mainstream users. The identification and selection of lead users is a crucial part

of a successful innovation process, but finding and involving the “right” lead users can still be

complicated.

It has been demonstrated that the tourism companies have a great potential to harvest the

knowledge held by lead users that can be intermediaries like tour operators or individual

consumers (tourists). Because tourists have influenced tour operators with their information,

they fit into the category of lead users as well as these agents for their strong opinions on the

company’s offerings and constant communicating with the tourism companies’ management.

Recommendations for the tourism industry

The lead users should be involved in the innovation process from the start and through

the entire process by applying a clear structure to their involvement.

More proactive methods should be used to collect information from users and more

information could be collected. Also customer complaints and dissatisfied customers

can be a great source for new ideas.

Cooperation and networking within the industry could be helpful in overcoming the

constraints of the innovation process and bring better, more developed results.

The lead users should not be looked at alone, but also other stakeholder groups should

be involved in order to develop attractive, long term and sustainable products/services.

Several techniques should be used to identify lead users, like mass screening,

“pyramiding”, nominations, crowdsourcing etc.

The Alam framework could be used for analysing the current user situation in the

company, as part of strategic work on innovation projects.

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Recommendations to policy makers and for further study

In order to promote innovation in tourism sector there is a need to facilitate knowhow

and funding: cooperation and networking could be helpful tools to overcome the lack

of time and funding needed for innovation activities of tourism companies; a publicly

funded and run innovation programme could help in improving the skills needed in

applying user-driven innovation process.

Further research could be conducted on: studying the needs of lead users and how

these relate to recent trends like sustainable toursim and health tourism; studying the

importance of Internet and role of user communities, especially virtual innovation

communities; studying the competences of tourism businesses needed to harness the

knowledge from users to innovate.

Further research could also be conducted on how to use analogous fields as the source

of innovation for tourism companies and on potential lead user role of various

innovative stakeholders from B2C users to users in analogous markets. The lead user

method should be looked at with a wide-angle lens, as the lead user can hold various

positions in the organisational network.

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Table of content

1.0 INTRODUCTION .................................................................................................................... 10

1.1 BACKGROUND .............................................................................................................................. 10

1.2 LAYOUT OF PAPER ........................................................................................................................ 11

2.0 A REVIEW OF EXISTING LITERATURE .......................................................................... 13

2.1 INNOVATION ................................................................................................................................ 13

2.1.1 What is innovation? .............................................................................................................. 13

2.2 USER-DRIVEN INNOVATION – A NEW PARADIGM IN INNOVATION ............................................ 14

2.2.1 Why involve users in the innovation process ........................................................................ 15

2.2.2 The lead user method – a user-driven innovation method ................................................... 16

2.2.3 Finding the lead users ........................................................................................................... 19

2.2.4 User driven innovation in tourism ......................................................................................... 20

2.2.5 Models for user driven innovation ........................................................................................ 21

3.0 INNOVATION IN THE NORDIC AND BALTIC COUNTRIES .................................... 25

3.1 INNOVATION IN NORWAY ............................................................................................................. 25

3.1.1 Introduction........................................................................................................................... 25

3.1.2 Norwegian tourism and innovation ...................................................................................... 26

3.1.3 User driven innovation in Norway......................................................................................... 27

3.2 INNOVATION IN DENMARK ........................................................................................................... 28

3.2.1 Introduction........................................................................................................................... 28

3.2.2 Danish tourism and innovation ............................................................................................. 29

3.2.3 User driven innovation in Denmark ...................................................................................... 30

3.3 INNOVATION IN LATVIA................................................................................................................... 32

3.3.1 Introduction........................................................................................................................... 32

3.3.2 Latvian Tourism and Innovation ........................................................................................... 34

3.4 INNOVATION IN ESTONIA .............................................................................................................. 35

3.4.1 Introduction........................................................................................................................... 35

3.4.2 Estonian tourism and innovation .......................................................................................... 36

3.4.3 User driven innovation in Estonia ......................................................................................... 37

3.5 INNOVATION IN ICELAND............................................................................................................. 37

3.5.1 Introduction........................................................................................................................... 37

3.5.2 Icelandic tourism and innovation .......................................................................................... 38

3.5.3 User driven innovation in Iceland .......................................................................................... 39

3.6 COMPARISON OF INNOVATION IN THE COUNTRIES OF STUDY ...................................................... 40

3.6.1 Similarites and differences in Innovation .............................................................................. 40

3.6.2 Similarites & differences in tourism trends ........................................................................... 40

4.0 METHODOLOGY .................................................................................................................... 41

4.1 INTRODUCTION ............................................................................................................................ 41

4.2 OVERVIEW OF PREVIOUS RESEARCH METHODS.......................................................................... 41

4.3 RESEARCH DESIGN ....................................................................................................................... 42

4.4 PRIMARY RESEARCH ..................................................................................................................... 42

4.4.1 Selection of case companies ................................................................................................. 42

4.4.2 Selection and background of lead users ............................................................................... 43

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4.4.2 Semi – structured interviews ................................................................................................. 43

4.4.3 Interview guides .................................................................................................................... 43

4.5 RESULT ANALYSIS ......................................................................................................................... 44

4.6 LIMITATIONS TO RESEARCH ......................................................................................................... 44

4.6.1 Lack of pertinent literature and research ............................................................................. 44

4.6.2 Unfamiliarity with terms ....................................................................................................... 45

4.6.3 Limited primary data............................................................................................................. 45

4.7 EVALUATION OF RESEARCH ......................................................................................................... 45

5.0 PRESENTATION OF CASE STUDIES ................................................................................. 46

5.1 NORWEGIAN CASE STUDY 1: DIN TUR ......................................................................................... 46

5.1.1 Background ........................................................................................................................... 46

5.1.2 Innovation strategy ............................................................................................................... 47

5.1.3 The innovation process ......................................................................................................... 48

5.1.4 Identification of lead users .................................................................................................... 49

5.2 NORWEGIAN CASE STUDY 2: KONGSVOLD MOUNTAIN REFUGE ................................................ 50

5.2.1 Background ........................................................................................................................... 50




5.3 DANISH CASE STUDY 1: HELLE THORUP SPA ................................................................................ 54

5.3.1 Background ........................................................................................................................... 54




5.4 DANISH CASE STUDY 2: HOTEL SKT. PETRI ................................................................................... 56

5.4.1 Background ........................................................................................................................... 56




5.5 LATVIAN CASE STUDY 1: AKTĪVĀ TŪRISMA CENTRS EŽI, SIA (CENTRE OF RECREATIONAL

TOURISM) .............................................................................................................................................. 60

5.5.1 Background ........................................................................................................................... 60




5.6 LATVIAN CASE STUDY 2: AERODIUM ........................................................................................... 63

5.6.1 Background ........................................................................................................................... 63




5.7 ESTONIAN CASE STUDY 1: OTEPÄÄ ADVENTURE PARK ............................................................... 66

5.7.1 Background ........................................................................................................................... 66




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5.8 ESTONIAN CASE STUDY 2: SAAREMAA SPA HOTELS .................................................................... 69

5.8.1 Background ........................................................................................................................... 69




5.9 ICELANDIC CASE STUDY: BLUE LAGOON ...................................................................................... 73

5.9.1 Background ........................................................................................................................... 73



5.9.4 The Identification of lead users ............................................................................................. 77

6.0 PRESENTATION AND DISCUSSION OF FINDINGS ....................................................... 79

6.1 INNOVATION STRATEGY OF CASE COMPANIES ........................................................................... 79

6.2 INNOVATION PROCESS OF CASE COMPANIES ............................................................................. 80

6.3 HOW DO CASE COMPANIES AND LEAD USERS INTERACT ........................................................... 82

6.3.1 How is feedback collected from lead users? ......................................................................... 83

6.3.2 What do lead users think of the involvement in the innovation process? ............................ 83

6.4 THE CASE COMPANIES ATTITUDE TO LEAD USERS AND USER DRIVEN INNOVATION ................. 85

7.0 CONCLUSION AND RECOMMENDATIONS ..................................................................... 88

7.1 CONCLUSION ................................................................................................................................ 88

7.2 RECOMMENDATIONS FOR THE TOURISM INDUSTRY .................................................................. 90

7.3 RECOMMENDATIONS TO POLICY MAKERS .................................................................................. 91

BIBLIOGRAPHY ............................................................................................................................... 93

Appendix 1. The Innovation wheel process analysis ...................................................... 102

Appendix 2. Background to innovation ................................................................................... 114

Appendix 3. Overview of reference groups in each case country ............................... 119

Appendix 3. Questionnaire guide for case companies ................................................... 121

Appendix 4: Questionnaire guide for lead users .............................................................. 125

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1.0 INTRODUCTION

The subsequent chapter offers a general background to the topic area of the study, namely

innovation, user driven innovation and the application of lead users in tourism innovation.

Furthermore it presents the reader with the aim of the study at hand and gives a brief outline

of the chapters to come as well as the method applied for the research. Theoretical perspective

on recent trends in tourism and open innovation systems are discussed to cover the academic

aspects of the subject.

The objective is to shed some light and strategic view on how managers can make their

companies more innovative as well as help to understand the importance of involving users to

generate new ideas and identify solutions. Can the lead user method turn out to be a usable

tool to create value, differentiation and to gain a competitive advantage? The need to innovate

is growing stronger for companies to survive (David & Foray, 2002). These changes are

evident throughout the tourism sector; the products and processes of tourism are being

modified at an increasing rate (Hall & Williams, 2008). Mainstream users are the majority of

customers in a corporation and therefore form the voice of the customer because of their

numbers. Listening to their voice by extracting information gathered from them can be an

effective way to improve the products and services. The lead users, who are a more select

group of customers, give even more in-depth input and can inspire more innovative actions.

In a historical context it is not a relatively new method when companies use ‘special’ clients

when generating or designing new innovations. For example in the sports industry, companies

have used top running athletes in the development of new running shoes. Extreme sports

products are an area where the user is actively involved in improving existing products which

often serves as direction for product enhancements. Computer games are another area, where

the consumer assumes an active role in developing new products (FORA, 2005, p.31).

Product testing is frequently being used in particularly for food and beverage products.

Tourism researchers have only recently identified innovation as a focus of academic attention.

The case studies demonstrate different indications of user involvement in the innovation

process of the case companies. There are several stakeholders of the companies; lead users,

mainstream users, employees, experts, specialists in analogous fields and agents who generate

new outputs of services or products as well as improving their previous ones by adopting

user-innovation methods.

1.1 BACKGROUND

Innovation is important for organizations to survive and prosper in the modern world. The

customer has become an actor in this context getting more focus from organizations and

academics in the last decades. This kind of a shift of paradigm from the manufacturer to the

customer has been strengthened by ever increasing speed of information and communication.

This technological evolution has also been a catalyst to open up the innovation process and

look at the potential innovative role of other actors in the network of the company. Users are

becoming a steadily more important source of innovations, and will increasingly complement

other innovation-related activities. The user driven innovation approach has gained more and

more acceptance in recent years after the Internet revolution (Bilgram et.al. 2008). There is a

general trend toward more open innovation process driven by steadily better and cheaper

computing and web access. The service industries are taking full part in this revolution. The

tourism organizations have experienced these recent changes in technology and the rapid

transfer of information. There has been a change in the relationship between companies and

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customers in the tourism field with new websites and platforms opening for individuals to

plan their trip in a mouse-click. This has increased the pressure on middlemen like tour

operators. An interesting concept that is a part of this more open innovation evolution is the

lead user theory that defines what role, characteristics and impact the leading innovative users

can attain in the innovation process.

The last decade has seen a strong focus on innovation in Europe, including the Nordic

countries. Studies reveal that the innovation “hit rate” in this region is at only 4% and that it is

increasingly difficult to compete on price and technology-driven innovation (NIC, 2007). To

mend this less flattering situation, many businesses, governments and organisations have cast

their eyes on user driven innovation, which seems to be one of the current buzzwords in

business management.

The 21st. century has moved us from a time where companies produced what they thought

users wanted, to a time where an increasing number of firms turn to users to ask what they

want and how they want it before developing any product. Although user involvement in

product development is not new, the more strategic and systematic manner of the involvement

is. In user driven innovation, one of the matters to be decided upon is what kind of users to

involve, how to involve them and to what extent. Several theories have been put forward; one

of them is von Hippel’s (1986) lead user theory, which favours the use of what may be

labelled as trend setting expert-like users. This theory requires these users to be part of most

of the innovation process, from idea generating to product launch.

The service industry, of which tourism is part, has been labelled innovation laggards (Miles

1993, in Duverger and Hassan, 2007) while more recent studies have found that this labelling

is based on innovation metrics from the manufacturing industries, industries which after all

are different from that of service industries. Tourism is an important business sector in the

Nordic area, particularly in terms of creating local employment and economic activity in rural

areas. The Nordic region is however facing increased international competition and statistics

show that the Nordic region in general is lagging behind the average numbers for other OECD

members (NIC, 2009). This fact calls for action, both in terms of product development and

market positioning. The Nordic region has vast natural resources, which are both unique and

indispensable assets: wide-open spaces, fresh air, close proximity to flora and fauna, peace

and tranquillity. Although many tourism products have been developed, there is a need to

further develop and refine the product range, and to do so, why not involve the users

themselves, to ensure an optimal product satisfaction and attractiveness.

The following paper examines the innovation strategy and process of nine Nordic area

tourism businesses, from Norway, Denmark, Iceland, Estonia and Latvia, with various

activities, and evaluates their application of lead users in their innovation process.

1.2 LAYOUT OF PAPER

This report is made up of seven chapters and four appendices. Chapter 1 introduces the

background and area of study, before setting the aims, which shape the research. It further

explains the method used when collecting data. Chapter 2 examines the literature connected

to the study, and it is divided into three sections, namely innovation; user driven innovation

and lead user innovation. The first section looks at innovation in general and how service

innovation is different from that of manufacturing industries; the second section explores user

driven innovation; the third section looks at lead user theory and seeks to relate it to the

tourism sector. At the end of the chapter two models of user driven innovation are presented.

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Chapter 3 offers a brief status of the innovation situation in the Nordic area countries that are

presented in the report to give the reader a background for chapter 5 and 6. Chapter 4

presents the methods selected for the research and outlines how the data obtained were

analysed. At the end of the chapter the study's limitations are highlighted and a brief

evaluation of the research is offered. Chapter 5 gives a factual presentation of the case

studies. The objective is to provide the necessary framework for the findings and analysis that

follow in chapter six. Chapter 6 contains the main findings from studying the companies and

the lead users. A summary of all cases is presented based on Alam´s framework presented in

chapter two. The chapter is divided into the discussion of the research objectives and main

questions. Chapter 7 presents the conclusions to the research. It starts with evaluation of the

lead user perspective and then offers some recommendations to the tourism industry and

public policy makers.

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2.0 A REVIEW OF EXISTING LITERATURE

The following review presents an assessment of the relevant literature on innovation and

particularly user-driven innovation and lead user method related to tourism. The purpose of

the chapter is to review this theoretical phenomenon with the perspective of tourism and

services. Those fields have not been high on the agenda of lead user research in the past. To

support the case study with a proper link to the existing material a few fundamental concepts

need to be defined in some detail. This way a proper foundation for the cases is set.

Erich von Hippel, currently head of innovation research at MIT is the author or co-author of

11 of 14 papers on lead users written in the period of 1978-2003. The lead user theory

originally stems from Erich Von Hippel’s paper: Lead Users: a source of novel product

concepts (1986) where the lead user is defined as an early adopter in the diffusion of a new

innovation.

We start by trying to clarify the broad concept of innovation and give some overview and

insight into service and tourism innovation. Then we continue to outline the user driven

innovation concept, incorporating lead user innovation. We also discuss strengths and

weaknesses of the lead user concept. In the last part we outline two models that can help to

analyse the user´s contribution to tourism innovation.

2.1 INNOVATION

Whereas the general literature on innovation was found to be endless, there was far less

literature on user driven innovation. The last decade or so has however seen a fair amount of

research and reports on user-driven innovation, several of these being published in the Nordic

countries by organisations such as the Nordic Innovation Centre (NIC) or the Danish

Enterprise and Construction Authority (DECA). However, the literature on tourism

innovation, and particularly user-driven innovation in the tourism industry, was very scarce.

The researchers have therefore focused on various aspects of user-driven innovation and lead

user theory with the aim of providing a sound conceptual framework for the following

analysis.

In the following section we look at what is innovation, and what innovation types and drivers

there are before examining the difference in innovation in the service industry and in

manufacturing industries. At the end we consider the situation of innovation in the tourism

industry.

2.1.1 What is innovation?

The innovation field is vast, and there are many definitions on what the term innovation

entails. Schumpeter, the man widely acknowledged as the founder of innovation research

defined innovation as “the implementation of new factor combinations (e.g. a new product

and a new production method). All factor combinations are eventually replaced by new ones

which lead to significant improvements.” (1934, in Strecker 2009, p.13)

A more recent, definition of innovation, suggested by Trott (1998) asserts that Innovation is

not a single action, but a total process of interrelated sub processes. It is not just the

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conception of a new idea, nor the invention of a new device, nor the development of a new

market. The process is all these things acting in an integrated fashion.

Innovation is often divided into two sub areas, namely concept (or radical) innovation which

often is completely new products, and incremental innovation which is change being made to

already existing solutions. With incremental innovation one easily runs into a grey zone: what

is innovation and what is a mere improvement, or even an “imitation (Tether, 2005)?

However, this discussion is not the topic of this paper and will thus not be discussed here, but

it illustrates why it sometimes is challenging to both define what is, and what is not an

innovation, and moreover, to measure innovation ability and activity.

Further background to innovation is given in Appendix 2.

2.2 USER-DRIVEN INNOVATION – A NEW PARADIGM IN INNOVATION

User-driven innovation (UDI) is a relatively new term, which is about determining a more

systematic way to understand and develop solutions that respond to user needs (Hansson,

2006). User is a highly controversial and ambiguous term. The countless meaning of the term

user is sometimes problematic. The term is commonly used interchangeably with actors,

participants, workers, and customers (Johnson, 2007).

Users can be both end-users (consumers) and businesses using products or services in a

professional capacity (professional users). Both groups can be further divided into lead users

and mainstream users.

User-driven innovation is part of an open innovation process, as opposed to a closed

innovation process. The closed innovation process is characterised by innovation taking place

within the company, within their framework, control and by their personnel. In the open

innovation model innovation is made up of own ideas and products, as well as products and

ideas from outside the company. This latter model believes it to be naïve to think that the

company can harbour all the best knowhow and ideas. Input from people/firms outside the

company can results in better products and services, as well as their own ideas, when shared,

can add value to other companies’ products and services. The importance of free flow of

knowhow takes priority over patent- and intellectual rights and the open innovation process is

practical and solution based (Bergum 2004).

UDI was originally connected to innovations carried out by a consumer to increase the utility

value of a given product, as opposed to a company innovation, which only serves a

commercial purpose (von Hippel et al., 1999). Involving users at some level and in various

ways in the innovation process is not a new phenomenon, but what is new within the last

decade or two is that an increasing number of companies develop, structure and consciously

apply users in their innovation process. Two independent studies of service innovation (one

from Australia, the other from Norway) found user involvement to be particularly important

in the early and late phases of the innovation process (Alam 2002, Bergum 2004). However,

and despite information from users being collected widely by companies, there is no evidence

that advanced and sophisticated methods are used, neither in data collection, nor in data

analysis (Bergum 2004).

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According to the Nordic Innovation Centre (2007) user-driven innovation can be

characterised by:

A more direct involvement of the user/consumer in the innovation process

A strategic focus on the consumer pull – producing what sells rather than selling what

is produced

Revenue-enhancing activities by developing solutions that better meet consumer needs

Use of multiple skills and perspectives in the innovation process – adding ethnologist,

anthropologists, designers to the science, in addition to the engineers and business

specialists.

Today, the common understanding of the innovation process builds on the observation that

firms rarely innovate alone and that the innovation process can be seen as interactive

relationships among producers, users and several other actors (Laursen and Salter, 2005).

Companies are increasingly using alternative methods to identify new opportunities to create

value, areas where users’ needs have not been met before, or where challenges are currently

unsolved. Because many of these opportunity areas are based on needs that users cannot

articulate themselves, traditional market research methods are not adequate. Increasingly,

companies initiate the innovation process by using ethnographic methods to uncover both

articulated and non-articulated needs to identify new opportunity areas (Wise and

Høgenhaven, 2008).

2.2.1 Why involve users in the innovation process

Von Hippel (1986) argues that users possess a unique need-related knowledge acquired

through their own use of products and services. Sometimes these needs are distinctive, at

other times they reflect the needs of a larger population. Empirical studies by Dahlin Taylor

and Fichman (2004, in Shah and Tripsas 2007) have also shown that users will frequently

develop different solutions and identify solutions that industry participants might miss. More

importantly for this study, an analysis of determinants of innovation performance by Hernard

and Szymanski (2001, in Alam, 2002) suggests that user involvement is a much stronger

success factor for services than for tangible products.

The Danish Enterprise and Construction Authority (DECA, 2007) points out several reasons

why companies should focus on users:

Users give greater insight into customers’ realised and non-realised needs, which in turn

increase the innovation hit-rate and create a better return on the capital invested (produce

what sells).

Opportunity to launch solutions to customers’ realised and non-realised needs, products,

which distinguish the producer from competitors. This may also enable companies to

charge a higher price for their products or services.

By giving the customer influence on product design, it is possible to create ownership

with of the company’s products. This ownership may give the individual enterprise more

loyal customers and hence improve income over time.

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Additionally, Alam (2002) suggests that the involvement of users in the innovation process

will win product support and accelerate market acceptance of the product, as well as enable

service providers to educate users. In a study of IT- and media companies in Norway (Bergum

2004) the companies interviewed mentioned some disadvantages of involving users in the

innovation process. Communication was costly and time consuming at times, some users had

limited experience and proficiency, others had little time to participate and a few were also

reluctant to share their ideas. In a study of financial service providing companies in Australia

(Alam, 2002) companies warned about listening to all what users say, as their information

may not be practical and far from the capability of the company. Christensen and Bower

(1996) are sceptical to the application of users in the development of new products as they

argue that users make the producer create only what individual users want and hence the

producer eludes a long-term innovation strategy. Bennett and Cooper (1981, in Bergum 2004)

contend that users lack the basis to think radically new ideas and are unaware of technical

opportunities and are therefore likely to choose what they already know.

The challenge of time and cost in user involvement may seem to be reduced by improvements

and new developments in technology (virtual communities, blogs). The study by Baglieri and

Consoli (2009) of an Italian tour operator ,which successfully uses its own virtual community

to gain important information on customer needs, is an example of this.

2.2.2 The lead user method – a user-driven innovation method

As opposed to other user-driven methods, which are less categorical in defining users, the

lead user method (LUM) is very specific on what kind of users should be involved. Von

Hippel, (1976, 1986, 1988) focused originally on end users as a source of innovation where

lead users diffusion rate could give organisations a hint of the size of the potential market

(von Hippel, 2005).

Von Hippel (2005) defines lead users as members of a user population who have two

distinguishing characteristics:

1. They are at the leading edge of an important market trend(s), and so are currently

experiencing needs that will later be experienced by many users in that market.

2. They tend to innovate because they anticipate relatively high benefits from obtaining a

solution to their needs.

Moreover, lead users are willing to share their ideas for free (von Hippel, 2005) and Rogers

(2003) characterises them as innovative, variety seeking opinion leaders.

The most recent and rigorous evidence to support lead user theory empirically (Hienerth et.al.

2007) is provided by Franke et al. (2006). The study confirms the basic tenets of lead user

theory and finds that the two variables (1 & 2 above) in the lead user definition are

independent dimensions. They found that a high intensity of lead user characteristics has a

significant positive impact on the likelihood of generating commercially attractive user

innovations. Robust quantitative confirmation is the mainstay of the lead user concept. The

literature on new product development (NPD) suggests several strategies for innovation.

Among these techniques, the lead user approach has received the greatest empirical support as

a driver of commercially attractive and highly novel product ideas (Kratzer and Lettl, 2009).

We do however need to keep in mind that the findings are (is) based on Innovation in

manufacturing industries, not in service industries.

17

Nevertheless innovation by users is sometimes not recognised because functionally novel

innovations often are brought into organizations by informal channels. Engineers may attend

conferences and salesmen and technical service personnel discover user-modified equipment

on field visits. The lead user is a user that is a part of an environment where there is a new

market trend and the lead user is ahead of this trend. The lead user is willing to innovate

because he has extreme needs and benefits strongly from his innovation. In the first papers on

lead user theory the lead user was similar to a frequent customer, either B2C or B2B, but later

opened up for other interpretations of the term ”user”. The user can be in an analogous field

like ABS brakes in cars that came from the field of aviation (von Hippel, 2005; Tidd and

Bessant, 2009) or an accidental entrepreneur, starting his own company because he knows the

product or service from heavy use as in the research on the Juvenile products industry (Shah

and Tripsas, 2007). The lead user can also be an employee that has a hobby that can be a

source of ideas in the internal process of innovation at his firm, a sort of intrapreneur (Kotro,

2007). So the lead user concept has been expanding in last year’s.

Lead users have tastes or demands that are ahead of the general market. They will only be a

very small proportion of all users, most likely less than 10% of all users. Nevertheless they

can be strategically important as their demands for a service can signal what will be the next

generation of a service or a product. By involving lead users in the innovation process,

companies can get valuable input on how to develop new products, services and other areas of

their business model (NIC, 2009). The lead user can hold any positions in the organizational

network: B2B customer; B2C consumer; analogous field; accidental entrepreneur and an

employee as a hobbyist. There are also three organizational levels possible: as an individual in

firms, and in communities. The lead user can also be in two market fields: at the leading edge

of ’advanced analogue’ fields or at the leading edge of target markets. Lead users from

analogous markets, particularly those reflecting high market distances, contribute solutions

that are significantly more novel than do lead users from target markets. The novelty of

concepts contributed is a function of the market distance of a lead user between his/her

analogous market and the target market problem. Technical distance has a negative influence

on the novelty of concepts. Lead users with a high level of experience from direct use make

better contributions than do equally qualified individuals without such experience (Hienerth

et.al. 2006).

A number of empirical studies using the lead user method have been undertaken, but almost

solely in the manufacturing business as shown in Figure 2.3. Many of these studies have been

from outdoor sports equipment (especially from extreme sports), a field strongly connected to

tourism.

18

Figure 2.3. Lead user research fields 1978-2010. Einar Svansson´s presentation.

This is not a coincidence because the largest share of user innovators in all the fields studied

to date in lead user research is 37% in outdoor consumer products (Lüthje, 2004), followed by

32% in extreme sporting communities (Franke and Shah, 2003). What outdoor sports are

involved? The outdoor and extreme sports fields up to date included in Table 1 are

skateboarding (Shah, 2000), snowboarding (Shah, 2000), windsurfing (Shah, 2000),

boardercross (Franke and Shaw, 2003), cycling (Franke and Shaw, 2003), canyoning (Franke

and Shaw, 2003), sailplaning (Franke and Shaw, 2003; Schreier et.al. 2008),

climbing/mountaineering (Lüthje, 2004; Parsons and Rose, 2004), hiking (Lüthje, 2004,

Parsons and Rose, 2004; Kotro, 2007), skiing (Lüthje, 2004; Kotro, 2007; Bråtå et.al., 2009)

mountain-biking (Lüthje, 2004; Lüthje et.al. 2005), kite surfing (Tietz et.al. 2004; Franke

et.al. 2006; Schreier et.al. 2007; Schreier et.al. 2008), rodeo kayaking (Hienerth, 2006;

Baldwin et.al. 2006), diving (Kotro, 2007, Schreier et.al. 2007; Schreier et.al. 2008), sailing

(Kotro, 2007), and golf (Kotro, 2007). In general, the recreation and sport markets are rich in

examples for user innovations. Shah (2000) explored the sources of innovation for equipment,

which is used in specific areas of sports like snowboarding, skateboarding and windsurfing.

Her findings reveal that it was always the end users who invented the first versions of the

basic equipment in each of these fields. Similarly, 58% of the major improvements to this

equipment, were developed by lead users.

Only two studies have been carried out in the tourism industry (Baglieri and Consoli, 2009,

and Duverger and Hassan, 2007). In the latter study the lead users’ participation was strongly

driven by the identification with the case company. Knowledge of the company and its

operation, or lack thereof, did not impede participation interest and inputs from its lead users.

Furthermore, and opposed to von Hippel’s definition of lead users, the lead users in this study

were motivated to participate by some kind of reward. This may be explained by the

increasing number of companies seeking clients’ feedback, at one level or another (guest

questionnaires, surveys, focus groups etc.), and where some kind of reward is commonplace.

As people’s time is scarce, it increasingly seems to come with a “price”.

0

1

2

3

4

5

6

7

8

9

10

1978-1990 1991-2000 2001-2005 2006-2010

Lead user research fields 1978-2010

Industrial products

Computer / software

Outdoor equipment

19

2.2.3 Finding the lead users

Consumer knowledge and user experience as well as locus of control and innovativeness help

explain an individual’s lead userness (intensity). These factors might also be used to identify

the rare species of lead users (Schreier and Prügl, 2008). Finding lead users in advanced

analogue fields has proven effective by asking more easily identified lead users in target

markets for nominations (Lüthje and Herstatt 2004). Lead users at the leading edge of target

markets can be identified by several techniques; common methods are mass screening and

“pyramiding” (von Hippel et al.1999). Mass screening involves collecting information from

every member of a population or a sample to identify those with the desired attributes (Von

Hippel et al. 2008). Pyramiding is a search process based upon the idea that people having a

strong interest in a given attribute or quality, for example a particular type of expertise, will

tend to know of people who know more about and/or have more of that attribute than they

themselves do (von Hippel et al., 1999). Experiments have shown that pyramiding can

identify high-quality informants much more efficiently than can mass-screening techniques

under many conditions (von Hippel et al. 2008). When the desired type of lead user is so rare

as to make screening impractical (often the case) pyramiding can be applied. Users at the

leading edge of a target market often congregate at specialized sites or events that companies

can readily identify, visit and listen in. When specialized rendezvous sites for lead users do

not exist in a particular field, companies may even be able to create them. Early research on

lead users pointed out the dominant role of users in idea generation but the role of the user has

developed over the years to include in some cases all stages of innovation. Figure 2.4 shows

the systematic lead user process (Lüthje and Herstatt, 2004).

Figure 2.4. The process of the Lead User method, based on Lüthje and Herstatt, 2004,

Einar Svansson’s presentation.

Figure 2.3. shows that in the last year´s lead user research in the fields of computer and

software has been expanding and the tourism industry has been increasing its presence on the

internet with websites that incorporate comments from users. The characteristics crucial for

the online identification of lead users are: being ahead of a market trend; high-expected

benefits; user expertise and motivation; extreme user needs; as well as opinion leadership and

an online commitment (Bilgram et.al. 2008).

20

Outsourcing idea generation to the crowd of users (crowdsourcing) is one way of finding lead

user ideas. An example of this method is the comparison of ideas generated by the firm´s

professionals with those generated by users in an idea generation contest. The outcome was

that user ideas scored higher than the professional ideas in customer benefit and novelty, but

lower in feasibility (Pötz and Schreier, 2009).

Although some research praise lead user research to be the source of radical innovations,

critics of the lead user method point out that users may have limited ability to provide input to

the development process (Christensen and Bower, 1996), the innovation process has been

lengthy (2-7 years) from start to launch, and many specialists and skills have been involved,

making the innovation process both a time consuming and costly affair. The lengthy nature of

the process can prevent this methodology from being applied effectively in industries with

short-term innovation cycles or where quick turnaround from research to market delivery is

required (Simo, 2007), which is often the case in the tourism sector and most other service

sectors. Moore (2002) argues that lead users, who he equals with the “early adopters of the

market adoption curve, have more in common with each other than everyone else and should

thus not be left to steer innovation. Furthermore, Simo (2007) suggests that the lead user

method is better suited to meet the needs of the industrial goods market rather than consumer

goods market as lead users of industrial goods can typically be identified more reliably than

lead users of most consumer goods.

From the above discussion it is clear that the identification and selection of lead users is a

crucial part of a successful innovation process. Finding and integrating the “right” lead users

is still a tricky task in real lead user idea-generation projects. Although few studies have

further investigated characteristics that differentiate lead users from more ordinary users and

thus help to ease the identification process (Franke et al. 2006, Lüthje et al 2005, Schreier and

Prügl 2008, Schreier et al. 2007), little is known about which type of lead users really

contribute best to the generation of most innovative concepts. It could be difficult to predict in

advance which users are most likely to develop very valuable innovations. Radical and

profitable user developed innovations have been said too often originate from lead users in

advanced analogue fields (von Hippel, 2005). However, there has up to the present been little

empirical research on the quality of contributions of lead users from analogous markets in

lead user research (Hienerth et.al. 2007), so this is certainly an issue to investigate in further

studies. Are lead users a rare breed or do they get unnoticed in the innovations systems of the

organizations as information sometimes is coming through informal pathways?

2.2.4 User driven innovation in tourism

An increasing number of companies seek to reap the knowledge held by lead users such as

tour operators or individual consumers (tourists). Networking, discussion groups and in-depth

interviews can be utilized to tap knowledge of these unusually reflective and creative

individuals. In tourism, the most obvious example is where tourism companies have

responded to the increased awareness of environmental issues amongst tourists, learned from

them, and have innovated by designing holiday products that seek to integrate sustainable

tourism practices (Hall and Williams, 2008). A set of data based on interviews of larger

national and global tourism firms in North America and Europe disclosed that the major

movers of innovations are customers (users) (Weiermeir, 2004).

The tourism product, by its very nature, offers a unique possibility of immediate and often

unprompted user feedback. Particularly services requiring the physical presence of the

21

customer facilitate and even make natural the interaction and feedback between user and

producer – users thus become an implicit and natural part of the innovation process.

Despite this natural connection between user and producer, there are few documented

examples of systematic user-driven innovation in the tourism sector. The Danish Tourist

Board, Visit Denmark, is leading a project on cycling holidays in Denmark (“Den Gode

Cykeloplevelse”, funded by the Danish Enterprise and Construction Authority, project due to

conclude February 2011). The project aims to develop new cycling holiday concepts through

involving users and applies observations, interviews, user-diaries (including video and photo

diaries), as methods to obtain users input. The users are in addition asked to design their own

cycling route maps (Daugbjerg and Christensen, 2010). The mentioned methods are

particularly good for uncovering non – articulated needs (DAMVAD, 2009).

A practical example of user-driven innovation in tourism is iBAHN, a global provider of

digital entertainment and Internet solutions for the hospitality and meeting industries, which

set up a web site called http://www.ourhotelroom.co.uk/. Visitors to the site were asked,

through a questionnaire with space to freely express themselves, what kind of digital

equipment they would like to have in their hotel room as a potential guest. This initiative

came from outside the tourism industry, IBAHN being a IT-company, a fact which support

the findings of Hjalager (2002) and Mattson et al. (2005, in Teigen et al., 2009) which

propose that innovation in tourism is be driven by players outside the conventional tourism

producers/companies.

Another practical example is Starwood Hotels and Resorts' ultra-hip W chain building a new

hotel brand called “aloft”. Before hammering in a single nail the company tried to create a

buzz around the new properties by posting drawings of the hotel on a blog which invited

viewers to post comments about their likes and dislikes (Correa, 2006).

The systematic application of lead user method in tourism innovation is however almost

unknown. To the knowledge of this project group, there are only two documented studies

applying lead users in tourism innovation. One is the study of dissatisfied users (“Defectors”)

of a hotel (Duverger and Hassan, 2007); the second is an Italian case study on managing

virtual communities (Baglieri and Consoli 2009). The first study identifies its lead users as

guests having stayed at the hotel frequently within a set period of time. The group consist of

both guests who keep on using the hotel, as well as guests who once stayed there frequently,

but who have later defected (thus the name defectors) from the hotel. A toolkit for idea

competition (TIC) for services was developed and used for the project. The study revealed

that good ideas come from both within the firm’s current customer base, as well as from its

defectors, a result, which has implications for service organisations that wish to innovate.

The second study explores two prior examples of virtual communities development processes

and analyses the case of CTS's virtual community, an Italian-based tour operator firm. The

findings propose that tourism firms may strategically influence virtual communities to build

strong customer relationships and customers may provide useful information on their needs.

As there was no clear identification of lead users, our opinion is that this study is not a real

contestant for a research on lead users application in tourism innovation.

2.2.5 Models for user driven innovation

To analyse the user involvement in an innovation process, it is useful to have a good model.

Companies use different approaches when working with innovation and may use a variety of

22

different terms to describe the process. The more traditional models of innovation are mostly

based on the idea that the internal knowledge of the organisation mostly suffices to improve

and develop new products (closed innovation) (Rosted, 2008). To analyse user driven

innovation we propose two models, the Innovation Wheel model (ibid.) and a more

operational framework applied in a study by Alam (2002), and which we for this study will

refer to as the Alam framework.

The Innovation Wheel model

The Innovation Wheel is a model used to describe a company’s innovation process and the

involvement of users throughout the process. The model is developed based on interviews

with forty design and business consultancies in USA and Europe and their experience with

innovation processes with a large number of companies (Wise and Høgenhaven, 2008).

The innovation wheel divides the innovation process into two phases, namely the WHAT and

HOW phase. The two phases are then again divided further into four distinctive steps (see

table 2.1) It is important to stress that an innovation does not always include eight steps, nor

does an innovation process necessarily go through the steps successively.

Table 2.1: The Innovation wheel1

WHAT phase

Aim: Come up with concept ideas HOW phase

Aim: How can ideas generated be used/turned into

products/services

Opportunity identification

Discovery of business opportunities, within the firm or

outside (often involving users).

Conceptualisation

Ideas are described in detail as to evaluate the

economical potential

Data collection

Collecting data about users. Different methods used as to

better understand users articulated as well as non

articulated needs

Prototype

A prototype of the new product or service is created

(sketches, models, descriptions, experiments)

Pattern recognition

Analysis of data to understand unsolved problems and

user needs. Users are seldom involved in this process

Test

Future users test prototype. According to user’s reaction

and input, adjustments are made to the product/service.

Concept ideas

Patterns discovered in the previous steps are transformed into new concepts,

Can be tangible, non tangible, a new or adjusted business

model, a new way of meeting users needs

Implementation

The innovation team might work together with other departments in the company (production- sales &

marketing departments)

Alam Framework

Alam (2002) employed a highly operational framework for analysing the user driven

innovation process of 48 concept innovation projects at 12 financial service providers, which

he studied in Australia. The framework is not referred to as a model, but we find the structure

and its many relevant variables very useful and highly relevant to our study of innovation in

the tourism sector.

The Alam framework is based on four main questions which he in his study posed to the case

companies in order to establish 1) Why involve users, 2) At what stages are users involved, 3)

How intensively are users involved in the different stages?, and finally, 4) How is input from

users gained. Each of these four questions then has several sub-questions in order to gain as

much detailed information as possible (see table 2.2).

Similar to our research design and method, Alam interviewed two managers + one

professional user per company. The professional user is not defined as a particular type of

1 Source: Rosted, FORA 2008

23

user (like our lead users), but it is a user which is involved in several innovation projects of its

financial service provider.

We will apply Alam (2002) framework of service innovation when assessing the lead user

involvement in the innovation process of case companies in chapter 6. The Innovation Wheel

model is referred to in the Norwegian cases, and in the Icelandic case the Innovation Wheel

analysis is outlined in Appendix 1 for comparison.

24

Table 2.2: The Alam Framework (2002) 2

Main Question Sub Questions

Objective/purpose of

involvement

Why are users involved in the service development

process?

Superior and differentiated service -The possibility to offer unique benefits and better value to customers

Reduced cycle time of production

User education - Educate users about use, attributes and specification of service

Rapid diffusion - Accelerate market acceptance of product

Improved public relations - Through user involvement before intro of service

Long term relationship - Improved producer – user relationship

Stages of involvement

– at what stages of the service development process are users

involved?

Strategic planning

Idea generation

Idea screening

Business analysis

Formation of cross functional team

Service and process design

Personnel training

Service testing and pilot run

Test marketing

Commercialisation

Intensity of involvement

how does the intensity of

user involvement vary across various stages of the

development process?

Passive acquisition of input - Users take initiative to give input into the development process, e.g. come with a service idea. Producer acquire input

passively, intensity of involvement is low

Information and feedback on specific issues - Producer may approach users to obtain information and feedback on specific issues at various stages of the

development process – the intensity is medium high.

Extensive consultation with users - Producer takes initiative and invites user

input by means of a planned process with predetermined objectives. Intensity of involvement is relatively high

Representation –users are invited to join a new service development team where

they contribute to the specific stages of the development process in their capacity as a team member. The intensity of involvement may be considered extremely

high

Modes of involvement

What are the means through

which input and information are obtained from the users

Face to face interviews - Producers conduct in-depth interviews to gather user input on various aspects of a service to be developed (needs, preferences,

likes/dislikes etc.)

User visits and meetings - Users attend service development team meetings where they provide input on various aspects of the development process.

Brainstorming - Including group creativity techniques designed to arrive at creative ideas and solutions.

Users’ observation and feedback - Users are asked to observe and comment on several service development activities, such as delivery process, testing of service

delivery process and personnel training.

Phone, faxes and emails - Producers inform users about specific issues of service

development through phone, faxes and emails, brochures, other publications.

Focus group discussions - Producers conduct focus group discussions with groups of invited users on several issues related to the development process.

2 Source: Adapted from Alam (2002): An Exploratory Investigation of User Involvement in New Service Development

25

3.0 INNOVATION IN THE NORDIC AND BALTIC COUNTRIES

The subsequent chapter aims to offer a brief status of the innovation situation and

international standing in Norway, Denmark, Latvia, Estonia and Iceland with special focus on

tourism and user driven innovation. The chapter serves to give the reader a background,

particularly for the analysis in chapter six.

3.1 INNOVATION IN NORWAY

3.1.1 Introduction

In December 2008, the Norwegian government issued a Whitepaper on Innovation (“An

innovative and sustainable Norway”, NHD, 2008-2009) which states that the aim of the

government is to strengthen the country’s innovation ability as to contribute to an optimal

value enhancement in the national economy. This document gives a good picture of the

innovation status of Norway and will therefore be the basis of this chapter.

Although well-established indicators with the basis in GNP places Norway in the top layer for

value creation and productivity, important mechanisms, which have contributed to the

Norwegian development have been assimilated only to a limited degree by the traditional

innovation ratings (ibid). On the European Innovation Scoreboard (EIS) where most European

countries, plus countries like the USA, Canada, Australia and Japan, are being rated on 25

different indicators, Norway was ranked below average in 2007. Sweden, Switzerland and

Finland held the three top positions; Denmark was ranked number five, Iceland number 11

and Norway number 20.

Figure 3.1. Main Index from European Innovation Scoreboard 2007 (Pro Inno Europe, Inno

Metrics, 2007)

In the EIS and other international ratings of a given country’s innovation ability, there is a

focus on research, advanced technology and physical products.

Innovation in the public- and service sector is not properly captured in the abovementioned

analysis and rankings. They are large dynamic sectors in most developed countries, sectors

which constantly need to adapt to changes users/customers preferences and demographic

composition. It is undoubtedly easier to decide the innovation value of a physical product than

26

of a service. EIS 2006 did in fact contain a separate index for service innovation, but it is

pointed out that the results from this index are tentative. It is worth noticing that several of the

countries, which came out low on the innovation index, got a high score on the service

innovation index, Norway being one of these countries. (NHD, 2008-2009)

3.1.2 Norwegian tourism and innovation

Tourism represents about 6.6% of GDP in Norway (WTTC, 2007). In December 2007 the

Norwegian government presented their national strategy for the tourism industry in a

Whitepaper named “Valuable Experiences – National Strategy for the Tourism Industry”

(NHD, 2007). The vision of this paper is that Norway, through offering valuable experiences,

shall create value both to its visitors, tourism enterprises and their employees, the local

communities involved, the environment and the nation as a whole.

The report stresses that innovation is necessary to strengthen Norway’s competitive edge,

improve cost efficiency and create growth in tourism. Through an active, collective effort

geared towards development of holistic, market oriented tourism products of high quality,

Norway may further develop into a more attractive destination. The stress is on developing

holistic products, i.e. products, which give the visitor a total experience as opposed to a

fragmented one. Such a total experience could consist of culture, food, history, nature,

activities, in addition to effective transport and the development of attractive accommodation.

(NHD, 2007). In order to develop holistic products, there is a clear need to cooperate both

with partners and even competitors within the industry, as well as with partners outside the

tourism industry. A good example of this innovation and development strategy are mountain

resorts such as Hemsedal and Trysil, attracting both national and international tourists.

Despite the Governments clear impression of lacking innovation ability, the actual innovation

activity has not been systematically registered and analysed. According to Rønningen (in

Teigen et al., 2009), this knowledge void is partly due to the Eurostats regular innovation

surveys which do not include important parts of the tourism sector.

In 2008 the Lillehammer University College undertook a national survey on the innovation

activity in Norwegian tourism (Teigen et al., 2009). The most unexpected finding was the

high innovation inclination as it was reported from the companies. The study also revealed

that:

Innovation activity increased with participation in innovation directed cooperation.

Companies, which involved their employees in development processes had higher

innovation ability than companies which did not involve their employees in such

processes.

Companies, which systematically collect market data/information, are more

innovative than companies who do not undertake such activities.

There is a tendency that companies which receive public/governmental

support/funds, increase their inclination to innovate.

The size of the business was found to have a certain importance on innovation activity, larger

businesses being more innovative than smaller businesses. This is mainly because the size of

the company affects the company’s ability to collect market data and to involve employees in

the development process (ibid.).

27

3.1.3 User driven innovation in Norway

Farstad et al. (2007) points out that users and customers have been a natural part of the

innovation process in Norway for many years. Nevertheless, a study of Norwegian business

managers (Perduco/STEP, in Huse and Hoholm, 2008), reveals that user-driven innovation

does not seem to have a strong foothold among Norwegian managers. 95% of the surveyed

business managers deemed themselves responsible for the contribution which led to renewals

and innovation of products and services. Other important contributors who they considered

important in this process were employees (83 %), owners (81 %), customers (56 %) and

suppliers (53 %). These results reveal a priority to closed, top-down innovation processes in

Norwegian businesses.

Another study by the STEP group (in Herstad et al. 2008) revealed that in a comparison of

Austria, Belgium, Denmark and Norway, Danish companies showed the highest degree of

open innovation and user involvement, while Norwegian companies had the lowest degree of

open innovation and user involvement.

The two preceding findings are no good news to Norwegian innovation as empirical studies

have found that many of the innovations developed by users have commercial attractiveness,

greater marketplace appeal than concepts developed by conventional market research methods

(Franke et.al, 2006).

At present there are a number of studies in the works on user driven innovation in Norway.

Several of these are funded and initiated by the Nordic Innovation Centre or the Research

Council of Norway. There are also research departments at various academic institutions

around the country working on, innovation, such as Eastern Norway Research Institute, the

University of Agder, Nordland Research Institute and the Norwegian School of management

(BI) (Huse and Hoholm, 2008). In addition there are, despite the above empirical results,

some companies applying user-driven innovation in Norway, successfully, see table 3.1. It is

however worth noticing that none of the listed companies are within the service or tourism

business.

Let us hope that the on-going research and focus on user driven innovation is all business

sectors can create an awareness and discussions which in turn can challenge the current

attitude and application of user driven innovation in Norway.

Table 3.1. Norwegian companies applying user driven innovation (Huse and Hoholm, 2008)

Company name Industry Level of user

involvement*

Description of innovation methods

TINE Foods 3 Focusgroups, user panels, surveys

Jordan Hygenic Articles 3 Design based

Håg Office Furniture 3 Design based

Trolltech Software- Platforms 4 User driven, open sourc innovation

Lærdal Medical Medical Equipment 4 User driven innovation

Tomra Recycling 4 User testing

Hardrocx Sports Equipement 4 User Innovation

* The number indicates the level of user involvement, where 1 is the least intense involvement and 5 is the highest.

28

3.2 INNOVATION IN DENMARK

3.2.1 Introduction

Through the implementation of the National Innovation Policy, the Danish Council for

Technology and Innovation (RTI) has launched several new initiatives in order to support

specific sectors and guide markets’ ability to improve their competitiveness. In their 2008

annual report RTI launched initiatives for user-driven innovation and for public sector

innovation. The EU Commission’s annual trend chart shows that Denmark has

managed to establish a focused and coherent innovation policy over the last decade, which has

brought Denmark into the leading group of EU countries concerning innovation score cards

and policies. Nevertheless, Denmark still has some main policy challenges, these are:

Table 3.2. Main Danish innovation policy challenges in 2009 (Pro Inno Europe, 2009)

Description of challenge Relevant indicators and trends

1. Competitiveness; keep and improve

national competitiveness and simultaneously

secure national cohesion

European Competitiveness Report has several indicators that

may be relevant for comparisons. These are for example

Macroeconomic conditions, Demand side factors, Inputs to

production, R&D and Innovation, Market structure, and

Openness & barriers to trade.

2. Education; especially youth and

S&E graduates and doctorates

Graduates and doctorates: The Danish production of graduates

is far above the EU-27 average supporting national

competitiveness in core sectors such as high tech

and KIS.

The Danish production of doctorates is speeding up in recent

years, almost doubling the number of students since 2000 and

still increasing in numbers.

3. Innovation; especially improve national

output and effects/impacts of innovation

activities. Also entrepreneurship and

innovation among SMEs (as identified in the

national National Reform Programmes in

response to the Lisbon Strategy).

The CIS based innovation measures such as EIS 2008

innovators indicators, but also new indicator types such as user-

driven innovation, open innovation, design innovation,

employee-driven innovation, and public innovation are

relevant.

Denmark is performing at a low level on the production and

industry related innovation indicators, but seems (in case

studies) to perform above average on many of the new

innovation types. This may indicate the transformation of the

Danish society away from product innovation towards KIS

innovation

Developing the information on the innovation measures, the figure below shows that most

Danish measures are targeting environment, health, ICT and biotech, followed by energy and

nano-sciences. The spread is rather narrowed in S&T fields and far from the EU27 picture. (Pro Inno Europe, 2009)

29

Figure 3.2. Profile of public intervention in innovation

From the overview of Danish innovation support programmes it seems clear that

tourism is not a target area per se, neither for traditional industry support measures, nor for

newer ones like user driven innovation. Hence, although Denmark traditionally scores high on

international comparisons on innovation policies and investment in innovation related activities,

the tourism industry has not been targeted in such activities.

3.2.2 Danish tourism and innovation

Looking at Denmark’s tourism policy and growth plan for 2009 it was stated in the annual

budget that financial support measures for the tourism sector will be directed towards projects on

product development, innovation and branding of the tourism sector. Financial support

measures may also be used for business services and marketing activities, which can create a

stronger and more coherent image of Denmark abroad. Especially the attraction of sports and

cultural events should be a priority. Tourism sector has about 2.8% share of GDP in Denmark. (OECD, 2008)

In spite of the good intentions for developing Denmark’s tourism industry, the realities have

been that the sector has experienced a downward trend the last seven years. According to Visit

Denmark, the national tourism organisation, year 2009’s visiting level was at the same as in

2005. Moreover, from 2007-2009 the 50 most popular Danish tourist attractions have

experienced a smaller decline.

32

INNO-Policy TrendChart

Profile of public intervention in innovation Developing the information on the measures further, Figure 3 shows that most Danish measures are targeting environment, health, ICT and biotech, followed by energy and nano-sciences. The spread is rather narrowed in S&T fields and far from the EU27 picture. As under Figure 2, there may be double counting among related R&T fields for some measures resulting in over representation in the R&T fields of these measures. Figure 3: Targeted R&T fields by support measures in Denmark compared to EU27

0% 5% 10% 15% 20% 25%

Materials

Food, agriculture and fisheries

Industrial production

Services

Transport

Security and defence

Government and social relations

Other

Space

Socio-economic sciences and humanities

Nanosciences and nanotechnologies

Energy

Biotechnology

ICT

Health

Environment (including climate change)

% of total number of measures DK % of total number of measures EU27 Source: TrendChart-ERAWATCH database of support measures (data downloaded on 5 June 2009); analysis Technopolis Group

30

Figure 3.3. Development in visit trends at Denmark’s top 50 tourist attractions 2002-2009

(www.visitdenmark.dk)

3.2.3 User driven innovation in Denmark

In Denmark, the term user-driven innovation was applied for the first time in the 2003 FORA

publication “A Benchmark study of innovation and innovation policy - what can Denmark

learn?” Following this work the arguable first national innovation programmes for user

driven innovation was introduced in Denmark. The focus and definition of user-driven

innovation for these programmes have been:

• Customer focus

• Skills for analysing and assessing customer needs

• Methods applied in conducting user surveys

Later on in 2007 the Ministry of Economic Affairs launched a national programme for user-

driven innovation running from 2007-201. A programme which arguably made Denmark the

first OECD country to have a formal user-driven innovation policy. The programme had an

allocation of about 14 million EUR. The user-driven innovation programme had from its

beginning focus on three different efforts: a regional effort, a strategic effort and other

important areas.

The regional effort will ensure that knowledge of and experience with methods for user-

driven innovation is disseminated through out the country. Regional actors in each of the

country’s five geographic regions will have the possibility to initiate a yearly project in their

region. The strategic effort concerns a number of thematic issues under which applications are

especially welcomed. The themes are selected from year to year and can relate to:

Areas where Denmark has particular business competencies, for instance environment

and energy technology, construction, health, design, and foodstuffs.

Cross-sectoral issues relating to societal problems with promising market potential.

For example healthy and energy saving construction, or fighting obesity.

31

Welfare areas. In particular where the citizen interact with the public sector. For

instance in the care for children and elderly citizens and the health sector.(DECA,

2007)

Once again it can be noted that the focus is on high technology and R&D intensive industry

sectors like health care, and newer areas like environment and traditional strongholds like

foodstuffs. Denmark’s early focus on user-driven innovation seemed to have had a general

impact within the Danish business environment and in comparison with the other Nordic

countries. Thus a recent report from FORA on user-driven innovation in the Nordic and Baltic

Countries shows that Denmark is number one among the Nordic and Baltic countries in terms

of companies’ ability to involve their customers. (www.copcap.com)

Copenhagen Capacity, Denmark’s regional metropolitan investment promotion agency writes

about the report on their home page that:

“Consumers and customers ought to be involved in the idea- and product

development phase in order to successfully identify and meet their needs. That is the

logic behind user-driven innovation - a discipline which the Danish companies seem to

master better than companies in the other Nordic countries and the Baltic countries,

according to a new report by FORA and Nordic Innovation Centre. By far, Denmark is

the country in which the largest number of user-driven innovation projects has been

identified. In Denmark, we have found 20 projects, which we consider to be user-driven

innovation projects that have been carried through and introduced to the market, the

report states. More than 60 per cent of the projects have lead to the development of new

concepts and more than 70 per cent have resulted in new products.”

Yet, if we look into the individual projects financed under the Danish government’s user-driven

innovation programme there are few projects from the tourism sector. This is also underlined

by a statement from Visit Denmark, where it is mentioned that:

“User-driven innovation is not very commonly used within the tourism industry. Yet,

we see an increasing demand for new experiences especially within nature and culture

where Denmark has a large unexploited potential. Within these areas it seems obvious

to apply the methodology of user-driven innovation to develop new tourist offerings”,

states Ditte Mųller Munch from Visit Denmark (www.ebst.dk).

The report ‘Innovation Systems in Nordic Tourism’ from 2008 supports the general picture

that innovation in general and user-driven innovation in particular has so far escaped the

attention of Denmark’s and the Nordic region’s tourism industry. This report concluded

among other things that:

“Generally speaking, tourism policies at regional, national and transnational levels do not

particularly focus on innovation in the industry, if such an objective is present at all.

Tourism and related enterprises have also limited access to general innovation resources

and are scarcely heard in general policy making. Therefore we argue that tourism exists in a

kind of policy vacuum regionally, nationally and cross nationally in the Nordic context. In

conclusion we supply potential policy areas for Nordic tourism to be further developed and

researched’ (Hjalager, et al., 2008)

Although user-driven innovation seems to have gained relatively little impact within

Denmark’s tourism industry there are few examples that point in the other direction.

Copenhagen has thus today around 12 Michelin star restaurants and the restaurant NOMA

32

was voted the world’s best restaurant in 2010. In addition, a few number of five star and

boutique designer hotels have been established during the last five to ten years. Whether these

establishments are strong enough to survive in the aftermath of the global financial crisis

remains to be seen, but they do on the other hand suggest that there is an established platform

for elitist and lead user driven tourism in Denmark today. The question is, if the experiences

of these establishments can spill-over into the more mainstream parts of Denmark’s

tourism industry?

3.3 INNOVATION IN LATVIA

3.3.1 Introduction

While Latvia experienced an economic boost between 2005 and 2007, the annual GDP

growth in 2008 declined from 11% to 4.6%. The EIS 2008 identifies Latvia among the

catching- up group, with a performance considerably below the EU-27 average, but with an

above average rate of improvement. Latvia was ranked 30th out of the 32 countries included

in the EIS with its score (0.239) making only half of the EU- 27 average (0.475). So far the

increase in innovation inputs (enablers) has not resulted in an accompanying growth in

innovation performance.

Relative strengths, compared to the country’s average performance, are in Human resources

and Finance and support and relative weaknesses are in Linkages & entrepreneurship,

Throughputs and Innovators.

Over the past 5 years, Human resources, Finance and support, Firm investments and

throughputs have been the main drivers of the improvement in innovation performance, in

particular as a result from strong growth in S&E and SSH doctorate graduates (25.7%),

Private credit (23.4%), Business R&D expenditures (12.7%), Community trademarks (29.4%)

and community designs (19.2%). Performance in Linkages & entrepreneurship has worsened,

in particular due to a decrease in the Firm renewal rate (-18.6%) and Public-private co-

publications (-8.1%).

33

Figure 3.4. Comparative analysis of innovation performance of Latvia (Pro Inno Europe,

Inno Metrics, 2008)

Despite the government’s official position that all launched and prescheduled innovation

support programmes will be maintained as well as the objective that GERD should reach

1.5% of GDP by 2015, the 40% cut in state budget for R&D, tax raises and the government’s

indecision on introducing structural reforms even further inhibit innovative development in

the country.

Compared to the EU policy mix, Latvia has a larger share of R&D and innovation support

measures aimed at public research organisations and universities, but a comparatively smaller

one targeting R&D co-operation, knowledge transfer and support to innovation management

and advisory services, as well as direct support of business R&D and support to innovative

start-ups.

Main Innovation Challenges:

Enhancement of innovation capacity and performance of enterprise sector.

Maintenance and promotion of qualified workforce.

Facilitation and intensification of science/industry co-operation.

In terms of policy design, the major opportunity for Latvia lies in capitalising on the

complementary competencies possessed by players in the national innovation system and

ensuring their synergies in future policy-making in the field of R&D and innovation.

There have been substantial reallocations of financial resources between various policy

measures in Latvia in response to the needs specifically brought forward by the economic

crisis. It is highly important to also ensure continuity of established and well-functioning

schemes and policy lines, a systemic approach as well as a strategic long-term vision in terms

of policy planning and addressing the identified systemic challenges.

Tax incentives as a non-financial instrument for the promotion of innovation, so far unused in

Latvia, are still to be taken advantage of. The recent economic trends and market

developments shape the current opportunities and threats for further development in Latvia,

34

especially under the tight budget that requires strategic prioritisation of actions and funding

allocations.

The frequent changes and mutual rivalry of political players even more acutely determine the

need for adopting a national-level policy document that would ensure the succession and

consistency of the economic and innovation policy irrespective of the particular political

situation in the country.

3.3.2 Latvian Tourism and Innovation

The share of tourism sector in Latvian GDP is 4.1% (Central Statistical Bureau of Latvia,

2007). It was a difficult year in 2009 for the tourism industry in Latvia. The impact of the

global economic crisis on discretionary spending hit Latvia with tourist arrival numbers down

and tourism revenues likely to come in below expectations. This situation is likely to endure

over 2009 and into 2010 before a recovery can begin in earnest in 2011.

Figure 3.5. Percentage change in number of nights spent, 2009 compared with 2008

(Eurostat, 2009)

Latvia welcomed 5.26mn tourists during 2009. However, when it comes to tourism revenue,

Estonia leads the way with US$1.57bn, followed by Lithuania on US$1.29bn and Latvia with

US$879mn. Lithuania and Latvia both tend to have a higher proportion of same-day tourists,

whereas Estonia has a much greater proportion of overnight tourists, who add more value to

the tourism industry.

While overall picture for Latvia tourism is somewhat clouded 2010, the cruise ship sector has

clearly shown surprising resilience. Data from ports indicate that the 2009 summer season

was stronger than 2008’s. Latvia’s Riga Freeport experienced rapid growth in passenger

numbers, handling 572,709 passengers (including 135,133 cruise passengers) in the first nine

months of the year, an increase of 42.6% year-on-year (y-o-y).

One reason for the continued popularity of cruise holidays, even at a time of global economic

crisis, is that the majority of cruise ship passengers tend to be older and more affluent, and

have the necessary disposable income to go on cruise holidays. Moreover, their money is now

going further, with several cruise lines introducing significant discounts on Baltic routes in

order to ensure high volume.

There is no specific national strategy, action plan or research conducted regarding innovation

in tourism sector.

35

3.4 INNOVATION IN ESTONIA

3.4.1 Introduction

Estonia is a small country with an area of about 45 000 square kilometres) and with a

population of about 1,34 million. About 65% of the inhabitants live in towns and 35% in rural

municipalities. About 400 000 people live in the capital Tallinn. So the internal market is very

small.

In the Global Competitiveness Index 2008-2009 (World Economic Forum, 2010), which is

one of the world’s most comprehensive assessment of countries’ competitiveness, Estonia is

placed 32., which is behind all the Nordic countries, but ahead on Latvia and all the other new

EU members. At the same time Estonia has dropped 5 positions compared to 2007-2008

ranking. When looking at the Innovation sub index, then Estonia has a 40th

place, which also

indicates that Estonia is still in the transition stage to the innovation driven economy.

Estonia's economy slowed down markedly and fell sharply into recession in mid-2008,

primarily as a result of an investment and consumption slump following the bursting of the

real estate market bubble. GDP dropped nearly 15% in 2009, among the world's highest rates

of contraction. As the global recession has slowed down the overall active travelling then

Estonia has had a record year in terms of visiting tourists in 2010. More than 67% of the

Estonian GDP is delivered from the service sectors and tourism represents about 5% of the

GDP.

According to European Innovation Scoreboard 2009, Estonia was placed above the EU

average for the first time and belongs now to the Innovation followers group together with

countries like Austria, France, Ireland, the Netherlands and others, while the Nordic countries

Denmark, Finland and Sweden are all in the group of Innovation leaders.

Figure 3.6. European Innovation Scoreboard 2009

As the scoreboard uses data form 2006-2008 and some also from 2005, then it does not reflect

the effects of the financial crisis of 2009 or 2010. Nevertheless, Estonian growth rate over the

last years has been one of the fastest in catching up with the EU27 average innovation

performance in 2009. The main drivers for it have been strong growth in Firm investment and

Throughputs.

36

Figure 3.7. Comparative analysis of innovation performance of Estonia (Pro Inno Europe,

Inno Metrics, 2009)

The relative strengths, compared to the country’s average performance, are in Finance and

support, Firm investments, Linkages & entrepreneurship and Innovators and relative

weaknesses are in Throughputs. This is a result of strong growth in Business R&D

expenditures (20.0%), Non-R&D innovation expenditures (29.3%), Community trademarks

(14.5%) and Technology Balance of Payments flows (16.9%). Performance in Innovators has

remained stable.

According to the Innovation Research conducted in Estonian Statistics Board in year 2008

48% of the Estonian companies were technologically innovative and 35% had implemented

an organizational or marketing innovation during past 3 years. For about a quarter of the

companies gained from these innovations. The share of innovative companies in services

sector in 2008 was a little over 40%, which is above the EU average.

Estonia has made significant progress in R&D investments in recent years, due to large

infrastructure investments by public sector, but also investments by private sector. In 2000-

2008 the average growth of Estonian R&D investments has been 10%, which is the highest in

EU. Especially high growth has been in private sector R&D investments, about 19%, due to

very low base level. In monetary terms the R&D investment level has five folded. The

investments by public sector have also continued during the economic downturn, in order to

compensate the decrease in private sector investments. The public sector investments have

grown to 1% of GDP, which is considered to be optimal in developed countries. The EU

average is 0,7%. The private sector contribution into R&D development as a share of GDP is

still more then 2 times below EU average. Also the share of scientists and engineers in

Estonian work force is below EU average. (Estonian State Chancellery Strategy Unit, 2010)

Estonian innovation policy is focused in 3 areas: 1) emergence and development of local

internationally competitive high-technology companies, 2) attractive environment creation for

international companies for creating their development units in Estonia, 3) involvement of all

the other companies in the innovations system according to their specifics and possibilities.

3.4.2 Estonian tourism and innovation

According to the UN WTO (World Tourism Organization) the tourism grew 7% in the world

during the first half of 2010, but the base rate of 2009 was very low as the aftermath of the

37

financial crisis in 2007 were still felt on most continents. The lowest growth was in Europe,

only about 2% and more specifically in Northern Europe, there was a decline.

In Estonia the number of nights spent in accommodation location grew 12%, but income of

the companies grew only about 4%. The number of international tourists visiting Estonia grew

about 13% from January through July of 2010 compared to the same period of 2009. This is

also an all time record number of visiting tourists. This is a good result compared to the other

new EU members. Most of the tourist growth came from Finland and Russia and they mostly

stayed at spa’s. Norway is one of the few countries from where the number of tourists has

continued to fall (whereas in Latvia the number of Norwegian tourists grew about 25% in the

I half of 2010. (Enterprise Estonia, 2010).

The main focus of Estonian government in tourism, through it’s support programs and

Enterprise Estonia, is to increase the recognition of Estonia as a travel destination and to

increase Estonian tourism products’ international competitiveness. There is no specific

national strategy, action plan or research conducted regarding innovation in tourism sector.

There is a yearly “Tourism innovator “ award awarded among other entrepreneurship awards

by Enterprise Estonia and one of the award winners in 2006, Otepää Adventure Park, is also

included in this study.

3.4.3 User driven innovation in Estonia

The term of user-driven innovation is very little known and does not get much specific

attention. The focus in discussions is rather on open innovation and not yet on user-driven

innovation. There is no previous research conducted on user-driven innovation in Estonia.

3.5 INNOVATION IN ICELAND

3.5.1 Introduction

Iceland is a geographically large country (over 100 000 square kilometres) with a small

population, just over 317 000 in January 2010, (Statistics Iceland, 2010) and thus a small

internal market. The development in the years before the economic collapse seems to have

been very prominent with Iceland high on many lists of innovation and competitiveness.

While looking at the public figures from various sources it was noticeable that the economic

crisis with the fall of the Icelandic banks in the end of year 2008 seems to have made a shift in

the competitiveness of the Icelandic environment.

Iceland´s economic growth before the collapse was substantially generated by an economy

characterized by services, natural resource and low-technology manufacturing industries. The

service sector accounted for more than two-thirds of total economic output in 2004 (OECD,

2006, p.7). Services from Iceland are around 0,07% of World Export Share (WES) but goods

are only around 0,03% of WES or less than half the export services from Iceland

proportionally (Porter, 2006, p. 24).

R&D spending increased significantly, as both government and industry invested more in

R&D and government funding of R&D exceeded that of all other OECD countries in relative

terms, standing at almost 1.2% of GDP in 2003. Industry spending on R&D grew rapidly,

38

increasing from 0.6% to 1.3% of GDP between 1995 and 2003, exceeding the EU average by

a wide margin (OECD, 2006, p.4).

International linkages are an important element of Iceland’s national economy and innovation

system. This poses restrictions to local expansion, but also forms a stimulus for many

companies to internationalize. The economy is generally open to competition through

international trade and foreign direct investment, except in energy, agriculture and fisheries.

The Icelandic governments until 2008 actively encouraged foreign direct investment (FDI) in

power intensive industries, and Iceland was well-known for its net outward FDI, especially in

sectors like food processing, fishing, chemicals (mainly pharmaceuticals) banking, retail and

property (OECD, 2006, p.8).

By many indications, the Icelandic innovation system gained considerable ground in the years

before the collapse but it´s obviously a valid question how sustainable this development was

looking at recent figures. Most international comparative studies on innovation performance

until 2008 praised Iceland’s innovation and economic performance with Iceland performing

well above the EU-average and in many cases above the OECD average for many of the

leading innovation indicators and was often referred to as a leading country in innovation, a

situation very different from the one that characterized the country a decade or so before the

economic collapse (OECD, 2006, p.10) and perhaps a different situation to the current

situation after the collapse. The Global Entrepreneurship Monitor (2005) for an example

reported that Iceland was performing very well in terms of entrepreneurial activity and spirit,

and levels of venture capital appeared high as a share of GDP (OECD, 2006, p.10). The World Economic Forum ranked Iceland fifth on its Competitiveness Index, reflecting its healthy macro-economic environment and the high transparency and efficiency of its public institutions (Global Competitiveness Report, 2005). On the European Innovation

Scoreboard (EIS) where most European countries, plus countries like the USA, Canada,

Australia and Japan, are being rated on 25 different indicators, Iceland was ranked at number

11 in 2007.

But on a brand new list from the World Economic Forum (WEF), where countries are ranked

by competitiveness Iceland is now number 31 compared to place 26 in 2009 and place 20 in

the year 2008. In the year 2005 Iceland was in the seventh place on the list. The WEF analysis

is that Iceland´s fall on the list is based on an ongoing decline of the banking and finance

sector. They still point to some positive factors like education (6) and a technological

readiness (4) that means a technology driven business environment that is keen to use

technology innovation to increase productivity (WEF, 2010; Mbl.is). There are also other

positive points like the innovation intensity. The country is ranked number 20 in innovation

and sophistication factors.

3.5.2 Icelandic tourism and innovation

The hospitality and tourism in Iceland had a WES of around 0,06% from 1997-2003 and that

is higher export market share than most industries in Iceland had in that period (Porter, 2006,

p. 25). The tourism sector has had a around 17% of total export value in the last decade and 4-

5% of GDP. Employees in the tourism sector are around 8.000, thereof around 5.000 in the

core tourism industries. Inbound tourists have been growing rapidly in the last decades and

have been around 500.000 a year from 2007-2010 up from around 300.000 in the period of

2002-2004. Inbound tourists to Iceland declined 4,8% in number in the first 6 months of 2010

down from 2009 (Iceland Tourist board, 2010).

39

In 2005 the Icelandic government presented their national strategy for the tourism industry in

a Whitepaper named “Valuable Experiences – National Strategy for the Tourism Industry”.

The vision of this paper is that Iceland, through offering valuable experiences, shall create

value both to its visitors, tourism enterprises and their employees, the local communities

involved, the environment and the nation as a whole. To attain this vision, the government

aims to provide a platform and the right kind of framework for an increasing innovation in the

tourism sector where the tourism industry itself will be responsible for the development and

offering of attractive products. The report stresses that innovation is necessary to strengthen

Iceland´s competitive edge; improve cost efficiency and create growth in tourism (Icelandic

Parliament, 2005, p.1).

The main objectives of Iceland´s tourism strategy are to promote nature and wilderness and

the nation’s culture, and Iceland shall be in the forefront of environment-friendly tourism. The

competitive position of the tourism industry shall be ensured with the operating conditions

created for the tourism industry comparable to those reigning in Iceland’s competitor

countries. Innovation and development in the sector shall increase returns year-round through

better utilization of investments. Research shall be conducted on the impact of innovation on

the growth of Icelandic tourism. Processes for the development of products and services shall

be formulated for utilization by Icelandic tourism companies. The government shall, in

accordance with its policy statement, participate actively in innovation and product

development work within the tourism industry (Icelandic Parliament, 2005).

3.5.3 User driven innovation in Iceland

A NICe report on user driven innovation (Wise and Högenhaven, 2008) revealed that user-

driven innovation does not seem to have a strong foothold among Nordic managers and

priority is on closed, top-down innovation processes.

However, and according to the Community Innovation Survey IV, the most prominent source

of ideas for innovation in service companies is within the company (48%). A second

prominent source of innovation ideas is the customers (32%). Service companies are in close

contact with their customers and respond faster to customer wishes compared to

manufacturing companies (Finnbjörnsson, 2007; Wise and Högenhaven, 2008, p.66).

Another interesting research carried out in 2009 on entrepreneurship of user-innovators in

Iceland revealed that 32% have shared some content over the internet and 37% have changed

or adjusted a product to their needs and 25% have built a good or a thing for their own use.

About 2/3 of entrepreneurs in Iceland have experience of the good or service they are

marketing. (Sæmundsson, 2009; Sæmundsson & von Hippel, 2010). Interestingly user-

innovating entrepreneurs have 57% indication of market innovation compared to 30% of other

entrepreneurs that is significantly different (Sæmundsson & von Hippel, 2010, p. 8). There

seems to be a relationship between the level of user experience and innovativeness

(Sæmundsson & von Hippel, 2010, p. 9). The results of this pioneering research on Icelandic

users shows that innovating users are an important source of entrepreneurship and that user-

innovating entrepreneurs are likely to be more innovative (Sæmundsson & von Hippel, 2010,

p.10).

40

3.6 COMPARISON OF INNOVATION IN THE COUNTRIES OF STUDY

3.6.1 Similarites and differences in Innovation

The countries selected for the project have quite different standing in terms of

competitiveness and innovation. Denmark is surely a leading EU country in innovation

scorecards and policies and performs especially well in open innovation indicators. Also

Iceland, at least before the financial and economic collapse of 2008-2009, has made

considerable investments into innovation systems and was ahead of EU average by a wide

margin. Estonia has made considerable progress during recent years and belongs now to the

group of innovation followers and places above the EU average in European Innovation

Scoreboard as of 2009. Latvia has performed weaker in terms of innovation indicators and

was also probably hit the harder by world economic recession. During the last five years

Norway has been part of the EIS group of “moderate innovators” with innovation

performance and average annual growth in innovation below the EU27 average.

All the project countries have national strategies for innovation. Iceland and Norway also

mention tourism as one of the important economic sectors. There is however, still more focus

on innovation aspects in high-tech-, environmental-, health care- and other industries, and less

on service- and tourism industries.

3.6.2 Similarites & differences in tourism trends

Tourism is an important economic sector for all the project countries – in 2010 it represented

in Norway 6.6%, in Estonia 14.5%, in Iceland 14.7%, in Latvia 6% and in Denmark 7.7% of

GDP (World Travel and Tourism Council, 2010). The global economic recession also led to

hard times for the tourism sector. Only Estonia has shown an increase in the number of

visiting tourists in 2010.

Innovation, and more specifically user-driven innovation in tourism, has had most attention in

Denmark. Denmark had the first national innovation programmes for user-driven innovation

in 2007. For other project countries user-driven innovation is a much less familiar topic.

Previous reports have shown that Danish companies are better to involve their customers then

other Nordic and Baltic countries. Innovation in tourism is generally and still a closed, top-

down process where the main source of innovation is considered to be the companies’ own

employees. Thus the challenge in terms of promoting and encouraging user-driven, and

especially lead user driven innovation is present in all the project countries.

41

4.0 METHODOLOGY

This chapter gives an overview of methodology applied in this project and outlines how the

data was obtained and analysed. At the end of the chapter the study's limitations are

highlighted and an overall evaluation of the research is offered.

4.1 INTRODUCTION

The research design and methods employed in this study is a multiple case study based on

semi-structured interviews. A secondary data analysis of international literature and papers on

innovation and specifically user driven innovation and lead user theory and its application, is

undertaken in chapter 2 and appendix 2.

The study seeks to:

Assess the innovation strategy of the case companies

Examine the innovation process of the case companies

Study how the case companies and lead users interact in the innovation process

Appraise the case companies attitude to lead users and user driven innovation

4.2 OVERVIEW OF PREVIOUS RESEARCH METHODS

What methods have been used by researchers on former lead user studies? Case study has

been a common method in lead user research in the last decade (Lakhani and von Hippel,

2003; Hienerth, 2006; Baglieri and Consoli, 2009) both one case and many cases (Pötz et.al.

2005; Heiskanen and Repo, 2007; Droge et.al. 2010). Many case studies have used an

historical analysis of a field. Good examples are the fields of British outdoor trade (Parson

and Rose, 2004) and the rodeo kayak industry (Baldwin et.al. 2006). Overall there are 17

quantitative studies, 24 case studies and 11 mixed studies in this period. A clearer picture of

this evolution and frequency of study methods is shown in Figure 4.1. It shows that the case

study method has been used in about 50% of the studies in the whole period. There is a

pattern of increased number of case studies in the last decade and most of these studies are in

the last five years (Baldwin et.al. 2006; Kotro, 2007; Bilgram et.al. 2008; Baglieri and

Consoli, 2009; Snow et.al. 2010). Although several international studies on lead user theory

have been done since the theory firstly was presented in 1986, there was only one study on

tourism claiming to apply lead user theory (Duverger and Hassan, 2007).

42

Figure 4.1. Lead user research methods 1978-2010.

Source: Einar Svansson´s presentation.

The Nordic/Norwegian literature consisted primarily of recent reports (since 2000) and

conference papers on user-driven innovation, either in general or in others business areas than

tourism.

4.3 RESEARCH DESIGN

The multiple case comparative study approach was chosen by the project management as the

research design of current project. Each researcher was asked to present case studies from

his/her country. In all countries, except for Iceland, there were two cases that could be

compared with each other. All the nine cases were then compared to study the patterns and

possibilities that are the basis of this project rapport’s discussion.

Although one cannot generalise from case studies in the same way as one can from statistical

analysis, multiple case studies can be one way of testing an already well-formulated theory.

Although little generalisation can be made from the nine cases, we have made a comparison

of the nine cases (chapter 6) and formulated a conclusion and recommendations (chapter 7)

for best practice, which may serve as a stepping stone for tourism companies or other

stakeholders wanting to apply lead users in user-driven innovation.

4.4 PRIMARY RESEARCH

The nature of this study is an exploratory form where interviews with managers and lead users

of the case companies were the main method used for gathering primary data.

4.4.1 Selection of case companies

The project description required the study to have a national reference group consisting of

relevant industry actors. The aim of having a reference group is first and foremost to ensure

0

2

4

6

8

10

12

14

16

18

20

1978-1990 1991-2000 2001-2005 2006-2010

Mixed study

Quantitative

Case study

43

that the study is related to the industry, that the case companies chosen were pertinent for this

project and to come with useful inputs to the process.

The researchers applied their experience and knowledge to identify tourism businesses that

were believed to be innovative, and that would likely employ users, consciously or

unconsciously, in the innovation process. To confirm the selection, the researchers put up a

two-step selection process. They selected and contacted in total 19 national reference group

members (see Appendix 2) from the tourism & travel field to consult with them about the

most innovative organizations in each country. The main characteristics of the lead user’s

concept and the NICe project, formed a list of basic criteria:

The company is part of the main trends in the tourism industry in their home country.

The company is considered one of the most innovative in the tourism industry at

home.

Possible lead user effects – (B2C, B2B, analogous fields, accidental entrepreneurs).

4.4.2 Selection and background of lead users

Users, with the characteristics of von Hippel’s lead users, were suggested by the Icelandic and

Norwegian case companies. The Estonian and Latvian companies were not willing to identify

any specific lead user for interviews, and the Danish researcher interviewed one lead user for

the Hotel Skt. Petri case. The study produced interviews with six lead users. Two lead users of

each Norwegian case company, altogether four persons, were interviewed. The Norwegian

lead users were professional lead users of the companies. The lead user in the Icelandic case

was a psoriasis patient and his experiment is the foundation of the company today so he can

be classified as an accidental entrepreneur. The lead user in the Danish case was a VIP

customer with frequent visits to the hotel.

4.4.2 Semi – structured interviews

A total of 18 interviews were performed in the case study with 17 interviewees. One manager

in the Icelandic case was interviewed twice. Prior to the interviews, the managers were sent an

email with a short introduction to the study topic, the interview guide to allow the candidate to

get an idea of the topic and the type of questions, which would be posed. The questions were

discussed in an open context, allowing the interviewee to include whatever came up.

Sometimes the interviewees have the tendency to please the researcher by answering their

questions in favour of the subject being analysed. To prevent any bias, some of the

information surfaced by asking indirectly about certain subjects.

4.4.3 Interview guides

A general interview guide was suggested by the project manager. The project’s researchers

gave their inputs and comments to the proposal and a formal and common interview guide

was designed for the interview with the different case companies (see Appendix 3). The

interview guide grouped the questions according to topic areas and what was found to be a

natural flow. The language was kept at a basic level, allowing the use of only the most

necessary terminology. The interview guide for the lead users was based on that of the case

company (see table 4.2) and was slightly tailored to fit the individual interviewee (see

Appendix 4). Furthermore, questions and their formulation were geared towards the language

knowledge of the person interviewed, as well as to their background.

44

Although the topics covered in the lead user interviews were the same, the questions posed to

the lead users where slightly different from those raised with the case companies’

management.

Table 4.2: The different themes in interview guides for case companies and lead users

Source: Christina Aas presentation of themes.

Theme CASE COMPANIES – themes LEAD USERS – themes

1 What is your company’s innovation

strategy and innovation process?

How are you involved in the

innovation process of company X?

2 What are your sources of innovation Level of participation in the innovation

process?

3 Do you involve lead users in the

innovation process?

Motivation to take part in the

innovation process

4 How and at what level are lead users

involved?

Your view of participation of lead

users in the innovation process?

5 Your view of participation of lead

users in the innovation process?

Prior to the interview, the lead users were sent an email with a short introduction to the study

topic, the interview guide to allow the candidate to get an idea of the topic and the type of

questions which would be posed. It was stressed to all interviewees that the guide was merely

a guide and that neither would all the questions necessarily be asked, nor would they

automatically follow the order given.

4.5 RESULT ANALYSIS

The Alam framework was used to analyse all the cases (see Table 7.1). For the analysis of the

Norwegian and Icelandic cases, the Innovation wheel model (see Appendix 1 with an example

of the Icelandic case analysis) was also applied. This was done so the researchers could

distinguish a connection between the two analysis methods being used, to evaluate these

models and their usability for future business analysis in the tourism field.

4.6 LIMITATIONS TO RESEARCH

In this sub-chapter the authors address the limitations of the study. These limitations are

connected to lack of tourism based literature, unfamiliarity with terms and limited lead user

data.

4.6.1 Lack of pertinent literature and research

The authors outlined an historical overview of lead user research in the outdoor sports and

computer software in chapter 2. These are mostly based on manufacturing data but also in

fields closely related to tourism & travel like the extreme sports and the computer related

45

research can be useful in the tourism & travel field in connection to the internet and virtual

communities. Only one lead user paper is based on tourism data (Duverger and Hassan,

2007). There were a few recent articles and conference papers on user-driven innovation in

the Nordic area, but little or nothing on user-driven innovation and the application of lead

users in tourism innovation. We believe that a more solid literature base would have

facilitated a more thorough discussion and analysis of the primary research.

4.6.2 Unfamiliarity with terms

The term innovation is not a widely used term in the service/tourism industry and seems to be

associated with technical goods/objects. The terms product development and business

development seemed more familiar to our interview objects. The term lead user seemed to be

an even more unfamiliar term for the interviewees. Although the term was explained both

orally and in writing to the interviewees, it seemed to be an unfamiliar term, which at times

confused the interviewees (what is, and who actually is a lead user, the distinction between

lead users and main stream users). The researchers had to clarify the term several times during

the interviews.

4.6.3 Limited primary data

In light of the aims of this study (see 4.1), it should have been a prerequisite that all case

companies used lead users in their innovation process, consciously or unconsciously. Having

had case companies which all worked with lead users in some way or another in the

innovation process and data from their lead users, would give a more balanced and robust

discussion, reflecting all the project countries.

4.7 EVALUATION OF RESEARCH

A part from the imbalance mentioned in 4.6.3, the researchers consider the research, with the

data available, to be successful.

46

5.0 PRESENTATION OF CASE STUDIES This chapter presents the nine case companies of the study and offers an insight into their

innovation strategy and process. This information gives a useful background to the discussion

in the next chapter.

5.1 NORWEGIAN CASE STUDY 1: DIN TUR

Type of company: Incoming tour operator with an international market

Company established: 5. November 1995

Ownership: Share Company. 90% of the shares owned by the Norwegian forest association

Allskog

Employees: 14, including employees at sales offices in Germany and England

Headquarters: Verdal, Norway

Core Business: Self catering accommodation with activities

5.1.1 Background

In 1993-4 a number of forest associations in central- and northern Norway discussed how to

develop a new business, which could help create employment in their rural areas and

consequently slow down the depopulation they were facing. The group came up with the idea

to develop hunting- and fresh water fishing tourism, activities which would take advantage of

the abundant and high quality nature resources in their area. An incoming tour business

named Veideren was established.

The project soon flaws of its own good intentions, hunting- and fishing seasons were limited

and the market small and specialised. By the end of 1995 it was clear that if the company was

going to survive, then there was an urgent need for a change in strategy and leadership. The

company changed its name from Veideren to Din Tur and employed a new managing director

who is running the company up to the present day.

Since the establishment of Din Tur, the company has been built, step by step, developing and

introducing new products and concepts through a focused product development, where quality

assurance at all levels is paramount. Their product is self catering accommodation plus one

core activity. In addition a number of secondary activities may also be offered. Din Tur owns

the concepts, while the actual products are owned by small- and medium sized businesses

mainly in Central- and Northern Norway, with whom Din Tur nurtures a close and good

working relationship. Din Tur’s main concept is self catering accommodation with deep sea

fishing, followed by fresh water fishing and kayaking. Since 2008 Din Tur is developing bird

watching and hiking as two new concepts.

The head office in Verdal has, apart from administration and product development, also the

overall responsible for marketing, sales activities and customer service. Their focus is on the

product (which is in Norway) and on their clients (who mainly come from Central Europe).

To help with the international sales, Din Tur has established two sales offices abroad, one in

Germany and one in England. In other countries, like for example the Czech Republic, Poland

and Russia, Din Tur’s head office works with selected operators, often specialised in one of

the core activities that Din Tur is offering.

47

Almost without exception, all Din Tur products are located in rural area of the northern part of

Norway, thus keeping the rural focus, which was the initial strategy of the company.

Table 5.1: Din Tur – a brief company presentation

Year Turnover

in mill.

NOK

No. of pers.

in total

Sea Fishing

(no. of pers.)

Fresh water

fishing

(no. of pers.)

Kayaking

(no. of pers.)

Hiking

(no. of pers.)

Other*

(no. of

pers.)

2009 60,1 26.475 21.180 794 66 463 3.971

2008 50,8 22.944 18.355 688 57 402 3.442

2007 31,1 14.033 11.226 421 35 246 2.105

2006 40,4 17.797 14.238 534 44 311 2.670

2005 34,9 15.200 12.160 456 38 266 2.280

* Other = Active holidays, but with activities outside the core activities on offer.

Source: Din Tur, 2010

5.1.2 Innovation strategy

Din Tur has a clear innovation strategy and can be said to assume two types of innovation,

namely:

Concept innovation – developing completely new concepts, e.g. like bird watching

Incremental innovation – developing new destinations or accommodation based on

existing products/concept design. Although the destination or the accommodation

structure is new, the product as such already exists, but is adapted to the new

destination and improved based on knowledge and experience gained from already

existing products.

Concept innovation

On regular intervals (every 2-3 years) Din Tur seeks to launch a new concept in order to meet

new market trends, but also to broaden their customer base and thus being less vulnerable to

changes in markets, taste and preference.

The development of a new concept always starts with the identification of core activity.

International market surveys delivered by Innovation Norway give a good idea of the trends

in different markets and thus what can be developed. When a new core activity is identified

the new concept is always developed in close cooperation with a professional of the activity.

This could be, in the case of bird watching, a professional bird watcher or ornithologist,

somebody who has an outstanding knowledge and experience of the activity in question.

Incremental innovation

Din Tur’s incremental innovation consists of developing more self catering accommodation,

which offers one of their concepts. Although the destination and the accommodation outlet

may be new, the product is developed according to a set of norms already laid down. At the

same time it is adjusted to the destination in question, the wishes and demands of the

individual product owner, and recently gained knowledge and experience, including feedback

from lead users and other users. This process may thus be claimed to be an improvement of an

already existing product.

In the innovation process outlined below, Din Tur serves as the facilitator and advisor to the

product owners to-be. Applying their skills and experience from the trade, Din Tur advises the

48

product owners to-be what and how to develop their product and help them set up a plan for

the development. Furthermore, Din Tur advises and guides the product owner to-be to apply

for grants and loans from the regional authorities. Finally, when the product is ready to be

launched, Din Tur takes on the role as marketer and sales channel.

Due to their long experience and good reputation Din Tur is also a good sparring partner for

already established businesses. These product owners usually take the initiative to the

incremental innovations and contact Din Tur to have them facilitate and advise in the

innovation process.

Once the product is up and running, Din Tur follows up on the product and the product

owners as long as they are part of Din Tur’s sales portfolio.

Din Tur’s incremental innovation is the foundation for this case.

5.1.3 The innovation process

The incremental innovation – a three step process

Din Tur has a clear vision of what kind of products and how many products they want in each

region. Their innovation process has three steps:

Step 1

A local entrepreneur contacts Din Tur, wanting to know if it is worthwhile developing tourist

accommodation in destination X. Din Tur assesses if destination X will fit with one of their

existing concepts /core products and if the proposal in general is interesting to them. If yes,

they present the entrepreneur with a set of specifications, particular to each concept, and ask if

he/she is willing to fulfil these. If the two parties agree, a five year contract of cooperation is

signed, setting out the responsibilities and liabilities of each party.

Step 2

This is the main step where Din Tur enters into the process as a professional consultant in the

project planning, giving detailed advice on things like how big should the accommodation

units be, how far from the sea should they be located, how many beds in each unit, what kind

of boats should be offered, etc. The formulation of a full action plan, including marketing

strategies and sales forecasts, is also part of this step.

Step 3

The next step is to help the entrepreneur apply for funds from Innovation Norway

(governmental agency promoting nationwide industrial development). Once the plan and

funding has been approved, the entrepreneur moves on to the execution phase, while Din Tur

starts putting their production-, marketing- and sales plans into motion, deciding when is the

product to be launched, when can photos be taken, and testing by a test group and possibly

also by journalists, must be arranged, the product must be prepared and entered into the

booking system, web site and catalogue must be done in several languages etc. After many

years of operation, Din Tur has extensive experience of this detailed and time consuming

process. All products are tested by a test group, usually consisting of one or more persons

from Din Turs head office, tour operators, their own sales agents and journalists. Sometimes

journalists are going on separate tours.

49

Entrepreneurs, who already have a sales ready product, may turn to Din Tur for help with

sales and marketing. The process will be the same, but usually far less extensive.

Once the product is up and running, feedback flows from product owner to head office

(production department), and from tour operators and individual clients to their sales offices

and then to the head office. Using these channels of communications new and improved

products are developed.

5.1.4 Identification of lead users

Based on von Hippel’s definition of lead users, Din Tur places their lead users into the

following groups:

Some tour-operators and travel agencies selling their products (professional lead

users).

Independent marketers, such as free-lance journalists, private persons organising their

own groups of guests.

Typical of both groups is that they are businesses and persons with whom Din Tur has had a

long standing relationship. For this study, the case company was asked to suggest some lead

users. One central European tour operator as well as one well-known German free-lance

journalist was interviewed.

The main concept, in terms of turnover and number of customers, is the self catering

accommodation with sea fishing. This concept has thus been the focus of our study.

Source: www.dintur.no

50

5.2 NORWEGIAN CASE STUDY 2: KONGSVOLD MOUNTAIN REFUGE

Type of company: Historic hotel

Company established: 1704 (as a mountain refuge, at its present location)

Ownership: 100 % by the Norwegian State

Employees: 8 full time positions + two trainees

Headquarters: Kongsvold, close to Oppdal, Central Norway

Core Business: Accommodation, catering, conferences, special events and activities

5.2.1 Background

Kongsvold Fjeldstue (refuge) is a small, historic hotel with a long tradition and history,

situated in the central part of Norway. The hotel has 32 rooms and is part of the chain Historic

Hotels. Kongsvold is located in the high mountains, some 900 metres above sea level and

along the main road between Oslo and Trondheim (E6). The closest village is Oppdal, some

30 km to the north.

The hotel is owned by the Norwegian State, but managed by a host couple since 1998. Apart

from managing the property, the host couple serves as the frontline hosts for guests to the

hotel. Since the buildings are historical then the hotel is on the conservation list of the

Directorate for Cultural Heritage. This means that no changes can be made to the buildings

without prior approval by the Directorate, and all recent renewals, such as those necessary to

meet the requirements for fire protection, have been made in close cooperation with the

Directorate for Cultural Heritage.

Source: www.kongsvold.no

It is obvious that the hotel and its location have some special challenges, since it may not be

the obvious choice for guests, whether it comes to overnight only, vacations or conferences.

Therefore the management needs to be innovative in their market approach, requiring them to

create a product that is unique and at the same time meets the requirements of the customers.

During the past few years, the management has been active in incremental innovation such as:

A constant upgrade of the physical product.

Developing a unique culinary product based on Norwegian local food traditions and

Norwegian products.

http://www.kongsvold.no/index.php?option=com_content&view=article&id=66&Itemid=224

51

Co-developing nature based activities, such as unique mosque ox safaris with trained

guides.

Much of the process has been based on discussions with and feedback from regular guests and

key clients, although not necessarily in a structured way. The management is eager to improve

their performance related to consumer driven innovation and lead users, with particular focus

on the segment of conferences and meetings.

During the summer season, tourists from Norway and abroad are the most frequent users of

the hotel as well as the restaurant facilities. The restaurant receives a large number of day

guests and passing groups, who are there for the restaurant facilities only, or combined with

tours and visit to the local museum. The hotel accommodation is mostly used by individual

travellers. Outside the summer season, there are only few tourists visiting the hotel.

In spring and autumn the main client group is companies and associations organising

conferences and meetings. These clients are mainly drawn from the nearby counties, like

Trøndelag and Møre, and on occasions there are conference clients coming from Oslo. The

hotel is closed from November until March every year (unless they have special requests for

the whole hotel).


The source of innovation is based on the communication with the market, as well as

experiences gained through the operation. A major advantage for a small company like

Kongsvold, with a management team of two, is the ability to change rapidly, in order to create

products, which meet changing market demands and preferences. On the other hand it is also

important to balance such changes, as they want to be predictable and familiar to the clients

using the services on a regular basis.

The hotel’s main innovation focus is not so much on the physical product, but more on added

value products/services, things that can make the stay at the hotel a different experience from

that of other hotels. Examples of such products/services are the culinary products (food,

drinks and use of local raw material and food traditions), mosque safaris, a botanical garden,

the National Park, personalized guest service and storytelling related to the area.

The management deems it desirable that innovations should be linked to the hotel’s profile,

which is:

Tranquillity and relaxation

High level of personal attention

Nature based activities

Historical references

Unique local cuisine

Environmentally sustainable

The innovation strategy is more an attitude and approach than a streamlined plan. Much of the

hotel’s innovation and conceptual ideas are based on a combination of market analysis, clients

input and feedback, in-house discussions as well as exchange of ideas with local partners and

national networks. Nevertheless, the screening of ideas and the final decisions and

development rest with the management.

52

Major concepts of the hotel are:

A complete package of events offered for seminar organisers, including various

activities and a unique culinary experience.

Exclusive and tailor made use of all facilities for one seminar organiser, having the

chance to use the complete product with no disturbing elements.

Family vacation products for those seeking a quiet environment and activities in

nature, such as hiking and mosque safaris.

Tasty and efficient food service for passing groups and individuals on their way

between destinations.

Private or company based events and celebrations, using the culinary product for a fine

dining event.


The aim of the innovation process is to develop a product that is considered by the users to be

different from the competitors, while at the same time meeting the basic needs of the clients in

a satisfactory way, and through this create a position as a first choice for the clients.

Guest questionnaires are being used on a regular basis, both to check the quality of service

and the level of guest satisfaction, as well as to obtain new ideas for product/service

development.

An active follow up with main contacts, including private guests, organizers of seminars and

meetings, tour guides and travel group organisers is also used on a regular basis, and is even

more instrumental in the process of creating new ideas and innovation.

The management, sometimes together with the rest of the staff, also conducts site inspections

and testing of other companies and services, mostly to gain ideas and inspiration for their

innovation and to see how competitors perform.

Based on the ideas gained from various sources, the management discusses this among

themselves and with key contacts among their users, to determine the relevance and value of

the idea, and how it could be implemented in an appropriate way.

The process of innovation is primarily related to the:

development of both physical product and facilities, as well as activities and service

approach;

improvement of efficiency and customer satisfaction;

design of a few unique services rather than many standard products;

creation of a special guest experience based on a combination of the environment, the

activities and the personal touch to the product;

53

marketing of the property as being different and offering something special.

Participation in the program “Handpicked” is important in this case3;

sustainable and environmental friendly approach using local suppliers and products. In

particular the culinary product is considered important in creating a unique profile and

stand out compared to potential competitors;

location next to the National Park and the only tribe of mosque ox;

training and development of staff in order to create a personalized and unique guest

service.


Based on von Hippel’s definition of lead users, Kongsvold Fjeldstue defined their lead users

into the following groups:

1. Certain regular customers and seminar organizers

2. Key persons in the regional market organising company events, private celebrations

and gatherings, mainly related to the culinary product.

The lead users selected for this study belong to the first category, since they are seen as the

most important market segment for the hotel. The hotel suggested a number of potential lead

users, from these a public organisation running training courses as well an organisation in the

medical sector were chosen.

Source: www.kongsvold.no

3 Handpicked is a network programme instigated by Innovation Norway and the Ministry of Agriculture. It is a professional

network consisting of 15 outstanding and different meeting and conference venues tailor-making meeting and incentives for

companies. The members, which mostly are small and medium size companies, can participate for four years, can develop

and exchange experiences in order to become more visible, professional and competitive. The aim of the project is to

increase market awareness and profitability for the individual company.

54

5.3 DANISH CASE STUDY 1: HELLE THORUP SPA

Type of company: Health & spa

Company established: 1984

Ownership: Private owned company

Employees: 55 full time and 5 part time

Headquarters: Copenhagen, Denmark

Core Business: a) Spa & skincare treatments, b) Skincare products & fragrances (on-line

shop)

5.3.1 Background

The company is 25 years old and operates a Health & Skincare Spa in the two largest cities in

Denmark - Copenhagen and Århus. The service provided is based on body treatments with a

strong wellness undertone, characteristic to modern spas. Facial treatments are another basic

service with traditional facials and special treatments like the Silk Peel treatment. Customers

are mainly from Scandinavia, with the biggest group from Denmark. Outside Scandinavia the

biggest customer groups come from the Netherlands and Spain. The company is current in

computer technology with online booking for all

treatments. There is also an online shop selling skincare

products to customers as gifts or for daily use. This is

mainly to Danish customers, but some of the skincare

products are also sold in the Scandinavian market.

Helle Thorup Spa, source: www.hellethorup.dk


The basic foundation of the company is skincare and the mission is: Skin care for every body.

The company is not allocating a special budget for product development/innovation. The

innovation strategy for the business is to try to find new concepts and niche products in the

market to differentiate itself from the competition. An example is a new fragrance in a stick.

The company also develops new treatments and experiences such as the new Sauna Chill. The

innovation strategy focus is both on the service concepts and the physical products.

Consequently, the spa’s innovation activities are mostly concerned with concept innovation.

The company has the future vision that a more green,

environmental emphasis is the right strategy for the next

years. The main obstacle for innovation is the current

financial climate and lack of available cash to reinvest in the

business.


http://www.hellethorup.dk/Forside-CPH-311.aspx

55


There are four main innovation sources for the company – supply chain partners, own

employees, company’s own customers, related websites and magazines.

Supply chain partners

The basic procedure for innovation for the company is to work closely with the supply-chain

partners. The most important and influential is the supply-chain partner Ole Henriksen

Face/Body in Los Angeles (US). Helle Thorup Spa uses and sells his products as one of their

leading brands in skincare. Ole Henriksen is Danish and labeled by Helle Thorup Spa as

Hollywoods No. 1 Face Man working with many famous actors. Ole operates world famous

spa's on Sunset Boulevard and in the 5 star hotel "Shutters on the Beach". He uses the motto

"Less is More" and uses natural and clean first class ingredients. His products have the image

of natural and luxurious.

Employees

The employees are an important source of ideas for development, improvement and

inspiration and the two spas work closely together to share ideas. There is no dedicated

innovation department or innovation budget. Innovation is rather an organic process and

develops from the co-operation between the distribution and the buying department of the

company.

Customers

The company uses information from the customers by listening closely to their concerns and

ideas. The sales staff hands out questionnaires so that the customer can fill them out and send

them to the company. At the spas there is an internet access point where the customers can

give feedback.

Other companies, industry related websites and magazines

The company gets information from user communities on the internet, keeping an eye on

various related websites, to use strategically in business development. Improvement of

existing services and development of new concepts is also based on inspection of the industry

by visiting companies in the same field and reading various magazines and internet blogs.

The company considers the three most important focuses for business development to be:

receiving world-wide life-style inspiration

thinking sustainable green

listening to the customer



The company does not identify any specific lead users among their clients, but thinks that lead

users could be part of the future business development and probably relevant and important to

their industry. It is always good to have new opinions to compare with and the world is

always changing. Benchmarking and checking lead users ideas would thus be beneficial for

56

future sustainable growth. The company would use public sector innovation support programs

like financial and expert support or lead users panels if available, focusing on how to work

with the lead user concept.

The company is not classifying any of their clients as lead users, but the supply-chain partners

seem to be the main source of inspiration. One of their supply-chain partners is a textbook

story of an accidental entrepreneur. The Youngblood makeup products were developed by

Pauline Youngblood when she worked at a plastic surgeon clinic and discovered that there

was no good solution for makeup after operations that could cover the red skin and look

natural at the same time. Pauline Youngblood accidentally came into contact with people that

resulted in using crushed minerals for makeup. This product that Helle Thorup Spa is selling

is unique, because it is natural and the skin can breathe, but at the same time works as very

good cover for red skin. This is a good example of innovation in the health & spa field were

ideas come from an analogous field.

5.4 DANISH CASE STUDY 2: HOTEL SKT. PETRI

Type of company: Design hotel


Ownership: First Hotel

Employees: 50-200

Headquarters: Oslo, Norway

Core Business: a) Hotel accommodation (268 rooms), b) Conferences, c) Events &

happenings, d) Food & drink

5.4.1 Background

The Hotel is located in the heart of Copenhagen, in the middle of the Latin Quarter and its

downtown boutique shopping. The Hotel is part of a larger hotel chain “First Hotel”. They

operate 47 hotels in Scandinavia, including six hotels in Denmark with the main focus area in

the capital Copenhagen.

Majority of their customers come from Scandinavia and Germany and about 15-20% are from

UK and USA. Since the recession the customers have mainly been from Norway, Sweden,

Germany and UK. Right now the focus is on the same target market of customers: Norway,

Sweden, Germany and UK.

First Hotel Skt. Petri can be described as an experience hotel rather than as a design hotel.

They have three main categories under the “experience category”:

1. Stay Over

2. Conferences

3. Events & Happenings

Then there is a fourth category in terms of dining & drinks. There are no spa treatments on

offer, but there in-room massage and relaxing yoga for relaxation are available. The hotel also

has a fitness center.

57

Hotle Skt Petri, source: www.hotelsktpetri.com

The hotel is strong in the corporate market with good venues for meetings, conferences,

product launches and fashion shows. First Hotel Skt. Petri is one of Copenhagen’s leading

design hotels with modern and unique features, and was awarded the best business hotel in

Scandinavia by CNBC in 2010 - "The city's best choice for business or pleasure" as the only

Scandinavian hotel on the list. The hotel has good connections with the Fashion Industry.

They feature a modern French-inspired cuisine and their cocktail lounge is among the city’s

most exclusive. The hotel is open to new ideas with a good example in their concept of ´Gay

Wedding´.


The strategy is to focus on being a first class service company and provide and offer

customers the best service possible. The experience of the guests stay should be above the

normal hotel standard. The main strategic question is: How to have the 268 rooms fully

occupied with as low costs as possible.

The innovation strategy is based on the motto that the hotel always wants to be ahead of the

competitors and always aims to improve the services and the business platform that will make

it a high-end first class hotel. This is achieved by providing more experience, more

storytelling and more responsibility towards the guests in adding value as a good brand should

do. They also have a natural clear strategic consciousness to have only partnerships that stand

for the same values, products, services and high-end standards. They have for example a

partnership with Danish Fashion Institute, going four years back.

Hotle Skt Petri, source: www.hotelsktpetri.com

There is a business development department that is located at the hotel chain HQ in

Oslo/Norway in terms of the bigger picture business development for the First Hotel chain.

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The hotel itself does not have a production/innovation department. The development and

innovation work is based on few very good and creative employees. The expense allocation

for business development is included in the marketing budget, but used on an ad-hoc manner.

The company regards innovation to be a natural process for a 5 star hotel, meaning that they

should always be above and in front of the normal standard for a regular hotel. Each hotel and

the industry have to be extra focused on the main product and their target group. The focus in

business development is to have a natural flow of improvements of service; therefore the main

attention is on incremental innovation – improving the existing products and services.

A big challenge for the design hotel industry is resource allocation. The world becomes

smaller and smaller, and the customers’ demands are increasing rapidly, so it’s almost an

impossible mission to be in front of these demands. The biggest problem is that the

customers’ are not willing to pay for receiving more and better service and value. There is

growing pressure on the price in the high-end market. There has also been a mental change in

the middle range of the price segments. For example the female segment and the arrival

service have been increasing their demands very strongly. The guests today expect more than

they did before, so it’s about how the high-end hotels in the future can best fulfill these

demands and still have positive returns. When customer expectations become bigger and

bigger “social intelligence” is a very important skill to possess and loyal customer programs

are important for future development

The tourism industry is dealing with overcapacity and economically it’s hard to innovate right

now when managers can’t see indications of positive signs regarding the current global

economic downturn. Lack of time and money is also blocking innovation and development

intensity.


The company considers competitors, employees and customers to be the three most important

sources for business development. The basic process is to listen to customers and staff for

feedback in terms of improvement, and then evaluate the possibilities for adding value vs.

time and costs.

Competitors

The hotel considers competitors to be the most important source to look at for inspiration. The

main competitors are international, i.e. more located in London than in Copenhagen. The

company wants to be up to date with any new global inspiration travelling to the international

cities. London provides guidance for the current atmosphere, the Four Seasons hotel for

exemplary service and Hotel Costes in Paris for the upscale trends. The management

considers it very important to be professionally experienced and always being in front work-

wise.

Employees

The innovation activities of the in-house staff have a set structure. There are small in-house

working groups reporting to a project business manager for developing a new service

experience concept. An example of such a new service development is an ecological

Christmas concept, offering the customers a more modern, sustainable and ecological

Christmas. They working group had an idea and then researched for new products and

services and found some inspiration from already existing suppliers. This new service concept

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was in line with the hotel mission to offer good experience and trying to follow corporate

social responsibility principles when possible.

The hotel principle is to hire staff based on the right personality rather than going for the right

academic degree. The experience shows that it is easier to teach an employee with the right

personality, how to provide good service, so education plays in this respect a lesser role. The

human resource standards have been changed in the past years in order to select staff by this

principle.

Customers

Customers give daily direct feedback on services, which is the main source for improving the

services of the hotel. The improvement can be directed to an individual client, but sometimes

also a modification of the entire service model can take place. Some feedback is also given

through the booking system, but online customer feedback is in the early stage. There is an

electronic questionnaire formula in the “First Hotel” group site available. The company also

gets some feedback from the travel platform www.tripadviser.com, but not a lot at the

moment.

Recently the hotel joined the alliance with GHA-Global Hotel Alliance – where they can use

different loyalty programs such as SAS Eurobonus, First Member & GHA Discovery in

association with the world’s largest hotel alliance, the Global Hotel Alliance. The loyalty

program will in the future be used more strategically as a clear communication platform with

the customers.

Other sources for innovation

Other sources for innovation are the sales agents/channels, suppliers and partners organizing

various event in cooperation with the hotel. Industry information and business trends forecasts

are sourced from companies like Horesta and Deloitte. The hotel rarely uses consultants but

occasionally have some projects, where they are using some external consultants. Also

architects and designers can be a source for innovation in the case of a design hotel.


The company uses the VIP guests regularly to ask for feedback about services. They are

considered ambassadors for the hotel. The company places lead users in two groups:

Their regular guests that have stayed over five times per year. This group formed

6,4% of all hotel guests in 2009.

They also classify 60% of regular corporate clients as lead users such as front

persons in big companies.

Currently they work reactively with the lead users. Feedback from lead users is received at

arranged special events, when the managers can talk to them personally in an informal

manner. Thus, today they do not work and use the lead users proactively. The involvement of

the lead users depends on the lead users themselves. If they express their opinions and wishes

to the management, then they are considered, but the management does not ask for it

specifically for innovation purposes. The lead users are keen to take part when they have

ideas and feel they have the possibility to change and improve the company’s products and

services.

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The hotel named specifically one lead user, a regular guest, who stays at the hotel frequently,

over 50 times a year. This lead user, working with a leading Danish business newspaper’s

executive club - Børsens Executive Club, was also interviewed for the purpose of this study.

The hotel thinks it is worthwhile to involve lead users in the innovation process more in the

future, in order to get good feedback. It is also a good way to get to know your customers and

let them speak on an platform, where they can think freely and contribute to the innovation

process. The management thinks that it could bring new ideas for delivering the best service.

For example when doing a prototype, a good way could be to first discuss this

prototype with some lead users - what they think about it before the company

continues in the process and launches the new product. You don’t know the

reactions before you try it (Jacob Reis, General Manager of Hotel Skt Petri)

The company is aware that some competitors, large corporate hotels like Four Seasons and

Radisson, are using lead user input in their innovation process, but it takes place centrally in

the corporations head-quarters. The company would like to try to work with the lead user

concept using public sector innovation support programs like financial and expert support,

lead users panels, focusing on corporate clients and user-needs.

5.5 LATVIAN CASE STUDY 1: AKTĪVĀ TŪRISMA CENTRS EŽI, SIA (CENTRE OF RECREATIONAL TOURISM)

Type of company: Event planner + provides cycling and skiing equipment


Ownership: Privately owned company


Headquarters: Valmiera, Vidzeme district, Latvia

Core Business: a) Sales and rental of cycling and cross-country skiing equipment, b) Event

planning for companies and individuals

5.5.1 Background

Ezi was established in year 2000 and specializes in active and environmentally friendly event

organization, from simple trips to team building trainings it the woods. In their shops they

offer wide variety of products for recreation. Most of company’s activities are focused

towards creation of new products and services in active tourism area.

Ezi focuses mainly on three areas of business - sales and rent of cycling and cross-country

skiing equipment, as well as organizing innovative events for companies and individuals. Ezi

was the first in its market to offer cross-country skiing equipment. The company’s reputation

in Vidzeme district is mostly connected to the skiing and cycling equipment service, which

has now become secondary business for the company as most people nowadays have their

own bicycles. The event planning has taken over as the main business and is increasing

incrementally. Most of the company’s customers come from Latvia.

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Ezi Centre for Recreational Tourism, source: www.ezi.lv

One of the most innovative concepts in this field is the cross-country skiing route in the

Ethnographic Open Air Museum (Brīvdabas muzejs), which was started in 2010 and has

received very positive feedback from customers. Several types of skiing tracks are available

and offered to clients in packages both open (expeditions for the public) and closed (e.g. for

teams of friends or business associates). Ezi’s goal is to make the trip interesting and

unforgettable for the customer and they use innovative ways to fulfill that goal. For instance

by making regular skiing trips more extreme by offering night trips where participants are

equipped with head lamps.

During the summer season Ezi provides boat renting services with around 70 boats available.

They have their own boat house which is located on land that belongs to the municipality. Ezi

also has an open air adventure park, the Ežu šķūnis (Hedgehog barn), which is a place

specially adopted for different recreational activities and equipped with tools like Open Air

kitchen, Hammer golf, Wheelbarrow maze, Catapult, Flying saucers etc.


Ezi does not have a special innovation department nor focuses on any particular area of

operations in their business development. Usually there is no special budget plan made in

advance for innovative operations in their financial statement. However if a good idea is

proposed, the managers try to find a way to finance it and always do. The prevailing type of

innovation in the company is concept innovation, as most of company’s activities are

focused towards creation of new products and services.

The most critical factor which is stressed in Ezi’s innovation strategy is to keep the employees

motivated. The goal is to make the staff excited about their work and make them enjoy the

everyday tasks. The managers believe that the main obstacles of generating innovation is the

lack of motivation and when the staff is very busy for a long period of time, it may result in

overload and thus less creational work. Teamwork is what contributes the most to success in

the company and that is also the foundation during the brainstorming seminars.


The innovation originates mainly from the employees of the company via internal

brainstorming events. The secondary source of innovation is obtained through collaboration

with certain customers, who Ezi’S managers refer to as their most important customers.

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Employees

The company arranges internal creation/brainstorming events two times a year where most

innovations are proposed and developed. There are seven employees who generate ideas and

make the decisions. Afterwards tasks are delegated to certain project groups.

Customers

There is no particular strategy or a step-by-step process used when working with customers

regarding innovation. According to the CEO/co-owner, the managers have never felt the need

to systematically work with lead users in any way. However there are some clients that are

frequent users and/or represent a group of customers who are considered more important than

the general user, because they often require more detailed services. Swedbank is for example

a customer that fits into the lead user category because of their special requests.

The managers develop new services with these important users by conducting individual

conversations with them, where they get the chance to express their ideas and opinions. These

conversations are usually face-to-face interviews. Another tool used to obtain information is

non-formal feedback forms, but they are only used for chosen products.

Event planning is currently the most innovative area of the company’s operations. Most of the

events being offered combine entertainment with outdoor physical activities for business

groups, pupils, and teams.

The latest innovation is strategic competitions where small teams are competing on different

tasks interacting with the environment and local people. Many tasks are similar to American

television reality show ‘The Amazing Race’. This was an idea that one of the customers

explained during an interview and the employees brought the idea to reality.


Based on von Hippel’s definition of lead users, Ezi places their lead users into the following

groups:

Certain regular customers

Key persons in the regional markets organizing company/group events

Ezi does not work with their customers regarding innovation in any systematic way thus there

is not a clear identification of a lead user by the CEO/co-owner. Most innovation creation

comes from within the company from the employees themselves during brainstorming

seminars. However, the lead users selected belonging to the second category are seen as the

most important market segment for the company and are being included in the innovation

process of custom made events on a regular basis.

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Ezi Centre for Recreational Tourism, source: www.ezi.lv

5.6 LATVIAN CASE STUDY 2: AERODIUM

Type of company: Provider of recreational activities


Ownership: Privately owned company


Headquarters: Sigulda, Latvia

Core Business: Design and manufacture vertical wind tunnels where people can fly

(bodyflights)

5.6.1 Background

Aerodium owns and runs the first vertical wind tunnel for ‘body flight’ in Eastern Europe.

The vertical wind tunnel (VWT) is located near Sigulda, the most visited tourist area in

Latvia. The company became known after the 2006 Torino XX Winter Olympic Games

closing ceremonies, because Aerodium Latvia helped produce a part of the show that featured

flying acrobats.

Aerodium, source: www.aerodium.lv

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Aerodium develops, manufactures, sells, and rents vertical wind tunnels. They focus on three

areas of business:

The Military, for training of parachutists and para planers.

General customers for entertainment purpose in e.g. amusement parks.

Showbusiness by participating in many large-scale events with shows and other

significant events.

‘Body flight’ is flying in an artificially generated vertical wind stream, strong enough to hold

a human body in the air. The tunnel blows a wind stream of 200 km/h within a diameter of 3.7

meters. By changing the position of the body in relation to the wind stream, a person either

increases or decreases the force of wind, rises higher or drops lower and masters the basics of

flying.

Flying in Aerodium tunnels is as safe as any form of sport that has now become

commonplace. Flight with basic movements and height shifts does not call for any great

skills. It is even easier than learning how to swim. The customer group is large and the age

ranges from small children to senior citizens. Gender or physical conditions are also not a

constraint for the use the activity. Aerodium also provides an introductory training session

and all necessary equipment before you start your flight.

Aerodium provides their services all over the world. Currently they are the leaders within its

field and the goal is to keep that position and gain more world-wide recognition. The

company has received funding from Latvijas Investīciju Attīstības Fonds (Latvia Innovation

Development Fund) for amount of 2 million Ls. and second time 150 000Ls.


Aerodium does not have a dedicated innovation department. The do have regular meetings

with their clients, but with no formal process. Currently all the improvements in products and

services are mostly client-based. When the clients express their wishes, then the company

tries to apply them to existing concepts or create some new ones, which can lead to either

incremental or concept innovation. The main focus of the company regarding innovation is

on new technology of the products.

The company soon plans to employ few engineers, who`s main responsibility will be to

research and develop innovative technical solutions. Currently the innovation processes have

no formal structure and that is the reason they are hiring these engineers. Till now, innovation

has mainly been demand-forced and sporadic and the company feels that they need more

focus and structure in that activity.


The main source of innovation at the moment is the feedback and wishes of customers, which

is received in an informal manner, through conversations. Other sources of innovation include

the competitors and related internet sources.

Customers

Due to regular meetings and individual conversations with each of their clients, the managers

have never felt the need to implement any other form of feedback. Aerodium does not

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conduct any formal surveys with the customers. A tight collaboration, exchange of ideas and

working closely and personally with them, is developing new solutions on the go.

Competitors and internet sources

The company also follows other companies and industry related information from internet

sources. At the earlier stages of the business they were looking at their competitors for

inspiration, but since they have adopted the widest range of products and top expertise in the

field, they do not find that many new ideas from competitors anymore. Many of leads for new

business development are coming from the Internet via e.g. Twitter or Facebook.

The need for more employees and stronger financing are high on the agenda. Up till now

Aerodium has been using government funded financing options, but they proved to have few

significant cons – very slow decision making process and bureaucracy.

“Little insight in our business history: we purchased our first wind tunnel from

a Canadian enthusiast. After that we discovered it had many significant flaws

and did not function the way we expected. So, we collaborated with many

experts, like aero dynamics specialists and engineers till we achieved our goals

and made it work. By this trial and error process we became quite competent

in this field. Currently all the improvements are mostly client-based. When they

come up with some wishes, we try to apply them to existing concepts or create

some new ones”. (Ansis Egle, communication director)


The industry of vertical wind tunnels itself is quite innovative; however Aerodium has not

noticed any lead users in its industry. As this specific niche does not have a wide customer

base and there are not many advanced users of the products and services of the company, then

the wishes from the customers come at a basic level and most of the solution creation and

development work comes from the company employees.

Aerodium, source: www.aerodium.lv

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5.7 ESTONIAN CASE STUDY 1: OTEPÄÄ ADVENTURE PARK

Type of company: An outdoor park for recreational and adventurous sport activities


Ownership: privately owned company


Headquarters: Otepää, South Estonia

Core Business: Leisure & sport activities

5.7.1 Background

The slogan “Experiences between the earth and the sky” describes the company the best

because most of the activities take place in the air. The company focuses on creating

adventurous and creative activities for a memorable experience. The activities combine

physical and mental training which appeal to their various customer groups; children, adults,

families, companies, and groups of friends.

Most of the customers come from Estonia, Latvia, and Russia. The majority of customers are

locals and less than 20% are foreigners. Otepää has not been targeting foreigners with direct

marketing extensively since it is rather costly. The company does not have a great network of

foreign connections which can be practical in promotional sense. Despite the small percentage

of foreigners, the services are offered in the following languages; Estonian, Finnish, Russian,

English, and German.

Otepää Adventure Park, source: www.seikluspark.ee

Initially the company concentrated only on its own operations, but as time went by, the

customers were demanding more services. Then they started offering new activities like GPS

games and outdoor studies for schools. Some of the additional services take place outside

their own territory. In that way they are being flexible to special requests of groups and keep

other customers coming back by offering new features. Soon the company started cooperating

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with other companies that provide related outdoor activities such as canoeing trips. They have

also prepared large sports events in collaboration with other companies.

The Company knows their closest competitors quite well and they exchange ideas with them

in terms of product development. In Latvia there are four adventure parks close to the

Estonian boarder and the company cooperates with one of them. They have had a joint

marketing campaign with them.

The company has established partnerships with several companies and they promote each

other on their websites. This has been effective in terms of marketing purposes since the local

government has not been very active in promoting small companies in the tourism industry in

that region. According to the company’s board member, other counties in Estonia are being

promoted quite heavily, the Valgamaa county is left out. It seems that the local government

does not have a clear vision for support in the tourism sector. Public tourism information

centers have been the main helper in promoting the company locally. They have not been

working with agents, as the fees that they ask for are too high.


There are two members of the board who are responsible for the product/service development.

They lead the development activities for each season, which involves improving existing

operations and coming up with new ones, covering both incremental and concept innovation

aspects. By December each year they have usually decided on the activities for the new

season, so in the spring they can start with marketing activities.

There is usually no special budget plan made in advance for innovation development. The

members of the board evaluate the budget according to the company’s funding and the scope

of new ideas.


The owners of the company have realized that the main source of inspiration that leads to new

innovations have been the customers. The source of innovation is based on experiences

gained through the operation process. The employees collect information from their

customers from the beginning to the end of their visit. A small team of instructors and

managers interact with every customer every day making them key collectors of information.

The company has recently started to use Youtube and Facebook in promoting their operations.

Customers

There is a small compact team of four instructors, who has discussions with each customer

who arrives, and collects feedback from every experience. These instructors and managers

have direct contact with the customers from the initial instruction at arrival until seeing the

final emotions at the end of the activities. During the whole process the staff collects

information that can possibly lead to improvement of their services. During the season the

ideas and problems that have been collected over the season are compiled and during the

winter they are narrowed down to the most important ones and formulated.

Adopting this method has resulted in new service features. For example there were some

customers who complained about a problem regarding the landing at the end of the trails. In

some weather conditions it was uncomfortable to land on the spots. This problem, recognized

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by the customers, lead to a creation of a new landing mat, which is unique and much more

comfortable. It also made it possible to perform the activities during rainy and colder days.

By using this method of information gathering the company is able to collect and work with

feedback more rapidly than other methods. This has turned out to be very effective because

the customers are usually very eager to give feedback about the services, especially the new

ones. There is a base of repetitive customers who have turned out to be a very good source of

feedback. They also compare Otepää Adventure Park to other parks, as for they have high

standards.

Questionnaires have also been conducted twice where the respondent’s have been rewarded

with gifts. The customers were asked where they received information on the company, which

channels they prefer, which channels they use, what they expect of the company, are they

satisfied with the service, if the instructors are doing a good job, and if they get all the help

they need. This method has turned out to be more costly and takes a longer period of time.

Otepää Adventure Park’s managers look at other parks as well when they are trying to think

of new features for their operations. If they see an idea that they like, they try to modify it to

their park.


In the case of Otepää Adventure Park, the employees are those who address the problems of

the main customers by listening to their needs and problems. After discovering those needs

they then focus on finding a solution for them.

There are indications of user involvement in the case, because the process of getting into the

minds of the users is utilized in order to develop new products and services. However there is

no clear indication of a lead user amongst their customer base that is directly involved in the

innovation process of creating a new product/service. After the potential problem is identified

by the users, the development takes place from within the company where the customers are

not involved. That makes the employees key collectors of information and innovation

designers.

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There is an indication of repetitive customers who come back to Otepää Adventure Park when

they offer new features. The employees have noticed that these customers have given very

good feedback. They also compare Otepää to other parks, which make them more demanding

than the main stream customer. However there is not a clear distinction of a closer

collaboration in a strategic way with these repetitive customers than other general customers.

Otepää Adventure Park, source: www.seikluspark.ee

5.8 ESTONIAN CASE STUDY 2: SAAREMAA SPA HOTELS

Type of company: Health Spa resort and hotel

Company established: 1964 (when Kuressaare mud resort started its operations)

Ownership: privately owned company

Employees: 113 full time in 2010

Headquarters: Kuressaare in Saare County

Core Business: Hotel, health and medical centre, including numerous beauty services

5.8.1 Background

Saaremaa Spa Hotels is a chain of three hotels that offer a various range of holiday

experiences including relaxation and medical centers, gastronomic experiences, healthy life-

style spas, entertainment and sport facilities, and beauty salons. With its three spa-hotels:

Saaremaa Valss, Meri and Rüütli, and one guesthouse Merineitsi, Saaremaa Spa Hotels is the

market leader on the Estonia’s biggest island, with 86% of market share of the island, as of

first quarter of 2010. In 2009 the company had 76% of the market.

From the total number of visitors in 2009 about 40% were Estonians and 46% Finnish. Other

major customer groups were from Sweden, Latvia, Germany, Russia and Japan. About 70% -

80% of the foreign clients are from Finland. The company has partners in Finland as well as

representative offices in Finland and Latvia.

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The global economic recession has had its negative effect on the hotel industry. Even though

most of Saaremaa’s customers are senior citizens with high saving and a relatively high

purchasing power, the managers are concerned with the sudden decrease in the younger

generation of customers. People are spending less on luxury product and services and that has

forced the company to come up with new ideas in order to maintain its market share,

especially in terms of lower numbers of domestic clients. Thus more effort has been put into

the local market trends as for they are the largest customer group.

The main competitive advantage of Saaremaa is their health services. It is related to the

general attitude of their customers. People feel the need to use vacation for restoring their

effectiveness and gaining the power to continue with their day-to-day lives.

Saaremaa focuses on hiring people with various backgrounds, to offer something different

from their competitors. They require an international experience from the employees, which

has given an opportunity for better contact with their clients. The staff is able to get better

comparison and develop their empathy skills. They are more open to the needs of different

nationalities and cultures.

Spa Hotel Saaremaa Valss, source: www.saaremaaspahotel.eu


There is no specific innovation department. Product and service development for the hotel and

food & beverage sector is part of the sales- and marketing department. The head of the

medical department is in charge of development for medical and beauty treatments. No

special budget is made in advance for innovation development. The company deals with both

incremental and concept innovation.

Incremental innovation

The goal of Saaremaa is to maximize customer satisfaction. The strategy to obtain that is via

personal approach to the customers. The employees are encouraged to interact frequently with

clients on a casual and friendly manner. This approach has been used by employees in order

to gain trust by listening to the client’s needs and hearing what they expect from the services

and how do they want it delivered. The company is required to have a certain amount of

flexibility in their offerings because different nationalities have different expectations. The

incremental innovation, improvement of existing services and products is the direct result of

modifying the services according to requests from different customer groups.

Concept innovation

Most of Saaremaa’s clients are repetitive clients and the majority of them is elderly people.

They already have their own doctors at the spa-hotel, who have been treating them for several

years. Some of these customers have been coming back for 13-15 years. In order to attract the

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repeat customers they hotels need to provide a new feature of services every year so the

customers will always experience something new. The concept innovation is necessary to

keep the repeat customers coming back and getting new experiences. This will also maintain

the good general standard of the hotel.

The entertainment program for clients is also in constant need for innovation, as the repeat

customers are looking for new experiences. The hotels have many different experience events

developed for their clients: various tastings of local producs (beer, chees, cows milk etc),

handicraft work shops, language lessons, fashion shows of national costumes, workshops of

national dances.


The company considers the sources of innovation to be their own employees, the customers

and the cooperation partners/agents. The best feedback and new ideas comes through their bus

service staff, who accompanies the clients on their way from the capital Tallinn to the island,

and their local representatives in target markets, in Finland and Latvia.

Employees

The source for concept innovation in the company is the management. The management gets

its ideas for innovation from their own personal experiences in other countries and by getting

to know the preferences of different nationalities visiting the hotels. The management

identifies the specific needs of the customer groups in terms of transportation options to reach

the hotels, health treatments, entertainment options, food/snack, and tries to create new

concepts based on that. They also observe purchasing behavior very closely. They try various

things and use a lot of “trial and error” method.

One example is the introduction of systematic gastronomy principles, where everything is

systematized – the work with tables, machinery, kitchen procedures (similar to German

Intercity). It is not widely used in other hotels in Estonia. The system is very well received by

elderly Finnish customers, who appreciate the standardization of the quality level, that this

system provides.

Customers

The source for incremental innovation is mostly the customers. As mentioned before, the

employees use direct communication with customers in order to obtain useful information on

their services for possible improvements and new innovations. Questionnaires have not been

performed for clients because the managers feel that this form of interaction is too formal.

The managers want the employees to interact with the customers on a more personal and

friendly level. For example on the bus, which takes the clients back to Tallinn from

Kuressaare, the on-board service staff talks to clients and gets very direct feedback of their

vacation experiences. Even members of the management team join the bus trips occasionally

to get direct feedback themselves by talking to clients in a casual manner.

Another and quite an unusual approach, which the company has adopted, is gathering

information through the use of so-called spies. They are people from different nationalities

hired by the hotel, who act as clients and interact with the customers in order to get more

honest and direct information about their satisfaction and wishes.

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Partners/agents

The company also creates new services based on feedback they get from professional clients,

the local representatives and travel agents. These services are usually suggestions that reflect

the desires of the customers, who do the most business with them. E.g. the Latvian office

suggested having a Valentine’s Day special package because that would be popular with

Latvians. The Finnish office has suggested an idea for teeth whitening service, which is

popular among Finnish clients.

Saaremaa employees talk to the travel agents every day by phone. They don’t pay that much

attention to branding, they rather want to keep to old traditional methods and identity. The

internet site is important for them, but they don’t use any social media platforms like

Facebook, blogs or Msn. The main channel for personal contact with their clients is the

traditional telephone.


There are two main groups of lead users that could be identified:

Some local representatives and travel agents selling their products (professional

lead users).

Certain regular customers (repeat customers).

The local representatives of the company in target markets give very specific feedback and

ideas for service and product innovation, which is welcomed by the company management

and which has led to improvement of services and also new concepts. Specifically the

representative offices of the company in Finland and Latvia were named as well-informed

specialist and important contributors in innovation process and used as examples of lead users

in this study.

According to the sales and marketing director, there is no special method for including repeat

customers for innovation purposes. The employees of the company collect information and

ideas constantly, but in an informal manner. There are many repeat customers, who get to

express their opinions and ideas often, but further evaluation and development of these ideas

is done by the company’s management.

Spa Hotel Rüütli, source: www.saaremaaspahotels.eu

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5.9 ICELANDIC CASE STUDY: BLUE LAGOON

Type of company: Health and medical spa & skin products with an international market


Ownership: Share Company. Biggest shares in ownership of the CEO (doctor of medicine)

and his business partners. Part of the shares are owned by HS energy that is now owned by

Magma energy

Employees: 200, including employees at sales offices in Reykjavík and Keflavík Airport

Headquarters: Svartsengi, Iceland

Core Business: Public geothermal spa & sales of skin products

5.9.1 Background

The Blue Lagoon is one of Iceland’s most visited tourist sites with 410.000 visitors last year

and the turnover of the company is 10-15 million EUR a year. About 80% are inbound

tourists to Iceland. The company turnover is approximately 10 million pounds with about 200

employee´s. The lagoon had formed after 1976 as a wastewater from a new geothermal plant

in the Reykjanes peninsula. Seawater steam from deep drilling was the renewable energy

source. The mead in the lagoon has a high content of silica and an unusual mixture of salts

and green algae only found in Iceland and Japan. The case covers the bathing spa in

Grindavík and skin products. The ingredients of the lagoon have been scientifically confirmed

to have healing powers, which lead to better, and stronger skin texture and even some anti-

aging effects. The Blue Lagoon has a geothermal bathing lagoon that is 5000 m2 and at each

time the lagoon holds six million liters of geothermal brine all of which is renewed in 40

hours (Blue Lagoon (e.d.) , 2009).

Source: www.bluelagoon.is

The brand is already international and one of the best known brands of Icelandic companies.

The company has got five domestic and four international awards (architecture, marketing,

innovation, customer satisfaction, best medical spa). The market segments are both the

general public and treatment patients. The customers increasingly want to bring children with

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them to the lagoon but the marketing strategy is not aimed at children or families. The Blue

Lagoon attracts many celebrities, Hollywood actors, music bands and has developed a

separate executive lounge for elite customers. Loyal customers can sign up online and get

newsletters and special offers. The company also operates an online shop, selling skin care

products that are also sold in retail outlets in the Blue Lagoon spa in Svartsengi but also in

outlets in the international airport in Keflavík and selected retail shops. The clinic has a small

number of hotel rooms used for the clinic patients and the company works closely with Spoex

(the psoriasis association) and The Health Society (the Medical Tourism Society of Iceland).

What the future holds for the Blue Lagoon is open for many interesting possibilities. Could it

become a 4-5 star spa & health resort hotel and/or an Anti-aging clinic for elite customers? A

natural resource scientific park with green organizations has also been in the discussion where

the Blue Lagoon would be the heart of a sustainable network of organizations.


The Blue Lagoon has a long term innovation strategy that is based on health tourism and

green sustainable foundation. The image is connected to a strong natural, holistic experience

by the customers that visit the lagoon. The company uses Supply chain based on renewable

energy and organic methods; the lagoon is not heated by energy, which means the company

has to cool it down for customers. The slogan and mission statement of the Blue Lagoon

organization for the future is: To create energy for life through the forces of nature. In recent

years the company has been emphasising its brand as a nature related in a high price range,

almost as a luxury brand in competition with cosmetics (skin care industry).

The R & D department is a structured new product development unit with green chemistry as

the mission. The green trend helps the company to penetrate the market because it breaks

down customer loyalty to the older famous brands. The Blue Lagoon is kind of a test bed for

new products, could be called a R&D spa or an action spa. New service development is broad

and in many places, like in the kitchen of the Lava restaurant. The managers follow closely

the trends in the market and in travel magazines and monitor closely the feedback from

customers in the bathing area and in the retail shop. The company wants to be a trendsetter

but also improves and simulates good ideas from the competition or similar organizations.

Analogous fields are an interesting source of innovation in this case, fields like organic sea

products, medical, health and cosmetics. An interesting example is the forming of a strategic

innovation group with managers and outside professionals in the year 1997. The specialists

were an Icelandic designer working in Milano and a small company from France specialized

in organic sea products like seaweed. Together with the Blue lagoon management the

strategic foundation for the skin products line was created. They met the French seaweed

company in a cosmetics trade show in Italy after recommendation from an Icelandic scientist

working at the Technical Institution of Iceland. They saw instantly that they were dealing with

similar problems and tasks trying to market products based on organics from saltwater:

“…their company was a little bit related to us, the ingredients, they were

specialized in this and the owner had recently got some awards for design of

products from the sea ... and they are growing seaweed and producing from

it, it was almost like our own world. We got well together from the beginning

and she understood us right away and had this service concept, design of

products, formulation, production, they could provide all the emballage for us

…”

(Brynjólfsdóttir, Sept 18th, 2009)

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The biggest innovation driver in the Blue Lagoon has been scientific research and the

treatment patients have been involved in some innovations that are later commercialized. This

scientific focus would fall under the category of research-driven innovation because many

studies were made by doctors and pharmacists and the goal was to deliver a product or service

that distinguishes itself from the competition (FORA, 2005, p.29). The medical field is very

important in the Blue lagoon operations. The CEO is a doctor of medicine and a former

athlete, the manager of the R&D department is a pharmacist. Other doctors like skin

specialists and research scientists have been working closely with the company. An example

of this is the German research on anti-ageing effects of the lagoon. When the first

moisturizing crème came out there was some research made by the R&D department to study

the effectiveness of the lagoon by monitoring patients between treatment institutions.

Treatment patients from over 20 countries have visited the lagoon clinic to heal their ruptured

and weak skin.

“Yes well there has been some research which we participated in where it was

examined those who went into the lagoon and those who went to the outpatient

department in the general hospital and I think the results from that were

positive and I think it was tested the treatment methods, the lagoon and the

light treatment of the hospital department and even later on some crèmes and

something that is connected to that” (Margeirsson, 2009).

The Blue Lagoon offers a variety of massages in the lagoon itself. There is a facility inside for

massages; however the idea of offering the service outside comes originally from the

treatment patients at the clinic. It began when the patients started to stay for a longer period of

time for each therapy. For many the treatment is a relaxing period and one day there came a

request for a massage in the bathing resort.

“…it started like this, people wanted to get a massage inside the lagoon and

originally it starts with our patients so we come again to the core ... and

people are perhaps staying for a long time, they have asked for a massage and

that is something the customer wants in the lagoon and that’s how it starts. We

started giving a simple neck massage in the lagoon and then the customer

started asking for a full body massage and that was added and then little by

little we started working with these special chemicals, rubbing the silica ... and there were opportunities to make the customer stay longer.”

(Brynjólfsdóttir, 2009)

Source: www.bluelagoon.is

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The patients were covering and rubbing the chemicals on their bodies from the lagoon. Soon

came the idea to rub silica and tiny lava pieces and make it a part of a massage treatment, the

result was a new type of service. It started out in the clinic only with the patients but later it

was offered to all guests in the general bathing area (Brynjólfsdóttir, 2009). The treatment

patients are considered the core customers of the Blue Lagoon because of their connections

and great interests of the lagoons healing powers which make them large stakeholders.

“…even though this group of patients is small, a small portion of the turnover,

the diamond is always the clinic. The source is from there, it is always the core

in this company.” .” (Brynjólfsdóttir, 2009).

The invention of the skin products and massages is all traced back to the treatment patients.

They are a living proof of the effectiveness of the lagoons healing powers. Research was

begun on different algeas which are only located in the Blue Lagoon because of the effects it

had on the skin of those patients. This discovery became the main attraction for the company

(Brynjólfsdóttir, 2009).

The innovation process of the Blue Lagoon includes many types of innovation, namely:

Concept innovation – developing completely new concepts, e.g. massage treatments

for the general customer or shorter treatment packages for skin treatment patients

(lead users). The customer wants more diverse products and service. Developing

private cells and an exclusive bathing area for elite customers.

Incremental innovation – developing new package sizes for skin products, the

product as such already exists, but is adapted to the other use and improved based on

knowledge and experience gained from customers in the retail shop.

Process innovation – developing new highly improved processes to lower carbon

footprints by binding CO2 in growing the algae for the skin products in their small

biotech factory by using excess CO2 from the geothermal plant as a raw material in

the algae farm.

Technology innovation – developing a portal for online booking and an online retail

store. Developing new buying methods, like with electronic wristbands.

The innovation process possesses many actors and some of them have lead user

characteristics. The exclusive lounge serves a market segment which has higher demands and

other needs than the normal main-stream user. The exclusive lounge was created because of

the demand from individual celebrities and groups who needed to have much privacy for

themselves. These customers have a demand for quality features like privacy and space. These

demands came from the customers and also from agents.

An example of a tour operator is Luxury Adventures, which has been transporting and guiding

elite customers with helicopters and private planes to the site. The tourists influence the tour

operators with their comments. Thus agents are constantly commenting on past experiences,

which they receive from their customers and use them to develop new packages or improve

the previous ones. The agents are intermediates and this cooperation is a source of lead user

effect in the innovation process.

Airlines have also innovative impact by opening up new routes that have big effect on the

type of customer and nationalities that visit the lagoon. Bus transport organizations are in

close cooperation and a good example is Kynnisferðir that recently decided to make the Blue

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lagoon their hub in the peninsula and introduced lockers for their customers to keep luggage

while visiting the lagoon.

The employees play an important role and some innovations are discovered because of their

participation in the innovation process. Staff in the reception at the clinic receives comments

from customers who are treatment patients. They ask for more recreational activities to be

available for them at the site. Requests for more tours and family activity have reached

employees at the reception who forward them to their superior. Because the products and

services are offered on site it creates the opportunity for the company to reach and receive

commentary from the mass of Blue Lagoons users.

Spa and treatment specialists have worked on innovation in new treatments and new types of

massages but in close cooperation with managers and employees. The organization has also

been working closely with architects and designers to create the organic image of the brand.

This counts for new facility design in the whole organization. All buildings and interior are in

a naturalistic style.

Innovation institutions have helped to create new opportunities with experiments on the

production process of the algae that is an important ingredient to the skin products. One

project funded by the Technical foundation has increased algae production 10 times. Another

process has now been designed to become with minimal carbon footprints by new technique

that binds CO² from the geothermal plant in growing the algae. That can give the Blue lagoon

products a unique place in the skin products market.

In Appendix 1 is a further complementary analysis of the Blue Lagoon innovation process

based on the eight steps of the Innovation Wheel.

5.9.4 The Identification of lead users

The pioneer is an accidental entrepreneur that has strong characteristics of a lead user. Mr.

Margeirsson was diagnosed with psoriasis in the year 1960 and has been a treatment patient at

the Blue Lagoon clinic since it was created in 1994 (Brynjólfsdóttir, 2009). He discovered the

healing powers of the lagoon on the human skin in 1981.

“…it was in the year 1981, then I was really ill and no other option for me

except to go to the hospital. At that time there had been some studies made

here in connection with the Hitaveita Suðurnesja4 and here had formed a

lagoon which was drainage from this power plant which they were

experimenting on. And since this was seawater and it didn’t make it worse that

it was warm seawater, then there was an interview with the local engineer in

the local newspaper here which said that employees had been dipping their

feet into this mead and experienced some better comfort. ... then I decided

before the doctor put me into the hospital to go to the chief of the Hitaveita and

try to get permission to try to go to this lagoon which had formed there and see

if it would have any effect on the psoriasis.” .” (Margeirsson, 2009)..

The current CEO of the Blue Lagoon saw the business opportunity to start a health clinic

when he saw the possibilities from the healing effect on the first patients. While many

people, including doctors, were skeptic on this unscientific treatment which was at that time

4 Hitaveita Suðurnesja: The regional heating corporation and propietor of the lagoon area at that time

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not proven by any research. When a user does the testing spontaneously himself it is a sign of

when a lead user drives innovation (Norden, 2006, p.13). As pointed out in the lead user

chapter they tend to innovate because they anticipate relatively high benefits from obtaining a

solution to their needs. Mr. Margeirsson did not let anything affect his determination and will

power to find a cure for his disease and went on experimenting by frequently bathing in the

lagoon. He had tried every other possible treatment with limited results. Though Mr.

Margeirsson had psoriasis disease on a high level he experienced a certain need that was later

experienced by many users in that market, the need to heal and protect your skin.

“…the first effect that I experienced from this was that the itch disappeared.

This irritation in the skin disappeared in three days and ten days till about half

a month after I went to the lagoon I started seeing new skin developing in

between, so it seemed to be very effective and started to build up and the skin

healed. So actually this is how it started.” (Margeirsson, 2009).

Mr. Margeirsson is also a member of Spoex, an Icelandic association for psoriasis- and exem

patients. This community is a large stakeholder of the Blue Lagoon because of the positive

effects of the lagoon on these patients’ diseases. After his discovery he went to the association

and together they started to build up a facility at the site so more patients could join in.

Hitaveitan then built a facility for the general public and started selling admittance.

From the analysis of the case it seems that the lead users in this case are in three categories:

B2B network partners – like tour operators, for an example they cooperate with the

chef in Lava restaurant to present something new and exciting for a big group, if it is a

success it will possibly be a new concept on the menu or a new package for mainstream

groups.

Treatment patients – the example of Mr. Margeirsson seems to be very clear and a

recent example of this leading customers group is a new Psoriasis clinical research

project that is open for this group to take part in trials. Another example is Alex a

skipper from the Shetland Islands, a psoriasis patient that became a frequent visitor and

in the end bought a house near the Blue Lagoon and married a local lady.

Analogous fields – Specialists in fields like medical health, cosmetics and seaweed

production.

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6.0 PRESENTATION AND DISCUSSION OF FINDINGS

This chapter presents and discusses the study’s research findings, which are based on

interviews with the nine case companies presented in chapter 5. There are two Norwegian

companies, two Danish companies, two Latvian companies, two Estonian companies and one

Icelandic company. In addition, four lead users of the Norwegian companies, one lead user in

the Icelandic company and one lead user in the Danish company have been interviewed.

The study seeks to:

Assess the innovation strategy of the case companies

Examine the innovation process of the case companies

Study how the case companies and lead users interact in the innovation process

Appraise the case companies attitude to lead users and user driven innovation

Innovation does not seem to be a well-understood concept in the tourism industry. The

subfields of these companies are diverse but some patterns are visible. Case companies 1 and

5 are tour operators; the Norwegian company Din Tur in outdoor activities related to fishing

and the Latvian company Ezi planning and operating outdoor sports events. Case companies

2, 4 and 8 are hotels; where the Norwegian Kongsvold hotel is a mountain hotel, the Danish

Skt. Petri is a design hotel in Copenhagen and the Estonian Saaremaa Spa Hotels is a spa

hotel on an island. Cases 3 and 9 are spas; the Danish Helle Thorup a skincare spa and the

Icelandic blue Lagoon a medical treatment & public spa and outdoor lagoon. The case

companies 1, 5, 6 and 7 are all working in the field of outdoor & extreme sports, where the

Latvian Aerodium is operating and building equipment for free flying and the Estonian

Otepää Seikluspark is an adventure park. The fields of operation looking at all the cases are

concentrated in outdoor activities (sports), hotel operations and the health & spa sector of

the tourism industry.

6.1 INNOVATION STRATEGY OF CASE COMPANIES

The case companies use differentiation as a strategy to try to set them apart from the

competition. In many of the cases it is a quest to offer a better (service) experiences: The

Norwegian Kongsvold’s hotel main innovation focus is on added value products/services,

things that can make the stay at the hotel a different experience from that of other hotels. The

Skt. Petri Hotel innovation strategy is based on the motto that the hotel always wants to be

ahead of the competitors and the hotel always strains to improve the services and the business

platform that will make it a high-end first class hotel providing more experience, more

responsibility towards the guests.

The approach of the Icelandic case is similar with a slogan and mission statement of the Blue

Lagoon organization for the future: To create energy for life through the forces of nature. In

recent years the company has been moving towards a more holistic image approach with

emphasis on its brand as a nature related and organic but in a high price range, almost as a

luxury brand in competition with cosmetics (skin care industry). That is very close to the

Danish hotel case with the future vision of a more green environmental emphasis. The basic

foundation of Helle Thorup Spa is skincare and the mission is: Skin care for every body. The

innovation strategy for the business is to try to find niche products in the market to

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differentiate itself from the competition. The Estonian case of Otepää Adventure Park is

similar in the innovation focus where the source of innovation is based on experiences gained

through the operation process. This is also largely the case with the Norwegian tour operator

Din Tur.

The Baltic cases focus more on operational goals like customer satisfaction and quality of

technical solutions. Ezi does neither have a special innovation strategy, nor do they focus on

any particular area of operations in their business development. The most critical factor,

which is stressed in Ezi’s innovation strategy is to keep the employees motivated. The main

focus of the company regarding innovation is new product technology. Aerodium´s

innovation has mainly been demand-forced and aimed at innovative technical solutions. The

goal of Saaremaa is to maximize customer satisfaction via a personal approach. In summary

it can be said that the Baltic case companies are focused on service quality and technology

solutions to increase their competitiveness.

To conclude, our study reveals that the case companies have very different innovation

strategies based on formality (slogans and mission statements) and content (experience,

quality, green). Common in the cases was the need to further develop and improve the current

product/service base and improve and further develop existing concepts. Another similarity

was that all companies wanted to differentiate their offerings to the market to seek superior

advantage to the competitors. What was different was how such a differentiation was planned

and achieved. Formal, written strategies were rare.

6.2 INNOVATION PROCESS OF CASE COMPANIES

Table 6.1 gives a good overview of the innovation process regarding user’s involvement. The

following examples from the case companies give some detailed description and discussion of

the process.

In the Norwegian cases, the hotel company reports that the network programme named

“Handpicked”1 is an innovation source for them. Another vital source in the innovation

process is professional meeting- and conference organisers, several of these with lead user

characteristics. The Norwegian tour operator lists market surveys undertaken by Innovation

Norway in tourism generating markets as particularly to their concept innovations. For their

incremental innovations, selected tour operators and an internationally renowned journalist,

give indispensable input and feedback on their products. These persons are users who have

excellent market knowledge as well as much experience with the activity (product) in

question. Additionally, they personally benefit from an improved product (write better and

sell more articles, sell more products/tours and thus increase profit), and may therefore be said

to fit von Hippels (1986) and Rogers (2003) definitions of lead users. The tour operator

organise test tours before launching a new product, inviting lead users to participate and give

their feedback and input as they are on the spot. A part from these tours, both Norwegian

companies continuously seek out views and feedback from persons who may be characterised

as lead users (like those interviewed), as well as from main stream users (through

questionnaires, customers complaints and general comments). There is however no formal or

structured way of collecting, recording and applying the information, a finding, which is in

line with the study of Bergum (2004). Although both the Norwegian case companies include

lead users in their innovation process, there is, apart from the test tours of the tour operator,

no evidence of a formulated and conscious user driven innovation strategy.

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The innovation process in the Icelandic case has actors that have lead user characteristics. The

psoriasis patient that went on experimenting by frequently bathing in the lagoon is a classic

example of a lead user by the definition from von Hippel (1986, 2005). An interesting aspect

of the Icelandic case is the source of ideas from analogous fields. Spa and treatment

specialists have worked on innovation in new treatments and new types of massages, but in

close cooperation with managers and employees. The French seaweed company is a good

example of knowledge incorporated into the Blue Lagoon skin products from an analogous

field in a formal way. Doctors like skin specialists and research scientists have been working

closely with the company. An example of this is the German research on anti-ageing effects

of the lagoon. Innovation institutions have helped to create new opportunities with

experiments on the production process of the algae that is an important ingredient to the skin

products. One project funded by the Technical foundation has increased algae production 10

times. Another process has now been designed to become with minimal carbon footprints by

new technique that binds CO² from the geothermal plant with growing algae. That can give

the Blue lagoon products a unique place in the skin products market. The exclusive lounge in

the Blue Lagoon serves a market segment, which has higher demands and other needs than

the normal main-stream user. The exclusive lounge was created because of the demand from

individual celebrities and groups who needed to have much privacy for them. These demands

come from the customers on their own and also from agents. An example of a tour operator is

Luxury Adventures, which has been transporting and guiding elite customers with helicopters

and private planes to the site. The tourists influence the tour operators with their comments.

Thus tour operators are constantly commenting on past experiences, which they receive from

their customers and use them to develop new packages or improve the previous ones. The

agents are intermediates and this cooperation and communication is a source of lead user

effect in the innovation process of the Blue lagoon.

The Danish case companies do not identify any lead users, but use information from the

customers by listening closely to their concerns and ideas. The Helle Thorup Spa gets

information from user communities on the web to use strategically in business development.

Improvement of existing services and development of new concepts is also based on

inspection of the industry by visiting companies in the same field and reading magazines and

internet blogs. The company gets inspiration from other spas. Skt. Petri Hotel’s innovation

process use small in-house working groups reporting to a project business manager for

developing a new service experience concept. Competitors are important to look at for

inspiration.

The innovation process of the Latvian companies to gain user´s input is not very systematic.

Sources of innovation in Ezi originate mainly from the employees of the company via internal

brainstorming events. The secondary source of innovation is obtained through collaboration

with the most important customers. The company arranges internal creation/brainstorming

events twice a year where most innovations are proposed and developed. There is no

particular strategy or a step-by-step process used when working with customers regarding

innovation. According to the CEO and co-owner, the managers have never felt the need to

systematically work with lead users in any way. The managers develop new services with

these regular customers by individual and informal conversations. The Aerodium case

company does have meetings with their clients on a regular basis, but with no formal process

or method. Currently the innovation processes have no formal structure and has mainly been

demand led and sporadic. They regularly contact the customers personally to get feedback.

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In the Estonian cases, there is no special cooperation with customers of lead user

characteristics for innovation purposes. There is no strategic process of involving customers

in new product- or service development. In the Otepää Adventure Park case company the

main source of inspiration that leads to new innovations have been the customers. A small

team of instructors and managers interact with every customers every day, making the staff,

managers included, key collectors of information. The instructors and managers have direct

contact with the customers from the initial instruction at arrival until seeing the final emotions

at the end of the activities. Otepää Adventure Park’s managers look at other parks as well

when they are trying to develop new features for their operations. If they see an idea that they

like, they try to adapt it to their park. The Saaremaa Spa Hotels case company applies an

interesting method in their innovation process. Service staff travels on their shuttle bus

between the spa and Tallinn and talk to customers as to get direct feedback of their vacation

experience. Even members of the management team join the bus trips occasionally to get

direct feedback themselves by talking to customers in a casual manner. Saaremaa also creates

new services based on feedback they get from professional clients, local representatives and

travel agents. Saaremaa Spa Hotels also uses so called mystery guests to assess their products

and services. The mystery guests are people of different nationalities, hired by the hotel, to act

as clients and interact with other clients in order to get information on their products and

services.

The above discussion shows us that it is common for the case companies to gather and apply

ideas from their customers, be it lead users or mainstream users. The procedure is however

not a formal and structured part of the innovation process in any of the cases. The input from

the customer comes frequently with observation and oral feedback. Furthermore, customers

(users) are in many cases conferred for feedback on specific issues, merely giving advice, not

steering the innovation process. The Internet is used in some cases to gain feedback and

information on the user’s needs and ideas. In such for a it usually no distinction of user types

(lead users/mainstream users). The case companies think that the inputs from the employees

are very valuable and sometimes the main source of ideas for service innovation. Supply

chain partners like tour operators are also a source of innovation ideas in many of the cases.

Looking for ideas by observing and visiting the competitors is a method used in some of the

cases. The input from customers helps the companies with their service and process design,

and in some cases also in the service testing and pilot run. In the cases that have the strongest

cooperation with lead users, the companies even use the input from lead users in the test

marketing and commercialization phase, the last part of the innovation process.

6.3 HOW DO CASE COMPANIES AND LEAD USERS INTERACT

Lead user is not a well-understood and familiar concept in the service industry according to

this study. Some companies have heard the term lead user mentioned, but have no further

knowledge of what it entails. This may be due to the fact that user-driven innovation as a

structured innovation approach still is somewhat new to the Nordic and Baltic, and maybe

more so to the Nordic and Baltic tourism industry. The initiative to involve users who come

under the definition of lead users in the innovation process is predominantly taken by the case

companies that were able to suggest lead users for interviews (Norwegian and Icelandic cases)

in the research. The discussion in this chapter is predominantly based on these three case

companies and the five interviews with lead users.

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6.3.1 How is feedback collected from lead users?

The Norwegian tour operator gains feedback from their lead users on test trips or private trips

organised by the lead users themselves. Their test groups consist of professional users, be it

tour operators, the case company’s own sales agents, journalists in addition to one or more

persons from the case company’s management. On one test tour owners and employees of

German fish tackle shops were invited to test the product. All these professionals, apart from

the tour operator’s own staff, can be defined as lead users to the operator’s sea fishing

product. According to the tour operator, the most vital product feedback comes on test trips,

when newly developed products are tested before they are launched for sale. The tour operator

gains their feedback orally on the test tours and in other discussions with the lead users, as

well as in writing (by email) if the lead users have been travelling alone to inspect the

product, or is reporting a customer complaint on the product. In both the Norwegian case

companies the collection and recording of feedback is highly informal which reconfirms that

the innovation process is not consciously and structurally user driven. One of the lead users

suggests that in the actual innovation process there is not enough time to discuss options and

changes. The situation is further complicated by the fact that lead users, tour operator and

product are in three different geographic locations. Discussions could to some extent be done

using e-technology like in the study of Baglieri and Consoli, (2009), but as much of the

tourism product is intangible, this may not prove adequate.

The Norwegian hotel collects feedback orally at meetings and in discussions with their lead

users, as well as from situations appearing when lead users are at the hotel with their groups.

Some feedback my also come as emails, pre- or post- event. Complaints are both received

written and orally, response to these may be written, but more “serious” complaints are dealt

with immediately and on the spot, which also means that action of improvement is taken

immediately. One of the lead users actually argues that:

“Complaints are what moves (= changes/improves) the product the most”.

In the Blue Lagoon case the tour operators gain feedback from their lead users, which they

forward to the Blue Lagoon. Employees report back on feedback from bathing- and treatment

guests, as well as from some retail customers. The invention of the skin products and

massages is all traced back to the treatment patients. Around the year 1993 the treatment

patients were the customers who inspired the creation of the first skin product, the

moisturizing cream, which was fully developed and put for sale in 1995. After some testing

period of the product the patients started asking for bigger tubes of silica and moisturizing

crème to take home, even abroad (Brynjólfsdóttir, 2009). As a result the products were put for

sale in the store.

6.3.2 What do lead users think of the involvement in the innovation process?

The lead users of the Norwegian and Icelandic case companies comprised in this study

consider the involvement of customers as crucial to the innovation process. Half of these lead

users see themselves as opinion leaders who set a trend for main stream users as they

themselves have much experience and knowledge of the topic/product and can thus give very

valuable input to the product developer/company. One lead user even professes that:

“… lead users themselves will choose to be involved (give feedback,

be heard, be part of the product development). If they do not get this

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chance, they will ask to be involved, and if not allowed or listened to,

they will change business partner”.

This statement certainly has implication for any company’s innovation strategy. Furthermore,

it can partly be related to the study of service defectors by Duverger and Hassan (2007),

where customers who had left the hotel (defectors) because they somehow were unhappy with

it, were positive to take part in a lead user driven innovation process run by the hotel. The

study revealed that the same defectors were the ones to come up with the best ideas! The level

of lead user involvement in the three case companies is that of giving expert advice and

feedback on new and existing products or services. Lead users of both Norwegian companies

state that they are very happy with the case companies and their innovation progress, one lead

user discloses that:

“… In the beginning there were much more to be rectified, but the

[case-] company have learned and become experienced over the years

and there is now less and less things to report back.”

The case companies confirm that the lead users give them very valuable feedback on their

products and services Although there is no formal system of receiving and recording

feedback, all lead users feel that their feedback is valued and considered seriously by the case

companies. The hotel company admits that they sometimes find it both difficult and time

consuming to use the feedback from lead users in a systematic way, a finding consistent with

that of Bergum (2004) and his study of customer involvement in IT- and media firms in

Norway. Moreover, all four lead users in the Norwegian cases find the involvement in the

innovation process very useful as it enhances products that they offer and consequently they

benefit through smooth operations, satisfied customers, increased sales and profitability. As

one of the lead users put it:

“… A good product is connected with quality and sincerity, which

again will reflect on us all. To be involved in the product development

gives me the chance to choose the best products, which again will

grant us less complaints and better profits.”

The same lead user also deems the participation in the innovation process decisive for the

cooperation with the case company as he feels that being involved in the innovation process is

the only way he can ensure that the products that they sell are the best possible. He adds that

the more specialised the product (e.g. trekking, fishing, diving) the more important it is to

involve lead users as the attention to detail and the correct information is crucial to the

success of the experience (e.g. like not having the right clothing for a trek up the Himalayas).

When the Norwegian lead users were asked how much time they would be willing to spend in

helping the case company in the innovation process, the replies where somewhat vague. One

of the lead users replied that it was important that such an activity would fit into his work

schedule. Another one supported this view and added that there was much work to follow up

on in his office when he got back from a test tour (implying that the time he could spend

helping the case company would be limited). Additionally, their replies, or lack thereof, also

divulge that the lead users look at their participation as part of their job, they are helping

themselves (their firms) as much as they are helping the case companies. None of the lead

users get any reward or otherwise incentive to participate in the case company’s innovation

process, but none of them articulate the need for any remuneration for the involvement in the

innovation process.

85

In the Icelandic case the treatment patients are considered the lead users of the Blue Lagoon

because of their great interest towards the lagoons healing powers.

“… even though this group of patients is small, and represents a small

portion of the turnover, the diamond is always the clinic. The source

of innovation is from the clinic, it is always the core in this company.”


The lead user involved in the Icelandic study considered the involvement of treatment patients

as very important, both for the start of the company and also for development of the clinic and

the skincare products. He has been involved from the beginning of the company. The original

business idea of the Blue Lagoon was based on the experiments that the lead user did

personally by being the first to bath in the lagoon. The strong healing effects of the mead in

the lagoon were noticed by other psoriasis patients and their association, SPOEX. Treatment

patients have repeatedly since been contributing to new ideas of skin products and continuous

improvements of treatments. This original idea and the later development into a full grown

tourist destination with over four hundred visitors gained a lot from the contribution of the

lead users.

To sum up we have seen that the case companies take initiative to user involvement and see

user input as very valuable in the innovation process. The findings also show that the

companies consider inputs from some users (like the lead users interviewed) more valuable

than that of more mainstream users. The lead users interviewed for this study take the

initiative to give product feedback when there is a specific and urgent issue at hand, e.g. like

customer complaints and comments, in testing new products or treatments, or when they have

experienced things privately that they want to share. In the Norwegian cases we found that the

case companies took the initiative to collect or ask for feedback on test tours/when launching

new products. The interaction is informal and mostly oral and seems to be a continuous

process between producer and user, something which is concurrent with Tether‘s (2005)

description of the service innovation as a continuous process. The collection and recording of

feedback and input is also informal and of no structure. However, lead users still feel that

their feedback and inputs are valued and used by the case companies. The lead users

interviewed consider the involvement as mutual beneficial and are willing to spend time on

this kind of involvement, provided it fits into their working schedule.

6.4 THE CASE COMPANIES ATTITUDE TO LEAD USERS AND USER DRIVEN INNOVATION

Both Norwegian case companies appreciate the importance of applying lead users in order to

ensure a market attractive product. They acknowledge that working closely and systematically

with lead users could be very useful both for the industry and for small, individual companies

like themselves. Nonetheless they fear that they lack time and resources needed to undertake

such innovation, and believe that hotel chains/larger companies are probably the only ones

with the resources to carry out innovation involving lead users.

When asked about the dedication to the application of lead users in the innovation process, the

tour operator manager voiced the concern that lead users product views may be too short

termed and too specialised to be attractive to a wider market. Although the tour operator’s

product concepts are specialised, they (eventually) want to reach a market of more

mainstream users. The managers concern is in line with Alam’s (2002) research of financial

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service providing firms in Australia, as well as Moore’s (2002) statement about lead users

“having more in common with each other than everyone else and should thus not be left to

steer innovation”. According to von Hippel’s lead user theory (1986), lead users preferences

later become the needs of the mainstream market. Perhaps, if the innovation process in terms

of involving lead users is more conscious and structured, carefully analysing and considering

the inputs from the chosen lead users before the ideas are implemented, one could better

ensure innovations that are not short termed and too specialised?

The same manager also emphasised the need for the products to be sustainable and beneficial

to society in general, a concern not always shared or understood by lead users from another

country/area. Then again, the lead user method does not address the issue of social

consciousness and local insight of lead users, an aspect deemed to be important in much

tourism innovation as tourism development impacts so many parts of society (Aas et al.

2005). The Norwegian case companies sees the lead user project as very interesting and

important, but deems innovation involving lead users to be hard to put in to practice. For them

the undertaking of such a process would depend on the availability of resources, guidance and

assistance in implementing such a strategy in the company. There is also the discomfort that

lead users might be too specialised and short termed in their needs and thus not necessarily

harbour the necessary holistic and sustainable view.

The Icelandic case company sees user input as very valuable in the innovation process. The

company recognizes that it is important to interact with the customers, but does not have a

formal and structured user driven approach in their innovation.

“I think regarding lead users, I haven’t thought of it this strategically, but they

are those who are very loyal with us, the treatment patients and the tour

operators.”

(Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009)

The study findings have disclosed that none of the companies can be said to have a formal and

structured user driven approach to innovation. The process is open, as they involve users in

giving expert advice, but it is still a top down innovation process. The companies agree that

what is important to them when seeking input in the innovation process, is to identify the

most relevant and reliable information sources, regardless of who they are and what they are

labelled. While both Norwegian companies see the current lead user involvement in the

innovation process as highly constructive, they admit that such involvement is also time

consuming and costly. Furthermore, the companies fear that they do not have the adequate

skills to formulate such an innovation strategy and perform such a process. This fact could

maybe be resolved by, for example, a publicly funded and run innovation programme. Time

and money, as well as the lack of skills are perceived as a restraint to a user driven innovation

process. When asked if they would be interested in participating in a public funded innovation

programme, if available, the case companies were quite interested, depending on the time and

resources required for such an involvement. One company underlines that such an initiative

(public programme) would need to be flexible in order to be interesting to them. The

Norwegian “Handpicked” project was mentioned as a possible platform for such a

programme.

Applying the results to Alam’s (2002) Framework of four basic questions we get the

following result, see table 6.1. a summary of the case companies findings on the next page.

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Table 6.1 Alam’s Framework of four basic questions. Source: Adapted from Alam (2002): An Exploratory Investigation of User Involvement in New Service Development

Alam´s Basic

Questions

Case 1:

Tour operator

Case 2:

Mountain

Hotel

Case 3:

Skincare Spa

Case 4:

Design Hotel

Case 5:

Outdoor

sports centre

Case 6:

Extreme

sports

Case 7:

Adventure

park

Case 8:

Spa Hotel

Case 9:

Medical Spa

& Lagoon

Objective/purpose of

involvement

Why are users

involved in the service development

process?

Company seeks

superior and

differentiated

product/service

Long term

relationship

Company seeks

superior and

differentiated

product/service

Long term

relationship

Company seeks

superior and

differentiated

product/service.

Long term

relationship

Company seeks

superior and

differentiated

product/service

Long term

relationship

Company seeks

superior and

differentiated

product/service

Company seeks

superior and

differentiated

product/service

Reduced cycle time

of production

Long term

relationship

Company seeks

superior and

differentiated

product/service

Company seeks

superior and

differentiated

product/service

Long term

relationship

Company seeks

superior and

differentiated

product/service

Reduced cycle time

Medical tests of new

products

Long term

relationship

Stages of involvement

At what stages of the service development

process are users

involved?

(Idea generation)

(Service and process

design)

Service testing and

pilot run

Test marketing

Commercialisation

Idea generation

Service and process

design

Service testing and

pilot run

Test marketing

Commercialisation

Idea generation

(inspiration from

other spas)

Service and process

design

Idea generation

Service and process

design

Idea generation

Service and process

design

Idea generation

Service and process

design

Service testing and

pilot run

Idea generation

Service and process

design

Service testing and

pilot run

Service and process

design

Strategic planning

Idea generation

Service testing and

pilot run

Test marketing

Commercialization

Intensity of invovlement

How does the intensity of user

involvement vary

across various stages of the

development

process?

Passive acquisition

of input

Information and

feedback on specific

issues

Extensive

consultation with

users

Passive acquisition

of input

Information and


issues

Extensive

consultation with

users

Extensive

consultation with

users (feedback from

clients through

questionnaires and

website)

Passive acquisition

of input

Information and


issues

Passive acquisition of

input

Information and


issues

Passive acquisition

of input

Information and


issues

Extensive

consultation with

users

Passive acquisition

of input

Information and


issues

Passive acquisition

of input

Information and


issues

Passive acquisition

of input

Information and


issues

Extensive

consultation with

users

Modes of involvement

What are the means

through which input and information are

obtained from the

users?

User visits and

meetings

Users observation

and feedback

User visits and

meetings

Users observation

and feedback

Users observation

and feedback

Users observation

and feedback

Face to face

interviews

Users observation

and feedback

Face to face

interviews

User visits and

meetings

Users observation

and feedback

Phone and emails

Users observation

and feedback

Users observation

and feedback

User visits and

meetings

Users observation

and feedback

* The companies were not asked why they involved users in the innovation process, thus the answer presented here have been deducted from what else was disclosed in the interviews.

88

7.0 CONCLUSION AND RECOMMENDATIONS

The phenomenon of lead users has been outlined in the previous chapters linking theory to

new Nordic and Baltic findings from a multiple case study. This chapter presents a brief

summary of the findings relating to the objectives of the study, before providing an overall

conclusion to the research. To complete the study, recommendations are made for the tourism

trade as well as for policy makers for future application of lead users in the tourism

innovation process.

This research shows a new aspect in the field of tourism innovation. Although the application

of users in the development of tourism products is commonplace, user-driven innovation as a

structured and conscious innovation strategy seems to be in its infancy in tourism and thus

needs to be developed if it is applied. Following von Hippel’s (1986) initial work on lead

users, the importance of users as a source of innovation has been widely accepted and the lead

user method has proved its high potential for successful idea generation in various industries.

The systematic application of the lead user method in tourism innovation is however almost

unknown. To the knowledge of this project group, the only documented study applying lead

users in tourism innovation is that of Duverger and Hassan (2007), studying dissatisfied users

(“Defectors”) of a hotel in the United States. As the subject of this study is relatively new and

the amount of previous research was limited, it became both challenging and exciting to study

the subject. The reader should therefore have a certain notice on the reliability of the

conclusions because the applicable academic theory is recent and it is only possible to

compare methods and conclusions in similar cases. The case study did not have a defined time

period; the case companies are studied through the entire lifecycle. The rational for this

approach was that we wanted to get the most evident examples of lead users in the different

company’s operations. If the period would have been defined to a certain period (for example

three years or five years) is likely that certain characteristics that were identified in this

research would not have been noticed.

7.1 CONCLUSION

None of the case companies can be said to have a formal and structured user-driven approach

in their innovation. The process is open, as they do involve users in giving expert advice, but

it is still a top down innovation process. The companies agree that what is important to them

when seeking input in the innovation process, is to identify the most relevant and reliable

information sources, regardless of these users being customers, employees, trade partners or

otherwise. Common in the cases was the focus on incremental innovation – the need to further

develop and improve current product/service base and existing concepts. The rational for

innovation in all companies was that they wanted to differentiate their offerings to the market

to seek superior advantage to the competitors.

All case companies make use of ideas and input from their users, but the recording and

application of this feedback is not a formal part of the innovation process in any of the cases.

Some companies, like the Icelandic and Norwegian companies, make a clearer distinction

between their users; some users are relied on to give more valuable feedback than others.

Those users depended on for more reliable feedback, fits the characteristics of von Hippels

(1986) and Rogers (2003) definition of lead users. The case companies do not use the term

lead users themselves (a totally new term to them in fact), and they are not necessarily very

conscious about their own distinction of users (it is more a mental distinction than a practical

one). Although the Baltic case companies do not identify lead users, it is likely that also these

companies, when going further into their innovation process, have some users which feedback

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they consider more valuable than that of others. When it comes to applying users in the

innovation process, the Danish and Baltic case companies report that they use feedback from

customers, employees, competitors, supply chain partners and/or feedback from Internet sites

and blogs (own and others). Several of these sources are also used in the innovation process of

the Icelandic and Norwegian case companies.

Lead users can have the three defining characteristics (von Hippel, 1986; Morrison et al.,

2000) that make them key actors in the innovation process.

(1) They are early adopters of the product or service;

(2) They experience the need for a given innovation earlier than the majority of the target

market (They are ahead of the majority of users in their populations with respect to an

important market trend); and

(3) They expect as users to gain relatively high innovation-related benefits from a solution

to their problem (the need they have encountered) (von Hippel, 2005, Jeppesen and

Laursen, 2009).

The lead user concept has been tested extensively and confirmed as valid theory with

quantitative research data. Among the literature on new product development (NPD), the lead

user approach has received the greatest empirical support as a driver of commercially

attractive and highly novel product ideas (Kratzer and Lettl, 2009). We do however need to

keep in mind that the findings are based on innovation in manufacturing industries, not in

service industries.

The current lead user involvement in the innovation process is considered highly constructive

by the case companies that cooperate with lead users. The lead users on their side see their

involvement as important to the innovation process as well as mutually beneficial as it creates

attractive products and subsequently satisfied clients and higher profits. This study also

highlights some critical points when it comes to applying lead users in innovation. Some case

companies perceive lead user involvement as time consuming, costly and requiring skills that

(small) tourism firms seldom possess. There is also certain uneasiness that lead users might be

too specialised and short termed in their needs. That they do not possess the necessary

knowledge and skills to develop tourism products that are sustainable and long term for the

tourism trade and local communities alike. Previous research also discloses that projects

involving lead users have been lengthy (2-7 years) from start to launch. The lengthy nature of

the process makes it costly and can prevent this methodology from being applied effectively

in industries like tourism and services where product lifespan often is short and profit margins

are low. In such an economic environment a quick turnaround from research to market

delivery is required.

The identification and selection of lead users is a crucial part of a successful innovation

process. Finding and integrating the “right” lead users is still a tricky task in real lead user

idea-generation projects. Although few studies have further investigated characteristics that

differentiate lead users from more ordinary users and thus help to ease the identification

process (Franke et al. 2006, Lüthje et al 2005, Schreier and Prügl 2006, Schreier et al. 2006),

little is known about which type of lead users really contribute best to the generation of most

innovative concepts. It could be difficult to predict in advance which users are most likely to

develop very valuable innovations. Radical and profitable user developed innovations have

been said too often originate from lead users in advanced analogue fields (von Hippel, 2005).

However, there has up to the present been little empirical research on the quality of

90

contributions of lead users from analogous markets in lead user research (Hienerth et.al.

2007), so this is certainly an issue to investigate in further studies. Are lead users a rare breed

or do they get unnoticed in the innovations systems of the organizations as information

sometimes is coming through informal pathways?

7.2 RECOMMENDATIONS FOR THE TOURISM INDUSTRY

From the above conclusion several recommendations can be made for the tourism trade,

This study has shown that professional lead users are valuable contributors in the

innovation process due to their knowledge and experience. We believe that

professional users will be easier to identify as opposed to end users. To make the most

of the lead users capabilities, the potential innovator should aim to introduce the lead

users earlier in the innovation process (the “What” phase in the Innovation Wheel), as

well as to ask them to take part in more, if not all steps of the innovation process. This

extended participation needs to have some kind of structure and be planned: The

results/inputs need to be monitored and recorded along the process (as opposed to the

more informal and hap-hazard approach of today). The tone of the process may well

continue to be informal, but the innovator should be focused on what he/she wants to

obtain as well as to record whatever comes up. To minimise cost of lead user

participation, the innovator could aim to use electronic tools such as video-

conferences, emails etc. whenever possible.

As the tourism product is a composite product, the innovation strategy in tourism

firms should build on cooperation and inter-organisational networking. Such a strategy

will hopefully reduce the innovation costs per company, as well as remedy the lack of

competencies, which has been pointed out in earlier studies. Furthermore, it might be

easier to apply for public funding or other grants or support for such projects if more

companies/parties cooperate. One could also hope that the outcome would be better,

more holistic tourism products.

When developing an innovation taxonomy for the tourism sector one should not look

at lead users or users alone, but identify all relevant and reliable sources of

information to help develop products which are both attractive, long term and

sustainable. As the tourism product is an aggregated product which often takes place

in local communities where the population plays the role of the host, it becomes

paramount not only to involve lead users or any users, but also to involve other (local)

stakeholder groups in the innovation process – lead users and users alone do not hold

the key to a successful tourism innovation.

It is recommended that the tourism companies consider several techniques to identify

lead users. Common methods are mass screening and “pyramiding”. To find lead users

in advanced analogue fields it has proven effective to ask more easily identified lead

users in target markets for nominations. It is also possible to find users at specialized

sites or events that companies can readily identify, visit and listen in. When

specialized rendezvous sites for lead users do not exist in a particular field, companies

may even be able to create them. Outsourcing idea generation to the crowd of users

(crowdsourcing) is one way of finding lead user ideas. An example of this method is

an idea generation contest.

91

The case companies want to differentiate and be even more creative in generating new

ideas for its business and gain a competitive advantage over its competitors. It is

recommended that they use more proactive methods to collect information from their

users and involve them even more. For example it is possible to contact customers via

e-mail and ask if they are interested in working in a focus group with the staff

regarding a new product or service. Another possibility would be to put up a virtual

platform for a social community of loyal customers or lead users with blogs and

discussion boards. This kind of participation may also create a feeling of loyalty and

ownership towards the company in question, as well as extra market exposure.

It is often so that customers do not express their opinion on their own experience

unless asked. One suggestion is to create a field/forum where every user receives a

short survey in the form of open and closed questions where a business development

team from the company can explore features they want to evaluate. In that way the

research team can receive a lot more information, which will reflect the situation more

reliably.

For smaller companies with a regular customer base, the direct personal contact,

interaction and observation will be more valuable in terms of gaining user feedback

for further product development (innovation). Another invaluable and often readily

available source of customer feedback is customer complaints and dissatisfied

customer who have stopped using the company’s services (See Duverger and Hassan’s

study, 2007). Such users often have clear ideas of what the company needs to improve

to be competitive.

The Alam Framework used in this study to present the findings, could be very useful

for tourism companies in analysing their current user situation, as a part of strategic

work or innovation projects. The Alam framework has the strategic phase as the first

part of the innovation process. We believe that tourism companies will benefit from

involving users already in the strategic phase of the innovation process, where

important customers and users from their supply chain and analogous fields could be

involved. This is a method that is increasingly used in high-performance innovation

workshops by international organisations.

7.3 RECOMMENDATIONS TO POLICY MAKERS

In the previous findings and discussion important points were addressed that could help to

improve the foundation of innovation in the tourism field by harnessing input from users. The

following recommendations have points that are aimed at policy makers like public

innovation bodies that support innovation knowledge and fund projects. There are also points

aimed at the academic field, pointing to interesting areas for further study on user’s

innovation in tourism.

This study, as well as others (Fussing-Jenssen, 2001, Hjalager, 2002), has suggested

that lack of resources and skills in general inhibits innovation in tourism, especially in

small and medium sized businesses. The reality for many of these firms is that profit

margins are tight and thus the focus is on sales and the day-to-day operation. There is

little time to think ahead and the possibility that there will be funds available to invest

in a resource (money, labour, skills) requiring innovation process which one does not

92

know the outcome of, is slim. Time and money are two important prerequisite for any

innovation process. To promote innovation in the tourism sector there is hence a need

to facilitate funding and knowhow. A strategy of cooperation and networking as

suggested earlier, may help. In addition, a publicly funded framework, which could

offer, for example, lead user panels, user surveys, help to formulate innovation

strategy and - process may work well.

As lack of skills is mentioned as a restraint to a user-driven innovation process, the

introduction of a publicly funded and run innovation programme could be an idea

worth looking at. Maybe existing projects, like the quality and marketing project

“Handpicked” in Norway could be a platform for such a programme? To ensure that

such a programme was more flexible one could divide the programme by type of

business, geographic regions, markets served, etc.

How can we find more fruitful cases in the tourism industry? This is perhaps possible

by looking at the needs of the lead users as important criteria by exploring first the

relevance of recent trends like sustainable tourism and health tourism (wellness,

medical) where users can have very pronounced values or extreme needs. By looking

at the importance of the Internet in the tourism environment it is worthwhile exploring

the role of user communities with focus on virtual innovation communities.

Furthermore, to explore how this method works when put into practice, it is logical to

study the competences of the tourism businesses they need to harness the knowledge

from users to innovate. So there are many pathways possible in further research.

Analogous fields are also interesting, and perhaps the broadening of the lead user

concept in recent years gives an opportunity to study the tourism industry from a more

pluralistic view to answer the question how the tourism company should innovate with

lead users? We recommend studies of the potential lead user role of innovative

stakeholders and actors: B2C users; B2B users; owners and founders (accidental

entrepreneurs); managers / employees (intrapreneurs and hobbyists), the value chain

suppliers and users in analogous markets.

The term and theory of the lead users has developed over the last decades. We

recommend policy makers, academics and tourism companies to look at the lead user

method with a wide-angle lens. The lead user can hold many positions in the

organizational network: B2B customer; B2C consumer; analogous field; accidental

entrepreneur and an employee as a hobbyist. There are also three organizational levels

possible: as an individual in firms, and in communities. The lead user can also be in

two market fields: at the leading edge of ’advanced analogue’ fields or at the leading

edge of target markets.

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Latvia

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Norway

Product manager, Din Tur. (C. Aas, interviewer)

General manager, Din Tur. (C.Aas, interviewer)

German Freelance journalist, lead user of Din Tur. (C. Aas, interviewer)

Niche tour operator, lead user of Din Tur. (C. Aas, interviewer)

General manager/host, Kongsvold Fjeldstue (hotel). (A.Sundt-Bjerck, interviewer)

Ministry of Defence, lead user of Kongsvold Fjeldstue (hotel). (A.Sundt-Bjerck, interviewer)

National Health Association, lead user of Kongsvold Fjeldstue (hotel). (A.Sundt-Bjerck,

interviewer)

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Appendix 1. The Innovation wheel process analysis

In the following analysis the innovation process of the Blue Lagoon will be run through the

eight steps of the innovation wheel described in the Innovation wheel chapter. The model

identifies features of innovation creation by the involvement of users of the companies’

service and products.

The innovation process does not always include all eight steps in the Innovation Wheel, nor

does a process necessarily go through the steps consecutively (Norden, 2008, p.23). In the

Blue Lagoon case every category will be covered to find out if it contains user-involvement.

The main focus in this analysis will be on how new products and services are created through

user-driven innovation in connection to the Blue Lagoons’ bathing resort and skin products.

Innovation and development in other operations of the company will be covered as well, but

in less detail.

OPPORTUNITY IDENTIFICATION

In this step sources of innovations are identified by different stakeholders of the Blue Lagoon;

lead-users, main-stream users, employees and travel agents.

Wristbands and outdoor vending machines

Employees who are working outside the lagoon receive requests and comments from guests

about various things. An example of this is the creation of wristbands which each customer

carries on their arm while bathing in the lagoon. The customers were asking for beverages in

the lagoon itself, especially on hot weather days. So the staff forwarded these requests to their

superiors and the idea was put into test.

“…then this summer we started selling products in the lagoon itself and we

have been doing that in small amounts for some years now. The wristbands

people receive, we increased the balance, it used to be 1500 but we increased

up to 3000. … It was actually done by the initiative of the employees in the

bathing area, they took the Coca Cola machines outside and the beer and

started selling among other things these crêpes, which is this half melted ice-

cream, very refreshing in the lagoon.” (Guðmundsdóttir, Interview no.2; Blue

Lagoon innovations, 2009).

Each band has a credit for 3.000 ISK which customers can use to credit cold beverages from

vending machines in the bathing area. Vending machines were put outside and the sales

increased instantly. In the beginning the credit was only 1500 ISK but later on it was

increased up to 3000 ISK because of demand (Guðmundsdóttir, Interview no.1; Blue Lagoon

innovations, 2009).

The exclusive lounge

Another example of opportunity identification is when the exclusive lounge was created. It

was because of the demand from groups who wanted to have privacy for themselves.

“I saw it was impossible to close the entire changing area when these types of

groups come to us, however we wanted to keep them coming to us so we

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created a private facility for them. Also we created a private bathing area for

those who wanted to pay extra for the privacy. A clear example of this is when

a group of musicians came and requested to have a private area for changing

and bathing. At first a part of the general changing area was sealed off for

them, but we saw it was not a satisfactory solution to do always when this

situation occurred.” (Guðmundsdóttir, Interview no.1; Blue Lagoon

innovations, 2009).

The exclusive lounge serves a group segment which has higher demand than the normal main-

stream user. This group of clients has been growing the past few years so the demand for a

private facility was essential. Even though Iceland has been going through economic crisis

which has affected many industries the Blue Lagoon maintains a certain number of clients in

this category of customers. It proves that there is a foundation for this group even when there

is an economic downswing and many customers are spending less money on leisure and

activity connected services. There is a group that has more budgets and it has demands for

certain quality features. These demands come from customers on their own and also from

agents from luxury travel agencies e.g. Luxury Adventures which has been guiding customers

through helicopters and private planes to the site (Guðmundsdóttir, Interview no.2; Blue


The outdoor bar

There is a new idea now which has not yet been put into action but it is on schedule; it is to

create a bar which is located inside the lagoon itself. Then guests can order beverages in the

lagoon itself while bathing. Because of the increase in outdoor selling of beverages the

managers would like to try the idea of serving drinks in a new way.

“We are going to through preparation work now but likely we will put some

money into building a small bar by the lagoon, some facility because we used

to have coolers and boxes before, so this is very exciting (Guðmundsdóttir,

Interview no.1; Blue Lagoon innovations, 2009).

This also creates the opportunity to serve new drinks and in open containers. This will bring

the outdoor providing of beverages to a new and advanced level. Because of close user

observations of staff members they have noticed that this feature of service is popular and

opens new opportunities for a service extension. Bathing customers have for example asked

for alcoholic drinks in the lagoon which is quantified for every guest in order to prevent

public intoxication; however with the new bar guests can buy the same amount of drinks but

with more choices (Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009). These

drinks will sell for a higher price than the ones in the vending machines and therefore a new

source of income is created. Sealed beverages fit into a certain category of luxury and are sold

for a price accordingly. Open mixed drink served by a waiter creates another experience for

the customer, it is a higher involvement service which is at a more luxurious level and thus

can be charged higher (Belch & Belch, 2007). Therefore this new feature will satisfy a new

group of customers while the sealed and cheaper beverages might serve others. The new bar

opens the door for new services as well, perhaps in the future other refreshments will be

offered at the bar as well like sandwiches and small courses.

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Skin product wrappings

Ever since the Blue Lagoon started to develop skin products the customers have been giving

feedbacks regarding its ingredients, texture and wrappings. Around the year 1993 the

treatment patients were the customers who inspired the creation of the first skin product, the

moisturizing cream, which was fully developed and put for sale in 1995. After some testing

period of the product the patients started asking for bigger tubes of silica and moisturizing

crème to take home, even abroad (Brynjólfsdóttir, 2009). As a result the products were

wrapped in bigger tubes for them. In continuation the products were put for sale in the store,

which was at that time only at the Blue Lagoon in Grindavík. Later on more products were

created and in different wrappings.

Feedback and comments from customers about the products are given to staff

on the floor inside the store and via internet through the “contact us” link.

Development of new products was later influenced because of these new fields

of feedbacks. For example the crèmes were put to the test in jars, because the

experience for the customer to get the product out of a jar is different than

from a tube (Brynjólfsdóttir, 2009).

Internet feedback from customers

Most of the customer commentary comes from the internet through the “Contact Us” link on

the Blue Lagoon website. Comments are received every day regarding the bathing facilities

and the products. On the website you can contact different department or employee depending

on the nature of your business. This categorization makes it easier for the staff to handle each

errand and more rapidly.

“Usually via e-mail, we have on our webpage on several locations a ‘contact

us’ link and I for example receive all enquiries from reporters. Then there are

others that are product related which go to Eyrún who handles the products.

... and then somebody could have gotten red lips and gets some kind of

allergic reaction or something like that and then we forward it to Ása, so we

keep good record of everything like this.” (Guðmundsdóttir, Interview no.2;

Blue Lagoon innovations, 2009).

The clinic activities

Staff in the reception at the clinic receives comments from customers who are treatment

patients. They ask for more recreational activities to be available for them at the site. Recently

the treatments have evolved in the direction that clinic guests are staying longer at a time and

are even bringing spouses or the whole family with them. In some treatments it is

recommended that you enter the lagoon two to three times per day for at least 45 minutes at a

time which makes it difficult for the guest to leave the area. This calls for more recreation at

the area during their stay.

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The Blue Lagoon therapy clinic. Source: www.bluelagoon.is

“…they also say, those who work in the clinic, ... that it is quite common

that people group together and are taking taxis and exploiting the weekends

together and we are equipping them with bicycles and walking sticks and of

course there is a small gym at the site (Guðmundsdóttir, Interview no.2; Blue

Lagoon innovations, 2009) ... As well as assisting them with planning

weekend trips by renting cars and driving around the country.”

(Guðmundsdóttir, Interview no.1; Blue Lagoon innovations, 2009)

Requests for these kinds of activities have reached employees at the reception who forward

them to their superior. However since the clinic is not the main focus in the Blue Lagoon

operations today it is not clear that demands from this group of customers will be fulfilled in

the nearest future. The main focus today is on development and expanding skin care products

and increase the number of guests in the lagoon itself (Brynjólfsdóttir, 2009).

Tourists and tour operators as innovative users

Agents from travel agencies are highly important clients to the Blue Lagoon as for they bring

group of customers to the site. These agents usually have strong opinions on the bathing

facilities and especially the restaurants offerings (Guðmundsdóttir, Interview no.2; Blue

Lagoon innovations, 2009). The reason for their high interference and constant observations

are because they have made certain promises to their clients regarding the Blue Lagoon

offerings. The service being offered at the lagoon must coordinate with the service which has

been presented to the clients. That puts the agent in the role of synchronizing the service being

offered and the expectation of the customer.

“…the party that is planning a conference and lets say that a travel agency is

throwing a conference and they for example are getting 200 people from

Sweden and have pitched the group a lot, then it is important for them to work

with a partner which they can rely on, so they are constantly watching over us

and we hear from them instantly if for example the napkins are not in the right

color. ... Then with our clients which are larger travel agencies ... those

working in the sales department they are in a everyday contact with these

parties, e-mail and telephone, so they receive a lot of comments directly.”

(Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009).

106

Agents from travel agencies are constantly communicating with certain contacts from the

Blue Lagoon office and they discuss new ideas with them. Some ideas originally come from

the agents and others from their clients. This characteristic of the agents as involvers and the

tourists because of their influence on the tour operators with their comments categorizes them

as lead-users in the innovation process for the Blue Lagoon (Hall & Williams, 2008) and


Opportunity identification; conclusions

User involvement was identified on several occasions in the opportunity identification

chapter. For example the user observations of employees in the bathing resort which

generated the idea of the bar. Employees generate and receive user commentary in different

areas; the lagoon inside and outdoors, internet, store, restaurants, cafeteria and clinic. It is

often by the initiative of customers (main-stream users), as well as some treatment patients

(lead-users) where the ideas for new service or product originate.

INNOVATION DATA COLLECTION

Data is collected by many methods for a new service to be recognized with the involvement

of customers.

Focus groups with local customers

When the Blue Lagoon was reopened in 1999 the company hired an consulting company,

PricewaterhouseCoopers, to gather and work with focus groups of local customers


“…we have been buying questions ... and we have also had focus groups

here. ... before we opened here in ’99 we just wanted to hear what people

expected from the Blue Lagoon. And before we launched an advertising

campaign for the local market we finished the marketing studies and then the

results were rationalized from those conclusions.” (Guðmundsdóttir, Interview

no.2; Blue Lagoon innovations, 2009)..

The goal was to gather information about what customers expected from the Blue Lagoon and

what is attractive to them. The Blue Lagoon was preparing to launch an advertising campaign

to create awareness of the reopening for the local market and the advertisements were

designed according to the information gathered in the focus groups.

Written customer feedback

Another method used to get customer feedback is by asking them to fill out a form after their

stay. In the form there are certain questions regarding chosen service features which managers

want to be evaluated. Customers can rank them according to their experience by marking in a

service measure (Service measure: a scale to evaluate service). There is also a comment box

where they are free to make their own comments in writing. This method however has not

been used for some time by the Blue Lagoon and is not currently an active method of getting

customer feedback (Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009).

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“...yes we have had these kinds of surveys ... but this is not something that

we do regularly but we have performed them and then just worked with them

internally.” (Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009).

The positive thing about these surveys is that the customer can fill them out privately and

without giving his identity which gives him the opportunity to be honest in the evaluation. It

can be a barrier for getting an honest opinion of the customer if they mediate it verbally to a

staff member, especially if the customer has had a negative experience they do not share them

all the time (Fitzsimmons & Fitzsimmons, 2008).

Research says the average business only hears from 4% of their customers who are

dissatisfied with their products or services. Of the 96% who do not bother to complain, 25%

of them have serious problems. The 4% complainers are more likely to stay with the supplier

than are the 96% non-complainers. About 60% of the complainers would stay as customers if

their problem was resolved and 95% would stay if the problem was resolved quickly. An

unsatisfied customer will tell between 10 and 20 other people about their problem. A

customer who has had a problem resolved by a company will tell about 5 people about their

situation (Fitzsimmons & Fitzsimmons, 2008). These percentages reveal that listening to the

voice of the customer is crucial in order to identify their true opinions. By collecting more

data on customer feedback those information can be valuable for the company in order to

improve their service and to prevent future customers from experiencing the same discomfort.

The negative thing about this type of survey is that they usually take more time than other

ones. Not all customers have the patience of filling out a survey in writing; it is easier to do

them verbally. The writing form can cause fewer surveys being filled out by the initiative of

the customers. A customer often gives comments in the clinic or in the lagoon but it is not

always by their initiative. Therefore it is important that employees are well motivated so the

size sample will reflect the mean more effectively.

Employees as key collectors

The HRM strategy is to hire employees with high interest into the business concept, some key

employees have a long working experience in the company, moving by the years between

areas from the bathing area into the retail shop. The company runs a school for the employees,

the Blue Lagoon school with short sale courses, and management courses.

It is company policy to keep all staff members well informed and encouraged to fulfill the

goal of being the main arrival of tourists in Iceland and in the whole world even. Every

employee works together towards the same goal which is to improve if possible and listen to

comments and indications from customers. Frequently a new service or product has been

created where an employee on the floor recognizes an opportunity and forwards the message

to the correct party inside the company (Guðmundsdóttir, Interview no.1; Blue Lagoon

innovations, 2009). When this situation occurs employees are referred to as intrapreneurs

according to description in the innovation wheel process (Norden, 2008, p.23).

The employees play an important role in data collection. Many innovations are discovered

because of their participation in the innovation process. As mentioned in the previous chapter

customers are not always willing to give feedback on their experience of products or service

by their own initiative. Then it comes down to the dedication of staff members to collect

customer feedback, especially those who are ‘on the floor’. The staff is coming up with new

innovations for the customers and they are doing so by involving the customers themselves.

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Blue Lagoon staff is well motivated as discussed in the opportunity identification section.

There is a special reward program, which the company uses to encourage employees to sell

more products and generate new ideas. The reward amount depends on three factors; total

income of sales, level of work pressure and results from secret visits.

“There is a company called Better Business and they send so called secret

visits to evaluate our service. So the reward bonus depends on the experience

of this secret guest which evaluates beforehand decided factors in tourism, the

arrival and the number of guests. So it is the level of work pressure, income

and secret visits that influence the bonus. The higher the income then the bonus

pot will be bigger. But our staff, regardless of any money, they are very

enthusiastic about selling and these recent years a very good selling culture

has developed in the bathing area. So they just had more interest in selling

more by the lagoon.” (Guðmundsdóttir, Interview no.2; Blue Lagoon

innovations, 2009).

If the staff feels that they can have effect on the development of product or service output and

be a part of the innovation process then a special connection is created. They feel a certain

responsibility to sell the offerings because they helped to create it (Fitzsimmons &

Fitzsimmons, 2008).

Residents and suppliers

The Blue Lagoon tries to use residential services from nearby companies. The involvement of

residents is important for the company’s image, it shows that the company respects their

closest neighbors and tries to support them which creates a positive collaboration.

“…we emphasize to try to do business with the service parties which are here

in the area ... we buy all the fish from Grindavík for example.”


Instead of thinking about the cheapest price for raw material from other suppliers they

promote their closest environment by doing business with them. Users can be both end–users

(consumers) and other businesses using your product or service (professional buyers)

(Norden, 2009). The suppliers are therefore categorized as professional buyers. This creates a

positive attitude and involvement of residents when for instance the Blue Lagoon is

promoting new activities. If this is not done the company can’t expect to count on the

residents acting as collaborators or ‘incidental’ staff members (Hjalager, 1997, p.39).

The loyal customers

There is a certain group of users which the Blue Lagoon categorizes as loyal customers. They

receive the company newsletter regularly and offer on products. By registering in the group

themselves they show an interest beyond other customers of the company. Generally these

users feel connected to the company with more adoration than other users which makes them

want to keep track of new features of service or products (Fitzsimmons & Fitzsimmons,

2008). These clients usually have strong feelings and opinions on the company and its

operations.

Besides from receiving commentary via the internet or through staff members this group

however is not contacted or involved in any kind of internal innovational work by the Blue

Lagoon. An exception regarding members of this group is some patients at the clinic. A

number of them have been working with the R&D department regarding new treatments and

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others with a group of doctors in Germany (Guðmundsdóttir, Interview no.2; Blue Lagoon

innovations, 2009).

Innovation data collection; conclusions

The field where employees can receive comments from customers is at the Blue Lagoon itself.

Employees who are ‘on the floor’ are located in the reception, the changing area, the bathing

resort, restaurants and in the store. The office receives information through the internet via the

‘contact us’ link. Regarding the skin products there is a store on site which is the most

receivable field/forum for receiving commentary from customers. Other data collection

methods were identified such as brainstorming with local users through focus groups and the

use of written question forms for customers to fill out. Neither method is currently in use.

PATTERN RECOGNITION

The pattern recognition step is performed internally amongst the company’s managerial team.

After collection of the data is done the Blue Lagoon staff extracts the information themselves

without the involvement of users. It is the staff that analyses the information gathered.

Meetings are held where the data is discussed along with the feedback from all of the sources

the company receives and patterns are identified (Guðmundsdóttir, Interview no.2; Blue


Concept ideas

The new main concept idea was gathered at a strategic group work session performed by the

members of staff in the year 2005 (Brynjólfsdóttir, 2009). The result was the remaining

slogan and mission statement for the future: To create energy for life through the forces of

nature. Before that session other meetings have also been held with the top management team

and main share holders where they make strategic decisions regarding future goals

(Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009). It is important for the

success of the company that the shareholders and its top management team agree on the

direction it is heading. These kinds of meetings are categorized as another kind of focus group

work and it did not involve customers.

There are different focus group works sessions also held regularly by senior managers and

shareholders where customers are not involved.

“…we worked with shareholders in a strategic work group and the board of

directors worked with them, they were the representatives of our biggest

owners.” (Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009).

In recent years the company has been moving towards a more holistic image approach. The

goal is always to work with the forces generated from the resources of the lagoon but now the

company’s operations spread to other connecting business areas. The forces of the lagoon

have healing effects on the skin which lead to better health. Therefore customers who are

clients of the Blue Lagoon are also clients of other health related activities e.g. practice sports

related activities and eat healthy food. That is why the Blue Lagoon branch in Reykjavik has

joined the Hreyfing fitness club (Brynjólfsdóttir, 2009).

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Conceptualization

This step is constructed internally amongst the Blue Lagoon staff. As discussed in the

previous chapter it was entirely staff members and stakeholders who performed the strategic

outline of the company’s current mission statement and future goals (Brynjólfsdóttir, 2009).

“…in 2005-2006 we had been spending a huge amount of work in connection

to what we call strategic work for the company. How are we going to grow,

how are we going to expand … and the focus was on the products, you know

what were we going to do with them. And there we laid down a certain plan

and a suggestion is made to enter this anti-aging market and take the first step

in that phase and then position ourselves as high-priced and locate us in our

own special stores.” (Brynjólfsdóttir, 2009).

The concepts were partly driven by the R&D department. Therefore this step in the innovation

process is research-driven.

PROTOTYPES

When a new service is being developed the step of prototypes applies more to the methods

used by the Blue Lagoon. It can be hard to make a prototype of a service or non-physical

products and therefore they often have the form of descriptions or experiments (Norden, 2008,

p.24). A classic example when a lead-user is involved in a new service development for main-

stream tourist offerings is one of the examples discussed in the opportunity identification step;

when rubbing silica and tiny lava pieces to the body became a new massage treatment. The

first concept idea was tried out on the treatment patient in the clinic who came up with the

idea originally. Then more patients started asking for a massage, which later developed into a

full body massage. The next step was to offer this new service in the general bathing area for

mainstream users (Brynjólfsdóttir, 2009).

When a new product is created and the first units are being put out for customer usage the test

step applies more to the Blue Lagoon methods than the step of prototypes. Regarding the skin

products the Blue Lagoon does not involve their customers in the use of prototypes. However

new products are initially produced in a limited edition before they are put for sale. In that

way the product is put to the test for popularity and effectiveness. If they sell well and user

commentary is positive then in continuance it is decided if more of the product should be

produced (Brynjólfsdóttir, 2009). In a way this method can be categorized as a prototype

however the first portion of the product is not launched strategically as a prototype but rather

as a test of the product, this process is better described in the following test step.

Tests

The final step of bringing in new services and products for the Blue Lagoon is putting it to the

test. Generally when new ideas and services are being developed because of customer

demands they are conceptualized by the staff without the involvement of users and when fully

developed they are tested by future users.

Products testing

An example of product testing is when the R&D department released their first skin product, a

moisturizing cream, which was originally made because of a request by the treatment patients.

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The first portion of the product was not tested specifically as a prototype on the patients

before sending it to the stores for main-users. It was fully generated in a limited edition and

then given to them for testing (Brynjólfsdóttir, 2009). Thus testing is a method for the

company to get feedback and make adjustments. This gives all users an opportunity to react

and provide input on the product.

The R&D department is constantly working on developing new skin products with the

resources located in the lagoon; silica, algae and minerals. The R&D department links

researches as an innovation driver, not the users, to the skin care industry where the Blue

Lagoon is a competitor. This kind of innovation is a type of research-driven innovation

(Norden, 2008, p.10). Therefore many ideas and concepts of new products are developed

within the R&D department without involving the customers. Even though the goal is to serve

a customer need the innovation process excludes the users until the test step in the Innovation

Wheel. For an example in the years 2004-2005, the anti-aging market was expanding and

research in the R&D was increased to secure the claims for the anti-aging effects of the

products. The company went into cooperation with Mr. Krugman, a famous german professor

and they analyzed the medical and health effects of the Blue Lagoon ingredients, the synergy

of the silica and the algae on the collagen in the skin. The outcome was a very strong claim

for the anti-aging products where 80% of the trial patients said that wrinkles disappear. In

2008, a scientific paper was published describing these claims and the research.

Service testing

A new service was offered to the customers when the demand for drinks in the bathing area

developed. In the example of the wristbands and vending machines discussed in the

opportunity identification the new service was put to the test on customers by placing the

vending machines outside in the bathing resort so every customer could try them out. Every

guest that was going to bathe in the lagoon received a wristband in the reception. This method

gave every customer the opportunity to try out the new service instead of trying this new

feature on a certain group of customers as a prototype. The employees tracked the sales and

added new products or increased the quantity of others by demand (Guðmundsdóttir,


“…the wristbands people receive, we increased the balance on it, it was 1.500

but we increased up to 3.000 ISK. So the people are using that money. It was

actually by the initiative of the staff in the bathing resort, they just went outside

with the Coca Cola machine and the beer and then started selling, among

other things, these crêpes, which is ice-cream half melted but very refreshing

in the lagoon…” (Guðmundsdóttir, Interview no.2; Blue Lagoon innovations,

2009).

The result was reflected in the number of sales, the revenue did increase so that indicates that

the new feature was popular among the customers.

Prototypes & Tests; conclusions

User involvement was identified in new service prototyping however for the skin products

there was not a clear example of prototype usage involving users. Methods used during the

process were receiving verbal feedback from treatment patients and user observation by staff

members at the bathing resort. Experiments and discussions of massage prototypes with the

patients were also notable.

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IMPLEMENTATION

Since the release of the first skin product in 1995 and the offering of spa treatments involving

massage therapies in 2003 the Blue Lagoon has increasingly been adopting more user-driven

innovation methods. By involving the users more strategically the Blue Lagoon is aware that

users are important stakeholders and their input is essential to gain a competitive advantage.

User-involvement has continued to increase ever since.

In the implementation step an innovation team works together with other departments in the

company (Norden, 2008, p.24). This applies to the Blue Lagoon but nevertheless it does not

involve its’ users.

„Yes, Ása the one you met is the head of Research- and development

department and though we don’t call the department ‘innovation’ there are

many new assignments which can be traced to that department. And then they

work in a close collaboration ... with other departments when a demand for

a product develops or something like that happens.” (Guðmundsdóttir,


On-going development

Users are involved in the on-going development of the Blue Lagoon in several ways. After the

launch of new features there is an open platform to receive user commentary regarding new

products and services. Most comments are received through the internet via the “contact” us

link on the Blue Lagoons’ website, as has been discussed before.

Agents from travel agencies contact certain Blue Lagoons representatives in

the sales office regarding group travels to the site. Often the groups experience

many of the companies services in a compact package besides from the bathing

resort e.g. the restaurants, conference facilities and spa treatments. Thus

agents are constantly commenting on past experiences which they receive from

their customers and use them to develop new packages or improve the previous

ones. Agents and sales representatives are sometimes communicating daily

with each other (Guðmundsdóttir, Interview no.2; Blue Lagoon innovations,

2009).

Patients of the treatment clinic are constantly working with doctors and pharmacists both in

Iceland and in Germany generating new skin treatments and products. This develops into a

long lasting cooperation between these parties. When patients have finished their treatment

they report to the doctors on their recovery and long-term results from the program


On-going development; conclusions

User involvement identified by communication through the Internet between the parties. Sales

representatives communicate with agents from travel agencies via internet, telephone or face

to face regarding group travels. Also patients communicate with doctors and pharmacists

regarding on-going recovery of skin treatments.

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Appendix 2. Background to innovation

Innovation types and drivers

The Oslo manual (OECD, 2010), an international set of guidelines for the collection and use

of data on innovation activities, divides innovation into four distinctive types, namely:

Product innovation – A good or service that is new or significantly improved in terms

of characteristics. This includes significant improvements in technical specifications,

components and materials, software in the product, user friendliness or other

functional characteristics.

Process innovation – A new or significantly improved production or delivery method.

This includes noteworthy changes in techniques, equipment and/or software.

Market innovation – A new marketing method involving major changes in product

design or packaging, product placement, product promotion or pricing.

Organisational innovation – A new organisational method in business practices,

workplace organisation or external relations.

The above types of innovation embrace both concept- and incremental innovation.

Furthermore, the four types of innovation are driven by one or more sources. Rosted (2005)

suggests the following three drivers for innovation:

Price driven innovation - companies compete on price and aim to deliver a product,

which is cheaper than competing products. The battle for lower costs is hence

considered to be the source of price driven innovation.

Technology driven innovation - is based on research and thus often generous budgets.

Firms, which compete on new technology, will always try to be ahead of competitors

when it comes to technology in order to offer new and better products or services.

Research-driven innovation implies that companies are striving to gain a technological

lead over the competition, allowing them to produce at a lower cost or to deliver a

product that distinguishes itself from the competition. The source of research-driven

innovation is, of course, research, but also the ability to translate research into

marketable products (FORA, 2005, p.29). Sundbo et.al. (2007) suggest that the

technology-economic-network model (Callon et.al. 1992) could be useful in a tourism

innovation framework. The biggest deviation from the model is that tourist firms

undertake little research or have relations to external research institutions; they are

more market oriented (Sundbo et.al. 2007).

User-driven Innovation – denotes that companies are attempting to deliver a product

that provides the consumer with a special value or experience unmatched by the

competitors. The source of user-driven innovation is a deep understanding of customer

needs, as well as the ability to translate these needs and customer knowledge into

unique products and experiences that competitors cannot match.

With price- and technology driven innovations, the markets for the product have to be

identified in order to sell what one has produced. For user-driven innovation, which is

governed by the adaptation of newly identified user needs, one produces what sells (ibid.).

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Examples of such innovations are specially designed ladies rooms at hotels and fun rides at

theme parks.

User driven innovation was further explored in section 2.2.

Service innovation - a different cup of tea

Current models and metrics of innovation are still predominantly centred on manufacturing

industries and the conceptual frameworks surrounding such analysis has been very much

within the dominant manufacturing innovation paradigm (MIP), a method often referred to as

the assimilation approach (Howells, 2000). The assimilation approach asserts that service

innovation can be measured and recorded in the same way, independent of industry.

As a reaction to the assimilation approach, another tradition of studies emerged in the 1990’s -

the demarcation approach (Coombs and Miles, 2000, in Tether 2005). The demarcation

approach contends that services and their innovation activities are highly distinctive and

diverse following dynamics and displaying features that require new theories and approaches

to measurement from those developed in the context of manufacturing.

The followers of the demarcation approach argue that:

Innovation in service producing businesses will moreover be of an organisational or

inter-organisational nature than in manufacturing industries where technology often is

the focus.

The development of services is a continuous process as opposed to incremental or

significant changes, as is the case with manufacturing goods.

Because of the process style in the development of services there will be ambiguity in the

perceptions of what is seen as product innovation, process innovation and organisational

innovation (Tether 2005). With the above arguments of the demarcation approach, it is clear

that service innovations may be underreported in innovation barometers such as CIS, which

are based on the Oslo manual (OECD 2010), or as postulated by Tether (2005), service

businesses may have reported their innovations as organisational innovation, while other

innovation types most likely are unreported.

In addition to the characteristics of service innovation pointed out by the demarcation

followers, the innovation process in the service industry is more strongly connected to users

and the users’ situation than to the emergence of concrete technological solutions and

products, than often is the case in the more traditional manufacturing industries. (NHD, 2008-

2009). Berry et al. (2006) point out that in many service products the service delivery staff is

part of the customer experience (e.g. a tour guide, a waiter) and thus part of the service

innovation. Services requiring the physical presence of the customer will also necessitate local

decentralised production capacity (a customer will only go that far to eat, however innovative

the restaurant is) (ibid).

Bergum (2004) suggests that there also are common traits in the development process of

service innovation and innovation in manufacturing industries, and that some service areas

have more in common with manufacturing industries than with other service areas. Moreover,

the service industry is highly fragmented and will thus need different approaches to

innovation. Howells (2000) sees an innovation blurring happening between services and

manufacturing businesses, where manufacturing firms are becoming more like service firms,

gaining ever higher proportions of their turnover from selling services. He goes on to give the

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example of IBM and Siemens, which derive more than 50% of their turnover from service

activities (ibid).

When applying traditional measures such as R&D intensity and a wide range of tangible and

non-tangible investment expenditure related to innovation, a noteworthy proportion of service

sectors and firms still display very low levels of innovative activity (Howells 2000). R&D

spending is only growing in the technology intensive service companies (ibid.). In tourism,

this low level of innovation activity may be explained by the fact that the vast majority of

tourism enterprises worldwide can be classified as small to medium sized businesses

(SMTEs) (Buhalis 1996). It is likely to believe that a large percentage of these firms have

limited funds to spend on R&D. Furthermore, there may be limited skills and organisational

framework to undertake a more structured innovation process, including recording and

reporting of innovation activity (Fussing-Jensen et al. 2001, Hjalager, 2002, Orfilia-Sintes et

al., 2005).

Figure 1. A process model of innovation.

Source: Tidd & Bessant, (2009), Management of Innovation.

Traditional process models like the one displayed in Figure 2.1 are based on the idea that the

internal knowledge of the organization can mostly suffice to improve and develop new

products. The role of the customer is minimal, he is a passive actor and customer information

is collected by surveys that aggregate the average customer in market segmentation. In that

way the models are very much based on the product and the R&D laboratory processes (Von

Hippel, 1978, p.42). Service innovation models are similar to traditional process

manufacturing models as can be compared by looking at the models shown in Figure 1 and 2.

Figure 2. The normative model of new service development.

Source: Grönfeldt and Strother, (2006). Service Leadership.

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Arguments have been raised against using innovation theory developed in manufacturing

industries in service sectors like tourism (Mattson et.al. 2005). Service innovation is based on

softer skills than manufacturing innovation (Tether, 2005) and service innovations are rarely

R&D based, but rather based on change of behaviour (Sundbo, 1998) driven by practical

experience and less structured than in manufacturing industries. Employees also seem to be

more involved in the innovation process in service industries than in manufacturing industries

(Sundbo, 2001).

Innovation in tourism

We often hear about the growth in tourism, but less frequently we hear about innovations in

tourism. There has also been relatively little discussion as to the importance and prevalence of

innovation in tourism (Weiermeir, 2004). Nevertheless, the tourism industry has seen many

innovations over the years, travel bookings over the internet (technology), new markets (both

receiving and generating), new modes of transport and the “greening” of experience-based

products. (Hall and Williams, 2008). These innovations have been both price-, technology-

and user-driven.

Tourism businesses cannot easily patent front-stage innovations so they have to innovate

relentlessly to stay ahead of imitators and free riders. There is an incentive to innovate in

back-stage operations, which is consistent with empirical evidence that organisational

innovation is more significant in tourism (Hjalager, 2002).

Process innovation seems to be more common than product innovation in tourism with

constant accumulation of incremental changes and small number of revolutionary changes

that redefine the arena of tourism (Hall and Williams, 2008). Weiermair (2004) claims that

the tourism industry is characterised by minor, almost only cosmetic changes in product

offerings sometimes mediated by international crisis like wars, swine flu, flood, terrorism etc.,

or simply by the introduction of new laws and regulations.

Regrettably, the innovation activity in tourism has not been systematically documented in the

European countries. There has been a number of studies published the last decade, but they

have been too fragmented or empirically limited to give a satisfactorily description of the

situation. (Rønning, in Teigen et al., 2009). An exception is a national survey in Denmark

looking at innovation in services, including tourism (Fussing-Jensen et al. 2001). The study

concludes that the tourism industry is the least innovative of all service businesses. The

reasons for this situation are found to be lack of leadership tools, lack of cooperation, which

could promote innovation, and the sector consisting of many small firms (innovation research

in general documents that the innovation ability increases with the size of business). The

survey was followed up by Hjalager (2002), who suggests that the tourism industry was

lacking a number of preconditions that facilitate innovation. Furthermore, she points to four

barriers for innovation in the tourism sector, namely,

Many small businesses – little time, money and skills for innovation

Lack of mutual trust among tourism sector firms – prevents collaboration and

exchange of skills and ideas

Frequent change of business owners who are not necessarily skilled or dedicated to the

business

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Low proficiency – high labour turnover, much temporary workers due to seasonality

and instability in demand, little or no training given

On the basis of her findings, Hjalager proposes that bordering sectors or systems (she

mentions as examples trade organisations, food suppliers, technology firms and authorities)

should supply the many small tourism enterprises with relevant skills, practical advice and

help which can heighten the knowledge- and skills required for innovation.

Contrary to Hjalager’s study, Christensen and Overdorf (2001) found that small businesses

also can be innovation leaders as they are not constrained by the internal routines of larger

firms. Large firms have sometimes more difficulty embracing the new and abandoning the

old, they often tend to defend the known and resist the unknown (Utterback, 1994).

Pechlaner et al. (2005, in Teigen 2009) agree with Hjalager in that the business structure in

the tourism industry (many small firms) limits the innovation ability. They suggest more

cooperation and an inter-organisational network as a strategy. The cooperation should be

coordinated, run and ensured through a local or regional leadership. They assert that the

leadership should be governed by central tourism organisations that can initiate and

coordinate networking processes with the stress on learning. Moreover their empirical

analysis suggests that collaboration which involves exchange of knowledge and experience is

what is the strongest factor associated with the companies innovation ability. The frequent

change of owners in tourism businesses, pointed out by Hjalalger (2002), as well as the high

labour turnover in tourism would be two obstacles to overcome in such a strategy.

Mattson et al. (2005, in Teigen et al., 2009) suggest, on the basis of eight case studies from

countries in Europe and Asia, that the innovator usually is someone outside the tourism

sector, which is in line with Hjalager's (2002) study and advocates that innovation in tourism

should be driven by players on the outside of the conventional groups of tourism

producers/companies. Contrary to these findings is a study by Orfila-Sintes et al. (2005),

which found users (mainly tour operators) of hotels, as possible drivers and associates of

innovation. Lehtinen & Lehtinen (1991) remind us that tourists are also co-producers in

tourism products and services, and that the quality of social interaction with both employees

and other consumers is vital.

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Appendix 3. Overview of reference groups in each case country

Denmark

Danish Tourist board

Jesper Andersen, Corporate PR Director, Visit Denmark

First Hotel Skt. Petri Jacob Rais, General Manager

Estonia

Enterprise Estonia, Estonian Tourist Board

Piret Kallas, Tourism Research Coordinator

Kadri Tammik, Product Development Consultant, Toursim Services Quality and

Product Development Programme

Tiina Peterson, Product Development Consultant, Tourism Innovator Award

coordinator

Estonian Association of Travel Agents

Kersti Kont, Director

Anu Kuning, incoming section’s Council member, incoming department of travel

agency Mainor Meelis

Association of Estonian Tourism Education

Sirje Rekkor, Member of Board

Estonian School of Hotel and Tourism Management

Sirje Rekkor, Director

NGO Estonian Rural Tourism

Sirje Rekkor, Head of Council

Estonian Hotel and Restaurant Association

Donald Visnapuu, director

Estonian Spa Association

Irene Väli, President

Aire Toffer, General Manager

Latvia

The Tourism and Hospitality Training Centre ‘Arcus’

Jadviga Stikane, General Manager

Riga Tourism School

Jadviga Stikane, ex-general manager

Inga Selecka, Teacher

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Iceland

The Icelandic Travel Industry Association

Gunnar Valur Sveinsson, Project Manager

Tourism office in the Ministry of Industry, Energy and Tourism

Helga Haraldsdóttir, Director

Icelandic Tourism Research Centre

Edward H. Huijbens, Director

Norway

Innovation Norway

Mr. Audun Pettersen, Manager Tourism

Federation of Norwegian Commercial and Service Enterprises (HSH)

Mrs Sigrid Sellæg Helland, Advisor

Oslo School of Management

Mrs Janne Olsen, Assistant Professor

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Appendix 3. Questionnaire guide for case companies

QUESTIONNAIRE GUIDE ON INNOVATION AND LEAD-USERS

Today’s lead user shows tomorrow’s mainstream tourism offering

NICe project no. 08141

Introduction

Innovation is when you introduce a new service or product, improve on your existing business

model, or put together various existing and new product parts in a new way. Innovation is also

known as product development or business development by many companies.

Innovation can take place within the following areas:

Product

Process

Platform (e.g. special portal for bookings etc.)

Technology (e.g. information, interactive, self service, part of product)

Service (what the client is delivered – spa treatment etc.)

Experience (developing a special concept for the experience, rooms etc.)

Branding/marketing (special target groups, magazines, news etc.)

Partnerships (common marketing strategy, joint product development)

Supply-chain (special focus on ecological food products, green light bulbs etc.)

Human resources (hiring people with special skills to offer something different from

the competitors)

User-led or User-driven innovation

Many companies involve users in various ways in the innovation process. This is called user-

led or user - driven innovation. Users can be both end – users (consumers) and other

businesses using your product or service (professional buyers).

Users can be categorised in two main blocks:

Main-stream users - these are the majority of customers for any business. They constitute the

fundamentals of the business revenue streams and are as such the bread and butter of any

business.

Lead users - these are users who e.g. have tastes or demands that are ahead of the general

market. Lead users will only be a very small proportion of all users, most likely less than 10%

of all users. Lead users can, nevertheless, be strategically important. This is so because their

demands for a service can signal what will be the next generation of a service or product. By

involving lead-users in the innovation process, the business companies can get valuable input

on how to develop new products, services and other areas of their business model.

In the following we would like to interview you about how you work with innovation and in

what ways.

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Questions

Q1: In your own words, how do you describe your business and what are the main

services/product/experience you sell?

Q2: Do you have an innovation strategy for your business or some kind of plan for how to

develop your services and product offerings?

Q3: How would you describe the way you work with improving your existing

products/services and develop new products/concepts that you offer (i.e. what do you

do and how do you do it)?

Do you have some kind of special way of working with developing services for all

your customers? If yes – describe.

Q4: Which of the following business areas do you focus on in your business development:

Product

Process

Platform (e.g. special portal for bookings etc.)

Technology (e.g. information, interactive, self service, part of product)

Service (what the client is delivered – spa treatment etc.)

Experience (developing a special concept for the experience, rooms etc.)

Branding/marketing (special target groups, magazines, news etc.)

Partnerships (common marketing strategy, joint product development)

Supply-chain (special focus on ecological food products, green light bulbs etc.)

Human resources (hiring people with special skills to offer something different

from the competitors)

Q5: Which of the following sources do you use for developing, improving and getting

inspiration for your business.

Competitors

Consultants

Business industry magazines

Universities and higher educational institutions

Staff/employees

Branch organisations

Market surveys/statistics

Public innovation programmes

Customers (including feedback through questionnaires and complaints)

Suppliers/Business partners (e.g. travel agents and operators, meeting organisers)

Investors/Finance

Other (specify)

None

Q6: Which of the mentioned sources for business development do you consider the three

most important for your business:

1. ………………………………………………………………………………

2. ………………………………………………………………………………

3. ………………………………………………………………………………

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Q7: What do you see as the main obstacles to doing innovation of your business?

Q8: What do you see as the next 1-5 years challenges for your industry?

Q9: Has your company ways of getting feedback and evaluations from your clients? And if

so, please describe.

Q10: Do you use user communities like knowledge portals, platforms, frequent users clubs,

networks etc. strategically in your work with business development?

Q11: Initially we described how some companies have a special strategy for working with

lead users. They do so to develop their business and stay ahead of their competition.

Do you among your clients have some persons who you would consider lead-users?

Yes or No. (If No, go to question Q.12)

If YES – do you involve your lead-users in your product development?

How do you work with these lead users:

How do you involve them /how strong is the involvement?

At what level do you involve them?

How often do you involve them?

Do the lead users seem keen to participate in the process? Why/Why not?

Do you give an incentive to get lead users to participate in the process?

Do you find it worthwhile involving lead users in the innovation process?

If NO – do you think involving lead-users could be part of your future business

development?

If yes or no – why?

Q12: Do you know of any competitors who work with lead-users when developing new

products or services? If yes, how do you consider this involvement (good/bad idea,

and why).

Q13: Do you think involving lead-users is relevant and important to your industry?

Q14: If available, would you use public sector innovation support programmes (e.g.

financial and expert support, lead-users panels), focusing on how to work with the

lead-user concept in your industry?

Q15: How likely do you think it is that you will think differently about your business

development strategy as a result of your participation in this project?

Very likely

Somewhat likely

Not likely

Q16: Do you have any other comments to the concept of lead-users and business

development.

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General information about the company

Position of person interviewed:

Age and gender of person interviewed:

When was company founded:

How many employees (full time and part time):

Geographical area of operation (where is their product/service based):

Geographical market (where do their customers come from):

Does the company have a production/innovation department:

Is there a special budget for product development/innovation:

Turnover in 2008 (or 2007):

Profit before tax in 2008 (or 2007):

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Appendix 4: Questionnaire guide for lead users

QUESTIONS FOR LEAD – USERS OF CASE COMPANIES

Make an intro about consumer driven innovation and tell them what lead-users are. Explain

that you have been informed that his/her company play an active role /supportive role/indirect

role in innovation/product development at company x.

1. Who takes the initiative to this involvement - are you asked to participate, or do

partake on you own accord?

2. How are you involved?

3. How is your feedback/contribution collected, formally or informally)? Please describe.

4. At what level/-s (of the process) are you involved?

5. How often are you involved?

6. Do you feel that your contribution, whatever it is, is being taken seriously/is made use

of?

7. Do you like participating in the process? Why/Why not?

8. What is your motivation to partake?

9. Are you given an incentive to participate in the process?

10. Is the partaking decisive for a continuous cooperation between your company and

company X?

11. In general, do you think it is worthwhile involving lead-users in the innovation

process?

12. Would you be willing to spend time helping company X (your supplier)

innovate/develop their products (explain how much time/work)

13. How do you view the innovation/product development at company X – are you happy

with it, or do you think they could do more? Expand on your views please.

14. Do you know of any companies who work with lead-users when developing new

products or services? If yes, how do you consider this involvement (good/bad idea,

and why).

15. Do you think involving lead-users is relevant and important to your industry?

General information about the interviewee and his/her company

• What kind of lead-user is the interviewee (consumer, business partner)?

• What type of company does he/she work for?

• What kind of products/services does this company offer?

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• Position of person interviewed:

• Age and gender of person interviewed:

• When was their company founded:

• How long has the interviewee worked there?

• How many employees (full time and part time):

• What are their target groups?

• Where do their customers come from (geographically):

• How many customers do their company have per year?

• How long has your company worked with case company X

Today’s lead user shows tomorrow’s mainstream tourist offering

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