co-creation in the hospitality industry by tobias koehler

Co-Creation

in the Hospitality Industry

Master’s Thesis

International Tourism Management Heilbronn University

Author: Tobias Köhler Matriculation No.: 172583 First Examiner: Prof. Dr. Christian Buer Second Examiner: Prof. Dr. Manfred Lieb Submission Date: September 30, 2011

The whole point of co-creation is not to ‘build it and they will come’, but ‘build it with them and they are already there’.

(Venkat Ramaswamy in Roth, 2011a)

Co-Creation in the Hospitality Industry

Abstract I

Abstract This paper introduces the ongoing paradigm shift in marketing, i.e. service-

dominant (S-D) logic, as well as the therefrom originating thought on value co-

creation applied on the hospitality industry. S-D logic and co-creation are intro-

duced in a comprehensive and accessible way before current issues in hospital-

ity marketing and existing influences of S-D logic and co-creation in tourism lit-

erature are explored. The author, furthermore, conducted a qualitative study on

current innovation practice in the hospitality industry. It revealed that the cus-

tomer is not yet an active part of the value creation process in hospitality. Alt-

hough consumers gain on influence through social media activities, most lodg-

ing corporations do not take advantage of this development; whether in market-

ing, nor in innovation. In order to drive the development of co-creation in hospi-

tality the author developed practical guidelines that support hospitality compa-

nies in their transformation towards an experience mind-set and to support co-

creative activities.

Keywords: Service-dominant logic, co-creation, hospitality, marketing, innova-

tion


Table of Contents II

Table of Contents

Abstract ............................................................................................................... I

Table of Contents .............................................................................................. II

List of Figures ................................................................................................... IV

List of Tables ..................................................................................................... V

List of Abbreviations ....................................................................................... VI

1 Introduction .................................................................................................. 1

2 A paradigmatic challenge to marketing orthodoxy .................................. 4 2.1 The evolution of marketing ............................................................. 4 2.2 Service-dominant logic ................................................................... 6

2.2.1 Service vs. goods ....................................................................... 7 2.2.2 From separation to collaborative value creation ........................ 9 2.2.3 Collaborative competence – a service-dominant logic

prerequisite .............................................................................. 11 2.3 Consumer emancipation ............................................................... 11

2.3.1 Influencing factors and drivers of consumer emancipation ...... 12 2.3.2 Implications for companies ...................................................... 15

2.4 The principle of co-creation .......................................................... 17 2.5 Competitive advantage through co-creating experiences ............. 20 2.6 Challenges for co-creative companies .......................................... 22 2.7 Summary ...................................................................................... 25

3 Hospitality status quo ............................................................................... 28 3.1 Hospitality definition ...................................................................... 28 3.2 Characteristics of hospitality as service industry .......................... 29 3.3 Today’s hospitality customer ........................................................ 31 3.4 Hospitality marketing .................................................................... 32

3.4.1 Relevant issues in hospitality marketing .................................. 32 3.4.2 New marketing thought in tourism and hospitality ................... 37 3.4.3 Summary and interim conclusion ............................................. 39

3.5 Qualitative study on current innovation practice in hospitality ...... 41 3.5.1 Theoretical background on innovation in hospitality ................ 41 3.5.2 Research methodology ............................................................ 44 3.5.3 Results ..................................................................................... 45


Table of Contents III 3.5.4 Discussion and conclusion ....................................................... 50

3.6 Summary ...................................................................................... 51

4 Co-Creation in hospitality: practical guidelines ..................................... 54 4.1 Co-creation and hospitality – a powerful match? .......................... 54

4.1.1 Co-creation components vs. hospitality characteristics ........... 54 4.1.2 The four powers of co-creation vs. hospitality challenges ....... 56 4.1.3 Conclusion ............................................................................... 57

4.2 Becoming a co-creative hospitality company ................................ 57 4.2.1 Creating an experience mind-set ............................................. 58 4.2.2 Identifying customer touchpoints ............................................. 60 4.2.3 Creating engagement platforms ............................................... 64 4.2.4 Setting goals for co-creative activities ...................................... 67

4.3 Types of co-creation ..................................................................... 68 4.3.1 Club of experts ......................................................................... 68 4.3.2 Crowd of people ....................................................................... 69 4.3.3 Coalition of parties ................................................................... 71 4.3.4 Community of kindred spirits .................................................... 71

4.4 Co-creative consumer types and their motivations ....................... 72 4.5 Intellectual property ...................................................................... 74 4.6 Co-Creation toolbox ...................................................................... 74

4.6.1 Service design tools ................................................................. 74 4.6.2 Digital/ online tools ................................................................... 75

4.7 Seven guiding principles of co-creation ........................................ 77 4.7.1 Listen ....................................................................................... 78 4.7.2 Define a goal ............................................................................ 79 4.7.3 Inspire participation .................................................................. 79 4.7.4 Select the very best ................................................................. 80 4.7.5 Connect creative minds ........................................................... 80 4.7.6 Share results ............................................................................ 81 4.7.7 Continue development ............................................................. 82

4.8 Summary ...................................................................................... 82

5 Conclusion and future outlook ................................................................. 84

Appendix .......................................................................................................... VII

Bibliography .................................................................................................. XIV


List of Figures IV

List of Figures Figure 1: The evolution of marketing Source: Own illustration based on

Lusch et. al. (2007) ................................................................................... 5 Figure 2: Consequences of growing specialization. Source: Own illustration ..... 8 Figure 3: Separation between firm and consumer in G-D logic. Source:

Lusch and Vargo (2009, p. 8) ................................................................... 9 Figure 4: The collaborative economic system of S-D logic. Source: Lusch

and Vargo (2009, p. 9) ............................................................................ 10 Figure 5: The core principles of co-creation. Source: Own illustration based

on Ramaswamy and Gouillart (2010, p. 36) ........................................... 18 Figure 6: Value creation and service-dominant logic. Source: Vargo and

Lusch (2008c, p. 257) ............................................................................. 19 Figure 7: Traditional vs. co-creative enterprise. Source: Own illustration

based on (Ramaswamy & Gouillart, 2010, p. 6) ..................................... 21 Figure 8: Advantages and challenges of co-creation. Source: Own

illustration ............................................................................................... 26 Figure 9: Change our way of thinking. Source: (Li & Petrick, 2008, p. 242) ..... 39 Figure 10: Framework for Innovation Research in the Hospitality and

Tourism Marketplace. Source: (Sipe & Testa, 2009, p. 3) ...................... 43 Figure 11: IHG 's assessment of stakeholder issues. Source:

(InterContinental Hotel Group, 2011) ..................................................... 58 Figure 12: Hotel guest’s journey, brand touchpoint wheel. Own Illustration

based on (Shaw & Williams, 2009, p. 327) ............................................. 62 Figure 13: Mapping of customer, supplier and encunter processes of a

travel company. Source: Payne et al. (2008, p. 92) ............................... 63 Figure 14: Customer engagment arenas and options. Source: Bhalla (2010,

p. 58) ...................................................................................................... 64 Figure 15: IHG's Innovation Hotel Engagment Platform Screenshot. Source:

(InterContinental Hotel Group, n.d.) ....................................................... 66 Figure 16: Types of Co-Creation. Source: (Pater, 2009b) ................................ 68 Figure 17: Crowdsourcing industry landscape. Source: Esposti (2011). .......... 76 Figure 18: Seven guiding principles in co-creation. Own illustration based

on (Pater, 2009a, p. 5) ............................................................................ 78


List of Tables V

List of Tables Table 1: Service-dominant logic foundational premises ...................................... 7 Table 2: Top 10 Website Ranking 2005 vs. 2010 ............................................. 13 Table 3: Comparison between goods-dominant logic and service-dominant

logic ........................................................................................................ 25 Table 4: Hotel corporation interview partners ................................................... 45 Table 5: Consumer engagement catalysts ........................................................ 72 Table 6: Co-Creation Consumer Types ............................................................ 73


List of Abbreviations VI

List of Abbreviations API Application Programming Interface

B2B Business to Business

CRM Customer Relationship Management

eCRM electronic Customer Relationship Management

FP Fundamental Premise

G-D Goods-Dominant

ICT Information and Communication Technology

IHG InterContinental Hotel Group

IP Intellectual Property

NTO National Tourism Organisation

S-D Service-Dominant

SNS Social Networking Site

USP Unique Selling Proposition


Introduction 1

1 Introduction When a word is used too many times in articles or conversations and the con-

text in which the word is used broadens every time, one might consider it as

“hype”. Moreover, it is possible that the management community develops a

sort of immunity towards the word (van Zijll Langhout, Brinkhorst, & Thijssen,

2011).

In hospitality, the most recent and still lasting hype is social media. While hospi-

tality marketers still try to convince their management to get involved and elabo-

rate at length on the obvious advantages of starting a dialog with their custom-

ers, other industries already discovered “the next big thing”: co-creation.

Some consider it as hype that goes as quickly as it came. Others, however, that

learned more about the topic of co-creation and the foundational principles be-

hind it recognize the opportunity that lies within (van Zijll Langhout et al., 2011).

Co-creation is far more than a tool to crowdsource new ideas with the help of

customers and other stakeholders. It describes a general change of mind-set

and acknowledges the ongoing development of a broad and irreversible shift in

society, technology and corporate culture. For instance, people engage on lev-

els like never seen before and force whole governments to step back. Iceland’s

government, on the other hand, makes use of that and crowdsources their con-

stitution (Hopkins, 2011). The growing connectivity drives a culture of sharing,

promotes the exchange of opinions and helps to push ideas forward as well as

it stimulates innovation. A new mindset is evolving and people engage with

each other in a speed and intensity like never before.

Not without reason Robert Lusch and Stephen Vargo gained world-wide atten-

tion with the publication of their award winning article (Vargo & Lusch, 2004a)

on service-dominant (S-D) logic. Since 2004 their article is the most cited mar-

keting article, which not only shows the general interest and longing for new

ideas, but also stands for the beginning of a new era of thought in the area of

marketing.


Introduction 2 We are on the edge of escaping the firm- and product-centric view of value cre-

ation, which currently is the dominant logic for marketing and strategy. Moving

to an experience-centric co-creation view, new and exciting opportunities un-

fold. This new perspective enables us to challenge the deeply held assumptions

about marketing basics, such as the meaning of products and services, separa-

tion between enterprise and customer in the value creation process, the mean-

ing of a brand and innovation.

So far, not many hospitality practitioners let alone researchers explored the

possibilities of co-creation for hospitality. Therefore, the goal of this work is

threefold. (1) For one, to explore and illustrate the basics of S-D logic and co-

creation in a comprehensive and accessible way. (2) Second, to give a broad

overview of the current marketing and innovation practice in the hospitality in-

dustry as well as explore existing influences of S-D logic and co-creation in tour-

ism literature. (3) The final goal of this work is to bridge the gap between theory

and practice with the development of practical guidelines for successful imple-

mentation of co-creation as guiding framework in hospitality companies in terms

of innovation and marketing.

Accordingly this work is structured into three main parts:

The first part looks into the paradigmatic challenge to marketing orthodoxy, i.e.

S-D logic. This chapter also introduces today’s emancipated consumer, ex-

plores the influencing factors and drivers that led to this development as well as

draws implications for companies. After an introduction to co-creation, the bene-

fits and challenges of co-creative companies are introduced.

The second part gives an overview on the current state of hospitality research

and practice, especially in terms of marketing and innovation. After a definition

of the hospitality term, it is elaborated on the special characteristics that apply

on hospitality as service industry. One sub-chapter is devoted to the savvy hos-

pitality customer and his changing needs. The main part represents a qualitative

study on current innovation practice in hospitality. The author conducted qualita-

tive interviews with five executives of German and Austrian lodging corporations

to get deeper insights into the current innovation practice of hospitality enter-

prises and their general attitude towards co-creation. After giving theoretical


Introduction 3 background on innovation in hospitality, the study and its results are introduced.

After a discussion of the findings a conclusion is drawn. In the final part of this

chapter the summary of the main points lead to a conclusion on the status quo

of customer engagement in hospitality.

In the third part practical guidelines are drawn from the findings of the previous

parts. Initially, it is explored if co-creation and hospitality are suitable for each

other, following a chapter that guides through the steps necessary to become a

co-creative hospitality company. Furthermore, different types of co-creation and

their application in hospitality as well as the different types of consumers and

their motivations are explored. It follows a short chapter on intellectual property.

After introducing the co-creation toolbox, seven guiding principles for successful

co-creation in practice are presented.

The work closes with an overall conclusion and future outlook on the topic of co-

creation in hospitality.


A paradigmatic challenge to marketing orthodoxy 4

2 A paradigmatic challenge to marketing orthodoxy Robert Lusch and Stephen Vargo raised world-wide attention with the publica-

tion of their article (Vargo & Lusch, 2004a) on service-dominant (S-D) logic. It

marks the beginning of a new era of thought in the area of marketing. The fol-

lowing chapter analyzes the evolution of marketing that led to the point where

we are now.

After looking into the three main phases of marketing evolution an introduction

to the new era of thought – S-D logic – follows. Here Vargo’s and Lusch’s ten

foundational premises (FP), that challenge traditional marketing assumptions,

are introduced. The main differences between goods-dominant (G-D) logic and

S-D logic are presented in a comparison in another chapter. In order for com-

panies to not lack behind and make use of today’s changing environment they

need to develop a collaborative competence which is introduced in chapter

2.2.3.

Since today’s consumers play a bigger role than never before, the influencing

factors and drivers of consumer emancipation as well as the implications for

companies are introduced in chapter 2.3. The integration of the consumers as

active part of the value creation process through co-creation is introduced in the

following chapter. The resulting competitive advantage through collaborative

engagement between enterprises and consumers are explored in chapter 2.5

before closing the first part of this work with a summary of the most important

facts.

2.1 The evolution of marketing

The thought on marketing underwent a steady development since the first for-mal ideas about it in the early 1900s. At first it was focused on the distribution and exchange of goods and the function that needed to be performed to facili-tate it (Vargo & Lusch, 2004a).

The general idea was about bringing goods and services “to market”. Marketing further developed into the marketing management school after World War II and moved to a “market to” orientation. Now markets and customers were re-searched and analyzed in order to produce products that meet customer or


A paradigmatic challenge to marketing orthodoxy 5 marketplace needs. However, the customer did not play an active role in this concept either. A goods-dominant (G-D) logic remained with the units of output as the central component of the exchange process (Lusch, Vargo, & O’Brien, 2007).

In the 1960s Marketing was characterized as “a decision-making activity di-rected at satisfying the customer at a profit by targeting a market and then mak-ing optimal decisions on the marketing mix” (Vargo & Lusch, 2004a). The mar-keting mix or the famous Four P’s – product, place, price and promotion – from then on served as the main framework of marketing and is still taught to fresh-men all over the world as basic knowledge of marketing. In this context competi-tive advantage was and most often still is seen to be a function of utility maximi-zation through adding value in products by superior management of the Four P’s. Being based on the conceptual foundation of G-D logic, this happens with an assumed passive consumer in mind. Furthermore, the idea of “service” as possible booster of competitive advantage was built on this concept (Lusch et al., 2007).

Service was not only regarded as a type of product, but also something of a fifth “P”, another tool for maximizing the value of other products. But what was ne-glected in G-D logic was to think of “service” as an independent variable and its central role in the process of exchange. Another downside of this concept was the already mentioned role of the customer as operand resource: He was seg-mented, targeted, promoted to, distributed to, captured and persuaded to con-tinue buying with the help of heavy promotional programs where transparency was the exception (Lusch et al., 2007).

Figure 1: The evolution of marketing Source: Own illustration based on Lusch et. al. (2007)

In contrast to that and mirroring the development of marketing thought of the 21st century Vargo and Lusch (2004a) promote the “market with” philosophy of service-dominant (S-D) logic. Here, the customer is an operant resource capa-ble of interacting with and on other resources. He no longer is a passive recipi-ent but a collaborative partner co-creating value with the enterprise.


A paradigmatic challenge to marketing orthodoxy 6 The following chapter will give an overview of S-D logic and its foundational premises in comparison to the principles and rules of G-D logic.

2.2 Service-dominant logic

It is not the evolution of marketing and the changing thought behind it altering companies’ business behavior; it is a general evolution of society and technolo-gy affecting the way of doing business. One is equally dependent from the other in order to work and be fruitful. The same applies for S-D logic. Without some major developments in technology and an ever-changing society S-D logic would not have come to where it is now. While the changing role of consumers is analyzed in chapter 2.3 this chapter deals with the general setup of S-D logic and draws comparisons to G-D logic.

The most obvious transition in business in the context of this work is the shift from manufacturing economy to service economy. Goods-oriented firms be-came services firms and services suddenly were everywhere: Service systems, service marketing, software-as-a-service, services science etc. However, this transition only appeared to be about service and was still built on G-D logic (Vargo, 2009).

Vargo and Lusch developed ten fundamental premises (FP) of S-D logic over the last years (Vargo & Lusch, 2004a, 2006, 2008a). To get an overview with a short explanation see Table 1. The most important and relevant FPs in context to this work will be explained in detail in the following paragraphs.


A paradigmatic challenge to marketing orthodoxy 7 Table 1: Service-dominant logic foundational premises

FPs Foundational premise Comment/ explanation

FP1 Service is the fundamental basis of exchange.

The application of operant resources (knowledge and skills), “service”, as defined in S-D logic, is the basis for all exchange. Service is exchanged for service.

FP2 Indirect exchange masks the fundamental basis of exchange.

Because service is provided through complex combinations of goods, money, and institutions, the service basis of exchange is not always apparent.

FP3 Goods are distribution mechanism for service provision.

Goods (both durable and non-durable) derive their value through use – the service they pro-vide.

FP4 Operant resources are the fundamental source of competitive advantage.

The comparative ability to cause desired change drives competition.

FP5 All economies are service economies. Service (singular) is only now becoming more apparent with increased specialization and outsourcing.

FP6 The customer is always a co-creator of value. Implies value creation is interactional.

FP7 The enterprise cannot deliver value, but only offer value propositions.

Enterprises can offer their applied resources for value creation and collaboratively (interactively) create value following acceptance of value propositions, but cannot create and/or deliver value independently.

FP8 A service-centered view is inherently custom-er oriented and relational.

Because service is defined in terms of custom-er-determined benefit and co-created it is inher-ently customer oriented and relational.

FP9 All social and economic actors are resource integrators.

Implies the context of value creation is networks of networks (resource integrators).

FP10 Value is always uniquely and phenomenologi-cal determined by the beneficiary.

Value is idiosyncratic, experiential, contextual, and meaning laden.

Source: Vargo and Lusch (2008a)

2.2.1 Service vs. goods

In S-D logic, service is defined as

"the application of specialized competences (operant resources - knowledge and skills), through deeds, processes, and performances for the benefit of another entity or the entity itself.”(Vargo & Lusch, 2008b, p. 26)

Rather than the plural, “services”, used to describe units of output (immaterial goods), the singular term reflects the process of doing something beneficial for or together with some entity. Hence, goods and service are not alternative forms of products. Goods, on the one hand, are supportive gadgets, tools or distribution mechanisms that are useful alternatives to direct service provision. Service, on the other hand, plays the role of the common denominator of the exchange process: Service is what is always exchanged (FP1). Supporting this argument FP3 says, goods only assist the service-provision process and derive their value through use (value-in-use), which, in turn, is the service they provide


A paradigmatic challenge to marketing orthodoxy 8 (Vargo & Lusch, 2008b). Goods do not drive economic activity; it is driven by applied knowledge, which is service (Vargo & Lusch, 2008a).

Service is nothing that suddenly appeared over the last years, however, there are two main criteria that are different today: (1) the growing ability to separate, transport and exchange information independently from goods or people and (2) increasing specialization of businesses, which in turn allows for more outsourc-ing. As individuals, organizations, and nations become more specialized they need others for what they themselves cannot do. This creates more possibilities of service provision (exchange of knowledge and skills). Therefore, increasing specialization boosts market growth. The result of intense specialization is an increased interdependency among all involved that leads to more collaboration, which, in turn, stimulates innovation (Lusch et al., 2007). See Figure 2 for illus-tration.

Figure 2: Consequences of growing specialization. Source: Own illustration

The growing connectedness of people and the importance of networks is also part of S-D logic’s FPs: “All social and economic actors are resource integra-tors” (FP9). This connectedness is not only limited to private conversations over social network sites (SNS). It also applies to business relationships. Not only individuals, but also companies are more and more specialized. This leads to the following conclusion: People are more dependent through their specializa-tion and through their lack of skills they become more connected since they can trade service with those specialized on the missing skills (Vargo & Lusch, 2006).

As one of their fundamental premises (FP5), Vargo and Lusch argue, “all econ-omies are service economies”. A logical conclusion is that all businesses are service businesses, which opens the door to many opportunities in innovation in new and innovative ways (Vargo & Lusch, 2008a). Value-in-use is what benefi-ciaries get from service interactions, as compared to value that is added in the production process within G-D logic. Innovation, in the context of S-D logic is not defined by what companies produce as output but how they can better serve. It is about competing through service as opposed to, in G-D logic, com-peting with service (Lusch et al., 2007).


A paradigmatic challenge to marketing orthodoxy 9 2.2.2 From separation to collaborative value creation

One of the main differences between G-D and S-D logic is their handling of re-sources, especially “human resources”. In the case of S-D logic the term of “human resources” becomes a whole new meaning since it not only is con-straint to internal resources, i.e. employees, but also to the consumer as oper-ant resource. In G-D logic the customer was considered as operand resource that must be acted upon in order to be useful. The customer was considered to be passive and outside of the value creation process. Things were done to the customer as he was unknowledgeable but could be encouraged to purchase and “consume” the firm’s output or production. Thus, he was the “destroyer” of value. The firm was seen as the active source of expertise and knowledge that was used to develop innovative and creative marketing offerings that were pro-duced in the factory. Therefore, the company and the factory were seen as the source of value (Lusch & Vargo, 2009). The strict separation between firms and the customer in G-D logic is illustrated in Figure 3.

Figure 3: Separation between firm and consumer in G-D logic. Source: Lusch and Vargo (2009, p. 8)

In contrast to that, the consumer plays an active role in S-D logic and is part of the value creation process. He is now considered as operant resource that is capable of acting and producing effects in other resources. As FP6 states, “the customer is always a co-creator of value” (Vargo & Lusch, 2008a). Now, things are done with the customer in an interactive value creation process (Lusch et al., 2007; Vargo & Lusch, 2008c). Not only consumers but also supply chain partners are viewed as endogenous to value creation and as a source of exper-tise and knowledge from which the enterprise could and should benefit (Vargo & Lusch, 2004a; Lusch et al., 2007; Lusch & Vargo, 2009). In fact, according to FP4, operant resources that serve with their knowledge and expertise are the fundamental source of competitive advantage (Vargo & Lusch, 2008a).



Figure 4: The collaborative economic system of S-D logic. Source: Lusch and Vargo (2009, p. 9)

Figure 4 illustrates how the firm and a respective partner (consumer or supply chain partner) are no longer seen as separate but rather as an integrated eco-nomic system. It is a collaborative process between both. They are co-creating by sensing and experiencing together, integrating resources for individual and collective benefit, and learning how to better serve each other (Lusch & Vargo, 2009).

It is getting obvious that value creation in S-D logic is an interactive process between firm and customer. It must be considered in a relational context. In ad-dition, FP10 suggests that “value is always uniquely and phenomenological de-termined by the beneficiary”. This means, that each individual has a different experience with the service being exchanged and values it differently (Vargo & Lusch, 2008a). Furthermore, the setting of the usage is essential to determine value. The context involves actors that are part of the experience and the other resources that are drawn upon in the usage experience (Lusch & Vargo, 2009). For example, a hotel guest staying in a hotel with his family during holidays ex-periences the stay differently than somebody staying in the same hotel alone on a business trip. Furthermore, viewing in the context of other resources such as previous experiences and therefore expectations from stays in other hotels, the use of room service, late checkout or airport transfer – all contribute to the ex-perienced value.

After realizing that the customer is always a co-creator of value and that value is always individually determined depending on unique experiences of the respec-tive beneficiary, the logical conclusion is that this service centered-view is in-herently customer oriented and relational (FP8). That, in turn, means that no “consumer orientation” is necessary in S-D logic since it is already individually build around each consumer (Vargo & Lusch, 2008a).

Moreover, Vargo and Lusch (2008a) suggest that the enterprise cannot deliver value, but only offer value propositions (FP7). Value is co-created during in-use


A paradigmatic challenge to marketing orthodoxy 11 experience. It emerges through collaboration of dynamic internal and external operant resources of a firm – employees, customers, supply chain partners and maybe even competitors.

2.2.3 Collaborative competence – a service-dominant logic prerequisite

Companies that want to have sustained competitive advantage not only have to be willing to learn, they also have to have a collaborative competence, given the interactive nature of service provision (Lusch et al., 2007). Following two meta-competences are critical:

Absorptive competence

“The ability of an organization to be able to comprehend from the external environment the important trends and know-how. This will assist in trans-forming these external environments into important resources the firm can draw upon for support. Collaborative competency will aid a firm in absorbing new information and knowledge from partners or improve its absorptive competence.” (Lusch et al., 2007, p. 9)

Adaptive competence

“The ability of an organization to adjust to changing circumstances. Once again, by developing collaborative competence the entity is able to use its partner firms as mechanisms for adapting to change brought about by com-plex and turbulent environments and, thus, improve its adaptive compe-tence.” (Lusch et al., 2007, p. 9)

Developing this superior collaborative competency secures a firm’s competitive advantage. It enhances the enterprise’s ability to grasp information and knowledge from the environment, customers, and its value networks as well as it enables firms to adjust to dynamic, complex and turbulence environments. Businesses have to develop those competences in order to be able to keep up with the more and more emancipating customer. The following chapter will give an overview of who today’s consumers are and why they now play a more ac-tive role than ever before.

2.3 Consumer emancipation

The consumer as an active player in business is the result of societal and tech-nological developments. Nowadays, consumers actually have the possibility to play an active role in the value creation process. This chapter will give an over-view of the different factors leading to this development and their implications for companies.


A paradigmatic challenge to marketing orthodoxy 12 2.3.1 Influencing factors and drivers of consumer emancipation

Consumers want to engage with firms in new ways. Four interconnected forces drive this transformation:

Information access and connectivity Networking and Social Media Open standards and collaboration Network ubiquity and activism

Information access and connectivity

The Internet offers unlimited amounts of information. Without it and the occur-rence of information and communication technologies (ICTs) to access it the customers would not be as well informed and emancipated as they are today. According to Miniwatts Marketing Group (2011), almost 60% of Europe’s and 80% of North America’s population are online. Worldwide 30% of all people are online. Globalization of information, the ubiquitous and ever-growing connectivi-ty makes consumers more knowledgeable and leads to more informed deci-sions (Bolton et al., 2004). Firms that were used to limit the flow of information to consumers experience a radical shift. They are now challenged by millions of networked customers who collectively aggregate information and question the tradition of all kinds of industries (Prahalad & Ramaswamy, 2004a). Consumers now have access to more and more information, causing them to turn away from communications that appear to be inaccurate, abusive, intrusive or overly one-sided (Lusch & Vargo, 2009). The same applies for tourism. Once a labor-intensive industry it was transformed to an information-intensive industry, due to the rapid distribution of new ICTs (Chung & Buhalis, 2008). The growing popu-larity and number of market entrances of price comparing websites (e.g. swoodoo.com) and hotel recommendation websites (e.g. holidaycheck.com) support this argument.

Networking and Social Media

Advances in communication technology and the fast growth of Internet usage amongst all age groups allow consumers to follow their natural desire to unite around common interests, needs and experience. Accordingly, “thematic con-sumer communities”, where everybody can share ideas and feelings independ-ent from age, origin or social background, are revolutionizing emerging markets and changing established ones (Prahalad & Ramaswamy, 2004a). Consumer networks allow what Prahalad & Ramaswamy (2004a, p. 4) call “proxy experi-mentation”. It means to learn from the experience of others. The diversity of in-


A paradigmatic challenge to marketing orthodoxy 13 formed customers all over the world creates a huge base of skills, sophistica-tion, and interest that any individual can make use of.

Comparing the top 10 website ranking from 2005 and 2010 (Table 2) it is getting obvious that the usage of social media1 and Social Network Sites (SNS)2 highly increased during the last years. The ranking from 20103 is dominated by web-sites with a social, sharing or community approach. While only 10% of the top 10 websites had a social character in 2005, the percentage rose to 50% till 2010. Internet users increasingly communicate with each other, create own con-tent and share it on respective platforms.

Table 2: Top 10 Website Ranking 2005 vs. 2010

Rank 2005 2010

1 Yahoo.com Google.com

2 MSN.com Facebook.com

3 Google.com YouTube.com

4 Ebay.com Yahoo.com

5 Passport.net Live.com

6 Amazon.com Wikipedia.org

7 Microsoft.com Blogger.com

8 Myspace.com Twitter.com

9 Google.co.uk MSN.com

10 AOL.com Amazon.com Source: (Alexa.com, 2005, 2010)

Whole new industries emerged out of the web 2.0 movement and SNS, e.g. Social Media agencies and consultants. Companies realize that consumers share information about them or their product on Facebook, Twitter & Co.. A lot

1 Social Media can be understood as Internet-based applications that carry consumer-generated

content which encompasses media impressions created by consumers, typically informed by relevant experience, and archived or shared online for easy access by other impressionable consumers (Xiang & Gretzel, 2010).

2 Boyd & Ellison (2007, p. 211) define Social Network Sites as “web-based services that allow individuals to (1) construct a public or semi-public profile within a bounded system, (2) articu-late a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system. The nature and nomencla-ture of these connections may vary from site to site.”. The exchange of information, opinions, and user generated content are some of the manifold possibilities on these networks.

3 Only websites in English were taken from 2010’s global ranking. Chinese or other websites have been dismissed to make it comparable to the only-English language website ranking from 2005.


A paradigmatic challenge to marketing orthodoxy 14 of them understand that it is better to actively join the conversation in order to better get to know their customers and their customers’ needs.

Open standards and collaboration

Open standards are relatively new and are best illustrated with the example of the free dictionary Wikipedia that anyone can edit. Mainly anonymous volun-teers from all over the world write all articles collaboratively without payment. The collective genius of more than 82.000 active contributors created more than 17.000.000 articles in more than 270 languages (Wikipedia.org, 2011). Open standards build the foundation of co-production and collaboration. Lusch et al. (2007) give to think that the first effort at open standards was language itself. The consequence of open standards is that information is increasingly symmet-ric, meaning that everybody has access to the same information and its flow is bidirectional as opposed to asymmetric information where only some have an information advantage. What started online with posting comments, sharing files, code, photos, videos and knowledge is now part of daily life as people also share their cars (zipcar.com; whipcar.com; nachbarschaftsauto.de), goods (neighborrow.com), food (neighborhoodfruit.com) or even their gardens (land-share.net; sharedearth.com) in a collaborative way, also known as “collabora-tive consumption” (Botsman & Rogers, 2010). Collaborative consumption is rooted in the technologies and behaviors of online social networks.

“Sharing is to ownership what the iPod is to the eight-track, what the solar panel is to the coal mine. Sharing is clean, crisp, urbane, postmodern; own-ing is dull, selfish, timid, backward.“ (Levine, 2009)

Network ubiquity and activism

Nowadays people can access the Internet from almost everywhere with a num-ber of devices: Their computers, cellphones and tablet devices. It is hard to find a place on earth where is no Internet-Café around the corner. A lot of hotels and restaurants already offer free wireless Internet access, thus making it possible to access all necessary information, which again benefits symmetrical infor-mation. Through new ICTs it became much easier for consumers to provide unsolicited feedback to companies and to each other through special recom-mendation websites or personal blogs. There is almost nothing that consumers cannot rate today: doctors (ratemds.com), employers (kununu.com), professors (meinprof.de), and hotels (tripadvisor.com or holidaycheck.com). Most of these websites offer the possibility to connect the user with like-minded people and


A paradigmatic challenge to marketing orthodoxy 15 build a network or connect to an existing network, e.g. via Facebook connect or other APIs4.

Increasingly, everyone and everything is connected to each other and each thing. Network ubiquity accelerates the consequences of open standards, specialization, and connectivity. The consequences are higher collaboration and more innovation. (Lusch et al., 2007, p. 10)

The Internet has become a powerful tool to express opinions, share views and organize interest groups. Thus, making the public or governments aware of crit-ical issues, e.g. environmental protection, or even supporting political revolu-tions like in Egypt, Tunisia and Lybia in 2011 (Somaskanda, 2011). Concentrat-ing on marketing issues, consumer advocacy through online groups may have even greater impact than a company’s advertising (Prahalad & Ramaswamy, 2004a). In hospitality, personal opinions and experiences from others already play a major role in the customer’s decision-making process and are most of the times the decisive factor before it comes to a booking (Litvin, Goldsmith, & Pan, 2008; Vermeulen & Seegers, 2009).

2.3.2 Implications for companies

The named drivers of customer emancipation implicate following important find-ings: Customers are not isolated and are active players. They interact with each other and firms directly, through customer communities or SNS. It is a dynamic and fast moving process with a lot of potential for innovation.

Emancipated consumers and a collaborative lifestyle

The growth of sharing-websites – be it music, data, information, cars, tools or gardens – show two things: (1) A new kind of consumer generation is evolving. What once was the isolated and rather passive customer developed into an ac-tive, sharing, collaborative and community/ network oriented consumer. Botsman and Rogers (2010) call this “collaborative lifestyle”. (2) People do not wait for companies to find that one market niche and then buy the product. Nowadays people take initiative, communicate on different channels what they are missing, and sometimes even start their own business because they see the potential behind their idea. Hence, customers and customer communities can play a fundamental role in innovation, product development and along the

4 An application programming interface (API) is a set of rules and specifications within a pro-

gram’s code that allows software programs to communicate with each other. It facilitates the interaction between different software programs (in this case websites) and serves as an in-terface. APIs make it easier to connect two databases and share their information with each other (Orenstein, 2000; PCmag.com, n.d.).


A paradigmatic challenge to marketing orthodoxy 16 whole value creation process. People love to share their ideas and insights, why not making use of it?

Dialog and Communication

In order to be able to make use of the vast knowledge of consumers and possi-ble buyers, it is necessary to engage in a dialog with them. The dialog becomes even more valuable when all stakeholders affected by the exchange of service (e.g. supplier, employees etc.) become part of the dialog. This leads to the con-clusion that the marketplace itself becomes an active part of marketing. Since it is hard if not even impossible to control the outcome of this conversation this measure may disturb some companies. Nevertheless, participating in it im-proves their understanding of customers and other stakeholders (Lusch & Var-go, 2009). Furthermore, the exchange of opinions and information increases transparency and eliminates the asymmetry of information between the stake-holders. Finally, an open dialog can also serve as risk assessment, e.g. during an early phase of product development (Bolton et al., 2004).

Co-creation of experience

Whether the engagement is with a single customer or a customer community the outcome is the co-creation of value; what is co-created is the experience. Products and services can be the means for an end to co-create personalized experiences. Furthermore, no firm alone can provide the total co-creation expe-rience (Bolton et al., 2004). Hence, it is important to work together with other companies – make use of their specialized insights in order to provide a unique co-creation experience. This again shows, how important it is to open up, not only to customers but also to relevant stakeholders. Consumerism moves from its old centralized and controlled forms toward one of sharing, aggregation, openness and cooperation (Botsman & Rogers, 2010). In order not to lack be-hind, companies have to do adopt the same collaborative way of doing busi-ness.

Armed with new tools and dissatisfied with available choices, consumers want to interact with firms and thereby co-create value. The use of interac-tion as a basis for co-creation is at the crux of our emerging reality. (Prahalad & Ramaswamy, 2004b, p. 5)

Summarizing those implications, enterprises can no longer act autonomously without little or no interference from consumers. Customers attempt to exercise their influence in almost every part of the business system: product design, pro-


A paradigmatic challenge to marketing orthodoxy 17 duction sites and processes, marketing messages, and sales channels. As a consequence of increased sharing of information and experiences direct ex-change and collaboration becomes a necessity in order to stimulate innovation.

2.4 The principle of co-creation

Previous chapters established the new mindset of the consumer’s and the ne-cessity of collaboration. With the influencing factors and drivers of the emanci-pated consumers in mind, this chapter explains the components necessary to transform an enterprise towards co-creation as well as the four powers of co-creation.

The transformation of enterprises towards co-creation underlies following core principle:

Engaging people to create valuable experiences together while enhancing network economics. (Ramaswamy & Gouillart, 2010, p. 35)

Picking up on this principle Ramaswamy defined co-creation in a recent inter-view (Roth, 2011b) as follows:

Co-creation is about inclusive and meaningful engagement of stakeholders (customers, employees, suppliers, investors, partners, regulators, citizens, and others) to mutually expand value, through the mindset of human experi-ences.

Both, the co-creation principle and Ramaswamy’s definition, have the same four components:

Experience mindset Context of interaction Engagement platforms Network relationships

Those components combined liberate the four powers of co-creation (Ramaswamy & Gouillart, 2010):

Increased strategic capital and returns to enterprises New experiences of value to individuals Lower risk and costs for individuals Lower risk and costs for enterprises

As Figure 5 shows, the four principles of co-creation are deeply intertwined. A co-creative enterprise reacts to insights originating from the actual engagement experience of people that are part of the process: customers, employees, sup-


A paradigmatic challenge to marketing orthodoxy 18 pliers and other stakeholder. It is an ongoing collaborative process of designing and redesigning what is of value with the stakeholder.

Unique value is created through innovating new types of experiences shaped by the context of people’s interactions. In order to be effective and make the pro-cess affordable, the design of engagement platforms is necessary (Ramaswamy & Gouillart, 2010). An engagement platform can be “any envi-ronment of online or offline available interfaces, people, processes, and arti-facts, which is purposefully designed to generate outcomes of value through the mindset of human experiences” (Roth, 2011c). Examples for engagement plat-forms are mobile devices, websites or communication software. They “industri-alize” the scale and scope of interactions, drive their costs down and reduce risk through co-creative engagement.

In addition to that, another basic prerequisite is an expanded, reconfigurable network of resources that goes beyond the traditional boundaries of the organi-zation to expand stakeholder relationships, including private-public-social enter-prise partnerships. This leads to a generation of radically new ecosystems for all participants involved in this co-creative ecosystem (Ramaswamy & Gouillart, 2010).

Figure 5: The core principles of co-creation. Source: Own illustration based on Ramaswamy and Gouillart (2010, p. 36)


A paradigmatic challenge to marketing orthodoxy 19 Through the expansion of value creation in this “win more-win more” fashion it comes to more transformational results since its scope of application also ex-pands over time. It is the small steps in the beginning that bring confidence to the company engaging in co-creative activities. Whether it is about the individu-al’s experience, the opening up of interactions or the expansion of their co-creative network. The key is to build confidence in a smaller group, experiment and modestly expand the circles. Over time confidence is strong enough to in-volve a larger and larger set of players, the scope of experiences attempting to influence will grow as well as the company will open up to more and of entirely new types of contextualized interactions. Every step will lower the cost of each new interaction that becomes part of the co-creative ecosystem and energizes new strategic capital that ignites further growth through new network interac-tions (Ramaswamy & Gouillart, 2010).

Figure 6 shows Vargo’s and Lusch’s (2008c) S-D logic representation of value creation. It shows the relational setup of the value-creation process in a cycle.

Figure 6: Value creation and service-dominant logic. Source: Vargo and Lusch (2008c, p. 257)

Firstly, firms have to overcome internal resistances. As the approach of co-creation is still very new, people inside a firm – no matter which position – can feel threatened for three reasons: (1) They might have the impression that peo-ple outside their company can do their job better and cheaper, which could make them redundant over time. (2) The approach of co-creation requires a


A paradigmatic challenge to marketing orthodoxy 20 certain amount of transparency. Firms have to reveal what they are looking for or working on. This means that everybody, including customers, the general public (press), and competitors, know more about the company’s activities. It is not easy for some companies to take that step (Liepuoniute, 2011). (3) The out-come of a co-creative project is not controllable for the companies, as too many individuals with different motivations are involved. It might be possible to give rough directions, however, the outcome is incalculable. However, participating in co-creative activities helps companies to understand their customers and stakeholders better(Lusch & Vargo, 2009).

More advantages of engaging in co-creative activities are explained in the fol-lowing chapter.

2.5 Competitive advantage through co-creating experiences

Co-creation sometimes is mistaken with simple outsourcing or transfer of activi-ties to customers, which it is not. It is not a marginal customization of products or services, nor is it a scripting or staging of customer events around a compa-ny’s products. Nowadays, company-customer interaction of that sort no longer satisfies most consumers. In co-creation the experience (not the offering) is the basis of unique value for each individual (Prahalad & Ramaswamy, 2004b). The core value of co-creation does not lie in the actual contribution to the final prod-uct or service. It does not imply co-production and goes beyond product devel-opment. The core value of co-creation is the collaboration itself (Lusch & Vargo, 2009). Furthermore, Payne et al. (2008) note that early experimenter are mov-ing away from G-D logic models to the new S-D logic model where value is cre-ated in use by experiences.



Figure 7: Traditional vs. co-creative enterprise. Source: Own illustration based on (Ramaswamy & Gouillart, 2010, p. 6)

An important role play personal encounters, personal relationships and every-thing that can be considered as a personal touchpoint or encounter with a com-pany. A high degree of trust is often required within collaborative lifestyles or in this case co-creative encounters because human-to-human interaction, not a physical product, is often the focus of the exchange. As a result, they generate a myriad of relationships and social connectivity. When personal relationships and social capital return to the center of the exchanges, peer-to-peer trust is relatively easy to create and manage, and most of the time the trust is strength-ened, not broken (Botsman & Rogers, 2010).

Not only do co-creation activities help companies to understand customers bet-ter, it is also likely to result in deeper bonds with them. More trust, more com-mitment, and more loyalty can be the result of co-creation with the customer. As already elaborated on, the process of co-creation requires firms to be transpar-ent through an open and honest dialogue. Through dialogue, the firm and the customers, as well as customers among themselves, create bonds of integrity and shared risk, as everybody knows about the good and the potential bad of a product or service. The enterprise can reduce uncertainty in capital commit-ments and even spot and eliminate sources of environmental risk (Jaworski & Kohli, 2006; Prahalad & Ramaswamy, 2004b).

As a result, trust in this dialogue is increased through co-creation. Since the customer is involved in the development process, he builds commitment to the resultant offering by the company. Owing to the fact that the offering is co-developed, it increases the product’s relevance for consumers, has higher


A paradigmatic challenge to marketing orthodoxy 22 probability of precisely meeting the customers’ needs, and therefore leads to higher customer satisfaction. Eventually, through exclusive co-creation activities customers provide assymetric information about the marketplace and personal insights about their sources of value, which are not easily available to competi-tors (Jaworski & Kohli, 2006).

In addition to that, Randall et al. (2011) found that consumers can perceive a connection in terms of co-creation with firms and their managers and frontline personnel as well as with other customers. This leads them to the conclusion that co-creation efforts increases the connectedness between staff and custom-ers as well as increases overall satisfaction, which in turn stimulates positive word-of-mouth and reduces marketing costs over time.

Through a larger pool of available information and the constant generation of insights, co-creation increases effectiveness and speed of product develop-ment. Employees can more deeply understand consumer aspirations, desires, motivations, behaviors, and agreeable trade-offs regarding features and func-tions. (Piller & Ihl, 2009; Prahalad & Ramaswamy, 2004b). Furthermore, co-creation helps reducing research and development costs, increases output and opens new markets (Chesbrough & Schwartz, 2007).

Still, the most important source of value is the co-creation process itself. Com-panies and customers collectively interact, provide inputs and exchange knowledge. The result is a constant process of learning, creating and develop-ing ideas (Lusch & Vargo, 2009). This way, co-creation can serve as a source of significant competitive advantage.

2.6 Challenges for co-creative companies

To be able to make use of the advantages of co-creation, several challenges have to be met.

A co-creative company should focus their entire organization on the experienc-es of all their customers and stakeholders. Doing so they need to be aware of that human experiences can stem from any kind of interaction with products, processes and people. Managers need to adopt an experience mind set rather than focusing on goods and service. As experiences are the basis of value, the organization’s products, processes and management funtions need to be de-sign in a matter that enables culture of collaboration internally as well as exter-nally. As a result compelling and meaningful experiences of value can be creat-ed. Besides that, companies have to redefine themselves away from single-company performance model towards ecosystem-based performance man-


A paradigmatic challenge to marketing orthodoxy 23 agement systems where collaboration with other stakeholders is the rule rather than the exception. (Ramaswamy & Gouillart, 2010)

In order to be able to step into collaborative engagement with others, compa-nies need to open up to external sources of value. Firstly, as already elaborated on in chapter 2.4, internal resistances have to be overcome (Liepuoniute, 2011; Lusch & Vargo, 2009). Ramaswamy and Gouillart add that rather the willing-ness of companies to engage in co-creative activities is more limited, than their ability to attract customer co-creators (Ramaswamy & Gouillart, 2010).

When it comes to co-creative design, the challenge is larger inside than out-side.(Ramaswamy & Gouillart, 2010, p. 144)

Rather than concentrating their focus on control, planning and forecasting, managers should be more pro-active, flexible and see the opportunities within opening up. Faster thinking and quicker reactions make the difference in a co-creative setting (Piller, 2010; Prahalad & Ramaswamy, 2004c). More factors that are a challenge for some firms are: a company’s learning ability, flexibility, empathic attitude, ability to create and maintain dialogue, level of openness and transparency as well as the level of accessibility consumers experience during the process. However, once accomplished they strongly influence the success of co-creative activities (Prahalad & Ramaswamy, 2004c).

Before engaging with consumers, enterprises should observe and listen to their customers to find out what they are talking about and what the brand, product or service means to them. This crucial step is often overlooked (van Dijk, 2011a). After gathering of insights the dialog can start. While it is impossible to control the outcome of this conversation, which might scare some companies, the ben-efit of understanding customers and stakeholders in return is much bigger (Lusch & Vargo, 2009). Leading an authentic and continous dialog increases trust and establishs a feeling of connectedness. Moreover, companies should be empathic and open, which helps to build an atmosphere that makes it easy for both sides to learn from each other (Lusch & Vargo, 2009; Prahalad & Ramaswamy, 2004c).

Value is created through different types of experiences shaped by the context of people’s interactions. Engagement platforms support this process and make it more effective and affordable. To find a fitting engagement platform is one chal-lenge, another is to let it further evolve as a function of the co-creative process it fosters. Co-creative design thinking is essential to keeping engagement plat-forms active and spirited (Ramaswamy & Gouillart, 2010). During the operation of engagement platforms as well as every co-creative engagement companies need to find a balance between freedom and control, in order to effectively de-


A paradigmatic challenge to marketing orthodoxy 24 velop and create value (Bartl, Jawecki, & Wiegandt, 2010). This can be accom-plished by means of participanct protocols that define the rules of engagement. Based on experiences during the process the rules can constantly be revised. Social norms, that are enforced by participants help to reduce risks (Chui, Miller, & Roberts, 2009; Prahalad & Ramaswamy, 2004a).

Stepping into co-creative innovation the question rises, who to co-create with.

The right solution comes from the right participants. (Chui et al., 2009, p. 5)

Finding, targeting and engaging users who can create a critical mass for partici-paction as well as add value is one major challenge. It is crucial to carefully choose the appropriate customers for a co-creative activity to make it effective. In order to generate a diversity of ideas and minimize risk of creating products or services that only a small segment of users value, Kristensson et al. (2008) recommend to choose lead-users, that represent a broad heterogeneous seg-ment of potential consumers. The development process can be disrupted if par-ticipants resignate or abdicate from their role as co-creators, which is why it is essential to diminish this risk by selecting only higly involved and dedicated consumers (Prahalad & Ramaswamy, 2004a). Money as an incentive is not suf-ficient as it only attracts customers interested in a personal need as their main goal for participating (Bartl et al., 2010). In addition to that, Chui et al. (2009) show in their research that monetary rewards to motivate consumers to in-crease their input are not effective. In contrast, they advise companies to change their tactics and play into customers’ desire for recognition and acknowledgement in order to increase the level of participation. In conclusion and according to van Dijk’s (2011a) study on co-creative consumers they are mostly driven by intrinsic motivation. When it comes to mass-produced goods, only a small number of consumer suggestions are actually considered. Hence, customers that participate in co-creation projects will rarely be able to determine the final outcome of a product. However, since they are listened to and experi-ence a sense of enjoyment and confidence they feel empowered. The actual influence on the final product seems not to be of highest importance (Füller, Mühlbacher, Matzler, & Jawecki, 2009). Moreover, the level of trust plays a big-ger role and has a direct influence on the quality of the interaction and feeling of empowerment. The more participants trust the company, the more involved they are. Participants want to feel secure and confident that the company does not end or change the rules of engagemt to pursue a different or better goal (Botsman & Rogers, 2010; Bughin, Chui, & Johnson, 2008; Etgar, 2008).



2.7 Summary

Chapter 2 focused on introducing the service-dominant logic, which is regarded to be a challenge to the existing marketing principles as it has a customer-centric approach rather than a company- or product-centric approach. The most important steps in the evolution of marketing towards the point where we are now have been explained.

In an introduction of the service-dominant logic it was compared to the tradition-al thought on marketing, the goods-dominant logic. In an introduction of Vargo’s and Lusch’s ten foundational premises, a comparison was drawn between the challenging customer-centric marketing assumptions and the old product-centered logic. Table 3 explains the most significant differences between G-D and S-D logic and summarizes the most important elements for this work.

Table 3: Comparison between goods-dominant logic and service-dominant logic

Element Goods-Dominant Logic Service-Dominant Logic

Exchange Exchange of (tangible) goods Exchange of services (process)

Service Intangible good Application of specialized competences (knowledge and skills)

Value Added by the enterprise in the pro-duction process

Value creation is interactional and can only be determined by the user in the consumption process

Customer Customer as target (operand re-source) Customer as (operant) resource

Employees Replaceable operand resources treated in a transactional mode

Primal source of innovation, organiza-tional knowledge and value

Information Assymetric flow of information Transparency

Based on (Lusch et al., 2007; Vargo & Lusch, 2008c)

Given the interactive nature of service provision companies have to have a col-laborative competence. Not only do enterprises have to be willing to learn, but also they need to equipped with an absorbtive and an adaptive competence to be able to put S-D logic into practice and to ensure sustained competitive ad-vantage.

Taking a step back and looking at the big picture, the shift from G-D to S-D logic means much more than just a move from goods to services. Not only can S-D logic be seen as a paradigmatic challenge to marketing orthodoxy, but it also


A paradigmatic challenge to marketing orthodoxy 26 implies a new set up of the whole purpose of the enterprise and its collaborative role in value creation, for both the actors involved in exchange and for society (Vargo & Lusch, 2008c; Ballantyne, Williams, & Aitken, 2011).

In an examination of drivers and influencing factors of consumer emancipation it got obvious that consumers are highly connected and that they are active play-ers in the market. In a dynamic and fast moving process they interact with each other and firms directly through customer communities or social networking sites. The consumers’ collaborative lifestyle and willingly sharing of ideas and insights is big opportunity for companies. Realizing that the marketplace is an active part of marketing, it is now important to step into an open and transparent dialog and create possibilities for consumers to co-create their experiences with the firms in order to stimulate innovation and create a competitive advantage.

In an examination of the principle of co-creation four main components of co-creation were introduced and explained, which again highlight the factors that led to today’s consumer emancipation:

Experience mindset Context of interaction Engagement platforms Network relationships

Engaging in co-creative activities brings a lot advantages to the firms. However, to be able to grasp the full potential of co-creation, several challenges have to be met. Figure 8 summarizes advantages and challenges of co-creation.

Figure 8: Advantages and challenges of co-creation. Source: Own illustration


A paradigmatic challenge to marketing orthodoxy 27 In conclusion, applying the S-D logic and making use of co-creation brings a lot of advantages as well as there are challenges to be conquered, that might not be easy for some companies. However, making the first little steps towards this challenging new concept of marketing opens up a world full of potential for growth, productivity and profits for everybody participating in it.


Hospitality status quo 28

3 Hospitality status quo This chapter gives an overview on the current state of hospitality research and practice especially in terms of marketing and innovation. Those fields where chosen because of their relevance considering the topic of co-creation. Not only are we in times of a paradigm shift in marketing, but also in times of growing collaboration on every level that can be used for innovation purposes. It is ex-plored in how far the consumer actually plays an active part in the so called “people’s business”.

Since hospitality is a broad term it needs to be narrowed down and specified for this work, which will follow in the first part of this chapter. After introducing the special characteristics of hospitality as service industry, todays savvy hospitality customer with his changing needs is introduced. In the chapter on hospitality marketing it is looked into current issues of hospitality marketing that are rele-vant for this work. Thereafter, an examination of hospitality marketing literature considering the paradigm shift of marketing follows. An interim conclusion will summarize and point out the main findings.

This chapter’s next main part is a qualitative study on current innovation prac-tice in hospitality. The author conducted qualitative interviews with five execu-tives of hospitality companies in Germany and Austria to get deeper insights into the current innovation practice of hospitality enterprises and their general attitude towards co-creation. After giving theoretical background on innovation in hospitality, the study and its results are introduced. After a discussion of the findings a conclusion is drawn. In the final part of this chapter the summary of the main points lead to a conclusion on the status quo of customer engagement in hospitality.

3.1 Hospitality definition

Hospitality is one of the oldest professions in the world and grew into different disciplines, which does not make it easy to find a fitting definition for the whole industry. Harrison and Enz (2004) define the hospitality industry as a group of businesses that welcome travelers and guests by providing accommodation, food, and/or beverages or a combination of these activities. This is a very broad definition of hospitality and can be applied to several industries. Ottenbacher, Harrington and Parsa (2009) identified six distinct areas of hospitality: Lodging, Foodservice, Travel, Leisure, Attractions, and Conventions. Each component


Hospitality status quo 29 industry is subdivided into various market segments, lines, brands, concepts, and so on. The author of this work, however, wants to focus especially on the lodging sector as part of the hospitality industry.

The lodging industry is defined as the provider of accommodations and other amenities for travelers and other desiring customers. The primary output of this industry is providing lodging services. The lodging industry can be fur-ther subdivided into various market segments, such as resorts, luxury hotels, high-end hotels, mid-level hotels, suites, economy hotels, budget hotels, inns and motels, hostels, lodges, bed and breakfast, and other accommodations. This division is based on the level of services offered and the type of accommodations provided at each type of property. Each type of lodging facility can be further subdivided using various criteria, such as brand repu-tation, nature of ownership, location, regional pricing levels, amenities of-fered and so on. (Ottenbacher et al., 2009)

Further references to the hospitality industry or hospitality in general in this work apply for the lodging industry.

3.2 Characteristics of hospitality as service industry

Per definitionem the primary output of the hospitality industry are lodging ser-vices. Hence, the hospitality industry can be accounted for as service industry. Hotels differ from other service businesses by serving those who are travelling away from home in contrast to local residents. Furthermore it is important to notice that the offering of an experience is also a major part of hospitality (Enz, 2009). In contrast to other industries, where goods are at the center of ex-change, following characteristics differentiate hospitality: intangibility, insepara-bility, variability and perishability.

Intangibility

As opposed to physical products services cannot be seen, tasted, felt, heard or smelled before they are purchased – they are intangible (Bowen, 2008). Con-sumers cannot be sure about the quality of the service they will receive until it has been consumed. Furthermore customers cannot take ownership of the ser-vices. There is no transfer of tangible assets (Reid & Bojanic, 2005). But, as Zeithaml and Bitner (2003) point out, very few products are either purely tangi-ble or intangible. The breakfast that is served in a hotel is tangible. The atmos-phere of the hotel and the employees’ uniforms help tangibilize the experience.


Hospitality status quo 30 Heterogeneity

Service encounters are experienced differently by different people or even by the same people at different circumstances. The customer’s level of satisfaction depends on the nature of the interaction with the service provider, the condition of the physical facilities in which the service gets provided, and other guests present in the hotel during the time the service is provided (Jones & Siag, 2009; Lovelock & Wright, 2001; Reid & Bojanic, 2005).

Inseparability

Not without reason the hospitality industry is called “peoples business”. As the experience of a stay is in the foreground, the human factor plays a much bigger role during the exchange of this service. Most of the times consumers are re-quired to be present during the production or delivery of the service. The ser-vices provided differ from tangible products since they are immediately con-sumed and require a people-intensive-creation (Jones & Siag, 2009). Owed to the fact that hospitality is a high-contact service, customers not only come into contact with service personnel, but also with other guests. The difference be-tween service businesses often lies in the quality of employees serving the cus-tomers. Similarly, other guests also have influence on the nature of the service experience (Lovelock & Wright, 2001).

Variability

The intangibility, heterogeneity and inseparability contribute the the variability that customers experience when consuming the hospitality product. The lack of consistency is a major case of customer disappointment. Services cannot be stored for later use, they are consumed in real time with many variables not be-ing under full control of the manager. Hotels try to minimize the amount of vari-ability between service encounters; however, much of the final product stays situational. Their quality depends on who provides them when and where. Sev-eral causes account for the service variability. Since services are produced and consumed simultaneously, quality control is limited. Fluctuating demands or seasonality make it difficult to deliver consistent products during periods of peak demand. Hotels may fail to cope with too many guests at a time, which can re-sult in customer dissatisfaction. With only few guests a vital ingredient of the hospitality product – atmosphere – can be missing, which can lead to customer disappointment. Moreover, the product consistency depends on the employee’s skills, attitude and performance at the time of exchange. Even more uncontrol-lable is the guest’s attitude, who may perceive the same service differently from day to day because of a different mood he is in. These factors make it difficult for hotels to improve productivity, control quality, and offer a consistent product


Hospitality status quo 31 (Lovelock & Wright, 2001; Reid & Bojanic, 2005; Wood, 2008). Nevertheless, not all variations in service delivery are necessarily negative. A lot of hotels rec-ognize the value of customizing at least some aspects of the service offering to the needs and expectations of individual customer, especially in the luxury segment where a high personalization is expected.

3.3 Today’s hospitality customer

As already elaborated on in chapter 2.3, consumers in general are more in-formed, networked, empowered, and active than ever. Apart from that, today’s savvy hospitality customers show other characteristics that are important to mention for this work.

As people work more and have fewer holidays, leisure time becomes more im-portant to them (Niininen, Buhalis, & March, 2007). More work, consequently means higher disposable income, which puts travellers in the position to be able to access and afford almost anything they want, especially when it comes to physical needs. Having those wishes fulfilled, their standards rise. Therefore, after fulfilling their physical needs, they are now in quest of psychological needs, like inspiration, cultural, spiritual and authentic experiences, belonging to a meaningful community, value and meaning in general (Binkhorst & Den Dekker, 2009; Niininen et al., 2007). Furthermore, the new generation of cus-tomers is highly technology-savvy and deliberately relinquishs personal interac-tion with front line personnel in exchange for money or time benefits. Conse-quently co-producing or self-servicing engagements, such as self check-in ter-minals, are highly popular among customers and considered convenient (Sanders, 2011). In general customers become more demanding. Each guest is a consumer with particular expectations. To be able to deliver satisfactory experiences, hospitality marketers need to segment the market to ensure com-patibility between consumers sharing the same premises at the same time (Middleton, 2009). Besides requesting high quality products and value for their money, they also expect value through a great experience throughout the entire length of their dealings with companies, from information seeking over booking, stay and follow up service. Enterprises complying these expectations with per-sonalized and customized value adding services encourage loyalty and the cus-tomers’ sense of identification with the brand (Niininen et al., 2007). Consumers are erratic and fashions change quickly, delivering what customers are looking for is increasingly the key to success. (ehotelier.com, 2006). With a highly per-ishable product, this represents a challenge for hoteliers.



3.4 Hospitality marketing

As part of the tourism industry marketing in the hospitality industry is much alike. Marketers of both follow the goal of helping tourism providers to increase visitation and consumption (Buhalis, 2000). The traditional views (“market to”) of marketing are the rule and the majority of practitioners and researchers in the field of tourism marketing still incorporate them as basis of their work. Current tourism and hospitality marketing is built on a provider-based, goods-centered, and transaction-oriented perspective. Thus, the relationship between guests and lodging suppliers is viewed as simply one of buyer versus sellers. Different service components are assembled into products and made readily available for buyers (Li & Petrick, 2008).

Following subchapter gives an overview of current issues and developments in hospitality marketing that are relevant for this work. Subsequently, a literature review on research considering the paradigm shift of marketing follows. The chapter on marketing in hospitality is closed by a summary and an interim con-clusions.

3.4.1 Relevant issues in hospitality marketing

Without going into further details of the classic marketing, following list gives an overview of current developments and value drivers in marketing practices in hospitality that are relevant for this work:

Brand relationships Internet and new ICTs Customer relationship management (CRM) Social media marketing

Brand relationships

The hotel industry has firmly embraced and accepted the value of branding as an essential component of its marketing strategy in the last decades (Dev, Zhou, Brown, & Agarwal, 2009). In their article on hotel brand strategy O’Neill and Mattila (2010) summarize recent research, which highlights the importance of a strong hotel brand and how it creates personality for an intangible entitiy, i.e. hospitality. It can create an emotional connection with the consumer and be an important cornerstone of a close (brand) relationship. They further explain, how brand equity can serve as a strategic advantage that not only opens oppor-tunities for expansion in a variety of markets, but also creates financial value due to its power to achieve cash flows via relatively higher margins. A hotel brand assures a certain level of quality in the eyes of the customer, which leads


Hospitality status quo 33 to customer loyalty and in turn has positive financial aspects, e.g. price premi-ums, increased market share or improvement of stakeholder value (O’Neill & Mattila, 2010). Extensive corporate development and changes in brand archi-tecture have resulted in most big hotel companies having a brand at every price level. This resulted in excessive sub-branding of the industries major compa-nies: Marriott has 13 subbrands, Starwood has 9, Hilton has 10, Intercontinental has 7, and Accor has 17 (Green, 2010). This proliferation of brands led to an extensive hotel brand segmentation in the market. This caused confusion to the consumer in differentiating products between and within lodging firms as well as it became harder for hotel corporations to establish brand relationships with consumers (Bender, Partlow, & Roth, 2008; Niininen et al., 2007).

Internet and new ICTs

With growing popularity and accessibility the Internet has brought many chang-es to the business environment such as the lowering of entry barriers, a growth in market size and greater potential to reduce costs (Stockdale, 2007). In com-bination with the occurrence of new technologies the tourism and hospitality industries where revolutionized in terms of industry structures and marketing. The new business environment created by the occurrence of ICTs had an es-sential impact on the tourism system. ICTs have become an inseparable partner of the tourism industry offering the interface between consumers and provider on a global scale (Buhalis, 2002). Over the last decade ICTs facilitated the ex-pansion of the industry and the enlargement of the market in a pace like never before. Especially the Internet and digital technologies reshaped the marketing mix and led to a shift from offline communications to online activities at the cen-ter of the marketing communications mix (Middleton, 2009). This development sped up the need for airlines, hotels and tour operators alike to continue to de-velop their online strategies and improve the ease and security with which their e-commerce initiatives can be used by online customers. One outcome of this is the increasing growth in self-serving technology with the consequent reduction in interaction between customers and the industry. Interestingly, while on the one hand businesses wish to build relationships with customers on the other hand, consumer autonomy is growing via the use of self-servicing technologies (Middleton, 2009; Stockdale, 2007). Considering marketing activities and spending, the most recent survey on digital marketing in hospitality by Starkov and Mechoso Safer (2011a) shows that the Internet is the only marketing chan-nel in hospitality that is still growing. Furthermore it is the most measurable channel. According to the survey most hoteliers believe that Internet marketing (40,5%) produces better results than traditional offline marketing (9,5%). Com-


Hospitality status quo 34 pared to last year, almost 75% of the hoteliers have a higher Internet marketing budget. In some cases this increase went at the expense of offline marketing.

Customer relationship management

Marketing strategy has been significantly affected by the ongoing developments in technology. The Internet became a catalyst for relationship marketing, which primarily is driven by knowledge gained and communicated by connected cus-tomer databases, often referred to as CRM-systems (Middleton, 2009). The strategy of CRM, “enabled by processes and technologies, is architected to manage customer relationships as a means for extracting the greatest value from customers over the lifetime of the relationship” (Heller Baird & Parasnis, 2011a, p. 1). It is typically concentrated on the operational response required to manage the customer. Apart from the ability to target individuals, databases have a powerful market research value in generating detailed knowledge of re-peat buyers and cutting out the cost of undertaking traditional usage and atti-tude studies among buyers (Middleton, 2009). Although the hospitality industry as a whole has been lagging in moving towards relationship marketing and uti-lizing existing data to develop marketing programs more tailored to the individu-al consumer, loyalty or frequent guest programs have become an integral part of the marketing strategy of hotel companies. By now guest loyalty programs have become a core brand feature for the industry as a whole (Bender et al., 2008).

According to Middleton (2009) only few hoteliers really know who the bulk of their customers are. Samanta (2009) draws a similar conclusion stating that hotel managers are not aware of the new technological improvements. They rarely take into consideration that getting to know their customer better is es-sential for their businesses to know where they can improve and what they should expand on. In contrast to that, Bender et al. (2008) found out that sever-al US lodging companies made use of their loyalty programs in combination with electronic tools to get to know their customers at every touch point. One of the studied corporations has guest information available at each point of cus-tomer contact to the employee servicing the guest. Throughout their brands, this hotel company has information about past and future behaviors as well as travel needs. For lodging companies operating an Internet-based strategy it is neces-sary to be able to distinguish between ‘lookers’ and ‘bookers’. In order to find out who these ‘bookers’ or ‘lookers’ are and what their needs or future patterns of behavioral intentions may be, it is worth developing an eCRM strategy. As the electronic tools and management information systems exist, it is possible to put far more proactive strategies in place (Middleton, 2009). One of the execu-


Hospitality status quo 35 tives Bender et al. (2008, p. 22) interviewed underlines this point: “Technology is allowing us to be much more personalized in customer experience and pre-plan people’s visits; know who they are and be able to recognize those custom-ers.”.

Social media

A few years ago, it was considered sufficient by many hoteliers to have a new hotel website and to launch a few Internet marketing campaigns, like email campaigns and paid search. Nowadays, the above is part of the basics and should only be the beginning of the hotel’s Internet marketing strategy. Hoteliers now need to do much more to engage the emancipated and hyper-interactive consumer in this multichannel, 24/7 environment of the Internet (Starkov & Mechoso Safer, 2011b). As already introduced in chapter 2.3 the usage behav-iors of Internet users developed towards one of creating own content, uploading it on social media sites and sharing it on SNS. Hotel guests use these channels to share their travel-related comments, opinions, and personal experiences, which then serve as information for others. Unlike content provided by market-ers and their companies, social media are produced by consumers to be shared among themselves (Xiang & Gretzel, 2010). However, companies can use so-cial media or their presence on SNS to their advantage. Besides, that social media allows for real-time and two-way communication, it also offers the oppor-tunity to embrace a company’s brand personality. Communicating via social media can reinforce a message through different formats (audio, video, photos and text) and help it to go viral (Lanz, Fischhof, & Lee, 2010). Since more and more guests make use of social media and talk about companies, whether they are engaged or not, this highly challenges the established marketing practices of many hotel companies (Litvin et al., 2008). Social media is believed to be a game changer and is going to become the primary communications channel to connect with customers (Heller Baird & Parasnis, 2011a). Hoteliers try to meet this challenge and continue to professionally develop their skills in this area (Starkov & Mechoso Safer, 2011a). Several agencies, consultancies and free-lancing experts specialized on social media and Web 2.0 communication help hotels and other tourism institutions to keep up with and further drive this fast development. Ongoing (cross-industry) exchange through blogs or on various kinds of meetings, conferences or workshops, help to stay up-to-date with the ever evolving world of social media. Facebook.com, for instance, is the leading SNS with over 750 million active users today (Facebook.com, 2011). Compa-nies can create a Facebook Fan Page and use it as channel to get in touch with their customers or potential customers. Most firms use Facebook in combination with other channels, e.g. Flickr.com for photos, YouTube.com for Videos and


Hospitality status quo 36 Twitter.com to spread news. Looking at the fast development of SNS, not only considering the different features and functions on each of those sites, but also the user migration from one established SNS to a new entrant, make social me-dia marketing a task of constant testing, learning and adapting.

In their annually conducted survey with hoteliers worldwide Starkov and Mecho-so Safer (2011a) found out that the perceptions towards social media changed drastically over the years. 43% of hoteliers said they believe social media is one of the Internet marketing formats that produces the best results and the highest ROIs in comparison to only 16,8% in 2007. From a customers point of view, however, social media does not play a big role when it comes to a holiday deci-sion. According to Teufel’s (2010) survey most of the customer (60%) start their holiday research on google.com. For 70% a visit on the hotel’s website is the first or second step of their holiday planning. For 30% the second step is re-search on recommendation websites like holidaycheck.com or tripadvisor.com. However, a visit on Facebook, Twitter or other social media sites had no influ-ence on the decision where to go or stay. This was relevant for no more than 2%. As most customers visit the hotels website and other third party websites to gain further information in the course of their decision making process, some hotel companies ease this process trough aggregating and integrating relevant content from different Web 2.0 platforms in a social media news room (Amersdorffer, 2009; Watson, 2011). Besides recent reviews on recommenda-tion platforms, latest Twitter or Facebook updates or recently published videos are shown. Not only does this enhance customer service by having all relevant data and media on one page, it also boosts the dialog and embraces necessary transparency which in turn leads to higher trust and loyalty from the customers (Watson, 2011).

Apart from the decision making process, customers are willing to interact with enterprises if they believe it could serve to their benefit, feel they can trust the firm and decide for themselves that social media is the right channel to use to get the value they are looking for (Heller Baird & Parasnis, 2011a). Following the idea of eCRM from above and connecting it with the possibilities social me-dia offers, Heller Baird and Parasnis (2011a) suggest the strategy of ‘Social CRM’. In classic CRM the customer is managed; with social media, however, companies are no longer in control of the relationship. On the contrary, con-sumers (and their highly influential virtual networks) are now driving the conver-sation. The advantages are unprecedented immediacy and reach, which can’t be reached with conventional marketing, sales or service efforts. Social CRM recognizes that in today’s environment the customer is in control. Instead of managing customers, the role of the company is to facilitate collaborative expe-


Hospitality status quo 37 riences and dialog that consumers value. Social CRM is about managing the dialog and customer engagement (Heller Baird & Parasnis, 2011b).

Following chapter takes a closer look on the emerging paradigm shift of market-ing in hospitality, i.e. S-D logic and co-creation.

3.4.2 New marketing thought in tourism and hospitality

Over the last years tourism and marketing practitioners as well as researchers where occupied with keeping up-to-date with the recent developments of ICTs and the growing possibilities of online marketing through newly created and still evolving channels. Owing to this fast development, the meta-level of marketing research in the tourism industry was neglected. Only few tourism academics engaged themselves in the research on the emerging paradigm shift of market-ing, i.e. S-D logic and co-creation, and its implications for tourism in general and hospitality in specific (Binkhorst & Den Dekker, 2009; Focken, 2011; Li & Petrick, 2008; Middleton, 2009; Shaw, Bailey, & Williams, 2011).

Traditionally in tourism and travel, even when consumer research was under-taken, managers decided what product should be provided and customers were expected to buy. Determined by a top-down management decision process, this is the classic firm centric approach still practiced in the majority of hospitality enterprises. However, this process is changing considering the many experi-enced and savvy consumers, introduced in chapters 2.3 and 3.3, who want to play an active part in the new value co-creation process. This consumer centric approach, introduced in chapter 2.4, is a collaborative one and as much bottom-up as top-down (Middleton, 2009).

So far it has been recognized that practicing knowledge management to ac-quire, store, and share knowledge among both internal and external customers is effectively beneficial to hotels. It is one source of competitive advantage and economic growth in hospitality (Yang & Wan, 2004). Further research estab-lished the importance of knowledge management, the exchange and transfer of knowledge within the hospitality industry and its value as driver for innovation (Shaw & Williams, 2009). In a study on the effect of customer participation on service quality, Wang et al. (2007) showed how the active involvement of cus-tomers in the service process improves the overall service quality of a hotel. Niininen et al. (2007) were the first to adapt the technique of consumer centric marketing to travel context. They showed the necessity of putting the customer in the center of marketing activities due to the possibilities through ICTs and the emancipated consumer in order to gain a competitive advantage and increase customer satisfaction.


Hospitality status quo 38 Li and Petrick (2008) discuss the approaches of S-D logic in the context of tour-ism. According to the authors, tourism providers work in a network to stage var-ious experiences for their customers, in which they are responsible for con-structing the context. Through their knowledge and skills they are offering solu-tions or, in the context of S-D logic, value propositions to satisfy tourists’ needs and wants. The proposition might or might not meet their customers’ needs and wants. The “product” is finalized and consumed simultaneously by tourists. Therefore, the value of a product is created and determined during tourists’ us-age. During this process, the customers are actively engaged in the relational and collaborative exchanges with providers. This leads to new key roles of tour-ism marketers during this process. The roles are to match tourists with the right suppliers (rather than promoting products on the behalf of a certain provider), and help the operand and operant resources to work efficiently. This has also an effect on their main focus of work, which is:

to improve the quality of customized experiences, to improve the relationship between tourists and providers, and to improve the connection and cooperation within the industry net-

work.

Considering hospitality as a service-driven industry, it might appear that S-D logic is the perfect match for it and that there is no need to discuss it. However, ‘service’ in S-D logic is much more knowledge embedded, customer oriented and technology driven than ‘service’ in tourism (Li & Petrick, 2008). On the one hand, it has been argued, that service marketing, to which hospitality marketing belongs as a branch, is grounded in a goods and manufacturing-based model. Services, in comparison to goods, have been considered as containing natural disadvantages, like intangibility and others named in chapter 3.2. The marketing of service requires efforts to make services more tangible and homogenous (Vargo & Lusch, 2004b). On the other hand, S-D logic argues the other way around. As standardized goods are produced without consumer involvement and require physical distribution and inventory, they are inferior to services. Not only do standardized goods only add to marketing costs, they are also non-responsive to customer needs (Vargo & Lusch, 2004a). Li and Petrick (2008, p. 241) see further research and more conceptual thinking on tourism and S-D logic as opportunity to help “break us free from told ways of thinking”.

Illustrated in Figure 9 is a comparison between the old and new ways of thinking about marketing. In the past tourism marketers thought in a two-dimensional (time and space) world. Time was cut into small pieces and it was concentrated on the static and discrete “time being”. Typically, tourism marketers stood on


Hospitality status quo 39 the supply side, hence their observations were one-directional: getting tourists to businesses. Li and Petrick (2008) propose that future tourism marketers will need to think in a more dynamic (as opposed to static) and holistic (as opposed to piecewise) way. Customers on the demand side should be considered from a relational lifetime value-centered perspective. As a consequence, for the supply side this means prioritizing the sustainable usage of resources. In addition to that, the authors suggest, that marketers should embrace a broader spatial horizon, from a local and regional scale to a global one. Marketers can serve as a link between suppliers and tourists as well as interact with both sides in a more balanced way to reach this goal. Beyond that, they propose to add a third dimension of thinking. An information/knowledge axis illustrates the ongoing learning from past knowledge to create future knowledge.

Figure 9: Change our way of thinking. Source: (Li & Petrick, 2008, p. 242)

3.4.3 Summary and interim conclusion

This chapter gave an overview of the state of hospitality marketing. It was found, that current hospitality marketing is provider-based, goods-centered and transaction oriented which puts the guests and hotels into a buyer versus seller relationship. In an analysis of relevant issues in hospitality marketing following challenges and notable facts became apparent:

Difficulty of establishing brand relationships due to hotel brand and sub-brand proliferation

Strong increase in online marketing activities due to rapid development of ICTs

Growing importance of CRM activities to better target and serve custom-ers


Hospitality status quo 40 Social media as “game changer” that puts customers in control of the

dialog Role of company changes from customer manager to facilitator of collab-

orative experiences and dialog through “Social CRM”

These issues are relevant as they either create opportunities or can serve as tools for co-creation activities.

In a literature review on the new marketing thought in tourism and hospitality, it was found that hospitality and tourism researches alike acknowledged the changing process of value creation towards one of collaboration. A growing awareness of knowledge management as source of competitive advantage and economic growth supports this development. Moreover, it appeared that cus-tomer participation increases service quality in hotels. Customer centric market-ing, enabled through new ICTs and the emancipated consumer represents an-other source of customer satisfaction, and therefore competitive advantage. The ongoing changes in the value creation process give a new role to tourism mar-keters, who now build the link between supplier and customer with the goal of matching tourists with the right supplier. It is their task to improve the quality of customized experiences, the relationship between guests and hotels and to im-prove and extent relationships and cooperation within the hospitality industry.

As a service-industry hospitality seems to be the perfect match for S-D logic. However, it is pointed out that ‘service’ in S-D logic is much more than the ‘ser-vice’ in hospitality. It powered by more knowledge behind the actions, supported by a much stronger customer orientation and driven by technology. In a com-parison between goods and services under the aspect of S-D logic, services are recognized as superior due to the lack of consumer involvement during the pro-duction of goods and the requirements in physical distribution and inventory.

In a visualization of the tourism marketer’s role in G-D logic and S-D logic a new way of thinking was promoted. A two-dimensional one-directional thinking, where the tourism marketer stands on the supply side with the goal to get tour-ists to businesses represents the old way of thinking. In the new way of thinking, a third dimension is added that considers the ongoing learning process. Fur-thermore the tourism marketer now is in the role as link between suppliers and tourists. The new way of thinking not only considers the customers from a sus-tainable relational lifetime value-centered perspective; it also takes a more ho-listic, global view in consideration.

In conclusion, it is found that the sooner hospitality enterprises accept the fact that the customer is in charge, the sooner they will be able to adapt their activi-ties towards customer centric and experience oriented marketing. Making use of


Hospitality status quo 41 knowledge management tools in combination with relationship and interaction oriented management is the first step to break free from told ways of thinking towards an era of co-creation.

3.5 Qualitative study on current innovation practice in hospitality

To get deeper insights into the current innovation practice of hospitality enter-prises and their general attitude towards the topic of co-creation qualitative in-terviews with five industry representatives have been conducted. First of all the theoretical background on innovatin in hospitality was examined to find potential clues on active customer participation in the innovation process of the hospitali-ty industry. It follows an introduction to the research methodology, the results of the study as well as a discussion and conclusions.

3.5.1 Theoretical background on innovation in hospitality

Innovation in general can happen in several ways, including business models, product services, processes, and marketing channels. Goal can be to maintain or capture markets or the desire to reduce costs or prices through greater effi-ciencies. Furthermore innovation can be characterized into different types de-pending on the nature of the change in knowledge:

Radical innovations: The knowledge required is different from what exists

currently.

Incremental innovations: Existing knowledge is the foundation for a new

product, service, process or marketing channel.

Furthermore, innovation can be distinct between product or service innovations: Product innovation: final goods or services.

Process innovation: how an organization does its business.

Innovation in service industries is often characterized as more fluid and evolu-tionary than product-based innovation, which tends to have more distinct devel-opment stages. In hospitality, innovation often occurs at the same time as im-plementation due to simultaneous idea design and delivery. Another key distinc-tion between innovations in service industries as compared to manufacturing is that innovation in services is supposed to be distributed throughout the organi-zation (Enz, 2009).

So far, there is not an extensive selection of research on innovation in hospitali-ty available, although it is an important aspect of hospitality management


Hospitality status quo 42 (Ottenbacher, 2007). Ottenbacher and Gnoth’s (2005) study highlight that suc-cessful innovations require close customer contact, detailed consumer re-search, and comprehensive understanding to be able to identify trends. Results of their survey show that the human factor plays an important role in innovation. Well-trained and flexible employees and their motivation and ideas are viewed as competitive advantage in these terms. However, the customer as active part of innovation does not play a role in the perception of the surveyed managers. With these results Enz and Siguaw’s (Enz & Siguaw, 2003) findings are con-firmed. According to their study innovations are significantly affected by person-nel with outstanding leadership qualities, problem solving skills, and project management skills, so called “best practice champions”. Ottenbacher, Gnoth and Jones (2006) add that market-related aspects such as market attractive-ness, market responsiveness and marketing synergy are further important fac-tors for innovation in hospitality. Ottenbacher (2007) furthermore highlights the importance of understanding the market and customer for successful innovation practices. Claiming that successful hospitality innovations are customer driven, he highlights the importance of acquiring “in depth-knowledge and appreciation of the customer needs, wants, and behaviors” (Ottenbacher, 2007, p. 445). Em-ployees as guests’ contact persons are considered to be the best source of in-formation concerning customer needs and wants and therefore the most im-portant source for new ideas. Ottenbacher (2007) further suggests to implement an employee-driven development process.

Sipe and Testa (2009) summarized existing studies on innovation in hospitality and tourism in a framework (see Figure 10).



Figure 10: Framework for Innovation Research in the Hospitality and Tourism Marketplace. Source: (Sipe & Testa, 2009, p. 3)

Recently another success factor of innovation became apparent. Yucelen and Yigitbas (2010) highlight the influence of knowledge management in service innovation performance. Managing knowledge is an important process linking individuals, teams, departments and organizations through knowledge sharing to be able to achieve enhanced organizational learning. Constant learning is a crucial success factor of innovation as knowledge builds the foundation for the development of necessary skills and competences to drive for innovativeness.

Considering the strong distribution of hotel chains, an analysis of their innova-tion practice showed that local management of individual hotels have very little freedom left for the implementation of independent innovative services, as local service and new products or amenities are almost totally dictated by the head-quarters (Yucelen & Yigitbas, 2010). The authors conclude that on the one hand standardization and centralisation of services is a reasonable method to opti-mize costs and fulfill customer expectations of the brand. However, on the other hand this could also restrict innovation, differentiation and globalization strate-gies in the long run.

Ibarra and Hansen (2011) give to think that staff in hotels mostly is very diverse in terms of nationalities. People with different experiences and backgournds highly increase the chance of new ideas, and therefore can serve as competi-


Hospitality status quo 44 tive advantage. Although the chance of conflict is also higher, conflict still is good per se, as long as it is constructive and drives the innovation process.

According to the research analyzed to this point, innovation is customer driven in terms of the necessity of fulfilling his wants and needs. However, the custom-er only plays a passive role in the innovation process. So far employees, as di-rect contact to the customers, took on the role as main source of information and innovation driver in hospitality. This again shows the rather provider-based and transaction-oriented perspective of current management practices in hospi-tality.

Considering the approach of S-D logic and the processes of co-creation, Shaw et al. (2011) demonstrate the new logic’s relevance for hospitality. Particularly in terms of innovation, co-creation can be a major driver for the industry. The re-sults from case studies show that some British hotels aiming at development through product/ service innovation already rely on co-creation strategies with customers as well as industry suppliers. The authors come to the conclusion that co-creation processes are highly complex and even if academic research lags behind in this field, co-creation is already relatively well advanced in some parts of the hospitality industry.

3.5.2 Research methodology

To get deeper insights in the current innovation practice of hospitality enterpris-es in the German speaking region and their general attitude towards the topic of co-creation qualitative interviews with five executives of hotel companies have been conducted.

The author asked 15 hotel companies in the German-speaking region (Germa-ny, Austria, Switzerland) to participate in this study. From this 15, seven were willing to participate. However, in the course of this work two could not find the time to participate. The main reason for not participating was the concern that revealing internal information to an external entity might harm the organization.

The lodging firms that participated in the study will not be identified to ensure the anonymity of those interviewed. In this work they are referred to as Hotel A, B, C, D and E. An overview of all interviewed hotel companies is shown in Table 4.


Hospitality status quo 45 Table 4: Hotel corporation interview partners

Hotel Hotel Type Characteristics Informant

A Austrian Multinational Hotel Group Upscale and Luxury Chairman of the Supervisory

Board

B German Multinational Hotel Group Upscale and Luxury Area General Manager

C Franchisee of a German Multi-national Hotel Group Luxury E-commerce Manager

D National (German) Hotel Chain part of International Group Mid- and Up-Scale Director Quality Assurance and

Hotel Development

E Privately owned Hotel (Austria) Upscale Hotel Owner/ Director

The interviews were conducted personally, via telephone or Skype. The conver-sations all followed the same catalog of questions about the hotel companies’ general attitude towards innovation, their innovation processes and responsibili-ties as well as their attitude towards involving customers or other stakeholders in the innovation process. Depending on their answers, questions were adapted, added or left away. Some interviews have been recorded with the agreement of the interviewees. The interviews lasted between 20 to 45 minutes. Subsequently an interview protocol was compiled and submitted to the interview partners to get their approval of the content and give them the opportunity to explain unclear issues or add further information.

3.5.3 Results

The interviews where analyzed, summarized and sorted into different topics that are relevant for this work. The topics are:

General attitude towards innovation Tradition vs. innovation Employee encouragement vs. top-down management Employee suggestion system Internal communication/ Intranet Market research activities Social media and recommendation websites Trends in hospitality innovation Customer co-creation Collaboration with other stakeholders


Hospitality status quo 46 General attitude towards innovation

The interviewed hotels consider innovation differently. In Hotel A, a multination-al chain, innovation is deeply anchored in the core value of the company. A full subsidiary of the company is responsible for all innovation matters. Not only do they conduct research, analyze the market and develop new products, they are also responsible for forging and distributing know-how throughout the organiza-tion. With a new owner and after a change in management, Hotel B, a multina-tional chain, now repositions their brand in several areas. In the course of this new orientation innovation became more important. The hotel needs to “create new products, new ideas, new service-concepts, in order not to let the brand become obsolete”. Special Teams, so called “Circles of Competence”, from dif-ferent departments throughout the organization and hotels work on different topics, develop ideas and innovations. Furthermore, the “Circles of Compe-tence” discuss which standards are really important for the image of the chain. In order for each hotel of the chain to be able to “develop its own personality” there has to be some space for own innovations in the hotels. Still, as the Area General Manager states, standards are important since customers most of the times “buy the brand” and expects a constant experience throughout the proper-ties.

As Hotel Company D consists of privately owned hotels, most hotels of the chain develop their own innovations. However, the central organization also realizes innovation through different international teams who each observe the market, conduct studies, follow developments, trends, and innovations by com-petitors in several fields, e.g. sales, marketing, service standards or reservation system. Important developments or promising trends are adapted or develop into innovations themselves which than become standards for the hotels.

Both, Hotel C and E are privately owned. However, Hotel C is a Franchisee of a multinational hotel chain, while Hotel E is a family hotel in third generation. This difference reflects in the handling of innovation. The family hotel sees their on-going (award-winning) innovation efforts as one of their main competitive ad-vantage and strongly relies on their employees as innovation driver. The hotel director encourages them to bring in their personal talent or know how to create new experiences for customers. Hotel E’s regular guests highly estimate the new offerings and ongoing development. In contrast, Hotel C concentrates on management-driven innovation and the implementation of irregular recommen-dations by the franchiser. Furthermore, Hotel C has a strong base of regular visiting guest, who “like ‘their’ hotel the way they used to got to know it ten or twenty years ago”.


Hospitality status quo 47 Tradition vs. innovation

Tradition and innovation might seem to be conflicting values. Nevertheless, Ho-tel A, B and E agree that tradition is a valuable orientation for innovation. Re-flecting on tradition does not mean to be antiquated; it rather can serve as a starting point for innovative efforts. Reflecting on core values, “play with them” and use them as basis for innovation can complete a brand or a hotel and helps to create a more authentic image.

Employee encouragement vs. top-down management

Most of the interviewed agreed on the point that a culture of innovation needs to be created on a small scale, i.e. encouragement of employees, to be able to create something big. Hotel B and E point out that this is not an easy process for both sides. Encouraging employees, giving them a certain freedom, and as manager letting go of control is something that developed only recently and is not easy to implement due to old thinking patterns on both sides. As Hotel B put it:

“Employees are not used to having the space for being creative. Already in school they were told where to go and what to do. Who deviated from the course was punished. Suddenly they are free to be creative and don’t know what and how to do it.”

Times have changed and management processes got more dynamic, open and democratic. However, Hotel C still follows a rather hierarchical management style. The hotel manager, who likes to have control over all processes and most of the decisions, practices a strict top-down management. As subordinate the interviewee complaint about missing internal communication and transparency which demotivates employees and slows or almost shuts down innovation from bottom-up.

Employee suggestion system

All of the hotels have an employee suggestion system in place, which in most cases also serves as anonymous feedback tool for the department and hotel managers. In most cases, the ideas are analyzed in three-monthly or quarterly intervals. Department managers decide whether or not ideas are implemented in their field of responsibility. More comprehensive ideas are forwarded to the hotel manager. In the case of the hotel chains, well working innovations or ideas on the higher strategic level are forwarded to the headquarters from where they are distributed to the other hotels in the chain.


Hospitality status quo 48 Internal Communication/ Intranet

An increasingly important role in the exchange and distribution of information plays the Intranet of the interviewed lodging corporations. Hotel D, for instance, finds it easy to gather information from all hotels through their Intranet forum in a fast way and points out the efficiency of analyzing the data through that tool. In addition innovations sometimes emerge from discussions to specific topics in the forums. Furthermore, Hotel Corporation D communicates service best prac-tices via this channel with the goal for other hotels to implement or adapt them. However, none of the interviewed companies has an ideas-only-forum or tool to collaboratively work or vote on suggestions. Generally, the engagement of low-er-level employees in the Intranet forums is rather poor. One reason is their high workload that does not allow for time-consuming online discussions; an-other is that they are concerned about being exposed to the whole company and the fear of valuations from their superiors. Hotel B pinpoints that “it needs to be worked on to give employees the necessary lightness to engage in such cir-cumstances”.

Market research

All interviewed hotels rely on market research and customer surveys as founda-tion for their innovation practices. Guests have the possibility to give their feed-back on the experience with service and facilities of the hotel either through questionnaires available on the rooms, or in follow-up online questionnaires. This represents the interviewed hotels’ preferred way of collecting customer feedback.

Social media and recommendation websites

While all of the hotels engage on SNS, especially Facebook, they are also aware of customer feedback given on recommendation websites. Most hotels use Trust You Analytics, a tool that aggregates customers’ opinions from SNS and recommendation websites, sorts them into topics and analyzes the senti-ments to give a quick overview of all data available. For Hotel D review web-sites increasingly play an important role to monitor customer opinions, trend developments and for quality assurance purposes. However, in the opinion of Hotels B and E recommendation websites are considered to be practical for identifying operational weak spots, but most of the feedback is very superficial and subjective in nature. Both, the perception and the stay are always subjec-tive; therefore it is almost impossible to work with most of the statements on recommendation websites. As Hotel E put it: “If ‘the service was bad’, how can we know what would be good or excellent service for the guest if we don’t even know the situation it occurred?” Consequently, they prefer the in-depth ques-


Hospitality status quo 49 tionnaires customized on the services and products offered in their hotels or the personal conversations with their guests as source for ideas. Furthermore, Ho-tel B identifies independent blogs, forums and institutions as valuable sources of ideas and information since they scrutinize relevant topics from a (mostly) neutral point of view.

Trends in hospitality innovation

All hotels agreed on the Internet as most important trigger for innovation. The Internet influences innovations in terms of distribution channels, communication and also the amenities in the hotels considering the offering of wireless Internet. Most of the hotels identified sustainability as another important trend of innova-tion in the field of hospitality. The sustainable construction of hotels, where a zero energy-balance was regarded as a goal to work towards, and the provision of produce from regional organic growers where considered as important influ-ences on ongoing product innovations. Innovations in the field of spa towards a “Medical Wellness” product where identified by Hotels A and E.

Customer co-creation

Considering the topic of co-creation, the interviewed executives had different approaches to the topic. Most hotels considered customer involvement through the guests’ input from questionnaires or the implementation of their suggestions as sufficient. In some rare cases Hotel B asks special focus groups or simply guests present in their facilities to answer multiple-choice questions in order to find out about their priorities. The Area General Manager notes that it is im-portant to select the right people for each topic due to the fact that “leisure guests have different priorities and needs than business customers do”. Hotel A observed a growing interest from regular visiting customers to participate in ser-vice and product development. According to the chairman of the advisory board the regular guests’ identification with the brand is very high and “the customers want to do their part in bringing us and therefore themselves to the next level”. Personal conversations between the regular guests and the hotels’ directors are the main source of ideas and suggestions in this case.

Asked for active involvement of the customers in innovation activities all hotels answered not to practice this approach for a variety of reasons. On the one hand Hotel E as privately owned hotel, where the owning family puts a lot of their personal identity in the hotel which makes it a very personal product and therefore a part of the owners’: “It is hard to let strangers be an active part of your own personality”. Hotel C with its top-down management approach saw this kind of customer-centric development not happening in the near future for two reasons. For one, it is hard to believe that the management will open up to


Hospitality status quo 50 somebody from the outside, when internal transparency is not a given. Second, the rather conservative customer base may not be willing to contribute since they like it the way it is. Hotel A and B, on the other hand, where open to the suggestion of involving customers more and considered the approach as prom-ising and pioneering.

Collaboration with other stakeholders

However, considering other stakeholders, Hotel B gives to think that they are already collaborating with travel managers and purchaser of tour operators. Alt-hough the focus of these cooperations is concentrated on sales topics, they still are able to give deeper insights, as the hotel would normally get through the questionnaires. Hotel A gives another example of stakeholder collaboration with their partnership with the Austrian National Tourism Organisation (NTO). To-gether they collaborate on new product development with the results of the NTO’s profound market research. Hotel E exchanges experiences with other hotels, however, there is no cooperation in terms of innovation. The hotel direc-tor considers their innovation as USP and does not want to share that at the risk of losing their competitive advantage.

3.5.4 Discussion and conclusion

The interviews revealed several issues of current innovation practices. The ma-jority of the hotels are aware of the opportunities that innovations bring. It be-came apparent that the innovation activities depend on the management as well as on the hotel’s business model. While the process for operational innovation is mostly one of bottom-up and not highly bureaucratic since only one superior is involved, suggestions on the strategic level involve at least another higher level of decision makers. In the case of hotel chains, innovation is something that customers perceived through the brand. Consequently, a kind of standard-ized innovation in line with the brand’s values is necessary.

It got obvious that a general innovative mindset supported by transparency and employee encouragement, needs to be established by the management in or-der to unlock and further grow the employees potential. In most hotels this was already the case to some extent, however, there was also one rather conserva-tive example. It is questionable, if a strict top-down management approach is still suitable in the times of growing collaboration in business.

Besides the employees as main innovation driver, suggestions also come from increasingly active customers. Hotels prefer detailed feedback, mainly through direct conversations or their feedback questionnaires. However, feedback through social media and recommendation websites is considered to be too


Hospitality status quo 51 superficial and subjective and only helpful to identify general operational weak-nesses. That leads to the conclusion, that it has not yet been realized that social media offers the possibility to step into a dialog and ask for greater details.

Within the small sample of hotels, it became apparent that customer co-creation is not yet practiced. Nevertheless, two hotel chains showed awareness of the opportunities of customer engagement. Furthermore, it was observed that ho-tels on the one hand are aware of the importance of selecting the right people to engage with, and, on the other hand, have active regular visiting guests who want to co-create “their” brand with the organization. Besides that, experience from existing collaborations with other stakeholders is also available.

In conclusion, there is a potential for co-creative engagement within innovation activities in hospitality organizations, provided the foundation of an innovative mindset and the willingness to open up, internally as well as externally, is laid. Although it cannot be expected that all hotels engage in customer co-creation activities, the author of this work expects it to be a huge competitive advantage to pioneer in this practice.

3.6 Summary

In the course of this chapter, characteristics of the hospitality industry and its players have been introduced.

After an introduction to the hospitality industry a definition of hospitality was in-troduced, which concentrates on the distinct area of the lodging sector. Hospi-tality, as a service industry, is differentiated through specific characteristics that are different to other industries, where goods are at the center of exchange. Namely they are: intangibility, inseparability, variability and perishability.

In a special industry also the hospitality customer has his own peculiarities:

Growing importance of leisure time Higher disposable income Higher standards Importance of the fulfillment of psychological needs (inspiration, cultural,

spiritual and authentic experiences) increases Technology-savvy and prefers self-service solutions for money or time

benefits Expects value throughout the entire length of their dealings with suppliers

In the chapter on hospitality marketing current issues and developments in hos-pitality marketing have been introduced. The identified issues on branding,


Hospitality status quo 52 CRM, social media and the changing role of the company either create oppor-tunities or can serve as tools for co-creation activities. However, the customer is considered as rather operand than operant resource. After a literature review on the new marketing thought in tourism and hospitality an interim conclusion was drawn. It was concluded, that tourism companies have to accept the customer as player in charge in order to be able to fully grasp the possibilities co-creation offers. Furthermore, a specific use of knowledge management in marketing combined with relationship and interaction-oriented management is the first step towards an era of co-creation.

A chapter about the author’s qualitative study on current innovation practice in hospitality followed. After giving a theoretical background on hospitality innova-tion, the results of the qualitative study were introduced. It revealed insights into the different innovation processes of five hotel companies, their main sources for ideas for innovations and current innovation trends. It was found, that cus-tomers do not play an active role in current innovation activities yet. However, lodging companies already engage in business-to-business (B2B) collabora-tions. Moreover, some hotels already have the necessary fundamentals to their hands to potentially engage in co-creation:

Awareness of the opportunities customer engagement offers Awareness of selecting the right people to engage with Customers that are willing to co-create “their” brand

In conclusion, the examination of current marketing and innovation practice of the hospitality industry revealed that the customer is not yet an active part of the value creation process in hospitality. Although the consumers gain on influence through their social media activities, lodging corporations still do not take this development serious enough; whether in marketing, nor in innovation. This shows that a collaborative competence, one of the most profound prerequisites for co-creation is still missing. However, some cases of willingness of compa-nies to deeper engage have been noted. The hospitality consumer in his gen-eral urge for deeper meaning is willing and waiting to participate in order to gain benefit from his active involvement. Letting the consumers be an active part and engage in collaborative activities would result in a win-more win-more situation for both, customers and hospitality organisations. To initiate this new era of co-creation, there is a need for a new way of thinking and pioneers courageous enough to take the first steps towards it. The insight for the importance of this this first steps has to come by the companies’ own conviction, however in order to speed up this process, following chapter illustrates why co-creation and hos-


Hospitality status quo 53 pitality are a powerful match and gives practical guidelines for successful co-creation in the hospitality industry.


Co-Creation in hospitality: practical guidelines 54

4 Co-Creation in hospitality: practical guidelines As it got obvious, the customer as active source and the principle of co-creation does not yet play a role in hospitality practice. In order to counteract the current provider-based, goods-centered, and transaction-oriented perspective of hospi-tality marketing, following chapter offers practical guidelines to drive the trans-formation of hospitality companies into co-creative companies.

This chapter elaborates on the practical implementation of co-creation in the hospitality industry. The author relies on practical examples, results of case studies and literature from practitioners to give recommendations as close to reality as possible.

First it is explored, if co-creation and hospitality are suitable for each other. The following chapter then guides through the steps necessary to become a co-creative hospitality company.

Furthermore, one chapter considers the different types of co-creation and pos-sibilities to apply them in hospitality as well as the different types of co-creative consumers and their motivations to participate in co-creative activities.

The topic of intellectual property is considered in a short chapter before useful tools for co-creation are introduced in the co-creation toolbox.

The seven guiding principles on the most important steps for successful co-creation in practice represents the last part of this chapter before it closes with a summary.

4.1 Co-creation and hospitality – a powerful match?

This chapter explores the suitability of hospitality for co-creation. With a com-parison of the main components of co-creation (experience mindset, context of interactions, engagement platforms and network relationships) and the special characteristics of hospitality and its customers it is looked for commonalities. In the second part of this chapter, the four powers of co-creation are used to en-counter selected challenges of hospitality to exemplify possible areas of appli-cation in hospitality.

4.1.1 Co-creation components vs. hospitality characteristics

Comparing the components of co-creation and the characteristics of hospitality as service industry as well as the peculiarities of hospitality customers, a num-


Co-Creation in hospitality: practical guidelines 55 ber of similarities appear. In the following, hospitality characteristics are as-signed to components of co-creation to demonstrate the overlapping areas, and therefore, the foundational qualification of hospitality for co-creation.

Experience Mindset

As has been shown, hospitality customers long for positive experiences that surpass physical ones and even fulfill their psychological needs. Moreover with the growing importance of leisure time, customers’ standards rise. They expect valuable experiences throughout the entire length of their experience with hos-pitality companies. Hospitality as service industry lives off creating these expe-riences and theoretically has the necessary setup to fully embrace an experi-ence mindset.

Context of Interactions

Hospitality as “peoples business” has the optimum prerequisites for embracing an interactive relationship with their customer. On daily basis, front-line person-nel interact with their customers, thus actively involving the customer in the val-ue creation process. Besides that, customers also willingly interact with self-service solutions creating value trough a tool provided by hotels. Furthermore, apart from the operational side, hospitality customers also interact among each other via SNS and social media. Some hospitality organizations already joined this conversation and started to interact with consumers through online chan-nels.

Engagement Platforms

In the context of hospitality, already two big engagement platforms are offered. The biggest and most frequented from both sides is the place of service ex-change itself: the hotel property. It offers almost unlimited possibilities of con-sumer encounters and the best possibility for personal interactions. The other big platform is the Internet with several specialized websites on the topic of hospitality, which in parts already serves for lively exchange among all involved.

Network Relationships

Hospitality organizations already have a well-structured network to their hands due to the strong interactions with suppliers, B2B customers, NTOs and other stakeholders. Not to forget the huge internal networks, that international lodging corporations have among their hotels including all associated brands.


Co-Creation in hospitality: practical guidelines 56 4.1.2 The four powers of co-creation vs. hospitality challenges

The four components of co-creation combined liberate the four powers of co-creation. Comparing the benefits of co-creation with the identified challenges in hospitality, one may realize several areas of common interest. Even more, the four powers of co-creation can serve as solution in some cases; exemplified here to show possible fields of application for co-creation in hospitality the in-dustry.

New experiences of value to individuals

Considering the current difficulty in establishing brand relationships due to hotel brand and sub-brand proliferation, this can be encountered through customer co-creation. Offering (potential) guests the possibility to actively take part in the process of creating value establishs a relationship and opens a new world of experience to hospitality customers. Not only does this possibility forge more trust, commitment and loyalty but also clearly differentiates the hotel brand from others through customer co-created values. Besides, it also helps to increase identification on customer and employee side. Furthermore, in the course of co-creation social media activities become a higher strategic meaning as they also follow the goal of facilitating collaborative experiences and dialog.

Lower risk and costs for individuals

Having participated in co-creative activities of a hotel or hotel brand, hotel guests now can be sure what to expect. For one, they had influence on the cre-ation of specific services before hand. Second, they do not have to rely on sub-jective ratings on recommendations websites in the evaluation process, be-cause third, in a co-creative hotel they have the possibility to actively engage in the value creation process during their stay. Besides, co-creative engagement can result in lower cost through an increasing possibility to customize service processes, for instance, self check-in terminals.

Lower risk and costs for enterprises

Especially when it comes to innovation and new service development, co-creative hospitality organizations can rely on their customers and other stake-holders for support. Customers have a great interest in being part of the value creation process from the beginning on, which eases the innovation process. This effort reduces R&D and marketing costs and at the same time increases product relevance for consumers. Above study showed that regular guests of certain hotel chains are willing to play an active role in product development and could be involved in according measures such as online communities or work-shops.


Co-Creation in hospitality: practical guidelines 57 Increased strategic capital and returns to enterprises

The constant generation of asymmetric information, the ongoing learning and adapting through the interaction with stakeholders gives hospitality organiza-tions the possibility to better target and serve their customers. Through increas-ing internal exchange and application of knowledge management tools this could serve as competitive advantage. Furthermore it increases customer satis-faction and positive word-of-mouth.

4.1.3 Conclusion

As has been demonstrated above, the hospitality industry already has important foundational prerequisites at their hand that enable them to engage in co-creation. It also appeared that co-creation can serve as solution for current marketing questions in co-creation. Therefore, hospitality and co-creation build a powerful match that offers new ways and possibilities to encounter challenges in hospitality.

4.2 Becoming a co-creative hospitality company

In the study above it was found that most hospitality companies already engage in social media activities and aware of customers talking about them. Also rec-ommendation websites are actively monitored with the help of software to find out about current issues in hotel’s operations. However, it was also found that not all lodging corporations have a fitting mind-set for co-creative activities.

Some hospitality companies already took the first steps in co-creation and serve as practical examples in the course of the following chapters. InterContinental Hotels Group (IHG), for instance, already conducted several co-creation pro-jects. Besides environment and community their corporate responsibility efforts highly evolve around the terms of collaboration and innovation, which shows a high awareness of these issues. Another indication, that IHG already under-stood the importance of collaborative value creation is an analysis of their as-sessment of key stakeholder issues, illustrated in Figure 11. Innovation and val-ue creation are considered as issues with high business impact and allow for the conclusion that IHG already changed their mind-set towards one of collabo-ration and customer experience.



Figure 11: IHG 's assessment of stakeholder issues. Source: (InterContinental Hotel Group, 2011)

Following chapter elaborates on the foundational prerequisites necessary to develop an experience mind-set.

4.2.1 Creating an experience mind-set

Hospitality is all about serving the customer and creating experiences. Co-founder and managing partner of the lodging corporation Grupo Habita, for in-stance, said "Luxury is not related to process or money: it is an experience." (Kanal, 2011). One might argue that there is no need for a shift towards the consumer as he is already in the center of attention. Undoubtedly, he is. How-ever, only as a passive receiving entity who is served upon in a transaction-oriented environment, as chapter 3 revealed.


Co-Creation in hospitality: practical guidelines 59 Co-creation requires management to perform a shift towards an experience mind-set that puts the experience at the center of attention and takes the con-sumer into account as active entity. The fundamental shift towards a definition of value based on human experiences rather than features and processes, whether downstream or upstream in the value chain, needs to be performed. The success of co-creation lies in using people’s engagement experiences to generate insights and improve the nature of interactions as a result, including employees of the company. Interactions among people inside and outside of a company are the key for new insights, learning, and innovation generation (Ramaswamy & Gouillart, 2010).

Bhalla (2010) identified three prerequisites for a new mind-set that can poten-tially facilitate migration from traditional models of value creation:

Authenticity Flexibility Conviction

Authenticity

Authenticity is a combination of ethics, transparency, and trust. It is an intent, or orientation, that a company brings to its efforts to collaborate and co-create val-ue with its customers. Over time, if reinforced by the right actions, it gets trans-formed into being a recognizable company trait. It is recognizable not through formal analysis, but through the right-brain emotional response of consumers. Achieving authenticity is impossible if every interaction with the customer in-volves an element of commerce. Consequently, participation in this community is not conditional on purchase (Bhalla, 2010). In conclusion, a heartfelt friendli-ness with the goal to actually help a guest, not to upsell another product or ser-vice is perceived positively and as authentic. By focusing on long-term connec-tions with guests, hotels can elevate their relationship from being just some ho-tel brand to being a trusted advisor and a source of valuable information for the ultimate holiday experience.

Flexibility

Today’s customers not only have their own opinion on several topics, e.g. im-portance of organic nutrition or working and living conditions of hotel staff, they also have a large number of opportunities to voice their opinions. It is easy for them to draw attention to conflicting issues and publicly blame companies that resist honest customer objections. Flexibility implies a greater willingness from the company side to accept opposing points of view. That does not mean, that companies and customers have to agree on everything. However, it is essential


Co-Creation in hospitality: practical guidelines 60 to demonstrate that the company is aware of opposing opinions, that it is listen-ing, and having listened that it is willing to reconsider its own beliefs, values and actions (Bhalla, 2010).

Conviction

According to Bhalla (2010) nothing sabotages customer collaboration and co-creation initiatives faster than lack of follow-through. Customers value follow-through and transparency; they are not easily distracted by symbolism or talk not backed by sincere action. Superficiality and lack of conviction will be identi-fied and penalized by the customers, no matter how hard an enterprise tries to disguise it. In effect this will weaken the market’s willingness to engage in any meaningful way with the company.

Having established that mind-set, the next step is to review existing interactions and adapt it with the new attitude as foundation. In a survey on co-creation it was found that the ability of those organization willing to achieve customer in-teraction, is mainly constraint by day-to-day business, the lack of formal pro-cesses and the lack of skills or knowledge within the organization (van Zijll Langhout et al., 2011). The author of present work suspects that the same is applicable for the hospitality industry. Therefore, it is concluded, that in case of serious willingness to engage in co-creation, it is necessary to newly create a position and appoint a person or team, either from inside or outside the compa-ny (depending on know-how and motivation) that is in charge of these matters on full time. Hyatt, for instance, did similar to commit to their innovation efforts by creating the new position of “chief innovation officer” (Hyatt Hotels Corporation, 2011).

The sooner companies take the first steps towards an experience mind-set and get involved, the sooner they can profit from the advantages of pioneering in this field in a short term and from the life-long relationships with their customers in a long term.

4.2.2 Identifying customer touchpoints

Hand in hand with the mind-set shift towards experience goes the analysis of potential customer encounters or touchpoints.

Encounters are two-way interactions and transactions between the customer and the company. Those contacts can occur either on the initiative of the com-pany (e.g. advertisement), on the initiative of the customer (e.g. via booking), or on the initiative of both (e.g. during check-in) (Payne et al., 2008).


Co-Creation in hospitality: practical guidelines 61 In order to be able to design a great customer-engagement strategy and expe-rience, companies need to understand how customers interact with them throughout the whole customer journey (French, LaBerge, & Magill, 2011). The interaction could be in the hotel itself or with marketing, sales or a telephone agent.

Encounter or customer journey maps are a useful tool to identify interaction op-portunities between the hotel and the guests.

A customer journey map provides a vivid but structured visualization of a service user’s experience. The touchpoints where users interact with the service are often used in order to construct a “journey” – an engaging story based upon their experiences. This story details their service interactions and accompanying emotions in a highly accessible manner. (Schneider & Stickdorn, 2011, p. 158)

This approach can be used in several ways. For one, it can assist in a hotel’s product or service development efforts by helping to focus on specific process-es that are an important part for the guest’s journey, and to design and structure relationship experiences. Furthermore, it can enhance understanding of how encounters should be designed in order to support customer learning and en-hance co-creation of value. Finally, it can also assist in the design of offerings that emphasis on “value-in-use” situations (Payne et al., 2008).

Figure 12 illustrates the hotel guest’s journey with the different brand touch-points before, during and after the stay. The author of this work notes, that due to the growing use and role of social media, it plays a part in every period of the experience.



Figure 12: Hotel guest’s journey, brand touchpoint wheel. Own Illustration based on (Shaw & Williams, 2009, p. 327)

In an EU sponsored pilot project, customers are invited to evaluate all service touchpoints they encounter at the tourism destination Juist in Germany. With the help of a software application for mobile phones called myServicefellow guests can define touchpoints by themselves (e.g. outside, lobby, check-in, etc.) and evaluate their experience using text notes, photos, videos and voice mem-os on their phone. This not only creates genuine customer insights, but also gives an insight into what guests actually consider as touchpoints. Furthermore, with the help of geolocation based information also the physical journey can be tracked (myServiceFellow, n.d.; Sukowski, 2011a, 2011b).

While it is questionable if every tourist or hotel guest takes the time to define and evaluate every touchpoint, the general idea of engaging the customer and at the same time considering his point of view largely corresponds to the idea of co-creation.



Figure 13: Mapping of customer, supplier and encunter processes of a travel company. Source: Payne et al. (2008, p. 92)

Figure 13 serves as an example of a more detailed mapping of customer, sup-plier and encounter processes. In this case the supplier is a European travel company that decided to base their value co-creation activities on the encounter processes with the goal of building stronger customer relationships over time. The figure shows the processes that were identified as important by managers and front-line employees in a series of two one-day workshops. The participants came from a broad cross-functional range of positions and multiple organiza-tional levels (Payne et al., 2008).

Applying Payne et al. (2008) findings on the hospitality industry, a guest’s total experience of a stay will be the result of the fit between the content and execu-tion of different encounters and the resulting experiences. Promises given to the customers in early stages of the relationship process (i.e. advertisement en-counters), need to be met in the later stages (i.e. hotel services). The more the customer understands about the opportunities available, the greater the value that can be created. The goal and meanings of each encounter should therefore be defined from a customer learning perspective. It is distinguished between cognitive, emotive and action based or behavioral goals.

In terms of hospitality, cognitive goals can include educating the customer about the property or destination by providing useful information material. Emotive goals include provoking the desire for spa treatments or a dinner in the restau-rant by guiding him through the property. Behavioral goals include triggering customer responses by issuing a discount for spa treatments or future stays.


Co-Creation in hospitality: practical guidelines 64 Payne et al. (2008) further note, that effectiveness of co-creation is partly de-pendent on achieving an appropriate division of activities. By enabling the guest’s active participation in some processes (e.g. self check-in), hotels can reduce their resource investments (e.g. time or staff). As most important in co-creation the authors consider the ability to manage expectations, communica-tions and promises between both parties throughout the co-creation process. This allows for the conclusion that again the three prerequisites for an experi-ence mind-set – authenticity, flexibility and conviction – are at the center of at-tention and are worth to deeply ingrain in the organizations values.

Tracking the customer’s journey and creating an encounter map paint a clear picture of where interactions with the consumer occur. The following chapter presents an overview of possible arenas of customer engagement.

4.2.3 Creating engagement platforms

Figure 14: Customer engagment arenas and options. Source: Bhalla (2010, p. 58)

Bhalla (2010) created an overview of possible arenas, or engagement plat-forms, and options of customer engagement. As shown in Figure 14 customer engagement can occur in physical spaces or digital arenas. The biggest physi-cal space in hospitality to engage with customers is the hotel property itself. The several departments, such as bar, restaurant or lobby, each can also be con-sidered as engagement arenas. Furthermore, in physical spaces it is distin-


Co-Creation in hospitality: practical guidelines 65 guished between groups or individuals. Especially in hospitality a bigger group of people interacting has a great effect on the experience due to hospitality’s heterogeneity and inseparability.

In 2006 the hotel group Starwood, for instance, decided to reposition the whole range of their brand portfolio in order to be able to deliver a better customer ex-perience, thus making each brand to its own engagement platform. After ana-lyzing customer data Starwood identified several demographic groups that built the foundation the new orientation. This effort resulted in several brands that each delivers a different customer experience, ranging from how guests are greeted by staff to the kind of toiletries offered in rooms (French et al., 2011).

“We are committed to connecting emotionally with our guests through our brands with brand-specific innovation, the creation of memorable experienc-es, resulting in the cultivation of great preference and brand loyalty for Star-wood brands.” (Starwood Hotels & Resorts Worldwide, Inc. CEO Steven J. Heyer in ehotelier.com, 2011)

This example shows the importance of customer engagement in physical spac-es and the strategic and sustainable planning of those efforts. Despite the grow-ing impact of digital touchpoints (e.g. social media), effective customer en-gagement must go beyond pure communication to include the product or ser-vice experience itself (French et al., 2011).

When engaging customers in digital arenas firms have to choose whether to engage them in company-sponsored sites, in social media sites (e.g. Face-book.com), or both. Finally, when a company decides to use company-sponsored sites, it must decide whether to engage all customers or limit the en-gagement to a chosen number of invited customers from specific market seg-ments.

One example for a digital arena and a company-sponsored site is InterConti-nental Hotel Group’s (IHG) “Innovation Hotel”. Everyone interested in sustaina-ble tourism can browse the site, find further information and sustainability fea-tures in hospitality as well as interact by commenting or sharing ideas (InterContinental Hotel Group, n.d.).



Figure 15: IHG's Innovation Hotel Engagment Platform Screenshot. Source: (InterContinental Hotel Group, n.d.)

Generally, an engagement platform, such as a website, involves experimenta-tion, learning and most of the times some missteps. Platforms evolve in trial-and-error increments, with the role of co-creators often changing over time. The actual design of an engagement platform evolves as a function of the co-creative process through ongoing interactions among the participants, an ex-panding of the space of experiences, the scope and scale of interactions, plat-form linkages and stakeholder relationships in the ecosystem (Ramaswamy & Gouillart, 2010).

During the time of writing, Ritz-Carlton announced a new “dynamic, ever chang-ing online portal that allows ladies and gentleman to publically curate triumphant stories of luxury service and care, reinforcing that the brand represents a new era in the luxury conversation among consumers” (The Ritz-Carlton Hotel Company, 2011). Not only does Ritz-Carlton step into co-creative activities with


Co-Creation in hospitality: practical guidelines 67 this supposedly very interactive form of engagement platform, they also antici-pate that the platform will change through interaction with the customers.

In order to be able to engage in co-creative activities, they should follow a cer-tain goal.

4.2.4 Setting goals for co-creative activities

Co-creative activities are always focused on a specific topic. Before engaging with stakeholder, it is important to set a goal of the activity. However, Ramaswamy and Gouillart (2010) warn not to set too specific goals as it would limit the participant’s responses within an already narrow process.

Bhalla (2010) identified three categories of co-creation goals: generation, re-finement and creation.

Generation

The company’s goal is to engage customers to bring forward their ideas, sug-gestions and/ or designs through contest or open-ended appeals. Part of the process can be a selection or short-listing of ideas from the customer side. The results are then used in the design and development of products and services.

Refinement

Contributors are invited to work with company representatives to refine one ore more features or aspects of a target product or service in order to enhance the customer’s overall experience.

Creation

A company invites contributors to develop a prototype of an entirely new prod-uct or service together with the initiator’s professionals. Most of the developed prototypes need further refinement and improvement before they are ready for commercialization.

The groundwork for successful co-creation was laid out with establishing an experience mind-set, analyzing the customer journey, identifying important touchpoints, creating engagement platforms, and setting a goal for the co-creative activities. Following chapter introduces the different approaches to reach the goals above.



4.3 Types of co-creation

There are different approaches towards co-creation practice, when to use which type of co-creation depends on the challenge or objective at hand. A company or a single person can initiate a co-creation project. Along the process, at least one contributor will be joining the project. However, the initiator determines who can join and under what conditions (Bhalla, 2010).

According to Pater (2009a), two central dimensions define the types of co-creation:

Openness: Is it an open process and anyone can join, or is there a se-lection within the process?

Ownership: Does the initiator own the outcome and challenges or the contributors as well?

As illustrated in Figure 16, these two dimensions lead to four types of co-creation: Club of Experts, Crowd of People, Coalition of Parties and Community of Kindred Spirits.

Figure 16: Types of Co-Creation. Source: (Pater, 2009b)

4.3.1 Club of experts

In the “club of experts” contributors meet certain specific participation criteria and are generally added through an active selection process. This style of co-


Co-Creation in hospitality: practical guidelines 69 creation is suitable for very specific challenges that demand a certain level of expertise (Pater, 2009a).

An example for the “club of experts” co-creation style is the Philips Hotel TV co-creation project on which the author of this work conducted a case study. It can be found in the appendix. In order to drive innovation and sustain its market leading position in the field of hotel TV solutions, Philips Hotel TV initiated the “Co-Creation Expert Team”. Wouter Staal, Senior Global Marketing Manager at Philips Hotel TV, selected a panel of independent industry leaders to test Philips products and offer insight on how Philips can continue to develop market-leading solutions to enhance hotel guests’ experiences. The team included sen-ior management from Philips’ major hotel partners Starwood, Marriott and Ac-cor, leading hospitality industry consultants and a professor of Lausanne Hotel School. A previous survey among travelers to discover their needs served as foundation for the product development. However, the qualitative insight of the expert’s panel helped to translate the data into product features. Wouter Staal summarizes the project’s results:

Our industry is speaking of us like they’ve never done before; it’s been great PR and we’ve not even started our actual launch. If we wouldn’t have done this, we wouldn’t have added our social media apps on the TV for example and we wouldn’t have hired a team of engineers and user experience de-signers to work on dedicated hospitality apps. We simply wouldn’t have known this was the key interest to set us apart from and the normal home market and from competition. The guest survey had revealed it and I had shared my views but the Co-Creation team gave the final feedback that gave me the power to tell (Product) Management to go for this and change the product.

In the case of the Philips Hotel TV project, the experts did not get together all at once, however in other cases, especially when time is limited, the contributors meet together in a workshop environment. Quality of input and “chemistry” be-tween participants are considered as key to success (Pater, 2009a).

4.3.2 Crowd of people

“Crowd of people” is better known as “crowdsourcing”, which is the most popu-lar form of co-creation. Coined by Jeff Howe and Mark Robinson, the term crowdsourcing describes a web-based business model, which harnesses the creative solutions of a distributed network of individuals through an open call for ideas (Brabham, 2008). Howe (2006) defines crowdsourcing the following way:


Co-Creation in hospitality: practical guidelines 70 Simply defined, crowdsourcing represents the act of a company or institution taking a function once performed by employees and outsourcing it to an un-defined (and generally large) network of people in the form of an open call. This can take the form of peer-production (when the job is performed collab-oratively), but is also often undertaken by sole individuals. The crucial pre-requisite is the use of the open call format and the large network of potential laborers.

IHG, for instance, used the online community communispace.com to rally a pool of 300 current Priority Club Visa cardholders willing to share their opinions and suggestions on what card benefits and services they would want. IHG integrat-ed the contributors insights into strategic, corporate business decisions, helping them create training documents for their hotels and call centers, creative briefs for promotions and advertising campaigns, and their actual marketing materials (Communispace, 2009). Cassandra Jeyaram, PhD, Social Marketing Manager for IHG evaluates the project like this:

“Our early successes in engaging with customers, testing ideas, and developing processes and learnings from their input have enabled some major wins for our company. I can’t imagine how we could have accom-plished so much and made so many customer-driven changes without this ongoing connection to our most valued guests.” (Communispace, 2009, p. 2)

After six months in operation, the community continued to serve as a learning platform for Priority Club Rewards, helping with both ideation and customer ser-vice (Communispace, 2009).

This example represents an ideal case of co-creation through crowdsourcing, as value is created for both sides with the aim for a long-term relationship. However, it is an ongoing discussion whether crowdsourcing is a type of co-creation or not, considering the rather short-term orientation of most crowdsourcing projects. Van Dijk (2011b) argues that the majority of crowdsourcing projects aim at collecting a lot of input, which is then analyzed and used by the initiator. Schroll and Römer (2011) add that crowdsourcing is about choosing the right idea, while co-creation is about choosing the right con-tributors. Furthermore, co-creation is about interaction, open dialog and building a relationship. Contributors share information that is evaluated and interpreted during the co-creation process itself. Therefore co-creation is more systematic and about building a collaborative relationship on different business levels. Practitioners consider it as difficult to achieve this goal with an entire crowd, let alone get a quality conversation going with a clear focus (van Dijk, 2011b).


Co-Creation in hospitality: practical guidelines 71 A solution can be to consider crowdsourcing as tool for co-creation. Crowdsourcing can be used in early stages with the goal of idea generation. Subsequently a selected group of motivated people discusses, evaluates and further develops concepts on the basis of the crowdsourced ideas (van Dijk, 2011b).

4.3.3 Coalition of parties

A coalition of parties is similar to a joint venture. Each of the parties involved contributes a certain asset or skill. They team up to share ideas and invest-ments to realize technical breakthroughs or shoulder high investments. Within the coalition style of co-creation co-branding is another possibility. Key success factors are the sharing of knowledge and creating a common competitive ad-vantage (Pater, 2009a).

Joint ventures are a common practice in hospitality and according to the consul-tancy Deloitte (2011) collaboration in hotel co-branding is going to be a trend for years to come. As an example, they name the recent joint venture between Marriot International and AC Hotels in Spain. Together they founded the co-branding joint venture “AC Hotels by Marriott”. It will combine Spain's leading business-urban hotel brand with Marriott International's global platform. This unites the global distribution, sales, marketing and loyalty program of a global hotel chain with the physical presence of a strong domestic brand. This enables both parties to reach a whole new customer base, increase their global footprint and provide them with a clear platform for future growth.

4.3.4 Community of kindred spirits

The community approach of co-creation comes to practice when developing something for the greater good. Groups of people with similar interests and goals can come together and create. As Pater (2009a) notes, this model is so far mostly used in software development. It leverages the potential force of a large group of people with complementary areas of expertise. Linux, the open source operation system software serves as an example. It was developed by users and for users. Everybody can access the software code, as it is free to use and owned by nobody.

In this overview on the different types of co-creation, it appeared that one major key to success is to engage the right people. How to do so and why they would participate is elaborated on in the following chapter.



4.4 Co-creative consumer types and their motivations

To create a meaningful engagement that is mutually satisfying, the initiator of a co-creative project first of all needs to spark potential contributors interest and passions. In the case of consumers, it was found that three domains are par-ticularly effective catalysts in igniting and nurturing their engagement as shown in Table 5.

Table 5: Consumer engagement catalysts

Domain Explanation

Relationships Engagement that revolves around customers’ relationships with them-selves, their family, friends, and the communities they live in.

Causes and values Causes and values that reflect customers’ human, ethical, moral, reli-gious, political, and social concerns provide a powerful focus for en-gagement.

Brand Symbolic and/or material consumption of branded products and services that meet consumers’ needs, wants, and desires; this could involve rela-tionships with brands and/or companies.

Source: Bhalla (2010)

Sparking the interest of potential contributors with one of the catalysts above, however, is not enough. Getting them motivated to actually participate in a co-creative project is another challenge.

Generally, consumers participate in co-creation because they expect it to be rewarding and are either driven by an intrinsic or extrinsic motivation (Etgar, 2008; Füller, 2010). Extrinsic motivations can be rewards or monetary compen-sations. Participants that are intrinsically motived get satisfaction from the co-creation process itself. They are involved, engaged and mostly novelty-seeking and exploratory in their behavior (van Dijk, 2011a). Research and the experi-ence of realized co-creation projects show that it should be focused on intrinsic motivations to engage involved, interested and creative co-creation contributors (Bartl et al., 2010). It takes more than financial rewards to keep smart, creative people engaged. They need praise, credit for ideas, and to see the difference that they're making (Stern, Brown, & Millar, 2011).

Analyzing the motives of participants in several virtual co-creation projects Fül-ler (2010) identified different types of co-creation contributors. It is distinguished between four types of consumers: reward-oriented, need-driven, curiosity-driven, and intrinsically interested (see Table 6)


Co-Creation in hospitality: practical guidelines 73 Reward oriented consumers

They are highly motivated to engage in virtual co-creation. The desire for mone-tary rewards and their interest in innovation activities and the knowledge asso-ciated with them are the main drivers for their engagement.

Need-driven consumers

Those consumers mainly engage in co-creative activities because of dissatis-faction with existing product or service solutions available on the market.

Curiosity-driven consumers

Looking for a new experience those consumers are driven by their curiosity.

Intrinsically interested consumers

A deep intrinsic motivation for co-creative activities and personal fulfillment through the engagement distinguish these consumers. They rarely expect a monetary reward for their engagement.

Table 6: Co-Creation Consumer Types

Reward-Oriented Participant Intrinsically Interested Participant

highly skilled likes to solve problems and fiddle

around late adopters: wait till a new product

has shown proof before s/he is con-vinced to buy it

moderate interest in virtual NPD moderate web usage previously innovated new or modified

existing product and further ad-vanced them

early adopter high exploratory behavior, novelty

seeker high innovativeness highly skilled likes to fiddle around and solve prob-

lems high interest in virtual NPD more previous innovation activities in

all development stages

Curiosity-Driven Participant Need-Driven Participant little web usage little previous innovation activity moderate to low exploratory and

novelty seeking behavior high Internet specific task involve-

ment early majority in product adaptation

low in domain-specific skills and in-novativeness

moderate to low exploratory or novel-ty seeking behavior

moderate web usage well educated

Source: Füller (2010) With new products and services developed and several parties involved in the co-creation process, the question of ownership may arise. The following chapter explores the importance of intellectual property.



4.5 Intellectual property

Some companies are concerned of engaging in co-creative activities because they fear that they cannot defend their intellectual property5 (IP) (Hoyer, Chandy, Dorotic, Krafft, & Singh, 2010).

This concern only is eligible if an IP policy was not laid out from the beginning of the project. Usually, co-creation practitioners define the terms of the IP before a project starts and let participants agree to these terms. The co-creation site In-nocentive.com, for instance, state what they are willing to pay for solving a giv-en problem (Gouillart, 2009). In the case of the Philips Hotel TV project, the par-ties arranged a non-disclosure agreement beforehand. Other companies let their legal department work out a co-creative arrangement as part of the pro-cess. This obviously is nothing new, as companies are used to formalities like that in similar processes on bigger scales.

The following chapter aims at providing a collection of co-creation tools and service design methods in order for companies to build their own co-creative activities.

4.6 Co-Creation toolbox

Co-creation is nothing that just happens by itself. It needs to be organized, managed and facilitated. The passions, interests and energy of a group of cus-tomers or stakeholders are pure potential for value-creation. In order to make use of this potential, collaborators need tools to convert their creativity into tan-gible value. This chapter introduces several online and offline tools derived from case studies or books written by experienced practitioners. As this is supposed to serve as a toolbox, not a manual, the tools are introduced in a short but com-prehensive manner.

4.6.1 Service design tools

Following examples for service design tools give a quick insight into possibilities how to gain customer insight during a workshop kind of environment with em-ployees, customers or other stakeholders.

Customer jouney maps

As already introduced above, customer journey maps can be created on the foundation of customer touchpoints. It is a visualization of the touchpoints, pref- 5 Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works,

and symbols, names, images, and designs used in commerce. (World Intellectual Property Organization, n.d.)


Co-Creation in hospitality: practical guidelines 75 erably on a large board or piece of paper, that reconstructs the customer jour-ney based upon the customer’s experiences. It provides detailled overview of the factors that influence user experiences from the customer point of view. The overview can serve to identify problem areas and opportunities for innovation. Furthermore, the visual representation makes it easy to compare it with similar experiences such those offered from competitors (Schneider & Stickdorn, 2011).

Mobile ethnography

With the help of mobile technology, customers can define and rate their own touchpoints. An example for mobile ehtnography is the EU project at the tourism destination Juist, mentioned above. Goal is to collect customer feedback in terms of text, pictures and videos. Participants defining their own touchpoints and defining their effectiveness provides a user structured image of how service is operating (Schneider & Stickdorn, 2011).

Expectation maps

An expectation map involves exploring and charting what customers expect when they interact with a specific service or a general form of service category. Sources for information, for instance, can be media coverage, for a quick over-view, feedback on a recommendation website, or in-depth interviews with cus-tomers. Expectation maps can serve as diagnosis tool reveals areas of a ser-vice in need of attention from a customer point of view (Schneider & Stickdorn, 2011).

Results of all service design tools can easily be combined into one big picture of information from the customer point of view and serve as foundation for the de-velopment of new ideas and innovation.

4.6.2 Digital/ online tools

This chapter explores digital and online tools. While online tools are accesible from everywhere, some digital tools only can be used on the platforms they were programmed for, such as mobile phones. However, in most cases they are accessible on the internet.

Available online co-creation labs can be used on a individual basis, i.e. each user is intergrated separately, or in a network and collaborative structure, where a social dimension is added that allows users to connect and communicate with each other and the company (Bartl et al., 2010).


Co-Creation in hospitality: practical guidelines 76 Figure 18 gives a broad overview of available websites that support crowdsourcing or related. Due to the vast amount of websites it is not possible to elaborate on all kinds.

Examples are:

Innocentive.com – open innovation problem solving Redesignme.com – community design co-creation Inklingmarkets.com – wisdom of the crowd for forcasting

Attachment 3 gives an extensive overview of several kinds of co-creation relat-ed online platforms. The range goes from R&D and development websites, over marketing, design and idea platforms to innovation intermediaries, who offer to create innovation projects on behalf of other firms.

Innovations intermediaries are specialized agencies that realize co-creation pro-jects for others. With the infrastructure and processes already to their hands, they can adapt them to fit other companies’ needs and wishes. Innovation in-termediaries, such as innocentive.com, are an important part of today’s collabo-rative innovation landscape due to their ability to connect firms to a global net-work of resources (Bhalla, 2010).

Figure 17: Crowdsourcing industry landscape. Source: Esposti (2011).


Co-Creation in hospitality: practical guidelines 77 Most common features of co-creative websites that aim at innovation are:

Possibility to submit ideas Vote for ideas Comment on ideas Contributor rankings Social media Wikis Questionnaires

Following three tools can be deployed independent from existing companies, such as on branded customer communities for development purposes.

Simulation

Simulation technologies allow collaborators to experience certain products in a virtual environment from wherever they are. On the basis of their experience they can make productive suggestions on how it could be refined and improved. Can be costly to develop in some cases, however, it is mostly cheaper than the development of a prototype and has a much higher coverage (Bhalla, 2010). A possible application would be to simulate the self-check-in process online to get customers’ feedback.

Play and experiment

A common approach for software in development phases, where users can download beta versions, test the application and submit their feedback (Bhalla, 2010). Possible approach, for instance, for hotel mobile phone apps.

Design toolkits

Design toolkits are a combination of previous two with the addition of a toolkit in termes of drag&drop utilities or similar to give users the possibility to design specific products or environments (Bartl et al., 2010). A possible application would be to let users design their own hotel room. Offering a range of furniture, designs, fabrics etc. and let them create what they desire. Often used fabrics or highly voted designs can be implemented in future hotel projects. It is the inter-active version of a dull questionnaire.

4.7 Seven guiding principles of co-creation

Summarizing the most important points of co-creation, Pater (2009a) created five guiding principles for co-creation. After several instructions in the chapters above based on in parts theory and on practical examples, this chapter is sup-


Co-Creation in hospitality: practical guidelines 78 posed to give a very “hands on” summary of what to take care of when engag-ing in co-creation projects.

Following guidelines are based on Pater’s (2009a) five guiding principles (here principles 3-7) enhanced with steps that the author of this work considers important (see Figure 18).

Figure 18: Seven guiding principles in co-creation. Own illustration based on (Pater, 2009a, p. 5)

4.7.1 Listen

Today’s customers are more involved than ever and are more than willing to contribute. They spend more time with the products and services companies sell than the companies’ managers. Therefore it might be worth to listen to them. People care about the products, brands and companies around them and talk about them with family, friends and colleagues. Fortunately, in times of so-cial media and SNS, this happens online, which allows companies to “tune in” and even step into a dialog.


Co-Creation in hospitality: practical guidelines 79 Analyzing the online “buzz” can help companies to find first hints of possible engagements with customers.

4.7.2 Define a goal

What do customers want from you? Do they want more customized service or just some little changes? Or are they longing for something totally new?

Sometimes it is not easy to find out what they actually want, because they are looking for a new experience, thus something they never experienced before. Generally, the three introduced main goals should be considered before starting a project:

Generation of ideas Refinement of existing products or services Creation of a new product or service

In a collaborative process like co-creation, it easily can happen that an idea was mentioned; somebody else picks it up and further develops it. It would be coun-terproductive to stop this process. Therefore a “no limits” policy should be ap-plied to all kinds of engagements.

However, to have a direction and a basis for the development of the engage-ment one of the three goals should be chosen.

4.7.3 Inspire participation

In order for people to contribute to a co-creative project, they need to be in-spired to participate.

First of all the challenge should be interesting or challenging in some way. Per-sonal benefits for the participants such as an improved product or monetary incentive are helpful. However, most importantly is to inspire people by

Showing who you are Explaining why you need their help What will be done with the results

The next step is to give access to anyone who might be beneficial to the pro-cess. Moreover, all opinions should be treated equally, no matter if from profes-sional, consumers or other stakeholders. Initiators and contributors should all have a common goal and be able to benefit from it.

The creation of the right atmosphere is of utmost importance to achieve results. Therefore, everybody should agree on openness and transparency throughout


Co-Creation in hospitality: practical guidelines 80 the process. Only if everybody feels welcome they can contribute to the chal-lenge.

4.7.4 Select the very best

Selecting the best ideas and the best people to deal with complex issues are considered as crucial.

Especially when engaging in crowdsourcing activities, the goal is to find the best ideas and keep them alive. It is important to constantly screen the ideas, espe-cially when a large numbers of ideas are generated. In an online environment, the big challenge is to filter and find breakthrough ideas that bring value to both the customer and the company. Important roles play moderators of this process and the online community itself through comments and ratings. In the end it is a competition and the best ideas win.

In a group of experts co-creation activity only the best people should participate. Furthermore, it is about involving individuals whose backgrounds and experi-ence somehow connect to the challenge at hand.

But how to tap into the knowledge that already exists out there? How do you find lead users that anticipate mainstream demand? Who can possibly add val-ue? Here, the listening part can pay for itself as valuable contributors most of the times already created some kind of content (blog posts, articles, videos, etc.) around the topic that is discussed. Thought leadership, proven track record and expertise, creative and constructive thinking, peer recognition, communica-tive and connecting qualities - it all adds up to being someone who is really good in what he or she does.

Finally, team chemistry is crucial and diversity is the key to success. A well-balanced mix of gender, nationalities, professions and interests generate the best results.

4.7.5 Connect creative minds

Co-creation only is possible when the “co” is very well executed. It is about en-abling bright people to work together and find that “spark”. It is easy to bring people together, however making sure they make to most of it is something completely different.

Besides a structured and constructive dialog it is considered important to have all participants resonating at the same wavelength. Initiators of this process have to:

Listen


Co-Creation in hospitality: practical guidelines 81 Be receptive Be interested Take people seriously Allow for criticism Unlock the potential of the contributors Look for moments of revelation

It is important to bridge the gap between initiator and contributors. In online communities this can be achieved by excellent moderation and communication. In a physical environment key is to establish common ground and build a sense of equal participation.

It is considered as destined to fail, when information is held back, an “us vs. them” approach is followed or a hidden agenda is at play. Co-creation is about sharing information, ideas, experiences, dreams, strategies, successes and failures in order to learn from each other.

Co-creation needs the best environment to create, share, respond to and im-prove on ideas. This ranges from online toolboxes to offline visualizers and great moderation in a brainstorming session. Clear rules and guidelines are needed in this process.

4.7.6 Share results

Co-creation has the goal to create value and especially the initiator profits from co-creative activities. This can be in the form of new products, new ventures, solving of a technical problem, insights fine-tuned and applied, etc. However, the contributors should also profit from the results.

The compensation should be clear and fair. A monetary reward can be one type of compensation, but more often a less tangible is considered as more valuable to the contributors. For instance, being recognized as a key contributor (status) or being invited to join more initiatives (recognition) are other possibilities to re-ward valuable contributions.

Most importantly after a co-creation initiative is to keep the contributors in-formed about ongoing progress and developments. Not doing so can damage a company’s ability to attract top contributors. Besides that, it also means that a valuable source further down the process is not taking into consideration.

Contributors want to know what happened to whatever they created. Co-creation involves an implicit promise to keep contributors posted. It is a way of showing the respect you have for the time and effort they put into it. Open


Co-Creation in hospitality: practical guidelines 82 communication and frequent status updates are very well received by anyone who has participated.

4.7.7 Continue development

Co-creation is not designed for short-term results. It is rather built for longer-term engagement, preferably part of a structured process that involves parties from inside and outside of a firm.

Results of a co-creation initiative are no ready-to-implement-solutions. They are sometimes far away from complete. It can be a long process till the idea is forged into tangible results.

The idea still has to go through all typical steps of the company’s innovation process. However, co-created ideas have the advantage to still have interested contributors at hand. This relationship should be leveraged in all steps of the process, for example by using the contributors’ specific knowledge and get con-stant feedback. Internally, the “not invented here” syndrome should be tackled by further driving the implementation forward and communicate the advantages of the direct exchange with the contributors. A company can learn from co-creation and should continuously adapt the process for the next time, thus form-ing a learning cycle.

4.8 Summary

An exploration of the suitability of hospitality for co-creation demonstrated that the hospitality industry already has important foundational prerequisites at its hand to fully engage in co-creation. Furthermore it was shown, that the four powers of co-creation could serve hospitality as solution for several current is-sues and challenges. Thus, co-creation and hospitality, indeed, are a powerful match.

The second part of this chapter gave an overview of steps necessary to be able for hospitality companies to become a co-creative enterprise. The three prereq-uisites – authenticity, flexibility and conviction – that can potentially facilitate migration from traditional models of value creation towards one of co-creation where analyzed. In order to commit to co-creative efforts and to be able to fully engage in it, it was concluded that the creation of a new position that facilitates this process is necessary. With the new focus on customer experience, the identification of customer touchpoints with the help of customer journey maps, and a brand touchpoint wheel based on the hotel guest’s journey were intro-duced. The example of an encounter map illustrated the importance of design-


Co-Creation in hospitality: practical guidelines 83 ing each touchpoint with the customer experience in mind. The overview of possible customer engagement arenas showed a division between engagement platforms in physical spaces and online environments. It was further elaborated on to acknowledge that an engagement platform is a dynamic environment, that is supposed to learn from the experiences made by engaging participants on the platform. Before engaging in co-creative activities, goals need to be set, that mostly are about generation, refinement or creation.

It followed an introduction of different types of co-creation – group of experts, crowd of people, coalition of parties, community of kindred spirits – with the pro-vision of practical examples. In an analysis of consumers’ motivations to partici-pate in co-creation projects four different types of consumers were introduced: reward-oriented, need-driven, curiosity-driven, and intrinsically interested.

In order to diminish concerns about intellectual property, the common practice of non-disclosure agreements and a priori arrangements have been introduced with practical examples.

With the provision of a co-creation toolbox a small range of tools for service de-sign and examples of online engagement tools have been introduced.

A final set of seven guidelines, concludes this chapter filled with practical in-structions how hospitality companies can step into and make use of co-creation in an effective way.


Conclusion and future outlook 84

5 Conclusion and future outlook In the course of this work the new marketing thought of S-D logic and co-creation were introduced. It was concluded that S-D logic and co-creation on the one hand offer several advantages; on the other hand there are also chal-lenges on the way that might not be easy to be conquered for some companies. However, making the first little steps towards this challenging new concept of marketing opens up a world full of potential for growth, productivity and profits for everybody participating in it.

In the examination of current marketing and innovation practice of the hospitality industry it was revealed that the customer is not yet an active part of the value creation process in hospitality. Although the consumers gain on influence through their social media activities, most lodging corporations do not take ad-vantage of this development; whether in marketing, nor in innovation.

In order to drive the development of co-creation in hospitality the author devel-oped practical guidelines that support hospitality companies in their transfor-mation towards an experience mind-set and to support co-creative activities. Doing so the author closed a gap between theory and practice in hospitality.

The author considers the thought on S-D logic as highly important and relevant considering today’s developments in technology and society. In the eyes of the author, the “market to” approach of classical marketing is highly outdated. Hav-ing in mind, that this approach alone is taught to freshmen all over the world, the author pledges for revising syllabi at universities and include the new mar-keting thought on S-D logic. Not only would this help the development of S-D logic towards becoming a theory, it would also inspire a whole generation of future managers to come. It can only be speculated about the consequences, however the author predicts a generation of new business models that nobody would have thought of with the “old” marketing theory in mind.

The author highly encourages further research on the topic of S-D logic and co-creation in tourism in general and hospitality in particular. Research topic, for instance, can be the influence of co-creation activities on service quality and customer satisfaction. In this context the application of the net promoter score as instrument to measure customer satisfaction can also be of interest.

Finally the author closes with the words of Peter F. Drucker (in Lawer, 2006):

The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.


Appendix VII

Appendix Attachment 1 – Interview Questions

Innovation

Which roles does innovation play in the daily business of your hotels? How do you conduct innovation? Is innovation under the management of a central postion or is it decen-

tralized and every hotel manages innovation on his own? Do you have an employee suggestion system in place? Who is responsible for product and service development? Which de-

partments are involved? What roles do employees play in the innovation process? Do the hotels in your company exchange ideas? With the help of which tools? Did you use co-creation/ crowdsourcing activities to generate innovation

or do you plan to?

Customer engagement

Which role do customers play in your innovation process? Are customers suggestions part of the your innovation process? Do you feel if customers would like to interact more and be part of the

process? Which channels do customers use to give you feedback?

Other Stakeholder

Do you cooperate in any way with other stakeholder (Supplier, NTOs etc.)?

Market Research

Do you conduct market research? If so, how? What role does the Internet play in your opinion? And how do you use it

to gather information?


Appendix VIII Attachment 2 – Case Study Philips Hotel TV

Philips Hotel TV is conducting a co-creation project for their new MediaSuite

product line. Wouter Staal, Sr. Global Marketing Manager Hotel TV and in char-

ge of the project, gave an interview to the author of this work.

In order to drive innovation and sustain its market leading position in the field of

hotel TV solutions, Philips Hotel TV created the ‘CoCreation Expert Team’. This

panel of independent industry leaders is bringing together years of expertise to

test Philips products and offer insight on how Philips can continue to develop

market-leading solutions to enhance hotel guests’ experiences. The team inclu-

des senior management from Philips’ major hotel partners Starwood, Marriott

and Accor; leading hospitality industry consultants Ted Horner and Bryan Stee-

le; and Ian Millar, of Lausanne Hotel School.

All team members had the possibility to test and experience the MediaSuite

product. During the project Mr. Staal travelled around the world to talk to every-

one of them in person. Together with the team members he shared thoughts,

experiences and opinions about IPTV hotel trends, as well as they gave their

feedback on the product itself.

How it helped and a lot more about this co-creative project in the following inter-

view:

How did you hear from co-creation?

As marketer I had read about it in several magazines, blogs and other relevant

literature and always wanted to involve customers at a product launch.

Did you or Philips conduct other co-creation projects before?

I have never, not sure Philips has ever.

How did you choose the member of the co-creation team?

I wanted to have a spread of different stakeholders, so that’s why we included

the main three hotel partners Starwood, Marriott and Accor, plus I’ve asked two

known industry independent consultants and a known hotel professor who

we’ve done business with before. Various stakeholders with in-room technology

in common, but with different perspectives would bring a rounded approach to

launching our new product.


Appendix IX Was the intention behind this collaborative approach clear to your part-ners, and if not, how did you explain it?

I hope it was. I’ve briefed them all via phone and email and when all six had

agreed to join, I sent out a formal CoCreation document where all expectations,

timelines and goals were described.

How did the hoteliers react? Do they realize the possibilities and advan-tages behind the co-creative approach?

You will note in the video interviews (see below), that all hoteliers love the idea

that a vendor starts interacting with a hotelier, before the launch rather than af-

ter launch for a sale. They’ve never seen it before and think it’s very innovative

and relevant, more vendors should do this.

You said you travelled a lot to visit each expert and talk to him. Was there also some kind of workshop where everybody came together?

I really wanted this to happen but because they’re across all continents (US,

EU, AUS), I couldn’t make this happen, therefore we hosted an online roundtab-

le discussion two weeks ago to have 90min discussion about IPTV and its

trends. This was hosted our media partner Cleverdis and set-up by Philips and

will be released through Cleverdis’ website and newsletters just after summer.

Did the experts’ experiences with the test devices help to improve the fi-nal product?

Yes they have certainly done so! We had launched a survey amongst more

than 7.000 travelers and this has proven to be very useful statistics. The

CoCreation Experts though have given us first-hand experience and feedback

which has provided us with the qualitative insights we needed to translate the

survey input we had before.

Have there been any agreements or contracts concerning intellectual pro-perty?

Yes we always have Non-Disclosure-Agreements signed, and had this already

set-up for Starwood, Marriott and Accor as long-time partners.

If you compare product development with and without co-creation, which advantages/ disadvantages do you see financially, organizationally, and in


Appendix X terms of the result?

Financially and organizationally, it’s a matter of time, priorities and travel. When

you see the importance you can free up time and it’s proving to be worthwhile.

Do you see other possibilities for co-creation in hospitality?

I would love to work with a designer to get a true signature product on the mar-

ket, but knowing with our vast production schedules, this is impossible. But with

the feedback received from hoteliers, and not only the ones in our team, but

also beyond, the message that Philips is doing this is spreading fast and is very

much appreciated. So more companies should pick up on this new way of pro-

duct management and marketing.

Do you think your project partners will try co-creation during their own projects?

Did they share plans with you or maybe ask you for help? No idea if they will

after this but I know hoteliers like Starwood and Choice are already testing with

frequent travelers on automated check-in for example, not sure if this is CoCre-

ation thoug.

Why should anybody else use the co-creation approach?

When relevant for the experts and the potential buyers and you have the possi-

bility to still amend the product, go for it!

What would advise people in hospitality if they planned a co-creation pro-ject?

Speak to you! No; pick the right target market, see who’s well know in that mar-

ket and your field of expertise and try to interest them for joining the team. If you

have one lined up, the rest is eager to follow suit. They’re in it for the people

and network as well! Involve knowledgeable customers, who can really contri-

bute to your creation as well as be a good sample of your target audience to be

relevant in your final product launch.

It is maybe to early to draw a bottom line, but maybe you can give me a sneak preview: Was the effort worth the result? Did you find something out, you never even thought of?


Appendix XI It’s already been worth the effort. Our industry is speaking of us like they’ve ne-

ver done before; it’s been great PR and we’ve not even started our actual lau-

nch. If we wouldn’t have done this, we wouldn’t have added our social media

apps on the TV for example and we wouldn’t have hired a team of engineers

and user experience designers to work on dedicated hospitality apps. We

simply wouldn’t have known this was the key interest to set us apart from and

the normal home market and from competition. The guest survey had revealed

it and I had shared my views but the CoCreation team gave the final feedback

that gave me the power to tell (Product) Management to go for this and change

the product.

Would you do it again?

Certainly! It’s just a fun way of doing business!

Members of the CoCreation Team also gave their feedback:

Ted Horner (Senior International Hospitality Consultan at JBA Consulting Engineers, HTHG Executive Advisor)

As a person who’s spent most of his life as an independent technology con-sultant, the opportunity to work with a vendor to help with the design and creation, as an incubator of ideas, is too good of an opportunity to pass up. I’m certainly heavily involved in in-room guest technology and TV, today, is an integral part of that.

Bryan Hammer (Director of IT EAME Starwood Hotels and Resorts, HTNG Form CoChair)

I joined the CoCreation Team because I think it’s a fantastic idea, and actu-ally pretty innovative, for a supplier to engage a hotel and get their feedback while in the development stage of a product. It’s something that doesn’t happen a lot in our industry and I think it should happen a lot more. It’s great to have the back and forth engagement and open discussions between con-sultants, hoteliers, vendors and developers.

Ian Millar (Deputy Director of Innovation & Entrepreneurship, Ecole Hôtelière de Lausanne, HFTP Executive Board Member)

[As an industry,] we’re not very proactive when it comes to technology and we need to be. Our guests of today and the future are going to look at teh-


Appendix XII cnology as part of the [in-room] experience that we are creating. That’s why I got involved with the CoCreation team.

Bryan Steele (Managing Director Jireh-Tek Limited, HTNG Advisory Board Member)

I think being a part of the CoCreation team is interesting because it’s brin-ging together Philips as a manufacturer with experienced consultants,a hotel school and hoteliers to talk about where this product should be going, where we think the market is going and if this product is going to meet that market need


Appendix XIII Attachment 3 – Link collection

In order to get the latest and most accurate results, following links are recom-mended for the largest collection of co-creation online tools: http://www.crowdsourcing.org/directory http://www.openinnovators.net/list-open-innovation-crowdsourcing-examples/


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