Category: Strategy

Strategy planning, strategy execution and business model design focused on collaborative modelling

Collaborative business modelsCollaborative cultureCulture change

BCG six rules for managing complexity come down to one: make cooperation happen

As it has been explained in previous posts, Destinations 3.0 are developed upon cooperation between a wide variety of agents, encompassing DMO, DMCs, Tour-operators, Government, local suppliers, local community, etc. To make this cooperation work and manage such a complex network of players, the Boston Consulting Group has developed a new approach to managing complexity, called smart simplicity, which hinges on six simple rules. Guess what? All six rules come down to just one: make cooperation happen.

How do companies create value and achieve competitive advantage in an age of increasing complexity? That’s the question authors of “Six Simple Rules” Yves Morieux and Peter Tollman try to answer. For them, the winners of the new much more complex context will be the companies that can transform complexity into competitive advantage. For that to occur, they provide six managerial rules that go for companies, managers and employees with less-direct control, fewer systems, more flexibility and more autonomy. If read carefully, all six are about increasing cooperation at organizations, but three of them talk about it more directly.

Rule number two is “Look for Cooperation”Authors ask managers to find out how cooperation happens and who makes it happen; identify the “integrators”, the people and units who bring others together and drive processes; and eliminate layers and rules and give these integrators the power, authority, and incentives to make the entire task succeed.

“Six Simple Rules” differentiate between Cooperation and Collaboration. For them collaboration is about teamwork and good interpersonal relationships, which could even lead to the avoidance of real cooperation. Cooperation is a demanding activity that involves taking individual risks because individual contributions to the joint output can’t be directly measured. People only cooperate when, by cooperating, they can win as individuals. “Remove managerial positions if they don’t influence people to cooperate”, authors advise.

Rule number four: “Increase Reciprocity” (to make cooperation happen). Instead of relying on dedicated interfaces, coordination structures, or procedures, authors recommend managers to increase reciprocity, which ensures that people have a mutual interest in cooperation (as their success depends on each other). “Reciprocity makes people cooperate more autonomously and, therefore, makes organizational life simpler.”

And finally, rule number six: “Reward Those Who Cooperate”. If people think cooperation is risky, make it riskier not to cooperate. Most organizations punish failure. But that can make people risk averse. The challenge is to encourage risk taking that improves performance.  For Yves Morieux and Peter Tollman the solution is encouraging cooperation. “People take personal risk, and risk becomes fruitful for the company, when they know they can count on others to compensate, relay, absorb, or provide a safety net in case things go wrong”, they consider.

The original article is available at Why Managers Need the Six Simple Rules

This article is from www.co-society.com/half-bcg-six-rules-better-simpler-management-cooperation/

Collaborative business modelsCollaborative cultureCulture changeInnovationInnovative culture

A fresh outlook to public-private sectors relationship where a Co- mindset is key

Since the latest global financial crisis, new evidences prove the mindset shift ingrained in the private sectors in accordance with the trends of Marketing 3.0, namely referring to the business mission driven purpose and the cooperation between businesses and also with governments. This article deepens in the new role of governments in this new paradigm. For Willian D. Eggers and Paul Macmillan, authors of The Solution Revolution, it’s time to contemplate a fresh outlook to public-private sectors relationship where a Co- mindset and practice is key.

As tough societal problems persist and government budgets tighten, citizens, social enterprises, and even businesses, are relying less and less on government-only solutions. The Solution Revolution describes how, as the subtitle puts it, “business, government and social enterprises are teaming up to solve society’s toughest problems”.

These wavemakers range from edgy social enterprises to mega-foundations that are eclipsing development aid, to Fortune 500 companies delivering social good on the path to profit. In order to make the biggest impact, they have started to think holistically about their role and their relation to other players, not as competitors fighting over an ever-shrinking pie, but as potential collaborators. By erasing public-private sector boundaries, they are unlocking trillions of dollars in social benefit and commercial value.

For the “Solution Economy” new players, government is an essential part of the solution but government’s role have to change dramatically. The traditional boundaries between public and private sector should blur in order to get better results when dealing with social problems. There are some on both sides of the divide who doubt whether there should be such a divide at all. They are realizing that each sector stands to do better with a little help from the other.

Fortunately, as The Solution Revolution points out, international companies are increasingly seeking “progressive structures” through which co-operation is endorsed and regulations are created to engender higher levels of trust and mutual interest between companies, sectors, supply chains and markets.

Thus, the business world is undergoing such profound change that a fundamental rethink of the relationship between companies and governments is required. For instance, the so called “Purpose Economy” or “Purpose-Driven companies” where a new CSR mindset is less about PR and more about looking at problems as opportunities, including social problems as education, water, low-cost healthcare, sanitation, recycling, or reducing traffic congestion.

The Solution Revolution examines scores of examples of how this kind of Co- approach is already solving social problems. Here are some of them:

  • Recyclebank turned recycling into a game by uniting cities, citizens and companies around a system of exchange and rewards. Citizens are encouraged to recycle more by earning points that can be redeemed for discounts and deals on products and services from Recyclebank’s network of more than 100 corporate sponsors.
  • Unilever created an entire ecosystem of diverse partners to address an urgent sanitation problem affecting more than 600 million poor Indians. It acted as a partner with NGOs, banks and schools to create a profitable market for cleaning products in rural India.
  • NASA partnered with SpaceX and other private space companies when fiscal constraints shut down the agency’s space shuttle programs. SpaceX’s unmanned Dragon capsule successfully docked on the international space station in May 2012.

You may find the original article in The Solution Revolution

This article is from www.co-society.com/fresh-outlook-public-private-sectors-relationship-co-mindset-key

Beyond the proposed destination models 3.0, which other public-private partnerships do you envision for tourism destinations?

Business model innovationBusiness trendsCollaborative business modelsCollaborative cultureCulture change

Business ecosystems come of age

As it has been explained in many posts and Whitepapers, one of the key success factors of destinations in their evolution towards the Vision of Tourism 3.0 is to develop an innovation ecosystem integrated by different types of contributors. In that regard, Business Trend Series Deloitte’s report Business ecosystems come of age presents a series of articles describing how businesses are moving beyond traditional industry silos and conjoining networked ecosystems, creating new opportunities for innovation.

The report offers a glimpse of how some view the rise of ecosystems as an opportunity for creating powerful new competitive advantage as it becomes increasingly possible for firms to deploy and activate assets they neither own nor control and expand the possible beyond of their expertise and activities.

This brief summary outlines the various subjects and ideas dealt with:

Introduction: A brief history of the concept of ecosystems applied to business and how it all started in the technology sector but now is also taking root far beyond.

Blurring boundaries, uncharted frontiers: Long-standing boundaries and constraints that have traditionally determined the evolution of business are dissolving, allowing new ecosystem possibilities to flourish.

Wicked opportunities: Many kinds of complex, dynamic, and seemingly intractable social challenges are being reframed and attacked with renewed vigor through ecosystems formed by unprecedented networks of NGOs, social entrepreneurs, governments, and even businesses coalescing around them.

Regulating ecosystems: Regulators are challenged to create policies and solutions that protect the public’s interests and are also dynamic enough to keep pace with innovation born through ecosystems.

Supply chains and value webs: A set of powerful developments have worked together to help transform the business environment, changing how supply chains are configured, further heightening their strategic significance for many firms, and creating new leadership imperatives for the years ahead. Now “companies don’t compete—supply chains do.”

The new calculus of corporate portfolios: The rise of business ecosystems is compelling strategists to value assets according to an additional calculus, often generating different conclusions about what should be owned.

The power of platforms: Properly designed business platforms can help create and capture new economic value and scale the potential for learning across entire ecosystems.

Minimum viable transformation: Business model transformations are not unprecedented, they have always happened. It is not even new that business model transformations must consider the evolution of a company’s broader ecosystem. What is new today is that such transformations must be considered and accomplished routinely—not as storm-of-the-century events.

You may download the document at Business ecosystems come of age

This article is from www.co-society.com/official-business-ecosystems-come-age-deloitte-confirmed/

Business model innovationCo-creationCollaborative business modelsInnovationMarketing 3.0

Case study: Trip4real. Tourism experience collaborative business model

Trip4real is a paradigmatic example of how the collaborative economy flourishes in new business models for the tourism industry. Founded in Barcelona by Gloria Molins, it connects local experience developers with tourists eager to discover the destination through tailored experiences for them. Trip4real is a collaborative platform where any local may market a tourism experience to help the tourist discover the destination from a particular point of view or live special interest experiences.

The platform acts like a marketplace and also as an intermediary, so the payment is controlled by the platform and it gets a commission out of it. After the payment is done, the supplier and the client are connected to meet and live the experience. The motivation behind this business model is the will of the tourists for discovering the destination off the beaten track, where the locals go, and the hidden secrets that cannot be found in the Guides, as well as the authenticity brought by the interactivity with locals, who facilitate a deeper understanding about the local culture.

The first platform was developed for Barcelona, but other platforms have been developed in Madrid, Lisbon, London, Paris, Rome, Dublin, Berlin, Amsterdam, Edinburgh and a handful of Spanish destinations.

As has happened with Uber, do you think that these business models may be treated as unfair competitors to the local “official” tour guides and incoming agencies? Do you think there should be any kind of restrictions to letting it legally compete with standard tourism service suppliers?
You may check further details at www.trip4real.com

Business model innovationCollaborative business modelsStrategy

Small local brands: You either collaborate or you’ll be intermediated

In Destinations 3.0, DMOs work as marketing platforms intermediating for the local businesses and joining efforts with those businesses to reach the global market, just in the way that thousands of niche companies are willing to enjoy the benefits of the level of visibility and consistency that only a more “mainstream” brand can offer. This article explains the imperative need for small businesses and brands to develop cooperative marketing platforms to avoid being intermediated by wholesalers with a much higher negotiation power.

Some early Internet evangelists promised anybody with a website and an e-commerce platform can have a global market no matter how small the company or where it is located. A theoretical true, that statement does not take into consideration the laws of Attention Economics that Internet itself is boldly proving right from the very first moment.

It’s also true “Long Tail” niche offers can overcome this barrier by the same differentiation and exclusivity that made them niche in the very first place. Yes, it’s possible to create a global audience or market by offering something nobody else is offering and then establishing a relationship with your customers leveraging all new media and tools available today. Yet, still, this level of differentiation is not always and for everybody possible.

Collaboration with others such niche brands can make this strategy less difficult and more potentially fruitful.  Good news is people seem to be rejecting the notion of large corporations and are looking for companies whose people and story they can connect with. Bad news is Attention Economics apply, making impossible for customers to have a relationship close enough with all niche brands that could be relevant to them in a particular moment.

This is why even living in a flat world we still need intermediaries. A different kind, but still intermediaries. But in the digital paradigm, once eliminated geographical proximity as a factor, we only need one of these intermediaries for each of the limited list of categories our minds can deal with, making monopolies or oligopolies a natural and logical outcome for every market.

Good for those understanding becoming the perfect interface for a particular category of products or services is the fast lane to success (and dollars) in the digital realm. Too bad for the ones who will have (or already have) to deal with a monopolist in order to make their products or services visible and purchasable. Too bad for thousands of musicians or app developers taken a cut of a third of every sale that would have been considered outrageous if taken by a local record or software shop. For every Etsy or Zappos of the world, there is the menace of them taking advantage of a dominant position, the threat of the “Upper Hand” syndrome we wrote about referring the case of Fulfillment by Amazon.

Collaboration will be the only possible answer for the convergence of a growing number of niche offers and the challenge for these companies of having enough scale for their offers to be visible and purchasable. If these companies do not create and own their own intermediation by collaborating with others, somebody else will create a digital intermediation for them.

Co-Society was recently involved in a project for an association of cooperatives looking for new roles in a changing, much different world in which the Co-op concept was born. There is still an opportunity to build many middleware platforms between consumers and niche offers, an opportunity for umbrella organizations representing smaller or local brands and offers with a promise to the consumer of a guaranteed consistency and quality. But for these to be owned by the smalls brands themselves, there will be no other way that to be implemented and managed by a more collaborative, democratic and horizontal organizations we are used to, organizations similar to the structure and mindset with which cooperatives were born more than a century and a half ago.

This article is from www.co-society.com/small-local-brands-either-collaborate-youll-intermediated/

Up to what extend could the local niche brand be differentiated from the destination brand if this niche business has to be marketed through the destination branded platform?

Collaborative business modelsCollaborative culture

Seven habits for a highly successful Co-initiative

As you may have read in previous post or some of the Envisioning Tourism 3.0 Whitepapers, destinations approaching Tourism 3.0 have to develop a culture of collaboration to enhance the success in the development of collaborative business models and co-creation activities. This article from McKinsey & Company sums up to seven the number of ways to make partnerships successful. Marco Albani, the author, refers specifically to advices to take into consideration when creating and maintaining an alliance to address social and environmental issues, but tips can be likewise applied to any kind of partnerships and all sorts of Co- initiatives.

These seven habits for a highly effective Co- are the result of a research consisting basically in the interview of dozens of business, government, and NGO leaders.

These were the seven essential principles identified for success in a Co- initiative:

01.- Identify clear reasons to collaborate

Any collaboration must make sense for all parties. Commitment can be weak if partners sign up for an alliance simply because they don’t want to say no. A nascent partnership must identify strong incentives.

02.- Find a ‘fairy godmother’

As in any other kinds of projects, first movers take the biggest risks. Behind most successful collaborations are one or a few organizations that are willing to invest more than the rest to make the effort a success. And that’s ok. For any idea of Co-, you can probably find a high-performing, credible institution that can be a fairy godmother for the project because is passionate, credible, and courageous enough about the idea. Take profit of such organizations if you find them.

03.- Set simple, credible goals

One main barrier for collaboration success is partners with different agendas. Is therefore necessary to avoid this by setting. An aspirational goal that everyone agrees on… and everyone involved can achieve.

04.- Get professional help

When organizations come together, they each could have their own incentives, biases, and organizational cultures. Odds of conflict are highest when organizations are from completely different sectors and cultures. The first few months tend to be particularly rough. Collaboration projects increase their chances of success if a “neutral” facilitator is included in the project. A professional facilitator not only has an expertise on how to implement collaboration but, more importantly, represents a common and neutral ground to work with.

05.- Dedicate good people to the cause

Successful collaborations, at least at the start, are led by senior leaders from the founding organizations. A co- project it’s usually difficult enough to need dedicate qualified staff. A co- project it’s usually strategic for organizations involved, so they should resource it like it is strategic. So not trainees or time dedicated besides business as usual. The good news are a co-project effort is like a start-up, so talented individuals will give their all if they believe in the goals and allows them to work differently as usual. Working on a major collaboration should be an exciting career builder, not a dead end.

06.- Be flexible in defining success

A Co-project if successful if it changes somehow the rules of a game in a positive way. But a Co-project (as most of any other kinds of projects) hardly will change the world. So it’s not a good idea to think so and then when it doesn’t, think that it failed. Understanding the nature of the change aimed will help not to dismay when trying to get it.

07.- Prepare to let go

No collaboration should be kept alive beyond its useful lifetime. Once set up a goal, it should be planned a process for the collaboration either wind down or become an independent entity.

This post is from www.co-society.com/seven-habits-highly-successful-co-initiative

The original article includes several real cases for each lesson learned. See the original post at     Creating partnerships for sustainability

Would you consider any other profitable habit to enhance the cooperation success?

Environmental sustainabilityStrategySustainabilityThird sector and social sustainability

Key strategies to address Barcelona’s tourism challenges

Historic overview. Barcelona is a case study where many of the mentioned strategies have been used. Till 1992, when the Olympic Games were celebrated, the city was a second tier destination within the European circuits. Despite having held two International Exhibitions, it had lost most of its appeal as a destination. However, the city carried out an extensive renovation to be prepared for the Olympics, and this resulted in relaunching many depressed clusters by leveraging their potential, as well as creating some brand new clusters.

Till then Barcelona had lived with its back facing the sea, and many parts of the old town were depressed and abandoned to the lowest class social sectors, also suffering from safety issues. So the greatest renovation was both in the waterfront and the depressed areas of the Old town. Further, directly related with the Olympics, a new district was built to host the Olympic Villa, where there was also the Olympic Port; and in the Montjuic area there was rebuilt the old Olympic Stadium keeping the original facade, and many other sport facilities were created.

The city regained its waterfront as one of the most attractive areas, creating two clusters for entertainment and many kilometers of beaches with a maritime promenade between the two clusters. Further, the Old town was equipped with culture entertainment facilities and many open spaces were created to attract both locals and visitors. The renovation consisted also of fostering the refurbishment of the old buildings with subsidies and building new residential buildings. This renovation drew the interest of the locals as an attractive location for housing.

As a result, these once-depressed areas started attracting new businesses such as shops, cafes, restaurants and accommodation facilities. Within a few years, they cleaned their image to a shining one like the most attractive areas of the town. All in all, the city leveraged all its potential charm and attractiveness namely based upon resources that were abandoned and through the vision of the city planning developers. From then on, the city started marketing itself as a new venue for international events, thanks to the regained reputation for the good organization of the Olympic Games, and as a tourism destination for city breaks among others.

Further on, Barcelona kept on targeting new market segments, leveraging and marketing under exploited heritage and also developing new clusters. In that sense, it took the leading position as a Cruise destination in the Mediterranean, which used to be Genoa. A few years after, the city’s tourism board started promoting the architectural heritage from Antoni Gaudi, as an attraction unique to Barcelona. At the same time, a new cluster was being created, also in the waterfront, to hold the International Forum of Cultures –a new kind of International Exhibition-, where a new residential area was built, along with Congress & Convention facilities and an iconic building which was later on to the Museum of Natural Sciences.

Over the last years two more clusters have been developed. First, the extension of the International Exhibition facilities in L’Hospitalet –Barcelona’s neighbor town- to host large international exhibitions and congresses such as the Mobile World Congress; and second, the last cluster to be developed –in this case, extended- was that of Sagrada Família Temple –the city’s top attraction- with the opening of St. Pau Hospital as a cultural center boasting the largest modernist enclosure in the city, within a five minute walk from the Temple.

New challenges. Despite being one of the top European urban destinations in terms of tourism revenue, the tourism development has raised the residents’ protests on the tourists’ behavior, the proliferation of tourist apartments which overload certain areas with too many visitors, the effect of these tourist apartments on the real estate prices, and the dominance of tourists in many public spaces. Further, there has been a growth of low budget travelers, whose expenditure is barely profitable for the city. At the same time, the raise of the Airbnb model has spread the tourism use of the residential areas. All these issues have invited the residents and the City Council to a reflection on what is the adequate Tourism model.

While the debate is still in process, this is a very good case to exemplify how the aforementioned strategies may solve some of the challenges typical of mature destinations. First are explained the clusters diagnosis and the corresponding cluster based solutions for each one, and finally the cross-destination programs to tackle the aforementioned challenges. In this case, only four clusters concentrate the suggested renovation.

Montjuic Mountain: “The Garden of Barcelona”. This is where the main Olympic facilities where built, nowadays used for sporting and cultural events. Despite the Montjuic Castle and two art museums, the area is quite underexploited, and is clearly a second tier cluster, with no must see attractions. However there is a large space where attractive attractions could be developed to make most of the tourists spend at least half a day of their stay in this area:

  • Using the Montjuic Castle as a venue for cultural events, combined with a street food market area with small outdoor restaurants, open on high season weekends and summer weeks.
  • Creating a first-class “botanical themed garden” with plants and urban aesthetics representing different world areas (Mediterranean, Japan, etc.), colorful vegetation, etc.

Forum Port: “Innovative entertainment”.  This is one of the most underexploited areas of Barcelona, where the International Forum of Cultures was celebrated in 2004. At present there is one Convention center and the Natural Science Museum in the Forum’s iconic building. This could be a cluster characterized by imaginative entertainment experiences, combined with iconic buildings with futuristic architectural style. These could be:

  • Imax & 3D Cinema in a ball shaped building with mirroring facade in a central location within the Forum area, as one of the most iconic buildings.
  • Large Aquarium in iconic building boasting species from different world regions, and including restaurants inside or beside the tank and a hotel with room views to the tank and the sea.
  • Seaplane terminal in the Port, offering sightseeing flights all over Catalonia, and possibly to some seaside destinations within Catalonia or the Balearic Islands.
  • “Dancing Springs Show” in the central area of the Port, installing a stable platform underwater with programmable springs to perform a light & music & water show.
  • Celebrity chef restaurants along the waterfront terraces of the Port, with exclusive views to the “Dancing Springs Show” and other selected performances.

Old Harbor: “Mediterranean history & tradition”. This is one of the clusters with the highest potential, given its privileged location nearby the Old town, and the most touristy waterfront area. Although it is already a very exploited cluster, the mix of attractions is far from optimum, as it is offering only a standardized experience, without any character related to the destination identity, nor with distinct value proposition. The proposal is to create:

  • Mediterranean Village with stores, restaurants, hotels and night entertainment. It would reproduce the local fishermen villages’ style, providing a truly Mediterranean experience.
  • 3 caravel reproductions in real size representing the ones with which Columbus discovered America. One would be a boutique hotel, another one a restaurant and the other a museum.

Poblenou district: “The art district”. This is a district with many faces at present: the Olympic Villa near the waterfront, the old Poblenou town with its village’s charm, and the old industrial Poblenou, full of warehouses and old factories with an abandoned atmosphere. The idea is to transform all this semi-abandoned area into an art district, filling both the open and the indoor spaces with sculptures and various types of art pieces. This would entail creating a new cluster from scratch, although leveraging most of the existing infrastructure, but filling it with an innovative experience system.

The Art district concept is both an incubator for new artists and an art marketplace. It is a destination model 3.0 in its full extent: a platform where many service suppliers (artists) can participate under a series of stated rules to contribute in creating a memorable experience characterized by both harmony and variety. The artist portfolio would encompass many types of art: scenic arts, sculpture, painting, handcrafting with glass, ceramic, etc.

An approach on the strategic and operational functioning may be found in the Whitepaper “Envisioning destination models 3.0”, but the upcoming Whitepaper “Envisioning Art Villages 3.0” will explain in more detail how this has to work.

These cluster developments are to create a sum of tourism attractions that correspond to and strengthen the aforementioned cluster identity, such as that of a Theme Park, but with original and authentic experiences targeting all segments, that you would never find in any Theme Park.

Beyond these key cluster developments, it is necessary to encourage tourists to visit these new areas, which should not only be achieved through good marketing but also by creating a network of charming transport systems. In the case of Barcelona, it could be a network of Old tramways, like the ones that used to circulate in the city many decades ago. The network would be the minimum necessary to reach all of these clusters through the nicest streets and avenues of the city.

Furthermore, as stated in the theoretical introduction, these new clusters should host many of the new accommodation developments to contribute in spreading the tourism flows.

Further, the development of these clusters would solve some of the mentioned issues:

  • Increasing the tourism expenditure: through the creation of the new clusters both the average stay and the visit repetition would likely increase, and many of the clusters would be to attract high expenditure tourists, namely that of the Forum Port. Concentrating the development of new accommodation in top end hotels or boutique hotels would strongly contribute to attract such kinds of tourists.
  • Demand for new accommodation development: many of the new clusters –if not all- could contribute in hosting some of the new accommodation facilities, also offering innovative concepts like art boutique hotel in the art district, garden boutique hotel in Montjuic, Mediterranean village boutique hotel in the Old harbor, the aforementioned hotel in the Aquarium tank, and many others, namely near the Forum Port cluster.
  • Conviviality with residents in the night-time: some of these clusters –namely the Forum Port and the Old harbor- could concentrate the nightlife of the city from a certain time on, prohibiting the operation of discotheques and night clubs in residential areas, so as to deviate all the noisy tourists in the non-residential clusters during the night-time. To make that work, there should be good public transport availability until the closing of these clubs.

Other issues regarding the proliferation of tourist apartments, the need to share the benefits of tourism with the poorer layers of society, and the rise in Airbnb based offers and its effect on the increase of the real estate prices could be addressed through policies such as:

  • Limiting the offer of Airbnb rooms to 1 room per apartment, 1 apartment per owner and also depending on the offer of every district, being more constrained in the areas suffering from congestion issues and with more accommodation offer.
  • Creating a body to control the non-regulated accommodation offer, enforcing the previous regulations to prevent the issues that residents complain about.
  • Offering the current night clubs in the areas suffering from conviviality issues a priority treatment to settle in the new clusters where nightlife is to be relocated, before they have to close or reconvert their current business.
  • Implement a limited capacity system and advance online booking in the cultural facilities such as monuments or museums, to avoid congestion and queues, and to enforce visitors to plan their visits in advance.
  • Create a tourism tax to make the tourists and tourism business contribute to the public expenses related to tourism spaces and subsidized public services they take advantage of. This could also help, by diminishing the business profitability, to lower the upward pressure of the real estate prices.

Do you think of other strategies to address Barcelona’s tourism challenges?

Environmental sustainabilityStrategySustainabilityThird sector and social sustainability

Typical challenges in mature destinations (II)

Lack of infrastructure renovation. Old destinations usually suffer from some kind of obsolescence at some point, not only regarding the transport or accommodation infrastructures, but also others such the buildings facades, the urban aesthetics, etc. All together, these elements may eventually give an image of decadence. However, this need for renovation may be regarded as an opportunity to develop each cluster’s identity, leveraging their uniqueness and their heritage to make them shine to the utmost.

Beyond usual competitiveness programs regarding accommodation facilities upgrade or quality labels certification, in line with the Re-clustering strategy suggested before in this section, some programs regarding the facades refurbishment and the development of unique urban aesthetics style for each cluster, using typical designs or elements that represent their identity.

Furthermore, beyond urban aesthetics renovation, an excellent way to change the atmosphere from decadence to lively and vibrant is to introduce elements of animation such as artists performing in the public spaces (painters, musicians, etc.) and imaginative illumination at night, in accordance with the type of atmosphere that is to be created.

Lack of new tourism businesses. A very different problem occurs when there is lack of private initiative to start up new businesses related to tourism. This may mean that the destination has no demand growth, but also that it is not capable of attracting new market segments or inspiring new experiences based on the current resources.

This challenge may be solved through either new cluster development or cluster reconversion, opening a new area with new resources to be exploited for tourism, which necessarily needs new business to operate, may inspire new experiences and attract new market segments. Complementing this move, there are two other possible programs to foster entrepreneurship. First, using one of the key concepts of Tourism 3.0, the development of an open innovation system is likely to bring in new business ideas and identify unsatisfied demands.

The second possible program is to create a tourism business incubator, facilitating entrepreneurs to start-up their business with a co-working space and business training at a subsidized cost for a certain period of time. Business incubators are to diminish the risk of business failure throughout the first months of the new business life. It is therefore a platform to encourage creative entrepreneurs to develop their ideas into the market.

Tourism expenditure & seasonality stagnation. Expenditure depends on many factors, such as the targeted segments, the geographical markets, the infrastructure and experiences attractiveness. Generating higher expenditure requires namely developing segments that target the wealthiest tourists: Luxury, MICE, Golf, Gambling, Special Interest, etc. with the adequate infrastructure and offering a charming and harmonic atmosphere leveraging the character of the destination, to attract investors, operators and, of course, the tourists.

Demand seasonality is another issue. It depends also on market segments and geographical markets, as some types of holidays or tourism related activities take place during the mid and low season. Also not all countries have their holiday at the same time, so there are many opportunities in this regard for marketing in new countries.

In both cases the idea of developing new or reconverted clusters to attract new market segments is more than appropriate, as it is also convenient to upgrade accommodation facilities and enhance the charm of the clusters to attract new businesses such as hotels, branded stores, prestigious restaurants and other entertainment infrastructures.

Poor branding, lost reputation, low brand awareness, etc. Marketing is always part of the problem and part of the solution. The cluster related solutions to brand challenges may be either the creation of new clusters, cluster reconversion or re-clustering the destination by developing each cluster identity and character. In this regard, providing a sense of variety to the visitor is strengthening the brand with more value.

Based upon these new developments, reconversions and re-clustering, it is important to define an identity for each cluster, where the experiences and the atmosphere feelings are reflecting this identity and character. So long as the most powerful marketing comes from the visitors’ opinions and recommendations, their experiences on site are the key brand developers.

Then, beyond the destination cluster development, a very effective marketing is –especially when there is a new cluster development- to organize a noteworthy international event that puts the destination in the spotlight of the outbound markets’ media and thus puts the destination brand at the target visitors’ top of mind.

What other challenges are usual in mature destinations?

Environmental sustainabilityStrategySustainabilityThird sector and social sustainability

Typical challenges in mature destinations (I)

Conviviality between locals and tourists. The most tourist crowded areas are sometimes also residential, and so there are usually many issues related to difficult conviviality between the local residents and the visitors, such as nightlife noise, tourists’ inappropriate behavior, or just a certain invasion of the public spaces and facilities, which are designed for the residents’ use only.

This may be solved with the development of other clusters to spread the tourism flows, and more specifically by regulating nightlife schedules in a way that from a certain time on nightlife entertainment is only allowed in specific areas with no residents, fully dedicated to leisure and entertainment. Further these and other rules concerning the tourists’ behavior should be well communicated through the tourist establishments and agents, and also enforced by local policemen controlling the problematic areas.

Finally, it is essential to control the concentration of accommodation facilities in the most demanded areas, not only by limiting the licenses for hotels and hostels, but also by limiting the allowance of Airbnb offers to a minimum, like 1 room per apartment and 1 apartment by owner, avoiding the proliferation of tourist apartments in the residential buildings. In accordance with the new clusters’ development, the demand for accommodation should be directed to the new clusters, also to help them grow and create demand for their businesses.

Congestion issues in popular areas. Closely related to the previous point, congestion issues are not only affecting the resident’s life, but also the tourists’ experience. Solving the issue for the tourist entails spreading the tourist interest hot spots and constraining visitors’ flows according to carrying capacity and bottle necks’ capacity.

First, the cluster development strategy should create new attractions in clusters other than the most crowded, even changing the location of some attractions from the crowded areas to the new cluster, as long as it is possible. This may be the case of museums or other cultural entertainment facilities. This may be done either through new cluster development or through reconverting existing clusters. Also the new accommodation facilities should be concentrated in the new tourism clusters, both to give them life and discharge the most popular areas from some of the tourism flows.

This new cluster development or reconversion should be complemented with the creation of tourism itineraries encouraging visitors to discover the destination off the beaten track, and the creation of charming transportation systems to move visitors from one place to another, encouraging them somehow to visit the new tourism clusters.

Excessive dominance of tourism businesses in the residential areas. Some residential areas popular among tourists have seen an increase in the percentage of tourism related businesses over the commercial mix, up to an extent that they lack some of the services they used to have close to their homes and many traditional businesses have had to close.

Being more profitable, some tourism businesses take the premises traditionally dedicated to services or products for the residents, up to the point where they barely exist or are too scarce according to the residents demand. The tourism business profitability allows them to pay higher rents than many residents’ oriented businesses and therefore it’s hard for these ones to keep their location. Such kind of business cannibalism obviously goes against the residents’ interest and so it is likely to put those residents against the tourism development.

Many solutions may be implemented to tackle this issue. A special tax for the tourism businesses could be fixed, so as to diminish their profitability after taxes and eventually lower the premises rental prices. The revenues from these taxes should be invested in helping the affected businesses to reconvert or start-up in another location. Another solution, combined with this one, could be the creation of micro-clusters for tourism businesses, allowing them to settle down in certain areas, but preventing them to settle in other areas reserved for the residents’ oriented businesses.

What other challenges are usual in mature destinations?

StrategyStrategy planning & execution

How cluster development applies to mature destinations

Most of the aforementioned challenges faced by mature destinations may be solved, at least partly, through an adequate cluster development strategy. Furthermore, cluster development strategies may have many other benefits for the destination. The following strategies summarize most of the approaches to cluster based developments in destinations:

New cluster development. Many destinations use undeveloped areas without any relevant resource, to build new tourism infrastructures which all together are to create a new tourism cluster. This is usually related to Theme Parks, Congress & Convention facilities or other modern buildings hosting all kinds of entertainment experiences. This is the case of the “Arts and Sciences City” in Valencia, an outstanding collection of innovative architecture facilities designed by the architect Santiago Calatrava encompassing an Opera House, a Science Museum, an Imax Cinema, an Aquarium and a Venue for various types of events.

Reconverting or relaunching existing clusters. Some destinations have unexploited natural or cultural resources, which are not leveraged as tourism attractions namely due to lack of vision or imagination. These type of developments should always be a priority, so long as they enhance the identity and uniqueness of the destination. This is the case of Shanghai’s Xintiandi and Tianzifang, two areas within the downtown’s French district with old houses and unique atmospheres, which have been reconverted as charming shopping and entertainment clusters, with many types of stores and restaurants.

Re-clustering the destination. Some destinations are perceived rather as homogeneous, or they do not have a defined characterization throughout its areas. However, the reality is that in most cases there are some distinct features in the different areas that may be leveraged to build a cluster identity. In this case, the cluster development strategy consists of enhancing and marketing the differentiated character of each cluster, providing a sense of variety to the visitor. This is what some Ski resorts do, “Theme-Parking” themselves to some extent, with distinct urban aesthetics, music, etc. to build a different atmosphere in every zone.

Cluster enhancement. As it is explained in the Whitepaper “Competitiveness Planning 3.0”, clusters should be reference units when assessing the destination’s competitiveness, and also when planning competitiveness programs. So long as each cluster may be considered as a sub-destination, with its own strengths and weaknesses, every cluster should follow its own development in accordance with its intended identity, adding more value, reducing risks and discomforts and marketing itself according to its distinct value proposition. This is the very minimum that a mature destination should do to not pass from maturity to decadence.

Based on these standard strategies, cluster development may contribute to solve some of the aforementioned challenges that are usual in mature destinations, so long as they are combined with the appropriate competitiveness programs and marketing strategies and activities. All tourism development strategies are interrelated, and so they need to be coherently weaved to be successfully implemented.

Do you think of other cluster development based strategies?