The External audit entails a sound market research to assess target markets attractiveness and markets trends to identify opportunities and threats. When analyzing the industry and market trends, every trend has to be classified according to its correspondence to one of the 5 competitive forces that shape the destination’s long term profitability: negotiation power of suppliers, negotiation power of buyers, threat of new entrants, threat of substitutes and competitor’s rivalry. This framework is to help the marketer with the strategic reflection on analyzing the effects of the market trend on the destination.
Once classified according to its corresponding force, an assessment has to be made on whether it represents an opportunity, a threat or it doesn’t have an effect at all. Furthermore, a level of priority corresponding to its impact on the destination should be assigned, and the following assessments should be carried out:
For every trend representing an opportunity:
- Assess the potential market value of the opportunity for the destination
- Assess the investment needed to take advantage of this opportunity. Consider many options
- Estimate profitability for many viable options
For every trend representing a threat:
- Assess the risk of the threat, considering likelihood, market value and strategic importance
- Assess the investment needed to neutralize that threat -if possible- and its profitability.
When assessing the markets & segments attractiveness, analyze for each of them:
- Market size, evolution and perspectives
- Public types and demand characterization: sociological profile, seasonality, length of the trip, demanded services, trip organization, advanced booking, motivations, expenses and price elasticity.
- Purchasing behavior: information sources, decision key factors, etc.
- Possibility of fostering customer loyalty, prestige and multiplying effect
- Quantitative and qualitative trends of both supply and demand.
- Key players, prescribers, opinion leaders and other trendsetters.
- Associations, publications, events, fairs, portals, forums, blogs and social networks.
- Key competitiveness factors and requirements.
- Best practices benchmarking in improvement of management and destination competitiveness, marketing, products, business models and technologies.
- Marketing strategies and actions. Minimum investment recommended.
- Tour operators, travel agents and web portals working with this segment. Positioning and market share of each one, segment concentration, entries and exits. Estimated share of FIT.
- Segment attractiveness: analysis of the 5 competitive forces and potential.
- Analysis of competitiveness/price, distribution and offer variety compared between destinations. Positioning of each destination.
- Knowledge and assessment of the destination by the tour operators and travel agents.
The market information may be obtained through existing market intelligence reports and complemented with ad-hoc research if necessary.
Would you consider any other point to assess the markets’ attractiveness?
The innovation platform should market its value proposition not only to the whole industry stakeholders throughout the region, but also to all potential contributors in and outside the industry. The process starts by identifying a pool of champions who are willing to showcase the benefits of open innovation for both contributors –solvers- and receivers –seekers-.
By identifying a group of visionaries in both sides of the platform, the conditions are set to face the first challenges, the ones which have to showcase how the open innovation works, and how it may contribute to improving the competitiveness of the whole industry. As soon as a few of these innovation challenges show successful results and satisfaction in both sides of the innovation process, a greater group of early adopters is likely to become interested and eager to participate to some extent.
As stated before, beyond rewards, the great motivators to take into account are the will for contribution to the community’s progress and well-being, and the will for recognition and prestige among industry peers. Such motivators suggest two main strategies to attract talent:
- Promote innovation challenges for non-profit purposes. Such challenges may be focused on helping destinations in developing countries or having suffered natural disasters, or mission driven tourism organizations, mostly related to environmental issues, like in ecotourism. Such challenges could be sponsored by private companies to offer some compensation.
- Organization of events to award best contributors and give them public recognition.
These and other strategies should be supported by marketing the open innovation platform to potential contributors in their communities and favorite media channels, which would entail social media, magazines, journals, public presentations, etc.
A more detailed explanation about the operation of an open innovation system is to be provided in the Whitepaper “Envisioning open innovation in destinations”.
Do you think of other strategies or tactics to attract talent to the open innovation system?
It is necessary to develop incentive systems to recognize and reward collaborative partnerships between innovators. Mind that the most powerful motivators that drive contribution are:
Contribution to the greater good. As long as innovations contribute to improve the community’s quality of life to some extent, this is itself highly rewarding. Intrinsic motivation is actually the primary driver, as a satisfactory result is already quite rewarding.
Peer recognition. One of the highest motivators –probably the highest- is the status and recognition attained through contributions. It is therefore crucial to find ways of recognizing contributors, rewarding them with appropriate community prestige.
Compensation. It is necessary to think of a flexible system of compensations, according to the various motivations within the pool of innovators. Beyond money rewards, it is necessary to find out other kinds of compensations that contributors would be willing to strive for.
Fostering collaboration in the innovation efforts poses many challenges, primarily related to the culture of trust, which has to be created over time, starting by the design of an appropriate system of rewards to tackle with critical issues such as intellectual property transfers and confidentiality, among other concerns.
The best way to start with collaborative innovation is in mission driven challenges that appeal to the contributors’ human spirit rather than for its compensation, which is actually likely to be symbolic or insignificant. The collaboration in non-profit challenges is expected to progressively weave interaction and networking among innovators, as well as trust among the frequent contributors. Such practice is also expected to inspire reflection about the design of collaboration systems for compensated challenges.
Can you think of other motivators or strategies to foster contribution in the open innovation system?
In contrast with free ideation where the mass crowd of solvers is empowered to bring in their ideas with little or no direction –as many companies have approached open innovation with rather bad results-, the most effective method to deliver real solutions to the seekers is challenge driven innovation. As aforementioned, this method consists of formulating specific and actionable problems or opportunities, to better focus the innovation efforts of potential solvers to a real solution that can eventually be implemented.
The open innovation platform is to be managed by a pool of Project Managers (PM) in charge of dealing with the Innovation challenges. Every time a public or private stakeholder (seeker) wants to open a challenge, a PM is assigned to the challenge and follows a series of steps:
- The PM works with the Seeker in the formulation and definition of the challenge.
- Once the challenge is defined, the Seeker has to set the prize or prizes for the winning solutions. There may be many prizes of different amount to take advantage of many ideas and encourage more participation.
- The PM has to define with the Seeker the terms of agreement to be offered in the tender.
- Beyond the registered innovators in the platform, the PM should search for more innovators outside the platform, especially when the challenge requires specific expertise which is rather scarce or nonexistent among the registered innovators.
- Once all potential innovators have been invited to participate to the challenge, these have to submit their solution by the specified deadline, complying with the stated requirements.
- When submitting the solutions, the PM screens them all to ensure that they all meet the requirements established by the Seeker, prior to deliver them to the Seeker.
- Then, the Seeker may decide which solutions are suitable and award as many as he considers, or none at all if any solution is good enough.
- In the case of discarded solutions, the Seeker has signed an agreement upon which he cannot use the non-awarded ideas without permission of the Solver. To guarantee the accomplishment of this agreement, a pool of Innovation controllers are empowered to carry out Innovation audits on the “Seeker companies” to make sure that such ideas are not used.
Regarding intellectual property (IP) transfer, there are many possible options to regard:
- IP may be fully transferred to the Seeker, especially when the reward is according to it.
- IP may be transferred under a non-exclusive license to the Seeker, if the reward is too low.
This issue is to depend also on the nature of the assignment, taking into account that some innovations are only applicable to one case, because of the uniqueness of the Seeker or because the job is tailored for the Seeker, such as a graphic design.
The funding of the platform may come from two complementary sources:
- Brokering commission for every challenge managed to be paid by the Seeker.
- Sponsorship by many industry stakeholders, including the government.
The platform should engage a vast range of shareholders within the industry, encompassing private businesses, educational institutions, governments and even non-profit organizations.
How do you thing that this operational system could be improved?
To better realize how destination models 3.0 outperform other models in creating value, reducing efforts and marketing efficiently, hereby are compared three destination models:
Cultural destinations: based on cultural or natural resources with several business owners operating independently. In some cases these cooperate in partnership with the government for marketing the destination.
Resort destinations: based usually on natural resources with one owner operating or controlling all business units providing service in the destination, being also responsible for the marketing. All business units are therefore integrated within the resort.
Destinations 3.0: based on either cultural or natural resources with business units belonging to many owners, and operators cooperating with different levels of integration on the management and marketing of the destination.
COMPETITIVENESS & MARKETING: KEY DIFFERENCES BETWEEN THE THREE DESTINATION MODELS
||Typically local cultural experiences
Based upon cultural & natural resources, and locals creativity
Based on standard products, natural and artificial resources
|Life-changing, personalized and imaginative experiences
Based on stakeholders co-creation
||Cultural character and authenticity with heritage protection and hospitality programs
||Lack of character and authenticity (replicated facility style)
|Enhanced authenticity through urban aesthetic harmony and locals’ inclusiveness as experience suppliers
|Service quality control
||Some service suppliers have Quality certifications
Ratings for restaurants and accommodations
|Comprehensive service quality control
Ratings for accommodation service
|Comprehensive and incentivized service quality control
||Dependent upon every service supplier and local service standards
||Fully specified comfort standards, adapted to the needs of tourists
||Only discomforts associated to cultural environment
|Insecurities & risks
||Dependent upon government regulations and control
||Full information and safety controls on critical issues
Safety dependent upon government regulations
||Functional and emotional
||Mostly functional, but also emotional
||Functional, emotional and spiritual
||All kinds of tourists
||All kinds of tourists, but primarily tourists 3.0
||Differentiation or price
||Mission, vision & values
||Sales transactions and satisfaction monitoring
||Sales transactions and satisfaction monitoring
||Experience co-creation, storytelling through communities
||TTOO, TTAA and direct sales
||TTOO, TTAA and direct sales
||Mission driven agents, communities
||Economic prosperity concentrated in local business owners
||Economic prosperity concentrated in the resort owners
||Poverty alleviation, socio-cultural change, environment protection
||Harmonize experience system and quality standards
||Develop unique experiences to compete upon differentiation
||Integrate and associate stakeholders
Foster culture change
Would you consider other destination models to compare performance? And other relevant points to be compared?
The open innovation platform is to be structured in many areas of innovation, according to the nature of the needed expertise. Hereby, six areas of innovation are envisioned:
- Technological solutions (mainly IT related)
- Environmental friendly solutions
- Product development
- Marketing designs and merchandise
- Business model innovation (strategy challenges)
- Stories in different formats, photos, videos, etc.
Every innovation area would have its own pool of contributors, who receive updates about the incoming challenges in which they are invited to participate. Such challenges may be classified into three categories:
- Private challenges posted by private companies
- Public challenges posted by governments, public institutions and DMOs
- Public challenges for mission driven purposes, posted by non-profit organizations, related to cooperation programs or for mission driven destinations
The difference between private and public challenges is mainly the publicity of the challenge, which in the case of private challenges is more likely to be directed exclusively to a selected group of innovators without revealing the name of the innovation seeker and keeping maximum confidentiality. Conversely, public challenges are open to the whole platform, without need to keep confidentiality on the identity of the innovation seeker.
Furthermore, there could be an “Ideation bank” to collect solvers initiatives on identified problems or opportunities which have not yet been posed as a challenge, as they are not among the top priorities for seekers or there is no budget to award solutions at that moment. This ideation bank should give room to creative initiatives and work as a social media platform where solvers may pay for enhanced advertising of their ideas and participants may vote for their favorite ideas. The posted ideas should comply with a series of parameters, requiring detailed and structured explanation of the idea, to filter the mass participation. The “Ideation bank” would not only foster innovation, but also the promotion of new talents in the industry.
Do you think of other types of innovation challenges or areas?
Beyond the aforementioned most conventional approaches, what sets destination intelligence 3.0 apart is the development of an open innovation system accessible to all the tourism industry stakeholders at a regional level.
An open innovation system works like a platform where innovation seekers -operators, tourism boards, governments, consultants, etc.- look for new ideas on how to tackle with their challenges by connecting with innovation solvers -trade professionals, consultants, creative designers, and experts in various fields- through open challenges where the problem is precisely formulated to help solvers envision possible solutions and submit proposals, which are to be assessed and rewarded as long as they help in solving the problem.
Among the posed challenges, there should be some non-rewarded ones for mission-driven purposes -cooperation with destinations in developing countries, destinations recovering from natural disasters, mission-driven destinations, etc.- to showcase how contribution to the greater good is one of the most powerful motivators in innovation, drawing the attention of a larger pool of creative talent than in other challenges.
Such a strategy is not only to support such mission-driven challenges, but also to raise awareness throughout the industry about the potential of mission-driven tourism, as the open innovation system leverages more intelligence and creativity for this type of purpose than for any other, hence providing mission-driven destinations with a natural competitive advantage, and compensating at least some of their constraints.
How do you envision such kind of open innovation challenges?
Once identified the portfolio of partners, infrastructures, facilities and service suppliers needed to start operating the platform, it is necessary to envision the necessary service capacity or carrying capacity for each of them throughout the subsequent development stages. This entails determining the needed capacity for every business and facility in each of the destination areas in a reference day, foreseeing the expansion of the model to the utmost of its potential.
There should not only be planned the service capacity of facilities, infrastructures and service businesses, but also for the entire portfolio of experience providers, to guarantee a balance in the variety of experiences offered throughout the destination, according to the demand.
The service planning serves as a layout for the expansion of the model, setting the direction on which services and facilities have to be developed in which location, ensuring a balanced and harmonious development in every stage of the model’s expansion. It depicts the type of businesses, facilities and infrastructures that have to be developed in each phase of the model expansion, specifying the service capacity of everyone. Such service capacity planning should be flexible for both facilities and service businesses, in different ways:
- For facilities, some resources such as personnel should be flexible to adapt variable costs to the needed service capacity according to demand. Every facility should have an established maximum service capacity, but its associated costs would depend upon the needed capacity.
- For service businesses, there would be an initial plan of the service portfolio, which could be changed as long as the experienced demand for every kind of service advises to do so.
Would you add any other consideration when planning the service capacity throughout the expansion phases of the model?
Transitioning to content based marketing
As it takes a certain time for the open innovation system to become a productive content marketing machine, it is necessary to use other marketing strategies along the early stages of the destination model development. These would mainly consist on the following:
- Partnering with Special Interest tour-operators and travel agents connected to a network of values driven travellers, to become our first brand ambassadors.
- Invite popular bloggers and journalists to write about the destination’s experiences and stories.
- Advertising in target related media, co-branding with our channel partners.
In parallel with these marketing strategies, it is necessary to start spotting existing stories to be used for marketing purposes. As many stories are already in the minds of the locals or even written, there has to be carried out some research to identify them. Further, the storytelling training is also expected to empower and motivate locals to tell their stories and create new ones.
So long as the storytelling facilitation and the content creation contests generate an increasing amount of marketable content, and this manage to create awareness about the destination’s brand and its life-changing experiences, the platform could start reducing the budget for the aforementioned marketing programs, eventually concentrating all the marketing efforts on the “content marketing system”.
Such transition requires accurate monitoring of the social media impact of the stories in contrast with the impact of the other marketing programs. Based upon the results of such tracking, the platform’s marketing executives should decide whether to accelerate or not the transition towards the storytelling system. For such purpose, the marketing plan should have a series of key performance marketing metrics to help the executives visualize the impact of every marketing program.
Therefore, the marketing plan has to be flexible, with marketing goals determining the turning points when to shift the budget allocation from conventional to storytelling marketing.
Would you consider any strategy to accelerate the transition to content based marketing?
The monitoring activities should be carried out by establishing Tourism Observatories in local regions, which are in charge of collecting and processing the data to elaborate the research outcomes. Then, these local Observatories are to be coordinated by an Observatory at an upper regional level to elaborate aggregated statistics ensuring that the research methods and criteria are unified and thus the data is comparable.
Such observatories should operate in cooperation with the local tourist boards and industry associations, to facilitate access to data from the local businesses. Further, cooperation with educational institutions at a University level should also be encouraged, to give prestige to the Observatory and nurture it with know-how and young talents whenever necessary.
The Observatories are to become the reference research center for the tourism industry both at a local and regional level, elaborating not only the regular statistics about tourism industry performance, but also carrying out ad-hoc studies to satisfy special research needs from either public bodies or private operators.
Tourism Observatories may be funded by industry associations, tourism boards and also through the ad-hoc services they provide to private businesses and public bodies. Again, the monitoring system is an opportunity to foster cooperation between the private operators and the public bodies.
Do you know about Tourism Observatories activities? What do you think they could do more to support local industry associations and governments in planning the tourism sector strategy, marketing and innovation?