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INSTITUTE OF HOTEL MANAGEMENT,
AURANGABAD
Service InnovationTheory and Practice in the Hospitality Industry
Aarthi Ramani (H-1401)
Submitted in Fulfillment of the Requirement for BA (Hons.) in
Hotel Management
THE UNIVERSITY OF HUDDERSFIELD,
UNITED KINGDOM
April, 2010
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DECLARATION
I declare that this Dissertation is the result of my own individual efforts and that it conforms
to University, departmental and course regulations regarding cheating and plagiarisms. No
material contained within this project has been used in any other submissions, by the author,
for an academic award.
Aarthi Ramani
(H-1401)
April, 2010
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ACKNOWLEDGEMENTS
I take this opportunity to thank Mr. Satish Jayaram, Principal of the Institute of Hotel
Management, Aurangabad for his never- ending support and help throughout the duration of
this work.
I would like to acknowledge Mr. Rushad Kavina, my dissertation guide for his support and
perseverance and without whos constant and critique the dissertation would have not take
this topic.
Mr. Malay Biswas and Mr. Anand Iyengar for their expertise and guidance in the course of
research methodology stage of dissertation.
I would also like to thank the librarians Ms. Rupa Matthew, Ms. Bhagwati Bhainsora.
I would like to thank all the colleagues fro the University of Huddesfield, U.K., Institute of
Hotel Management, Aurangabad and elsewhere for their help and assistance in the
compilation of this work.
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SYNOPSIS
It is common knowledge that the service industry contributes to a great extent to a countries
economy. However, what is unknown is the financial benefits of innovating services
inherently come with their four characteristics namely, intangibility, inseparability,
heterogeneity and perishability. These four characteristics pose various challenges in
innovating services. Also due to these characteristics various risks are posed which may have,
financial implications that are unmeasurable. Therefore service firms have avoided
innovating services.
Research on service innovation too is in its infancy, however services can be innovated using
some theories and models that have been developed based on the new product developmentprocess as well as keeping in mind the various key elements, challenges and risks involved in
service innovation.
This research aims at finding out the degree of disparity between these theories and models
and what is being done in the hospitality industry currently. In order to achieve this the
researcher has firstly outlined the aims, objectives, scope, limitations and structure of the
research paper.
Further the researcher has outlines theories and models on innovation, its various aspects and
how they impact an organization. This has been carried out by extensively analysing various
research papers done by experts in the field.
Moving on the researcher has concentrated on the difference between products and services
and their respective development processes. The limitations of new product development help
in understanding the process for new service development.
Various challenges posed by the service innovation process are market, environment,
technology, etc. have been analysed to see their extent of impact on the success of new
services. Key elements of the service innovation process are customer preferences, product,
employees and stakeholder interests which need to be kept in mind and fulfilled while re-
innovating services or developing services.
Lastly the researcher has analysed case studies from the hospitality industry to verify if these
theories and models are being practiced as they are. The researcher has given a brief on the
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service which has been developed, how they are executed and what the outcomes are for this
purpose.
Overall, the researcher gives a fair view of the theories and practices of service innovation in
the hospitality industry.
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Table of Contents
DECLARATION .................................................................................................................. 1
ACKNOWLEDGEMENTS................................................................................................... 2
SYNOPSIS ........................................................................................................................... 3
Table of Contents .................................................................................................................. 5
Table of Figures .................................................................................................................... 8
Chapter 1: ISSUE IDENTIFICATION .................................................................................. 9
1.1 Introduction ................................................................................................................. 9
1.2 Issue Identification....................................................................................................... 91.3 Aim and Objectives ................................................................................................... 10
1.4 Scope ......................................................................................................................... 10
1.5 Limitations ................................................................................................................ 10
1.6 Structure .................................................................................................................... 10
1.7 Conclusion ................................................................................................................. 11
Chapter 2: LITERATURE REVIEW ................................................................................... 12
2.1 Innovation ................................................................................................................. 122.2 Need for Innovation ................................................................................................... 12
2.3 Traditional Innovation ............................................................................................... 13
2.4 Innovation Now ......................................................................................................... 13
2.5 Types of Innovation ................................................................................................... 14
2.5.1 Product Innovation: ............................................................................................. 14
2.5.2 Process Innovation: ............................................................................................. 14
2.5.3 Market Innovation: .............................................................................................. 142.4 Service Innovation ..................................................................................................... 15
2.4.1 Introduction ......................................................................................................... 15
2.4.2 Importance .......................................................................................................... 16
2.5 Products vs. Service ................................................................................................... 17
2.5.1 Testing ................................................................................................................ 17
2.5.2 Imitation .............................................................................................................. 17
2.5.3 Planning & Development .................................................................................... 17
2.5.4 Employee Empowerment..................................................................................... 18
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2.5.5 Measurement of Financial Impact ........................................................................ 18
2.5.6 Funding ............................................................................................................... 18
2.5.7 Measurement of emotional impact ....................................................................... 19
2.6 Limitation to New Product Innovation ....................................................................... 19
2.7 Service Vacuum ......................................................................................................... 20
2.8 Theoretical Framework .............................................................................................. 21
2.9 Innovating Services.................................................................................................... 24
2.10 Service Process Innovation ...................................................................................... 25
2.10.1 Practising Service Innovation ............................................................................ 27
2.10.2 New Service Development (NSD) ..................................................................... 27
2.11 Challenges ............................................................................................................... 28
2.12 Key Elements in Service Innovation ........................................................................ 29
2.12.1 Customer Focus ................................................................................................. 30
2.12.2 Innovation Process ............................................................................................ 31
2.12.3 Continuous Improvement .................................................................................. 31
2.12.4 Hotel Type ........................................................................................................ 31
2.12.5 Use of IT ........................................................................................................... 32
2.12.6 Customization of Services ................................................................................. 32
2.13 Conclusion ............................................................................................................... 33
Chapter 3: RESEARCH METHODOLOGY ....................................................................... 34
3.1. Introduction .............................................................................................................. 34
3.2 Research Purpose ....................................................................................................... 34
3.2.1 Exploratory Research .......................................................................................... 34
3.2.2 Descriptive Research ........................................................................................... 34
3.2.3 Explanatory Research .......................................................................................... 34
3.3 Research Process ....................................................................................................... 35
3.3.1 Observation ......................................................................................................... 36
3.3.2 Initial Information Gathering ............................................................................... 37
3.3.3 Review of Literature ............................................................................................ 38
3.3.4 Analysis & Interpretation of Data ........................................................................ 38
3.3.5 Case Study .......................................................................................................... 39
3.3.5 Conclusion & Recommendations ......................................................................... 39
Chapter 4: CASE ANALYSIS............................................................................................. 40
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4.1 Introduction ............................................................................................................... 40
4.2 CAPELLA HOTELS AND RESORTS: 24-HOUR CHECK-IN AND CHECK-OUT
POLICY (Enz et. al., 2009).............................................................................................. 40
4.2.1 Execution ............................................................................................................ 40
4.2.2 Outcome .............................................................................................................. 41
4.2.3 Insights................................................................................................................ 41
4.2.4 Analysis .............................................................................................................. 41
4.3 ROYAL PLAZA ON SCOTTS: SUCCESSFUL BRANDING OF CUSTOMER
SERVICE (Enz, et. al., 2009) .......................................................................................... 45
4.3.1 Execution ............................................................................................................ 45
4.3.2 Outcome .............................................................................................................. 46
4.3.3 Insights................................................................................................................ 47
4.3.4 Analysis .............................................................................................................. 47
4.4 Conclusion ................................................................................................................. 52
Chapter 5: CONCLUSION AND RECOMMENDATIONS ................................................ 54
5.1 Introduction ............................................................................................................... 54
5.2 Discussion ................................................................................................................. 54
5.3 Recommendations...................................................................................................... 56
5.5 Scope for Further Research ........................................................................................ 57
REFERENCES ................................................................................................................... 58
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Table of Figures
Fig. 1: The vertical process used in this dissertation. ........................................................... 11
Fig. 2: New Product Innovation Process (Knox, 2002) ........................................................ 19
Fig. 3: Categorizing New Product & Service Innovation According to Risk (Knox, 2002)... 23
Fig. 4: Examples of Service Process Innovation (Verma, et. al., 2008) ................................ 25
Fig. 5: Key Elements of Service Innovation (Verma, et. al., 2008) ....................................... 30
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Chapter 1: ISSUE IDENTIFICATION
1.1 Introduction
This research attempts to investigate the difference in theory and application of service
innovation hospitality and related services. Whilst highlighting the reasons for identifying the
above issue in the hospitality sector, this chapter also deals with the aim and objectives that
will be achieved in due course of completion. Scope for further research has been listed along
with the limitations of this study. On a whole, this chapter deals with the antecedents
involved in choosing this particular topic for research, what it aims to achieve, the scope it
has for further research as well as the limitations that will be faced along the course of the
paper.
1.2 Issue Identification
Hildebrand and Forcada (2009) have reported that focus for the last few decades has been on
innovations related to technological artefacts or products whereas sparse knowledge has been
gained regarding the innovation process which occurs during the development of new
services which has resulted in the fact that current theory and understanding of the strategies
and tactics for developing new services is inadequate (Drejer, 2004)
Gallouj and Weinstein (1997) in their research showed that not only was innovation in
services recognised on both the empirical and theoretical levels but that service activities
played an increasingly prominent role in productive systems. Their research states that
innovation in services is difficult in theory as well as in the activities. Service innovation
based theory has been developed essentially on the basis of analysis of technological
innovation in manufacturing activities. Also, the specific properties of service activities,
especially the analytically vague nature of the output of services, make it tougher to measure
them by traditional economic methods or their productivity and to detect improvement or
change, on a qualitative level. (Gallouj and Weinstein, 1997)
Models that relate to product innovations cannot be applied to services. Services are
predominantly intangible, heterogeneous, perishable and simultaneously produced and
served. (Khan and Khan, 2009)
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1.3 Aim and Objectives
Aim: To observe the degree of discrepancies between theoretical service innovation strategies
and their practical implementation in hospitality and related services through case studies
Objectives:
To gain theoretical knowledge on implementing service innovation in the hospitalityindustry
To study the practical application of service innovation in the hospitality industrythrough case studies
Analysing the above data to find the difference in them1.4 Scope
This dissertation has tried to give the reader a review of the innovations in the services for the
hospitality industry. The researcher has explored the role of developing new services and
various strategies being used by the hospitality industry in new service development have
been documented in order to map current trends. Various literature and case study have been
reviewed for this purpose.
1.5 Limitations
The review of the case studies considers particular destinations and environments andthus cannot be considered universal.
Having gained academic significance rather late, research in this field is in its infancy. Being a desktop research the author had access to limited electronic resources
1.6 Structure
A structured systematic format has been used for this dissertation. Chapter one deals with
informing the reader of the issue being researched along with the aims, objectives, scope and
limitations of the dissertation. Chapter two contains the literature review which deals with
data that has been obtained from published sources including journals, books, electronic
database as well as other web sources. The review begins with the concept of innovation in
services especially for new service development. Key elements that play a role in service
innovation too have been reviewed.
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Chapter three has the method used for the research and the procedure for carrying out the
research. The researcher has conducted a desktop research by reviewing literature that has
been done. Then case studies of hotels that are implementing various service innovation and
its results has been covered in chapter four. The concluding chapter five has
recommendations for implementation and scope for future research made by the author.
Fig. 1: The vertical process used in this dissertation.
1.7 Conclusion
Service innovation has recently come to light as its economic benefits have gained
importance. The researcher intends to study theories and literature on this subject in order to
make recommendations for more effective implementation. A systematic desktop research
has been conducted to give the reader a three dimensional view of the subject. The researcher
tries to study the development of new services in the current hospitality industry using case
studies.
Issue Identification
Statement of aim andobjectives and outline structure
Review of previous literature
Methodology used for research
Analysis of case study
Conslusion andRecommendations
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Chapter 2: LITERATURE REVIEW
2.1 Innovation
According to one definition innovation is defined as the intentional introduction and
application within a role, group or organization of ideas, processes, products or procedures,
new to the relevant unit of adoption, designed to significantly benefit the individual, the
group, organization or wider society (West and Farr, 1990, pp. 8-10).
Their paper suggested a modified version of this definition based on the nature of services:
Services innovation is the intentional introduction and application within a role, group or
organization of ideas, processes, procedures, or products related to services, designed to
significantly benefit the individual, the group, organization, or region; considering the
distinguished characteristics of services and consumer satisfaction. Sundbo (1997) presented
three different theoretical approaches to explaining and understanding innovation:
the technological paradigm which sees technological development as being at thecentre of the innovation process
the entrepreneur paradigmwhich assumes that an entrepreneurial act is at the coreof the innovation process
the strategic innovation paradigm which emphasizes the organizations strategy asthe main driver for innovations
2.2 Need for Innovation
The deeper meaning of being a customer-led organization is the ability to create superior
customer value. Superior means their abilities are judged by reference to the best in class
competitor and customer value is about being obsessive over the things customers value mosthighly and seeking to find better solutions. (Knox, 2002)
Knox, (2002) explains that the organizations top management must nurture and embed the
distinctive behaviours and organizational capabilities which deliver innovation solutions. It is
the combination of many factors which together make the innovative organization.
The work categorized these factors into 4 broad categories which help sustaining innovation:
Culture and climate, Assets and capabilities of the management, Organizational structure and
controls, new product, service and process development.
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The organizations board plays a key role in innovation as they intervene and maintain a
balance between these factors. The senior management team must foster the market-led
approach, and empower employees to think innovatively about meeting customer needs at all
times.
Many researches have emphasized process (Hammer and Champy, 1993), technology (Day
and Schoemaker, 2000) and first mover advantage or time-to-market (Stalk and Hout, 1990).
However, relying too much on any one of these could lead to disaster.
Over these factors, Knox (2002) said that market understanding was most important. This
involved understanding the customers purchasing environment, the way they perceive value,
and how the customer will respond to the proposed innovation.
However, there is a certain degree of variability that makes it difficult, if not impossible, to
assess the success or failure of an innovation. Recently there is an increased interest in the
service innovation research (Drejer, 2004 and Sundbo, 1997). There is also a suggestion of
combining of approaches to innovation between the manufacturing and the service sector
(Drejer, 2004).
2.3 Traditional Innovation
Innovation and invention are often confused. Invention is the bringing out of new product and
technologies to the market, whereas innovation is about providing new solutions that offer
value to customers. Knox quoted American management guru Peter Drucker, exploiting
change as an opportunity Drucker also made the famous distinction between efficiency
doing things right; and effectiveness - Doing the right things. The former involving cost
reduction, while the latter implying innovation. Cutting on cost will undoubtedly lead to
short-term performance improvements, but many of them do not generate long-term
shareholder value.
2.4 Innovation Now
By definition innovation is about solutions that offer better value to customers. Developing
new products and services fulfils these requirements, but even a renewal of the innovation
process if it brings new products and services to the market more quickly.
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According to Knox (2002), the most effective way to build a reputation as an innovative
company is through a comprehensive market-led approach, which focuses on building value-
generating relationships with customers through the core processes by committed people
within the organizationas well as introducing new products and services.
2.5 Types of Innovation
Johne (1999) was of the view that a business serious about competing in a fast changing
market with fast changing technology must innovate. Lack of innovation could facilitate
competitors to succeed better than it is. New entrants in an industry have used market
innovation to achieve groundbreaking results. However, prior to market innovation, it is
useful to consider the other two types of innovation which contribute to organic business
developmentproduct innovation, process innovation and market innovation (Johne, 1999).
2.5.1 Product Innovation:
Product innovation provides the most obvious means for generating revenues. Process
innovation, on the other hand, provides the means for safeguarding and improving quality
and also for saving costs. Improved and radically changed products are regarded as
particularly important for long term business growth (Hart, 1996).
2.5.2 Process Innovation:
Process innovation embraces quality function deployment and business process reengineering
(Cumming, 1998). Although harder to execute, its purpose is now easily understood. Many
companies are currently working at reducing operating costs and also to increase service
quality through process innovation. It plays an important role in both the supply of the core
product and it supports other parts of the offer, both of which require quality standards to be
met and maintained (Johne, 1999). In the case of services, which by their very nature rely on
personal interactions to achieve results, the management of process innovation is a
particularly challenging activity (Johne and Storey, 1998).
2.5.3 Market Innovation:
Market innovation is concerned with improving the mix of target markets and how chosen
markets are best served. Its purpose is to identify better (new) potential markets; and better
(new) ways to serve target markets. We deal first with the identification of potential markets.
Identification is achieved through skilful market segmentation. Market segmentation, which
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involves dividing a total potential market into smaller more manageable parts, is critically
important if the aim is to develop the profitability of a business to the full. Incomplete market
segmentation will result in a less than optimal mix of target markets, meaning that revenues
which might have been earned are misread.
2.4 Service Innovation
Hildebrand and Forcada (2009) have reported that focus for the last few decades has been on
innovations related to technological artefacts or products whereas sparse knowledge has been
gained regarding the innovation process which occurs during the development of new
services which has resulted in the fact that current theory and understanding of the strategies
and tactics for developing new services is inadequate (Drejer, 2004)
A research by Khan and Khan (2009) also suggests that most of the innovations as well as the
theories related to innovation have been predominantly in the area of products when
compared to services, whereas now with services playing a major role in the economy of any
country, the current focus is on the development and study of innovation in services. Another
reason stated by them was the tremendous competition in business that differentiating
services from products and studying innovation in services became required for success.
Development of new technologies has tremendously accelerated this need.
2.4.1 Introduction
Past research and anecdotal evidence suggest that service innovation, in general, has a
positive impact on customers choice and can result in increased revenues for a firm. IBMs
innovative service program is just one example of the financial benefits that can be realized
from implementing service innovation.
At the Cornell Rountable Hospitality Proceedings reported by Verma, et. al. (2008),
participants lamented that there was a lack of innovative organizations in the service
industries. Almost 80 percent of the United States gross domestic product (GDP) and about
the same percentage of the labour force are involved in services, but service firms constitute
only 30 percent of the worlds most innovative companies, as recording in the survey of the
twenty-five most innovative companies by the Boston Consulting Group (Jena McGregor,
The Worlds Most Innovative Companies, Business Week, April 24, 2006
www.businessweek.com/magazine/content/06_17/b3981401.htm)
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They also noted that in companies known for innovation usually lean towards products and
not services. Hospitality firms in specific have remained relatively unbranded in this category
because of the lack of historical tracking for service innovation. Without records and
benchmarking, learning and growth of innovation as a status for the company is difficult.
Participants at the roundtable proceedings reported in a paper by Verma, et. al., (2008) found
that the tendency for viewing innovation as the opposite of a standardized approach to service
delivery. As this is normally associated with economical benefits, organizations avoid
innovation in their service delivery methods.
2.4.2 Importance
Evidence from Gray, Matear and Mathesons (2000) research shows that market o rientationhas a relatively large impact on the company performance and that this concept can be
applied to both manufacturers as well as service providers. Other organizational
characteristics which could affect marketing and performance include corporate culture, the
adoption of new information technologies, promotion of ethical guidelines and procedures
and most importantly for this research and emphasis on innovation.
Their research also noted that the business strategy, services marketing and innovation
literatures emphasise links between environmental scanning, innovation and firm
performance, with some evidence that innovation might mediate the market orientation-
performance relationship (Han et al., 1998).
However, comparing the characteristics of hospitality firms with the most highly market-
oriented service firms from other sectors has produced some important insights into possible
ways of improving hospitality management and performance (Gray, Matear and Matheson,
2000).
Their research showed that innovation is an important source of competitive advantage in
markets where customer preferences are changing rapidly, where competition is intense,
where product lifecycles are shortening and maturing, and/or where differentiation is limited.
Gray, Matear and Matheson chose this research as a fairly large amount of research had
already been done which link innovation and performance in the goods or manufacturing
area. This relation in the case of the services sector has been done recently by authors such as
de Brentani (1989, 1993); de Brentani and Cooper (1993), Johne and Storey (1998).
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2.5 Products vs. Service
The hospitality industrys challenge of innovating in real time sets up the distinction between
service and product innovation.
2.5.1 Testing
Verma, et. al., (2008) said that although its possible to run limited tests of service
innovations, services are simultaneously produced and consumed. Thus, the testing of service
innovations tends to occur in the actual marketplace, irrespective of how limited the test,
while product innovations can often be tested in a lab or in tightly controlled focus groups.
As a result, failures for service innovations are viewed as being extremely costly and
considered more risky than product innovations.
2.5.2 Imitation
In most cases, service innovations are easy to imitate. Verma, et. al. (2008), noted that the
terms service innovation and imitation often go hand in hand. Therefore, what is todays
service innovation becomes tomorrows commonplace service. Guests quickly learn to expect
what was once novel and hospitality firms must engage in a never-ending search for the next
new idea for service.
2.5.3 Planning & Development
Another key difference between service innovations and product innovations is that a single
person can develop a new product, but it takes a team to implement a new service.
Thus, service innovation tends to follow a democratic process where a leader needs to create
a culture that motivates employees to innovate. A top executive from a major hotel chain
stated that service innovation involves a cultural imperative, where a process is in place for
encouraging innovating thinking and the development of new ideas.
As stated by Verma, et. al.(2008), Such a culture is especially important in the hospitality
industry because, unlike manufacturing firms, most hospitality companies do not have
laboratories expressly devoted to research and development, and because innovative ideas
can arise from any individual at any level of the hospitality organization.
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2.5.4 Employee Empowerment
In an organization, the employees are the resources that are most in contact with a guest,
especially concerning the hospitality industry. Thus they must be empowered to come up
with new ideas, without worrying of a risk of failure. Managers should make clear to
employees that failure is not only allowed, but also acceptable as part of the innovation
process. As a consequence, evaluation methods should support innovative thinking. It is
managements role to be facilitators of innovation because a service innovation that exists
outside the context of motivation will ultimately fail.
2.5.5 Measurement of Financial Impact
In the success and failure of service innovations is the problem of how to measure the successof service innovations. Even with guest surveys and other measurement techniques, one
roundtable participant noted that it is hard to quantify a guests experience to determine the
success of an innovation.
Specifically noted by Verma, et. al., (2008), was the inability to accurately measure the
impact that a service innovation, has on profitability in isolation from other elements. In
product innovation it is possible to accurately measure R&D expenses, launch costs, and
resultant profits generated by a particular product, but with service innovation, the picture is
jumbled. Especially in a hotel, many service elements are bundled together and may be
either chosen or not chosen by each guest.
Thus, the task of accurately measuring the impact of any one service innovation is next to
impossible in the short term. Even in the long term the effects can only be suggested via
increased market share or brand equity. Nevertheless, without financial measures of success it
is hard to sell the idea of service innovation.
2.5.6 Funding
In relation to the challenge of measuring the impact of a service innovation is the difficulty in
getting research and development funding for service innovations because of the lack of hard
financial data that would support the projected profitability of an innovation.
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2.5.7 Measurement of emotional impact
Beyond finances, the connection between customers and services is emotional rather than
rational, and measuring this experience is difficult. Hence, it comes to innovations that
involve human interaction, and because every customer has different expectations and
perceptions of service delivery, hospitality firms must take different approaches to serving
different customersand different approaches to measuring their reactions to an innovation.
(Verma, et. al., 2008)
In summary, the distinction between product and service innovation was evident by the
challenges that arise with service innovations. Innovative companies are focused on new
methods for assessing the customers experience, particularly blogs and internet forums.
2.6 Limitation to New Product Innovation
Fig. 2: New Product Innovation Process (Knox, 2002)
Traditional NPD and NSD are sequential and functionally driven. Marketing and sales act as
the intermediary of customer needs. The simplified feed back path illustrated shows the
hands-off that can occur. (Knox, 2002)
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The diagram also leads to two distinct points noted by Knox (2002) as:
The traditional sequential procedures for moving idea through to final products andservices are no longer sustainable in todays business environment
Developing new products and services is a narrowed approach to creating customervalue.
Customer value is created when what is offered is better, cheaper and faster. For this
companies must come close to their customer, which requires innovative thinking at all levels
in the organization.
By introducing measures of value-added time versus non-value added time, the innovation
team can work together to identify the total time involved in value-adding activities and to
eliminate time wasted in hands-off in the process. This leads to parallel activities across the
multifunctional team, better internal communications and a clearer interpretation of customer
needs and insights within the team.
2.7 Service Vacuum
Considering the distinction between service and product innovation, it can be noted that there
is an absence of innovative firms in the service industries. Hospitality companies may be
unfairly labelled because of the lack of historical tracking for service innovation in
comparison to product innovation. Without a record of service innovation developments and
benchmarks of success, it is harder to learn and grow, but it is also harder to document a
firms status as an innovator.
Complicating the lack of documentation for services, participants again indicated that
products can be patented and clearly belong to the innovating firm, while services are
easily imitable. A successful service innovation that is quickly imitated by competitors seems
not so innovative.
Verma, et. al. (2008) also identified disincentives to innovation. In particular, once an
innovation is rolled out, it is hard to reverse the innovation or to pull a new service from the
market. When a single failure can result in expensive consequences, the risk becomes great
enough to discourage firms from pursuing service innovations.
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Finally, often firms are torn between minimizing costs and providing an extraordinary
customer experience.
2.8 Theoretical Framework
Models that relate to product innovations cannot be applied to services. Services are
predominantly intangible, heterogeneous, perishable and simultaneously produced and
served. (Khan and Khan, 2009).
Gallouj and Weinstein (1997) in their research showed that not only was innovation in
services recognised on both the empirical and theoretical levels but that service activities
played an increasingly prominent role in productive systems. Their research states that
innovation in services is difficult in theory as well as in the activities. Service innovation
based theory has been developed essentially on the basis of analysis of technological
innovation in manufacturing activities. Also, the specific properties of service activities,
especially the analytically vague nature of the output of services, make it tougher to measure
them by traditional economic methods or their productivity and to detect improvement or
change, on a qualitative level. (Gallouj and Weinstein, 1997)
These two difficulties constitute the starting point for complementary groups of studies on
innovation in service. (Gallouj and Weinstein, 1997)
One group focuses on analysis of the introduction of technical equipment and systems in
service firms and industries. Gallouj and Weinstein reiterated work done by Barras (1986)
who observed a product life cycle that is the converse of the traditional industrial cycle. The
basic element of this reverse product cycle theory is the adoption of an item of computer
equipment by a service activity that triggers what might be called a natural technolog ical
trajectory. (Gallouj and Weinstein, 1997)
This leads to the emergence of incremental process innovations which are meant to improve
the efficiency of the service being provided, an improvement in service quality through more
radical process innovation and to the emergence of product innovation. However, Gallouj and
Weinstein are of the view that Barras model is less a theory of innovation in services than a
theory of the diffusion within the service sector of technological innovation derived from the
manufacturing industry.
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The second groups study does not ignore the technological dimension, but focuses on non-
technological forms of innovation. These follow the precedent set by Schumpeter, whose
definition of innovation was particularly broad and open. Schumpeter identified several
different forms of innovation: the introduction of a new good, the introduction of a new
means of production, the discovery of a new source of raw material or semi-finished product,
the conquest of a new market, and the establishment of a new organisation (Gallouj and
Weinstein, 1997). In this case Gallouj and Weinstein report that ad hoc forms of innovation,
which are not immediately reproducible, as well as institutional formalisation trajectories
(i.e., the search for a certain degree of formalisation, although not necessarily, or even
predominantly, in tangible form) were more rampant.
Gallouj and Weinstein found that the latter trajectory was also recently highlighted in the
field of catering and related services by Callon (1995) and Dubuisson (1995).
Gallouj and Weinstein (1997) have mentioned that many researchers found that innovations
in services do not follow a technological trajectory, but rather service-professional
trajectories in which technology is just one factor among several others.
Being a successfully innovative organization helps respond to the cause of change and
requires a long term, customer-led strategy. The most obvious form of innovation is in theform of new products or new services. However, as many leaders would agree, developing
genuinely new products is a high-risk activity: industrial products have only a 50:50 chance
of being successful, while consumer goods fare even worse, with a one in ten chance of
succeeding (Cooper, 1993). To reduce the risk of failure, a robust multi-staged review
procedure is adopted as shown below:
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Fig. 3: Categorizing New Product & Service Innovation According to Risk (Knox, 2002)
Although successful inventions may offer genuine value to customers and be highly
desirable, when they are patented, their value may not be sustainable.
Products and services can be new in 2 ways:
New to the company- the organization has never made or sold the type of productbefore, although other firms might have
New to customers- the product or service is the first of its kind and is new to themarket.
They thus offer six different categories of new innovation which are summarized by Avlontis
et al. (2001) as:
New-to-the-market service including new-to-the-world services. New-to-the-company service, services that are new to the firm but not new to the
market.
New delivery process consisting of lines new to a firm, but not new to the world. Service modifications, major improvements or modifications of an existing service. Service line extension, addition to a firms existing lines. Service repositioning, that is, repositioning of an existing service.
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Most companies feature a mixed portfolio of NPD and NSD. Those which are stepping out
are in the highest risk zone. Product improvements and line extensions are lower risk and
represent over half of all new development activity. Similarly, the lowest risk developments
are cost reduction and repositioning, or a combination of the two.
2.9 Innovating Services
Given the need to communicate intangible benefits, and the relative importance of good
customer relationships, it could be expected that more rapid adoption of new information
technologies such as the Internet, and the presence of written codes of ethics could also be of
particular value to service firms, especially those in the hospitality industry. From previous
market orientation and services marketing research it could be expected that company
performance in the hospitality sector should be positively linked to:
Market-oriented behaviour (or a market orientation);Market Orientation is a term that has been popularised by marketing practitioners
that acts as an indicator of the extent to which a firm implements their marketing
concept. This in turn holds the key to achieving organizational goals including
market share and profitability. (Agarwal, Erramilli and Dev, 2003). Their research
showed that performance is a mediator in the relationship as well as between
innovation and objective performance.
A ``balanced'' corporate culture which incorporates marketing, employee andstakeholder concerns;
Effective and efficient innovation strategies; Yearly adoption of new media such as e-mail and the Internet for business
communication; and
Codes of ethics to guide staff conduct.(Gray, Matear and Matheson, 2000)
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2.10 Service Process Innovation
Fig. 4: Examples of Service Process Innovation (Verma, et. al., 2008)
Looking at service process innovation, or ways to improve the way they perform a task,
Verma, et. al. (2008) has outlined ways to assess their services.
Majority of the service process focused on new methods for assessing the customers
experience. Examples include using open forums (or blogs) in which customers share their
experiences (with the entire world), and creating complaint systems that are designed so that
service failures can be recovered prior to a guests departure.
Electronic word of mouth (e-WOM), i.e. any positive or negative statement made by
potential, actual, or former customers about a product or company, which is made available
to a multitude of people and institutions via the internet (Andreassen and Streukens, 2009).
There are several reasons for this endeavour.
Access to need-related information is often sticky, which means that it is costly toacquire, transfer, and use in a new location. One customer related information source
that may overcome some of the stickiness and cost issue is e-WOM.
Customers believe web-based e-WOM to be a credible and relevant communicationchannel.
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As a source of social capital e-WOM encourages others to share their knowledge,thereby being an ever-expanding knowledge base that contains information that
enables innovating organizations to achieve a sustainable competitive advantage.
Their study was the first to disclose that e-WOM is a multi-dimensional construct consisting
of four unique core categories, i.e. request for information and usage experience issues,
business practice issues, and comments pertaining to new products launches/developments.
They found that, with the strong increase in consumers engaging in various discussion forums
and blogs as evidenced by the increase in number of discussion forums (e.g. Google.com,
Yahoo.com), the increase in number of blogs (e.g. www.myspace.com, www.blogging.com),
and the development of dedicated blog search agents (e.g. www.technorati.com,
www.feedster.com, www.pubsub.com), there is both a dire need and a unique opportunity to
better understand what people talk about when engaging in product- or service-related online
conversations - an understanding that may help and guide firms in their quest for the next
disruptive or sustainable innovation (Christensen et al., 2004).
They then proposed that a proactive approach to e-WOM by listening in to ongoing
discussions in relevant discussion forums would help firms to improve their service
innovations in three ways. First, by listening to customers' desires, firms can get customerfeedback faster. Second, by better reflecting customer needs in future a service, the quality of
market information is improved, thus leading to superior decisions. Third, by adapting
existing services and business practice, actions based on customer responses become more
effective. If e-WOM can report the customers' voice effectively and efficiently, this may help
firms manage the adoption process for new products or services more effectively. If this is
indeed the case, then the bottom line is an improved innovation rate with better, faster results
(Andreassen and Streukens, 2009)
In addition, participants shared service innovations designed to wow customers. The group
was particularly interested in various forms of technological advances to the service process,
such as one-stop shopping, which allows the hotel to assist customers in planning an entire
vacation.
As the participants of the Cornell Roundtable dissected innovation failures, they found that
the majority of the failures stem from the peculiar characteristics of service innovation, most
of which they had already outlined. As the use of technology expands, employees may see
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technological applications as a threat, particularly technology that allows guest self service.
Finding ways to encourage employee acceptance of self-service technology is a challenge.
2.10.1 Practising Service Innovation
Service innovation consists of two inter linked issues: how to innovate and what to innovate
(Andreassen and Streukens, 2009). Acquiring a better understanding of what customers really
need would need is an efficient method of developing these ideas.
2.10.2 New Service Development (NSD)
NSD, as mentioned before, is risky as it has a failure rate of about 50 percent. In order to
address this high failure rate, studies have been focused on the factors that affect the
performance of new services. Some of these factors include new service strategy and
ascertaining the significance of NSD stages. (Alam, 2005)
Alam and Perrys (2002) research observed that research had been done on service
innovation and new service success factors, but little on the area of New Service
Development (NSD) and how they are actually developed. To further complicate this,
innovation has traditionally been associated with tangible products, resulting in literature
about NPD rich. Also, as mentioned before, because of the unique characteristics of services,viz., intangibility, heterogeneity, perishability and inseparability, the intricacies of NSD have
not yet been captured. Thus, NPD and NSD have stark distinctions in them.
Alam and Perry (2002) reported that only two NSD models in empirical studies are available.
The first model described eight linear and sequential stages of developing new services by
Bowers, (1987 and 1989). In turn, Scheuing and Johnson (1989) developed an expanded
model of 15 stages:
Formulation of new service objectives Idea generation Idea screening Concept development Concept testing Business analysis Project authorization Service design and testing
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Process and system design and testing Market program design and testing Personnel training
Service testing and pilot run Test marketing Full scale launch and post launch review
Although this second NSD models 15 stages are more comprehensive, the model does not
address the important issues of cross-functional teams, parallel processing of the development
stages and cycle time reduction that have been highlighted in the new tangible product
development models above. Thus, there is no model of NSD that matches the models of new
tangible product development.
2.11 Challenges
Considering future efforts to encourage service innovation, executives outlined the many
challenges they face in Verma et. al. (2008) research.
Some of the challenges mentioned included:
How to measure service innovations effects on profit Understanding what delights customers How to predict whether a technological innovation will be accepted by customers and
employees,
Establishing employee reward and motivation systems to encourage innovation The fact that innovations can be easily imitated
One of the main challenges identifies was that service innovations are easily imitable. Others
included the real-time nature of introducing new services and that services could not be tested
in a laboratory. New services once executed are difficult to recall like products. (Verma et.
al., 2008). Another very stark reason for this is being tangible products are easily patented
and are owned by the firm. Services on the other are easily imitable rendering them not so
innovative, and they typically spread and are copied.
The bottom-line for all the challenges, however, is the many sources of risk connected to
innovation: particularly, risk associated with service innovation failure, risk from the lack of
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measurement tools, or the risk of competitors imitating your innovation. At root, the risk of
service innovation derives from the unknowns involved with implementing that innovation.
Service organizations must constantly try to find new innovative ways to serve customers
more effectively and efficiently. Although it is essential, organizations face some challenges
in their efforts.
Participants of the Cornell Roundtable cited such trends as technological advances to
services, the offering of personalized service, and the use of customer relationship
management tools to gather guest preference data
2.12 Key Elements in Service Innovation
During recent decades, the importance of services to the global economy has steadily grown
while the importance of goods has somewhat declined. In fact, the service industries
comprise approximately 70% of aggregate production and employment in the Organisation
for Economic Cooperation and Development (OECD) nations and contributing about 75% of
US gross domestic product (GDP) (Berry et al., 2006).
Among all service industries in the United States, restaurant industry ranks among the top
with 945,000 locations, 13 million employees and sales forecasted to reach $566 billion in2009 reported Khan and Khan. It is projected to grow in 2009 in spite of the most challenging
economic environment in nearly three decades, according to the National Restaurant
Association (2009) Restaurant Industry Forecast
Verma et. al. (2008) said, especially in context to the hospitality industry, innovation is the
oxygen that keeps concepts fresh and attracts new customers, as well as encourages repeat
customers. Although innovation requires creative thinking, coming up with a new idea is only
the first step in ensuring successful service innovations.
Participants in the Cornell Hospitality Roundtable Proceedings agree that service innovation
was more complicated than just innovation. One participant said that service innovation is
the process by which significant improvements in products and services are adapted and
ultimately delivered to users.
Three key elements of service innovation were identified by Verma et. al. (2008) in his report
of the roundtable proceedings:
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Having a customer focusexceeding expectations of customers Having a process focusincreasing efficiency Utilizing a continuous improvement mindset to doing business
Fig. 5: Key Elements of Service Innovation (Verma, et. al., 2008)
Using the key elements found in the above figure, roundtable participants developed the
following collective definition for service innovation, encompassing the essential factors
related to service innovation, namely: customer focus, process focus, and continuous
improvement (Verma, et. al., 2008)
According to Verma et. al. (2008), Service innovation is the introduction of new or novel
ideas which focus on services that provide new ways of delivering a benefit, new service
concepts, or new service business models through continuous operational improvement,
technology, investment in employee performance, or management of the customer
experience.
2.12.1 Customer Focus
Falling within the customer focus category is not only the importance of understanding and
measuring customer acceptance of innovation but finding out their preferences as well.
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2.12.2 Innovation Process
The process related aspects of service innovation, which involve both the design and
management of the service process. In regard to managing the service process, many
researchers stressed that a service innovations success depends on employees both being on
board with innovation and feeling motivated to innovate.
To the end, a company must instil a culture that supports innovative thinking. Phrases such as
cultural imperative, democraticprocess, and employee empowerment were brought up
on several occasions to describe the impact employees have on innovation success. Along
with motivating employees to innovate and to help them embrace new service methods,
adding technology to personal services and to offer self-service options enhances the service
process innovation. In that context, it is important to remember that the success of technology
based service innovations is greatly influenced by employees being involved with the service
innovation process. In short, technology alone cannot support a service innovation.
2.12.3 Continuous Improvement
Many of the participants in the Cornell Roundtable noted that innovation often stems from
efforts for continuous improvement. To innovate, one must constantly search for and
implement improvements and new features to the current service offering. Measurement is
essential for continuous improvement. Many participants emphasized the importance of
continuously testing, analysing, and improving processes.
Verma, Plaschka and Dev, (2005) analysed various innovations in the hospitality. They
include
2.12.4 Hotel Type
Introduction of the boutique hotels concept in the recent past is an excellent example of an
innovative product, in an industry that is mostly based on standards.
This hotel type is an innovation to the traditional hotel experience and an attractive option for
customers. This becomes furthermore innovated if it crosses with other industries to obtain
co-branding for say fashion and jewellery concepts like the Bvlgari-Marriott alliance (Verma,
Dev and Plaschka, 2005).
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2.12.5 Use of IT
Use of up-dated Information technology is another form of innovation for hospitality
organizations. One study determined which of the recent technological innovations were most
beneficial, least beneficial, and had future benefits for hotels (Reid and Sandler, 1992).
Those which were found most beneficial include: wake-up systems, electronic door locks, in-
room pay-per-view, music players, internet connectivity, video check out, and a software
library (Reid and Sandler, 1992). Lack of operational capability or limited resources make
adopting some technology impractical.
Aside from customer preferences for technology, the addition of new technological features
to a hotels service concept has distinct phases of adoption (Namasivayam et al., 2000). Thetechnology adoption process includes:
Customer signalling, such as internet booking and in-room modems Enabling management, such as management email Enabling employees, such as voice mail Customer service revenue add-ons, such as ATM and interactive TVs Customer service value add-ons, such as internet access and in-room fax machines Wireless technology, such as curb side check-in, voice recognition, and smart cards
(Namasivayam et al., 2000)
2.12.6 Customization of Services
Service innovation can also be done through customization of the same service offered by the
organization to suit the needs of a variety of clientele. This could include:
Allowing guests to have flexible check in/out times Personalizing room decor Having child care options available
One of the challenges in implementing service innovation in this manner was the lack of
operational capability. Adding such a policy successfully requires the alignment of hotels
marketing and operational activities.
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Skinner (1974) provides a product-oriented example of the importance of balancing
marketing and operational activities. He suggests that although it may seem profitable to add
more products/features to the product mix, it may be too difficult operationally to implement
(Skinner, 1974). This could occur in a service background as well.
After extensive research, Verma, Plaschk and Dev (2005), found that overall, innovation does
matter when selecting a hotel to both business and leisure customer segments.
2.13 Conclusion
Service innovation is a rather difficult task, especially when compared to product-innovation.
Further, complicating this is the fact that the hospitality industry is one where real-time
scenarios could affect a guests perception of the hotel. This makes execution of service
innovation tougher.
However, New Service Development (NSD) can be undertaken following the model shown
in the research. Also, in this process some of the key factors that play a role include the
customer, technology, the market or environment, culture, and the management of the
organization itself.
In conclusion, it can be said that although various theories and models exist on serviceinnovation, many challenges both foreseeable and unforeseeable appear when innovation is
being done. In order to overcome these challenges an organization can focus on the key
elements which make up service innovation in order to find alternatives or solutions.
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Chapter 3: RESEARCH METHODOLOGY
3.1. Introduction
A successful research can be conducted through a well planned and organized structure. In
this chapter the author has discussed the method used for conducting the research. This
section gives a step by step elucidation of the research path with appropriate justification for
the adopted method. A desktop research has been conducted where a review of past and
present literature is done. Also analysis of case studies has been done in the following
chapter. Analysis method for the data has also been shown.
3.2 Research Purpose
Methodology defined by Robson (1993) is the approach to find the answer to a research
problem. It helps to determine the technique in order to find the solution to an issue or a
research question. It identifies the path taken to achieve the outcome. The purpose of the
research identifies the aim and the means to achieve it. Robson explains the purpose of a
research in the context of Exploratory researches, Descriptive Research and Explanatory
research.
3.2.1 Exploratory Research
This type is undertaken when the research problem has not been clearly defined. It
determines the best research design, data collection method and selection of subjects.
Exploratory research relies on secondary research
3.2.2 Descriptive Research
This research describes data and characteristics about the population and phenomenon being
studied. Thus the purpose of the research is to describe. It gives the choice of various
perspectives, aspects, levels, terms and concepts to observe, register, systemise, classify and
interpret.
3.2.3 Explanatory Research
This type is applied when the issue is already known and has a description of it. The desire to
know why to explain is its purpose. It builds on exploratory and descrip tive research and
goes on to identify the reasons for something that occurs. It looks for the causes and reasons
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In this research, the researcher has explored service innovation in theory and practice
through detailed literature review. The researcher has tried to find out the factors that impact
innovation in services in hospitality organization and the importance of NSD in innovating
services.
Thus, it can be said that the research undertaken is an explanatory research which builds on
exploratory research aspects. This method allows the researcher to understand and analyse
theories and make deductive statements from them. The research is centred on service
innovation during New service Development and funnels to the factors affecting innovation
in services. Analysis of data on this subject is done through the previous literature review and
case studies which is seen in a later section.
3.3 Research Process
The main purpose of conducting a research is discovering, interpreting, and developing
methods and systems for the advancement of knowledge on a wide variety of subject.
(http://en.wikipedia.org/wiki/Research)
Research is an organized, systematic, data based, critical, scientific enquiry or investigation
into a specific problem, undertaken with the objective of finding answers or solutions to it.
Sekran (2003)
The motive behind conducting a desktop research in the area of service innovation is to
identify the theoretical as well as practical implications it has on the hospitality industry. It
also explores the importance of NSD as a method of service innovation.
Zikmund (1991) showed the actual research process in the following 6 steps:
1. Identifying the research problem
2. Defining the research problem
3. Determining how to conduct the research or the method
4. Collecting research data before analysing
5. Interpreting the data
6. Presenting the result
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For the purpose of this desktop research however, the researcher would be using an adapted
research method based on Zikmunds research process that would go in the following steps:
3.3.1 Observation
According to Sekrans (2003) work observation is the first stage in which one sense that
certain changes are occurring or that some new behaviours, attitudes and feeling are surfacing
in ones environment. When the observed phenomena are seen to have potentially important
consequences, one would proceed to the next step. A people oriented manager is always
sensitive to and aware of what is happening in and around the workplace. Changes in attitude,
behaviour, communication patterns and style along with various other verbal and non-verbal
cues can be readily picked up the manager who is sensitive to the various nuances.
This stage therefore involves screening certain stages occurring within the environment.
Broadly, this research is pertaining to service innovation, which is essential for organizational
success in todays competitive age. Service innovation and its benefits have come to light
only recently and thus, in the form NSD it proves successful for smart -innovating
organizations.
Economic profitability that can be gained through innovation has also made many managers
and organizations rethink their innovation strategies. Thus, there is a need to study the
antecedents, role and advantages of service innovation.
Observation
Initial InformationGathering
Review of Literature /Theoretical Framework
Analysis andInterpretation of Data
Discussion andFindings
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3.3.2 Initial Information Gathering
Preliminary data collection comes from the initial data gathered from the researchers
observation. However, these must be reliable sources of data. Thus, initial information
gathered for this research included the basic literature review of the past and present stance of
service innovation. Its antecedents and importance was analysed for supporting the
theoretical framework being used in this dissertation. The researcher observed that interest
was being shown in this field of service innovation and development. Multiple sources of
literature were used in order to analyse the role service innovation plays during the process of
NSD.
Firstly some books were used to get basic academic knowledge on the subject. . Articles by
Alam and Perry, 2002; Chen, Daugherty and Grawe, 2009; Dev, et. al.; Drejer, 2004; Enz, et.
al., 2009; Gallouj and Weinstein, 1997; Gray, Matear and Matheson, 2000; Hildebrand and
Forcada, 2009; Khan and Khan, 2009; Knox, 2002; Oke, 2007; Sundbo, 1997; Verma, et. al.,
2008; and Verma, Plaschka and Dev, 2005 were reviewed to get a clearer picture of the task
involved. Articles dated as far back as 1989 and as recent as 2010 have been reviewed. After
this generalized electronic search engines were used such as Google, Google Scholar and
Wikipedia. Key search words for this purpose included Service Innovation, Process
Innovation, New Service Development (NSD)and Innovation in hotel services.
After a sufficient amount of literature and articles were collected, a citation index was made
for quick reference. The major part of information was gathered from electronic databases
such as Emerald Insight, EBSCO Host, Science Direct, Springer Link, and Sage Publications
available through Huddersfield Metalib E-Library using an Athens Databank Login.
Some of the Journals referred to include Journal of Services Marketing, Managing Service
Quality, European Journal of Innovation Management, International Journal of Contemporary
Hospitality Management, etc.
The researcher also referred to various white paper researches available on the world wide
web. The researcher used the snowballing approach to get deeper into the subject. Industry
reports and surveys done by Boston Consulting Group (BCG), Harvard Business Review
(HBR) and the Cornell- Centre for Hospitality Research, etc. were used. Referencing was
also done from newspaper and magazine articles such as Business Week.
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For the purpose of discussion, the author has reviewed, analysed and interpreted various case
studies pertaining to this subject.
3.3.3 Review of Literature
The researcher read extensively on available published literature by various authors on many
related subjects. It reviews the past and present of service innovation along with its impact on
the NSD process. The theoretical framework discuses the various relations shared by them
and the impact one have on another.
The basic structure of the literature review covers aspects such as innovation and its
importance especially in the field of hospitality. It talks about the need for hotels and related
hospitality services. It highlights the various different aspects of service versus productinnovation. Types innovation like product innovation, process innovation and market
innovation are discussed with illustrations on how they can be implemented successfully. The
service innovation process and various theories and models developed over years of research
have been illustrated. It concludes by discussing in-depth the key elements that assist service
innovation and the various challenges they brought on during the process.
From the above it can be seen that it summarizes the variable that are studied in this research
3.3.4 Analysis & Interpretation of Data
In order to support the theoretical framework built by the researcher additional data was
gathered. This data is in the form of case studies obtained from electronic article database of
various organizations, particularly those in hospitality and related services. The data would
contain information supporting the level of service innovation and development in the
organization.
Deduction is the procedure of arriving at conclusions by interpreting the meaning of the data
analysis (Sekaran, 1992).
The researcher will build using a detailed explanation of the data gathered. This will be in a
narrative style and compared to theoretically significant propositions. The findings will be
compared to the data from the literature review.
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3.3.5 Case Study
A study in which the researcher explores in detail a program, an event, an activity, a process
of one or more individuals can be called a case study (Creswell, 2003). The study of a
particular case is always time bound and data is collected using various tools and procedures
such as interviews, questionnaires, etc., over a period of time. For the exploratory part of a
research according to Yin (2003), a case study is most suitable. Various reasons support this
such as less control in the hands of the researcher with regards to events and the current facts
which are aligned to reality. One of the main benefits of case study analysis is that the
researcher is not restricted or bound by a particular methodological tool.
3.3.5 Conclusion & Recommendations
The discussion will lead to the discussions and findings of the explanatory study. Suitable
recommendations would be made to enhance understanding.
The conclusion is finally obtained by comparing the literature review results with the data
collected. Therefore, the researcher observes that the conclusions of the research are logically
linked to the research done earlier.
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Chapter 4: CASE ANALYSIS
4.1 Introduction
Analysis of data is imperative as it supports the researchs problem or aim and objectives. In
this chapter data collected from the various literary sources is analysed. The data gathered
from the case studies too is collated and analysed. This is then compared to results obtained
form the analysis of data which was obtained from the academic literature that has been done.
Thus, the practical data is compared to the theoretical data acquired.
Thus, the researcher has transcribed the case studies by studying it. The researcher then
identifies the various themes emerging from it. These themes from the empirical data and the
case study are then compared to arrive at sustainable conclusions.
4.2 CAPELLA HOTELS AND RESORTS: 24-HOUR CHECK-IN AND
CHECK-OUT POLICY (Enz et. al., 2009)
The Capella Hotels and Resorts chain allows its guests to check in and check out at any time,
day or night. Capella has pledged to have a room ready for each new guest upon arrival,
rather than asking the guest to wait until 2:00 pm or 3:00 pm, as is the industry norm.
Furthermore, guests can use the room as long as they like, rather than being required to
check out by 12:00 noon. In fact, guests are charged for an extra night only if they check out
after midnight. The focus on quality customer service is reflected in their twenty-four written
service standards, one of which states: The suggested hours of operation are guidelines, not
limitations for satisfying individual guest desires and preferences. (Enz, et. al., 2009)
4.2.1 Execution
Leaders at Schulze and Capella developed brands service standards knowing that check-in
and check-out times were areas of guest frustration. In putting to effect this 24-hour
standard innovative service concept affects operations for the front office, reservations,
laundry, and housekeeping. Employees soon became excited about the opportunity to pioneer
a new process which improved customer service.
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4.2.2 Outcome
Capella does not have complete data on satisfaction or loyalty yet because many of its
properties have just opened. They believe from 12 months of guest data collected for their
Velden and Dusseldorf properties that together yielded a 91-percent average overall guest
satisfaction score and a 93-percent score for likelihood of recommending the property.
Capellas first 18 months, there were no negative comments about rooms not being available,
but many positive comments about flexibility and personalized guest experiences.
More importantly their service standard influenced staff at all levels and inspired them to be
more customer focused. The employees felt empowered to provide the guests with the
experience they desired, and felt good about providing outstanding service. Even an
independent employee satisfaction survey in November 2008, employees rated their feeling
of empowerment at 92 percent.
4.2.3 Insights
Capellas 24-hour check-in and check-out policy is simple in concept, but could have been
difficult to execute. While the 24-hour po