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
5.2.2 Innovation strategy ............................................................................................................... 51
5.2.3 The innovation process ......................................................................................................... 52
5.2.4 Identification of lead users .................................................................................................... 53
5.3 DANISH CASE STUDY 1: HELLE THORUP SPA ................................................................................ 54
5.3.1 Background ........................................................................................................................... 54
5.3.2 Innovation strategy ............................................................................................................... 54
5.3.3 The innovation process ......................................................................................................... 55
5.3.4 Identification of lead users .................................................................................................... 55
5.4 DANISH CASE STUDY 2: HOTEL SKT. PETRI ................................................................................... 56
5.4.1 Background ........................................................................................................................... 56
5.4.2 Innovation strategy ............................................................................................................... 57
5.4.3 The innovation process ......................................................................................................... 58
5.4.4 Identification of lead users .................................................................................................... 59
5.5 LATVIAN CASE STUDY 1: AKTĪVĀ TŪRISMA CENTRS EŽI, SIA (CENTRE OF RECREATIONAL
TOURISM) .............................................................................................................................................. 60
5.5.1 Background ........................................................................................................................... 60
5.5.2 Innovation strategy ............................................................................................................... 61
5.5.3 The innovation process ......................................................................................................... 61
5.5.4 Identification of lead users .................................................................................................... 62
5.6 LATVIAN CASE STUDY 2: AERODIUM ........................................................................................... 63
5.6.1 Background ........................................................................................................................... 63
5.6.2 Innovation strategy ............................................................................................................... 64
5.6.3 The innovation process ......................................................................................................... 64
5.6.4 Identification of lead users .................................................................................................... 65
5.7 ESTONIAN CASE STUDY 1: OTEPÄÄ ADVENTURE PARK ............................................................... 66
5.7.1 Background ........................................................................................................................... 66
5.7.2 Innovation strategy ............................................................................................................... 67
5.7.3 The innovation process ......................................................................................................... 67
5.7.4 Identification of lead users .................................................................................................... 68
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5.8 ESTONIAN CASE STUDY 2: SAAREMAA SPA HOTELS .................................................................... 69
5.8.1 Background ........................................................................................................................... 69
5.8.2 Innovation strategy ............................................................................................................... 70
5.8.3 The innovation process ......................................................................................................... 71
5.8.4 Identification of lead users .................................................................................................... 72
5.9 ICELANDIC CASE STUDY: BLUE LAGOON ...................................................................................... 73
5.9.1 Background ........................................................................................................................... 73
5.9.2 Innovation strategy ............................................................................................................... 74
5.9.3 The innovation process ......................................................................................................... 75
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.
16
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
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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.
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).
5.2.2 Innovation strategy
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.
5.2.3 The innovation process
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.
5.2.4 Identification of lead users
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
5.3.2 Innovation strategy
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.
Helle Thorup Spa, source: www.hellethorup.dk
55
5.3.3 The innovation process
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
Helle Thorup Spa, source: www.hellethorup.dk
5.3.4 Identification of lead users
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
Company established: 2003
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.
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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´.
5.4.2 Innovation strategy
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.
5.4.3 The innovation process
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.
5.4.4 Identification of lead users
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
Company established: 2000
Ownership: Privately owned company
Employees: 8 full time and 12 part time
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.
5.5.2 Innovation strategy
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.
5.5.3 The innovation process
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.
5.5.4 Identification of lead users
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
Company established: 2005
Ownership: Privately owned company
Employees: 30 full time and 70 part time
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.
5.6.2 Innovation strategy
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.
5.6.3 The innovation process
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)
5.6.4 Identification of lead users
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
Company established: 2005
Ownership: privately owned company
Employees: 2 full time and 10 part time
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.
5.7.2 Innovation strategy
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.
5.7.3 The innovation process
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.
5.7.4 Identification of lead users
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
5.8.2 Innovation strategy
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.
5.8.3 The innovation process
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.
5.8.4 Identification of lead users
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
Company established: 1992
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.
5.9.2 Innovation strategy
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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5.9.3 The innovation process
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.”
(Brynjólfsdóttir, 2009).
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
86
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
feedback on specific
issues
Extensive
consultation with
users
Extensive
consultation with
users (feedback from
clients through
questionnaires and
website)
Passive acquisition
of input
Information and
feedback on specific
issues
Passive acquisition of
input
Information and
feedback on specific
issues
Passive acquisition
of input
Information and
feedback on specific
issues
Extensive
consultation with
users
Passive acquisition
of input
Information and
feedback on specific
issues
Passive acquisition
of input
Information and
feedback on specific
issues
Passive acquisition
of input
Information and
feedback on specific
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.
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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
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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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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
Lagoon innovations, 2009).
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).
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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
(Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009).
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
(Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009).
“…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.”
(Guðmundsdóttir, Interview no.2; Blue Lagoon innovations, 2009).
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
Lagoon innovations, 2009).
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,
Interview no.2; Blue Lagoon innovations, 2009).
“…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,
Interview no.2; Blue Lagoon innovations, 2009).
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
(Brynjólfsdóttir, 2009).
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