Doing, Using, Interacting

Doing, Using, Interacting – Towards a New Understanding of Tourism Innovation Processes Sara Nordin ETOUR/University of Uppsala, Sweden (corresponding author) Anne-Mette Hjalager University of Southern Denmark, Denmark

ABSTRACT Innovation is a critical factor for long-term economic development, including in tourism. This chapter examines the processes that lead to new products and services in a tourism context. It does so based on two commonly referred to modes of innovation (Jensen et al., 2007); that is, two types of innovation processes: science, technology, and innovation (STI) and doing, using, and interacting (DUI). DUI appears to capture the essence of innovation in tourism enterprises better than STI because it acknowledges the intrinsic nature of services and the typical size and working modes of touristic actors. The case study of Icehotel illustrates how working in partnerships and in close cooperation with customers enhances the advantages of the DUI model. The handling of externally induced events and difficulties and the critical partnerships are better understood through the DUI than through the STI lens. The DUI framework leads to a more correct picture of tourism innovation and could also provide a better guidance for policy processes in the field. Keywords: Innovation Process, Innovation Management, Tourism Innovation, Modes of Innovation, Doing Using Interacting Mode, DUI, Knowledge, Networks, Customer-driven Innovation, Open Innovation, Icehotel

INTRODUCTION When it comes to innovation activities and innovation performance, the tourist industry has often been accused of lagging behind other sectors in the economy (Camison & Monfort-Mir, 2012; Mattsson, Sundbo & Fussing-Jensen, 2005; Sundbo et al., 2007; Hjalager, 2010). However, this theory has been questioned recently from the point of view that tourism (like many other services) is different from these other sectors. For that reason, the approaches chosen for scrutinizing the effects and for analyzing the innovation processes should also differentiate themselves from those in areas such as manufacturing (Rønningen, 2010; Sundbo et al., 2012; Stamboulis & Skayannis 2003; Sundbo et al., 2013). Hence, the understanding of innovation in tourism requires a faceted approach and the use of distinctive models and frameworks. The tourist industry may actually be more innovative than hitherto assumed. Studies of tourism innovation have placed a significant emphasis on the innovation outputs: new products and services, changes in marketing approaches, remodeled organizational structures, etc. To date there

has been a lack of in-depth insight into the innovation processes that take place in tourism enterprises, and little is known about how managers lead and handle the progression of innovation (Hall & Allan, 2008). A more profound perception of the different modes of innovation may help a firm to identify strengths and weakness in its innovation management (Jensen et al., 2008). Any activity taking place in a tourism establishment is driven by a number of external forces and internal determinations. Therefore, it seems important to create a more accurate understanding of processes and management approaches in order to be able to judge the tourism sector’s innovativeness in a correct context. This knowledge can be essential for the enterprises, but also for policy bodies that aim to enhance the innovative capacity of the tourism sector (Hjalager, 2012; Rodriguez et al., 2014). At the same time as tourism enterprises are characterized as innovation laggards, some tourism establishments have actually manifested themselves as immensely innovative and have surprised their customers and competitors with daring concepts and radical solutions. When Icehotel in northern Sweden was first established, it spurred a further reflection on the paradoxes in the tourism sector concerning innovativeness. How did this come about? What was the process from the first idea to the establishment? What stimulated the highly remarkable innovative add-ons year after year? What type of managers could lead this process and pursue a continuation? What did they do differently from colleagues in the tourist industry? This chapter uses Icehotel to inquire into the innovation processes of one successfully innovative tourism enterprise. The aim is to use a “rich” case to come closer to an understanding of innovation processes in tourism. The study strives to use, critically discuss, and further develop the DUI model (Jensen et al., 2007) in the tourism context.

BACKGROUND The motivation behind this chapter is to move the discussion of tourism innovation away from the output emphasis and towards an insistence of the importance of the process. A vast generic literature deals with innovation processes and the management of innovation (Dodgson et al., 2014; Tidd & Bessant, 2013). However, the interest for innovation processes, specifically in tourism enterprises, arose much later (Aldebert et al., 2011; Hjalager, 2010). It can still be characterized as an emerging field that places a distinct emphasis on the importance of networks as stimulators and as facilitators of knowledge transfer (Novelli et al., 2006: Ottenbacher & Harrington, 2009; Weidenfeld et al., 2010). However, much is lacking in terms of an overall understanding of innovation processes in tourism and the managerial significance and integrative efforts.

TOURISM INNOVATION PROCESSES Two Ideal Type Models of Innovation Processes Introduction Jensen et al. (2007) described the STI–DUI modes as two ideal type models of organizing learning, knowledge flows and innovation processes in firms. STI refers to science, technology, and innovation, whereas DUI involves doing, using, and interacting. Some general features of the two models will be outlined in greater detail below, with an emphasis on the DUI mode of innovation. Table 1 summarizes the relevant parameters.

Table 1. A Comparison of the STI and DUI Modes of Innovation

Characteristics of the organization Staff composition Choice of innovation projects Main drivers Planning of innovation processes Visibility

Knowledge input Verification Management style Main advantage

STI Mode Rigid division of labor Well educated, a high proportion of scientific staff Strategic choice, long term perspective Technology Linear, step-by-step forward moving process Closed processes, a level of secrecy until introduction Scientific knowledge, disciplinary subgroups Tests, prototypes, patents Coordinative Efficiency

DUI Mode Flexibility of work functions, networks Mixed, experience-driven Responding to opportunities and constraints Demand Circular, taking in experiences where needed, accepting failures Open, relational processes, inviting customers and collaborators to follow the process Practical knowledge, interdisciplinary subgroups Real life implementation Integrative Creativity

There seems to be a tension behind the models in practical life, that it may be difficult to subscribe to the same models at the same time, and that they apply to different categories of enterprises. However, the most successful firms in Jensen et al.’s (2007) investigations have actually been found to be able to combine the two sources of knowledge and innovation.

The STI Mode The STI framework is associated with the linear model, suggesting that technical and scientific changes happen in a linear fashion from invention to product innovation and further to diffusion. The logic includes a research and development phase, and possibly patenting, then proceeding to prototyping, testing, and finally implementation. However, the STI mode deals not only with how innovation is carried out, but also with types of knowledge used and how learning takes place. In this innovation model, analytical and science-based knowledge dominates (Asheim, 2007), although synthetic (and often engineering-based) knowledge is also involved in the design of prototypes. The use of symbolic knowledge may also influence areas such as the marketing of innovations (Isaksen & Karlsen, 2012). Lundvall and Lorenz (2007) argued that STI emphasizes ‘know-why’ and ‘know-what’, rather than ‘know-who’ and ‘know-how’. Innovation management seeks to efficiently coordinate the different steps and the involved actors and departments in order to ensure the shortest possible process from idea to implementation. As a consequence of a high specialization, innovation activity is most often initiated in internal and highly specialized R&D departments, in universities and institutes, and in research-intensive small firms. The knowledge creation is predominantly based on the development and testing of scientific, formal models. Examples of STI-innovating firms are believed to be found in pharmaceuticals, ICT, mechanics, food and beverage sectors, but also in the health sector, banking, and finance (Isaksen & Karlsen, 2012). The R&D projects are triggered by factors such as a problem with a product, production issues, and new technological opportunities. Any new innovation project will be well founded within the general strategy and trajectory of the firm.

This innovation model has been dominating the scene for a long time, and the innovation management literature seems to strongly advise a well-planned and controlled process (Tidd & Bessant, 2013). In reality, however, many innovation projects are overwhelmed by various unexpected events and may suffer from a lack of creativity.

The DUI Mode Jensen et al. (2007) recognized that the approach to innovation has been moving away from a strong emphasis on formal research and development models towards other major sources and processes. These not only include firm staff and managers, but a far wider group of actors, possibly in regional or national innovation systems. Arundel et al. (2007) stated that: “More recent work within the national systems perspective highlighted the importance of other factors to successful innovation, particularly in low and medium technology sectors, where formal R&D frequently plays a secondary role. These other factors include interactions with suppliers and customers, other forms of ‘open innovation’, and feedback mechanisms from the market. These interactions frequently form within localized networks, creating unique innovation systems at the regional or national level” (p. 1176). Arundel et al. also emphasized the learning economy, where knowledge is experience-based and not just science-based. This mode of innovation has therefore sometimes been referred to as ‘relational learning’ (Jensen et al., 2007; Isaksen & Nilsson, 2013). This point corresponds well to how the DUI model typically places greater emphasis on ‘know-who’ and ‘know-how’, rather than ‘know-what’ and ‘know-why’, whereas the latter is given priority in the STI model (Jensen et al., 2007). In this way, relational learning can lead to social bonds, which are typically informal, and to common codes of information; this tends to happen across disciplinary boundaries. In this context, problem-solving groups, decentralized responsibility, job and task rotation, team work and investment in training are examples of ways to support a learning and knowledge exchange that can contribute to increased innovative performance. Whereas Jensen et al. (2007) used R&D activities (along with patents) and collaboration with university scientists and research institutes as indicators of the STI mode, there has been a lack of DUI measures that, according to Jensen et al. (2007) reflect political priorities and decision-making. Nevertheless, they introduce a number of ways to measure the DUI mode. These can be applied to a tourism setting as well, focusing on issues such as interaction and cooperation with customers (the extent of cooperation and the results); integration of functions, systems for collecting feedback and proposals (both from customers, partners and within the internal organization); interdisciplinary workgroups (in bigger tourism enterprises) and inter-firm cooperation (at the destination level); the share of firms belonging to a cluster; the use of systematic work rotation and softened demarcations (between employee groups); quality circles (where workers with similar work tasks meet regularly to discuss and solve work-related issues, but could also be at the destination level); and, finally, the degree of autonomous groups (when a team of employees are granted self-control over their responsibilities). Lundvall and Lorenz (2007) based their indicators on whether firms make use of core high-performance work practices. They sought to capture how adaptable organizations are and how rigid and hierarchical they are, as opposed to being decentralized and flexible. Tourism firms tend to be small or micro in size, which means that the majority are not divided into separate departments. The larger ones are often at least divided into different functions and sometimes also workgroups. However, in order to capture a larger part of the tourist firms’ innovation activity, it is appropriate and possibly even necessary to apply these indicators at the destination level as well. In the DUI model, the actors accept that mistakes occur and they learn from them. Feedback takes place as close as possible to real life, often using the customers as willing test persons. Managers need to be

integrators, working with all partners in the experimental processes; the critical task is to keep up the motivation and spirit, even when things are difficult and unpredictable. The downside of the DUI model is the significant risk of wasted resources, failed communication, and responsibility ambiguities. Due to its high dependence on interaction and networks, the DUI model is also often localized to a large degree (Jensen et al., 2008).

Methodology The STI–DUI framework is a guiding principle for the case study of Icehotel. Addressing findings from the literature, the present study emphasizes the discussion on models of innovation processes, applied to a tourism setting. In particular, the relevance of the DUI model of learning and innovating is discussed. The story of Icehotel AB in northern Sweden will serve as an example of how innovation in tourism can arise and develop over time. The case study was chosen because it is one of the world’s best-known tourism innovations and because it is competing with its uniqueness, rather than with volumes or price. Simultaneously, it is distinctively a tourism enterprise in the sense that services are produced and consumed at the same time, and because the experience is the most important element in the product. Unlike many innovations derived in the manufacturing industry, its goal is not mass-production, and the experiences gained by Icehotel may have value for other tourism enterprises. The research was comprised of eight semi-structured interviews, conducted by the main author, with people who have been involved in developing Icehotel. Some are still active and others were part of the earlier phases; some work at Icehotel and others have provide financial and business support, both private and public actors. The interviews were recorded to ensure correct understanding and were then analyzed.

Icehotel from an Innovation Process Perspective Icehotel started with a focus on traditional summer tourism, offering wilderness adventures such as riverrafting and fishing in the 1970s. At the time, Jukkas AB (now Icehotel AB) struggled with the winters and suffered from seasonality issues. The company management discussed ideas about how to turn the long, dark, cold winters from a disadvantage into an asset. In the late 1980s an art exhibition igloo was built on the frozen Torne River. Even though it was never intended as accommodation, some guests ended up spending the night there on a bed of soft reindeer skins and sleeping bags. The guests were so moved by the experience that it triggered the idea of building a hotel out of ice and snow. Thus, Icehotel was an innovation and development that was largely generated by customer reactions. This was the starting point of a successful establishment that has continued developing ever since. However, even though Icehotel often is portrayed as a ‘fairytale story’, it involved hard work to implement the idea and transform it into a new innovative product. “Few people realize how much time it has taken and how much work it has involved”, said Icehotel’s managing director, Yngve Bergqvist. He presented a journey with countless of difficulties and issues, particularly when dealing with public actors. The fact that the region in which Icehotel is built has been historically dominated by the mining industry probably increased the general initial skepticism. Most locals did not see the potential in building a hotel out of snow and ice. The officials at the local government were also skeptical when the idea first was presented. It was only with help from the leading politicians at the time that Icehotel was granted

permanent permission to build the hotel each fall, provided it was gone by the following summer. The potential of the tourist industry has not been acknowledged on a wider scale until more recent time and this is described as one of the main impediments in developing the venture, according to several of the respondents. The continuing journey was characterized by trial–and-error strategies, long-term visions, and the desire and intention to always stay one step ahead. Creativity and the role of the creative entrepreneur are often underlined when describing the evolution of Icehotel, but the innovations that have been generated over time are the result of close interaction with customers and, primarily, strong cooperation with collaborating partners, employees, and visiting artists. It was also challenging to find financers and get access to capital, particularly since the concept was a novelty and hence untried from a market perspective. “We had to finance the product development ourselves”, said Bergquist. Consequently, the first winters had a limited operation and hardly any profits. As late as in 1993, Icehotel had no sponsors and no license to serve liquor at the hotel. However, the media came to its rescue and the heavy media coverage has been one of the most important contributors to Icehotel’s success. A press release by the Swedish Tourism and Travel Council (now Visit Sweden) in 1993 also spurred the interest in the spin-off innovation of the Icebar, which was featured on Newsweek’s list of the world’s top 10 best bars, making it internationally renowned. The fact that the picture of the Icebar displayed Absolut Vodka liquor led to the start of a very productive and successful cooperation with Absolut Spirits. At the time that the pictures of the Icebar circulated worldwide, Icehotel had still not been granted permission to serve liquor. However, this serves as an example of how a creative entrepreneur can work around public legislation to fulfill a vision or a generated idea, rather than to give in to rules and legislations that can be difficult for a small company to both fully comprehend and meet. In 1994 the cooperation with Absolut Spirits commenced with an international PR campaign to promote Absolut Vodka with world-class fashion models, who were photographed in Icehotel and its surroundings. This was yet another landmark in making the hotel concept internationally known. Simultaneously, the product development in Jukkasjärvi continued, and along with the many suites and rooms at the hotel, an ice theater and an ice church were developed. The latter was part of BBC’s coverage and broadcasting of the world-wide millennium celebrations of the year of 2000, featuring a Sami wedding in the ice church. This led to further international promotion. The work with art, architecture, and building techniques has also progressed.

The Art of Design Group – a large team of sculptors, architects, and builders – have come to play a very important role in the building process and hence in developing new products. The artists are handpicked to make each individual room of the Icehotel unique and different from year to year. No two Icehotels are the same, which is a well-thought-out strategy to increase the incentives for guests to return. Art made out

of ice and snow is a vital component that makes each product unique and also requires a constant renewal process. The fact that the materials used to build the hotel are returned back to the Torne River each year when spring comes also makes it possible to promote Icehotel as an environmentally friendly choice, which has a good timing from a consumer demand perspective. This policy is based on the company’s motto: “From the river came the ice and to the river it shall return; all that will remain are memories”. The company aims to create experiences out of the available natural resources – coldness, darkness, ice, snow, and the Northern Lights. It also involves art and design (in using ice, snow and water), architecture, and landscape, as well as about industrial production and further developments at Icehotel. Absolut Icebar was later jointly developed into a franchise concept by Absolut Vodka and Icehotel, and the first establishment in Jukkasjärvi was followed by more outlets. The ice used in the production process originated from the Torne River in the north of Sweden. In this respect, Icehotel expanded its business from being a basically pure tourism enterprise in the 1970s into also dealing with production and export. This has required both new knowledge and equipment, such as snow canons, a wide range of front loaders, tractors, special ice saws, and other specialized tools that are used in the production process. A large freeze-house and production hall have also been built to store ice for processing and export. The “creative entrepreneur” – the managing director and founder, Yngve Bergquist – is given a prominent role in the story of Icehotel. He is highly credited by the respondents for raising innovative ideas and developing new products. “He not only comes up with great thoughts, he is also capable of carrying them through,” said one of the associates. However, Bergquist himself underlined the vital role of the people close to him: “When we took over in the 1980s we put together a group of people who became partners in the business. Most of them are still here. This was one of the most important strategic decisions, to have a majority ownership by actors who have the guts to take responsibility, to have a group with long-term thinking”. This team of associates, employees, and board members is described as having played an important role, along with the Art of Design Group, which is also an important source of innovation and product development. A lot of people with creative ideas, often thinking out of the box, are brought to the hotel and new ideas are developed in relation with these people. Creating active partnerships and interacting with other actors have been explicit strategies from the start; a way of accessing new networks and making new business. From a historical perspective, Absolut Spirits is described as the most important cooperating partner. Its networks, contacts, and knowledge have been an important resource in the marketing of Icehotel and the Icebar concept, as well as in developing the latter. Creative people working with their hands and minds are essential to the continuing development and it has been a central strategy to tie the right people to the network around Icehotel. Customers are also given a prominent role: “We need to be as close to the guests as possible to understand what they want,” explained one employee, as “they are in general an experienced and

demanding customer group.” Feedback from customers and their emerging demands are important for improving products and services. However, in the case of Icehotel, in creating the uniqueness, the truly innovative aspects of their operations do not seem to have the same significant role. In that matter, the creative entrepreneur and the Art of Design Group are emphasized. With regard to the relationships involving public institutions, particularly officials at the local government, one of the managers said: “We live in different worlds … They have their procedures and rules to play by before they can make a decision and we lose potential money for every minute that goes by”. Looking at the development from a historical perspective, from the enterprise offering mainly more traditional summer activities in the 1970s to the innovative approach the enterprise has today, the contact with the local government is described as having been the main obstacle. One key issue, according to several of the respondents, is that tourism has never been viewed as a “real” industry, at least not until quite recently.

The Icehotel and the DUI Model Icehotel is the proprietor of an impressive depth of tourism innovations. When observing the incidents over time, one could conclude that managers and employees mainly practice a DUI mode of innovation processes and management. If Icehotel had been analyzed from a more traditional STI perspective only, this innovative establishment would not have been perceived as the success it is from a process view, but more likely only from an output perspective. It is simply not an innovation that has derived from sciencebased knowledge or highly educated staff. It has not been developed in a firm with a R&D department, and the enterprise originally had little connection to universities. In these respects, Icehotel may have many similarities with other tourism enterprises. What is significant from this story is that customers have played a central role, not only to trigger the very development of Icehotel, but also in the continuing development over the years. Many of the guests have been highly demanding customers. This, together with active partnerships and networks, are described as the key elements that lead to both the central innovations and to the overall success. Artists, sculptors, architects, and builders make up a core of creative partners. The role of media has also been central to the company’s success. The ownership structure has intentionally demanded a shared long-term responsibility and involvement, at the same time as there has been room for creativity and visionary thinking. However, with the continuing product development, Icehotel has also cooperated with science-based research institutes, not least when it comes to building techniques and ice formation. One example of this is the latest innovation at Icehotel. Currently a big solar park is being built in Jukkasjärvi to keep ice suites, an ice bar and an art gallery open all year round with the help of a cooling installation run by solar energy. The idea to keep Icehotel open all year round is old, but it was just recently that they found a technical solution for it that is also environmentally friendly. From that perspective, the company has moved from a more ‘pure’ DUI innovation mode and come slightly closer to the STI mode, using both forms of learning. This is also supported by the fact that the company has started to work with immaterial rights protection (licenses and patents) of innovations. Looking at the overall history, however, there is an emphasis on ‘trial-and-error learning’. A success factor is the constant renewal of both the hotel itself, but also with new products such as an ice theater and

ice church. This development has evolved in close cooperation with external partners. Ice is a nonpermanent material, and this can be an underlying factor for the utilization of the DUI elements; therefore, everything must be reinvented every year. The role of the manager as an integrator is seen from the fact that it is essential for everyone – employees and partners – to be proud of what they have created and enthusiastic about the never-ending reinvention processes. The system is open and network-oriented to some extent, and it can be accommodated to artists’ work pace and processes. Nevertheless, individual power and commitment have played a significant role in the development of the operations behind Icehotel. The founder, managing director, and the company management have been rather stable. They have followed the development closely, some for over 20 years. At the same time, there has always been a flow of people coming and going with new ideas and fresh thinking, not least of which are the visiting artists and sculptors. Some years ago, new procedures were also implemented when appointing the board, taking the work to a more professional level. This has led to stability, with long-term strategies being mixed with new people and new thinking. The commitment to the business, particularly during difficult times, has been described as both a driving force and a success factor. Several managers have emphasized the importance of both seeing opportunities and being capable of implementing ideas, which they feel are among the greatest gifts of the managing director. Icehotel has also had the freedom to set its own goals of profitability, which has increased the opportunities to task risks and experiment. The company culture has been “allowing” in the sense that it has been permitted to try and sometimes also to fail. One example was the ice theater, which was too expensive to continue with, but led to intensive media coverage. Regardless of how successful Icehotel has been, it remains quite a small firm compared to many other companies. The story illustrates that in order to fully understand the innovation processes, it is necessary to include a more systematic and relational view. In this case, the destination resources are essential, but the expansive progression of the concept necessitated a wider network approach. Global and local networks are not mutually exclusive as drivers of innovation processes in tourism.

DUI and Tourist Enterprises Icehotel is extraordinary in its innovative scope, and there is good reason why it has received such a high level of attention. However, in many respects it is not that different from many other tourism enterprises when it comes to innovation processes. The ‘relational learning’ concept goes well with the common organization of tourism firms in their destinations. The notion of a tourist destination is often seen as a complex network with several levels of interaction – both networks of actors within the destination, but also networks linking it to its surrounding environment with potential and actual customers, other destinations, government bodies, etc. (Nordin & Svensson, 2007). Consequently, network relationships have played a central role in many contemporary discussions about local and regional tourism development. It may even be fair to say that the context of destination development in a particular community cannot be fully understood unless the interaction and knowledge sharing of key stakeholders is scrutinized. This also corresponds well to how the DUI mode typically places significant emphasis on ‘know-who’ and ‘know-how’ (Jensen et al., 2007). Firms relying on the DUI mode are often less resourceful; for example, in terms of the number of employees with higher education as well as R&D capacities and activities (Isaksen & Karlsen, 2012). This also corresponds well to most tourism firms, and they are known to have weaker bonds to universities and research institutions. Rather than basing development on scientific knowledge, the DUI

model represents an informal and experience-based learning that suits the tourism sector well and suits the limited time and budgets that many small and micro companies have at their disposal. Very few tourism firms are large enough to even have someone work with R&D-related issues, and R&D departments are more or less non-existent. This is another reason why the DUI mode of innovation – where the organization of innovation in firms is more likely to be a part of their ‘daily activity’ and a way of responding to internal challenges and/or customer demand – gives a more appropriate picture of the situation. The close bond to users and customers is another aspect that makes the DUI mode useful to tourism innovation, where consumption and production often takes place simultaneously (Nordin, 2003). It is also reflected by the growing interest in ‘user-driven innovation’ in tourism (Hjalager & Nordin, 2011). With this view, the firm’s organizational form comes to play an important role to the innovative behavior. A firm with a learning organization and a culture nurturing innovation will also be more likely to be competitive, as will a firm that gives priority to interacting with other actors, not just users and customers, but also suppliers. The model below represents an attempt to summarize what has been discussed so far and paint a picture of what the tourism innovation process can look like from a DUI perspective. Hence, the innovation process is likely to originate in an emerging need from customers, cooperating partners or suppliers, or a problem that needs to be solved. Therefore, this initial phase is largely based on practical experiences from daily activities and interactions with customers and users, being responsive to their demands. Feedback can play an important role at this stage. In the second stage, an idea is generated about how to respond to the received signals. This phase is, to a large extent, characterized by practical applications and learning-by-doing (and most likely a fair share of trial-and-error). The resources used to transform the idea into the launching of a new innovation are mainly based on tacit/implicit knowledge that is substantially shared by face-to-face contacts. This indicates the importance of interaction, both inside and outside of the organization and in networks, which makes the proximity at destination level important (the cluster). The use of natural resources – such as ice, snow, coldness, and darkness in the example provided here – may also play an important role in the innovation process. All these elements of doing, using, and interacting may lead to the creation and launching of a tourism innovation, which may later result in spinoffs and new developments, again partly due to feedback mechanisms.

Figure 1. The Tourism Innovation Process from a DUI Perspective

CONCLUSIONS AND FUTURE RESEARCH DIRECTIONS Should tourism enterprises become more STI, and would they acquire advantages if they employed a more rigid, planned, and well-controlled approach to innovation management? The Icehotel case shows us that DUI processes are useful and dominating in the touristic context, but also that elements from the STI mode of innovation can add to the innovative behavior of a firm, in this case particularly with science-based knowledge and cooperation with universities and research institutes, as well as with patents or licenses to protect some of its innovations. However, more than anything, Icehotel has most likely been saved by the unique and original experiences it has developed and offered to customers and the fact that it continues developing from year to year. There will naturally be copies, but there will only be one original Icehotel. Therefore, we support Jensen et al.’s (2007) results that enterprises combining the two innovation modes may be the most successful in terms of learning and innovating, even though the DUI mode is very much prevalent here. We are facing a society in which experience-based learning is challenging science-based learning. This implies that we need a bigger understanding of the DUI elements in order to capture innovation in tourism. Tourism enterprises have a lot in common with other service industries. They are generally all characterized by a larger share of informal and experience-based learning. Innovation is also more likely to be a part of their ‘daily activity’ and a way of responding to internal challenges and/or customer demand. However, it may be fair to say that tourism firms tend to be smaller in size and resources and that they often have a larger share of seasonality staff that often changes from one season to the next. These highly fluctuating knowledge assets mean that the destination plays an important role in the innovation processes. Consequently, when advocating for increased innovation, there is a need to put more emphasis on the destination level and, in this context, link with the capabilities of the individual firm. This said, perhaps the most interesting issue raised in this chapter deals with whether tourism is more innovative than hitherto assumed. This question cannot be answered based on a single case study. However, there are plenty of implications to support the fact that there is a much to gain from adopting the DUI lens when analyzing innovation processes in tourism and that it can be useful for policymakers, business advisors, and universities. There is a trend towards acknowledging the issues of open innovation and user-driven innovation in tourism, which is a step in the right direction. However, further exploration in future research is needed to increase the understanding of innovation processes in tourism and to shed light on how innovative the tourist industry actually is.

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Isaksen, A. and Karlsen, J. (2010). Different Modes of Innovation and the Challenge of Connecting Universities and Industry: Case Studies of Two Regional Industries in Norway. European Planning Studies, 18(12), 1993-2008. Isaksen, A., & Karlsen, J. (2012). What is regional in regional clusters? The case of the globally oriented oil and gas cluster in Agder, Norway. Industry and innovation, 19(3), 249-263. Isaksen, A. and Nilsson, M. (2013). Combined Innovation Policy: Linking Scientific and Practical Knowledge in Innovation Systems. European Planning Studies, 21(12), 1919-1936. Jensen, M. B., Johnson, B., Lorenz, E. and Lundvall, B. Å. (2007). Forms of knowledge and modes of innovation. Research Policy, 36: 680-693. Lundvall, B-Å., and Lorenz, E. (2007). Modes of Innovation and Knowledge Taxonomies in the Learning economy. Paper presented at CAS workshop on Innovation in Firms, Oslo, Norway. Mattsson, J., Sundbo, J., & Fussing‐Jensen, C. (2005). Innovation systems in tourism: The roles of attractors and scene‐takers. Industry and innovation, 12(3), 357-381. Nordin, S. (2003). Tourism clustering & Innovation : Paths to economic growth & development. Östersund : ETOUR (Utredningsserien / European Tourism Research Institute 2003:14). Nordin, S., & Svensson, B. (2007). Innovative destination governance: The Swedish ski resort of Åre. The International Journal of Entrepreneurship and Innovation, 8(1), 53-66. Novelli, M., Schmitz, B., & Spencer, T. (2006). Networks, clusters and innovation in tourism: A UK experience. Tourism Management, 27(6), 1141-1152. Ottenbacher, M. C., & Harrington, R. J. (2009). Institutional, cultural and contextual factors: Potential drivers of the culinary innovation process. Tourism and Hospitality Research, 9(3), 235-249. Peters, M. & Pikkemaat, B. (2014). INNOTOUR: An Innovation in Tourism Policy, in Pechlaner, H. and Smeral, E. (eds.), Tourism and Leisure, Current Issues and Perspectives of Development, Springer Fachmedien Wiesbaden, 51-64. Raich, F. & Zehrer, A. (2013). Einfluss der Besonderheiten und Ausprägungen touristischer Netzwerke auf die Produktentwicklung. In: Zeitschrift für Tourismuswissenschaft, 5(1), 5–21. Riessman, C. K. (2002). Narrative Analysis. In A. M. Huberman & M. B. Miles (Eds.), The Qualitative Researcher's Companion (pp. 217-270). Thousand Oaks, CA: Sage Publications. Rodríguez, I., Williams, A. M., & Hall, C. M. (2014). Tourism innovation policy: Implementation and outcomes. Annals of Tourism Research, 49, 76-93. Rönningen, M. (2010). Innovative Processes in a Nature-Based Tourism Case: The Role of a Touroperator as the Driver of Innovation. Scandinavian Journal of Hospitality & Tourism, 10(3), 190-206. Stamboulis, Y., & Skayannis, P. (2003). Innovation strategies and technology for experience-based tourism. Tourism Management, 24(1), 35-43.

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ADDITIONAL READINGS Alsos, G. A., Eide, D., & Madsen, E. L. (Eds.). (2014). Handbook of research on innovation in tourism industries. Edward Elgar Publishing. Asheim, B. T. and M. Gertler (2005). The Geography of Innovation: Regional Innovation Systems, in Fagerberg, J., D. Mowery and R. Nelson (Eds.), The Oxford Handbook of Innovation, (pp. 291317).Oxford: Oxford University Press. Greenan, N. and Lorenz, E. (2010). Innovative Workplaces: Making better use of skills within organizations, Paris: OECD Publishing. Hjalager, A.M. (2011). Strategic innovation in tourism business, In L. Moutinho (Ed.), Strategic management in tourism (2nd edn), (pp. 127-140). Oxfordshire: CAB International. Holm, J., Lorenz, E., Lundvall, B-A. and Valeyre. A. (2010). Organisational Learning and Systems of Labour Market Regulation in Europe, Industrial and Corporate Change, 19(4), 1141-1173. Isaksen, A. and Karlsen, J. (2013). Can small regions construct regional advantages? The case of four Norwegian regions. European Urban and Regional Studies, 20(2), 243-257. Lorenz, E. (2011). Do Labour Markets and Educational and Training Systems Matter for Innovation Outcomes? A multi-level analysis for the EU-27, Science and Public Policy, 38(9): 691-702. Lorenz, E. and Valeyre. A. (2005). Organisational Innovation, HRM and Labour Market Structure: A comparison of the EU-15”, Journal of Industrial Relations, 47 (4). Lundvall, B. Å. (Ed.). (2010). National systems of innovation: Toward a theory of innovation and interactive learning (Vol. 2). Anthem Press. Metcalfe, J. S., & Miles, I. (Eds.). (2012). Innovation systems in the service economy: measurement and case study analysis (Vol. 18). Springer Science & Business Media. Salter, A. & Alexy, O. (2013). The nature of Innovation. The Oxford Handbook of Innovation Management, 26-49.

KEY TERMS AND DEFINITIONS Destination: The destination generally comprises a wide range of competing and complementary tourism operators, public–private linkages, and multiple sectors combined in an infrastructure. It is geographically based but with no clear and set boundaries. Since people often give a place its identity based on their expectations and possible previous experiences, the perceptions could even differ from time to time depending on who you ask. Hence, a destination is dynamic and constantly changing. It is characterized by interdependencies, where complementary products and services are often required to satisfy the customers and where trust and reliability may be even more important issues than in manufacturing industries, since production and consumption to a large extent takes place simultaneously. Finally, it involves structures and processes taking place over time, which makes it important to handle the fact that relations between variables also change over time. Therefore, an approach that can handle dynamics is required. DUI Mode of Innovation: The DUI mode of innovation focuses on the development and use of knowledge through learning within and between organizations, and on the interaction with customers and users. This type of learning and knowledge is often found outside of R&D departments and universities, often involving tacit knowledge that requires face-to-face meetings and a geographical proximity with trust-based cooperation. Therefore, this mode of innovation has sometimes been referred to as ‘relational learning’. Icehotel: A hotel built out of ice and snow in Jukkasjärvi, approximately 200 km north of the Arctic Circle in Sweden. Innovation: The search for, and the discovery, development, improvement, adoption and commercialization of new processes, new products, and new organizational structures and procedures (based on a definition by OECD). Innovations normally emerge through incremental and cumulative processes, but may appear as radical and unexpected events. Innovation system: All important economic, social, political, organizational, and other factors that influence the development, diffusion, and use of innovation. This broad definition focuses on the determinants of innovation, and not on the specific outcomes in terms of, say, new products. It can also refer to the embeddedness and the ‘structuration’ of innovative practices. Hence an innovation system consists of actors and relations between those actors that, through collective processes, create the innovation performance within the system. STI Mode of Innovation: The STI framework is associated with the linear model (suggesting that technical change happens in a linear fashion from invention to innovation to diffusion), with patenting and with R&D activities. This innovation mode has been dominating the scene for a long time, and in the past largely led to other forms of innovation such as organizational learning and user-driven innovation being overlooked. User-driven Innovation: The phenomenon by which new products, services, concepts, processes, distribution systems, marketing methods, etc. are inspired by or are the results of needs, ideas, and opinions derived from external purchasers or users. User-driven innovation involves existing and/or potential users, and the processes rely on systematic activities that

search for, acknowledge, tap into, and understand the users’ explicit as well as implicit knowledge and ideas.