Can external communication strategies potentiate innovations' success? The case of hostels in Porto

Can external communication strategies potentiate innovations’ success? The case of hostels in Porto by Mariana Magalhães Pinho de Sousa Master Thesis in Innovation Economics and Management Supervised by Raquel Filipa do Amaral Chambre de Meneses Soares Bastos Moutinho September 2014 I Acknowledgments First of all, I would like to thank my supervisor, Raquel Moutinho, for her continuous help and guidance. I would also like to thank all my professors from FEP, for what I have learned in this two years. Thanks to my parents, for all the support they have always given me, and my friends, who have spent with me both fun and scary times while I was writing my dissertation. Last but not least, I would like to express my gratitude to the people of the hostel, for their availability for the interviews: Renata Serra, Rita Gonçalves, Gonçalo Castanho, Catarina Ribeiro, Rui Pina, João Saraiva, Dário Ferreira, Mário Marques, Rui Garrido, Alda Catarino, Loreta Sá Pereira, Luzia Moreira and Sara Moreira. II Abstract The concept of innovation has been subject to different interpretations over time, having nowadays a much broader meaning than the one originally defined by Schumpeter in 1934. Companies have the opportunity to innovate in distinct ways, not only in the product or service they offer, but also by restructuring the way they define the group of consumers they want to reach, the implemented processes and their presence in the marketplace (Sawhney et al, 2006). The communication of innovations, taking into account their specific features, can have a significant influence on their success. However, the communication channels of innovations vary greatly according to the specific characteristics of the industry in which they operate. In fact, to innovate is an important strategic resource to ensure growth and sustainable wealth for all sectors, but particularly for those industries where markets are saturated and customers choose products and services around the world, such as tourism (Peters and Pikkemaat, 2013). In Portugal, hostels are still a very recent phenomenon, but with an increasingly heavy weight in this sector. This analysis aims to explain in what way Porto hostels are innovative, based on the categories defined in the Innovation Radar (created by Sawhney et al, 2013). It is also a goal of this study to understand how the communication of innovations is performed, and if the communication strategies adopted influence their success. Given the exponential increase in their number, hostels in Porto feel the need to differentiate and innovate, in order to face strongly increasing competition. The way these innovations are communicated to the public can strongly influence their choice, and enable a hostel to be chosen instead of another. Keywords: Hostel, Communication, Innovation Radar III Resumo O conceito de inovação tem sido alvo de diferentes interpretações ao longo do tempo, tendo hoje um significado muito mais abrangente do que o inicialmente definido por Schumpeter, em 1934. As empresas têm a oportunidade de inovar de formas distintas, não só no produto ou serviço que oferecem, mas também ao reestruturarem o modo como definem o grupo de consumidores que visam atingir, os processos que implementam e a sua presença no mercado (Sawhney et al, 2006). A comunicação das inovações, tendo em conta as particularidades que lhes estão associadas, pode ter uma influência significativa no seu sucesso. Porém, os canais de comunicação das inovações variam muito de acordo com as características específicas da indústria onde se inserem. De facto, inovar é um recurso estratégico importante para garantir o crescimento e a riqueza sustentável para todos os setores, mas em particular para aquelas indústrias onde os mercados estão saturados e os clientes escolhem produtos e serviços de todo o mundo, como é o caso do turismo (Peters e Pikkemaat, 2013). Em Portugal, os hosteis são um fenómeno ainda muito recente, mas que tem um peso cada vez mais relevante neste setor. A análise realizada neste trabalho visa explicitar em que é que os hosteis do Porto são inovadores, tendo como base as categorias definidas no Radar da Inovação de Sawhney, Wolcott e Arroniz. É ainda objetivo deste estudo perceber como é realizada a comunicação das inovações, e se as estratégias de comunicação adotadas influenciam o seu sucesso. Tendo em conta o aumento exponencial do seu número, os hosteis do Porto sentem a necessidade de se diferenciar e inovar, com o objetivo de fazerem frente à crescente concorrência. A forma como estas inovações são comunicadas ao público pode influenciar fortemente a sua escolha, e levar a que um hostel seja escolhido em detrimento de outro. Palavras-chave: Hostel, Comunicação, Radar da Inovação Table of Contents Chapter 1 - Introduction .................................................................................................... 1 Chapter 2 – Literature Review .......................................................................................... 6 2.1. Innovation .............................................................................................................. 7 2.2. Communication .................................................................................................... 11 2.3. Communication of innovations ............................................................................ 13 2.4. The influence of communication in the success of innovations .......................... 16 2.5.1. Communication strategies ............................................................................. 18 2.5.2.. External Influence ........................................................................................ 20 2.5.3. Results ........................................................................................................... 21 Chapter 3 – Methodology and first findings ................................................................... 24 3.1. Selection of cases ................................................................................................. 27 3.2. Innovation through Costumer Experience ........................................................... 29 3.3. Innovation through Offerings / Customers / Customer Experience / Value Capture - Design Innovation ....................................................................................... 32 3.4. Innovation through Customers / Customer Experience / Solutions ................. 34 3.5. Innovation through process .............................................................................. 35 3.6. Interviews – a summary ................................................................................... 36 3.7. Script of the interviews ........................................................................................ 37 Chapter 4 – Main results and findings ............................................................................ 42 4.1. General findings ................................................................................................... 42 4.2. Innovation through Costumer Experience ........................................................... 47 4.3. Innovation through Offerings / Customers / Customer Experience / Value Capture - Design Innovation ....................................................................................... 48 4.4. Innovation through Customers / Customer Experience / Solutions ................. 50 4.5. Innovation through Process .............................................................................. 51 4.6. Conclusion........................................................................................................ 51 Chapter 5 - Conclusion ................................................................................................... 53 Bibliography ................................................................................................................... 55 Table of Figures Figure 1 – The Innovation Radar ...................................................................................... 8 Figure 2 - Framework for the communication of innovations ........................................ 18 Figure 3 – Systematic Combining .................................................................................. 25 Figure 4 – Facilities of Tattva Design Hostel ................................................................. 30 Figure 5 – One bedroom of Rivoli Cinema Hostel - “Corpse Bride” movie .................. 31 Figure 6 – The gallery of Gallery Hostel ........................................................................ 32 Figure 7 – Revised framework for the communication of innovations .......................... 53 Table of Tables Table 1 – Innovative hostels by the way they innovate .................................................. 29 Table 2 – Innovative hostels in Porto - summary of the study ....................................... 37 Table 3 – Issues addressed in the interviews .................................................................. 41 Table 4 – Main results of the research ............................................................................ 43 1 Chapter 1 Introduction Since the middle of the 60s, and nowadays more than ever, innovation is seen as a key strategic issue for organizations, changing the way they can establish their competitive position in the market (Baregheh et al, 2009). A quick search on Google on the word “innovation” achieves more than 57 million of results! 1 Companies are encouraged to continuously innovate, as they “seem to have an almost insatiable thirst for knowledge, expertise, methodologies and work practices around innovation” (Kelley, 2001, p. 4). After years of research and different interpretations of this subjective word, “innovation” has now a much broader meaning. According to the European Commission, based on the results of the Innovation Union Scoreboard, “innovation is a complex, cumulative, interdisciplinary and highly interactive process”. “More than ever, innovation performance is considered to be a key driver in increasing economic competitiveness, solving societal challenges and supporting the transformation of societies” (Izsák et al, 2013, p. 10). It appears to be essential for companies to innovate, in order to obtain profits and achieving a distinctive position in the marketplace. However, this differentiation only becomes a competitive advantage if consumers understand the innovation, if they are aware of its existence and if they recognize it as necessary valuable. Nevertheless, the promotion of innovations is still far from matching the status achieved by external communication strategies in other fields. “That happens because most of the focus has been misdirected; the issue is not about better inventions or more creativity. What is needed is a new paradigm: a combination developing the concepts and how they will be communicated” (Duboff, 2008, p. 28). Assuming that the communication of these initiatives may have significantly impact on their success, the aim of this study is to investigate in which way the communication processes of innovations are managed, and whether they can be an asset to the value 1 Source: Google: www.google.com, accessed on 29th September 2014 2 chain of companies. For this purpose, this research will be designed in order to answer the following question: Can external communication strategies potentiate innovations’ success? For the purpose of this study, this question will be addressed through an exploratory methodology applied to the area of tourism in Porto, performed on a set of selected hostels. According to IAPMEI 2 (the Portuguese Institute for Supporting Small and Medium Enterprises and Innovation), regarding the tourism sector, the following actions become increasingly important: • to promote and enhance the competitiveness of enterprises in the tourism sector, fostering the development of strategies that aim at increasing their technical and technological capacity and their bargaining power within the value chain of the sector; • acting on the critical factors of the sector, ensuring their sustainability, including the consolidation of the major tourist centres of production as well as the existing tourism offer, promoting the increase of productivity in companies and enhancing the qualification and training of tourism professionals, as well as promoting the internationalization of Portugal as a tourism destination; • supporting the internationalization of economic agents in the Tourism sector, through appropriate forms of access to internationalization, autonomously or in combination with financial mechanisms; • encouraging the development of new business areas in the creation of new tourist products based on the existing potential and / or contributing to the strengthening of regional cohesion through the exploration and development of new touristic areas. 3 2 Source: IAPMEI: www.iapmei.pt, accessed on 20th January 2014 3 Source: IAPMEI: www.iapmei.pt, accessed on 20th January 2014 3 In this context, companies directly or indirectly related with the tourism industry, have been developing innovative projects in order to obtain a competitive position in an increasingly explored market. “Innovation and new service development are important strategic features to assure growth and sustainable wealth for every industry, but in particular for those industries where markets are saturated and clients choose products and services from all over the world, such as is the case in tourism” (Peters and Pikkemaat, 2013, p. 1). In the scope of this study, “innovative projects” in the tourism industry are those which meet the requirements set by QREN – Quadro de Referência Estratégico Nacional (the Portuguese National Strategic Reference Framework) 4 : • creation of projects, equipment or services with an innovative character, with high level of differentiation or by the application, in the context of the tourism sector, of the most modern technologies; • requalification of projects, equipment or services by introducing factors of innovation or high level of differentiation as well as by the application, in the context of the tourism sector, of the most modern technologies; • expansion of the production capacity in markets with dynamic international demand, through the resizing of endeavours or equipment, or through the introduction of new services with high level of differentiation in these same projects. Investment in tourism seems therefore a solution to improve the economy, taking advantage of the natural and cultural heritage, and of all positive local evolution. But it must be done in a careful and balanced way, focusing on the areas of greatest interest. The awareness about the city of Porto as the object of this study results from a variety of factors related with its growing tourism expansion and its international recognition. 4 Source: Turismo de Portugal: http://www.turismodeportugal.pt/Portugu%C3%AAs/AreasAtividade/ApoioaoInvestimento/Pages/QREN -SistemadeIncentivosaInovacao.aspx, accessed on 30th March 2014 10 languages, through a profound understanding of broader changes in society, culture and technology” (Verganti, 2009, p. 3) Indeed, design can be considered a mean of reaching success because (Battistella et al, 2012):  it allows to intercept emerging issues and understand signs and weak signals and consequently permits to the manager to shape strategies;  it allows to communicate with stakeholders sharing values and meanings, reinforcing relationships with suppliers and customers and stakeholders' communities;  it allows to convey the meanings into different building blocks of the business model. In this process, the communication of innovations developed by the company plays a crucial role: it is needed to communicate a “value proposition” about the new product or service, or even about the firm, and targeting this message at potential stakeholders (Schoonmaker et al, 2012). The mistakes and misunderstandings of communication can be a barrier to the success of innovations. The “Apple’s Newton was the first PDA introduced, seemingly an easy winner. However, since the category was new (and required writing on an electronic device) more was needed than the “wow” factor at which Apple excels. Put another way, Apple failed to establish the PDA as a distinct category, complementary to the personal computer” (Duboff, 2008, p. 29). In other words, to innovate was not enough, and to properly communicate the innovation was also required. 11 2.2. Communication First of all, it is relevant here to understand the general role of communication in any relationship established between human beings. Humans can manage to communicate much more than simply encoding and decoding messages, and sometimes it is possible to understand all the words without understanding their real meaning. The same words used in different contexts and by different people may have multiple interpretations. Sperber illustrates this idea with an example: “Imagine you are killing time at an airport. There is a woman standing nearby and you overhear her say to her companion, "it's late." You have heard and even uttered these very same words many times. Do you know what they mean? Of course. But do you know what the woman meant in uttering these words right now? Think about it. She might have been talking about a plane and meaning that it would arrive - or maybe depart - late. She may as well have been talking about a letter she was expecting, or about spring being late. Maybe she was not talking about anything in particular; she might just mean that it's late in the afternoon, or in the day, or in her life. Moreover "late" is always relative to some schedule, or expectation: it might be late for lunch and yet early for supper” (Sperber, 2009, p. 192). Therefore, to know how to communicate becomes essential in any context, so that the information will not be misinterpreted. And when a company intends to promote a new product, design or service, this is one of the most important issues to take into account. It is just not as simple as “the company sells, the consumer buys”. Nowadays, with the Internet and knowledge easily available, it is necessary to convince a much more informed public, and spreading the right image becomes crucial. “Some companies and other organizations are well known for their ability to conduct a truly integrated communication campaign designed to get the message across even though it is tailored to various stakeholders. Not only is the matter one of providing a coherent and consistent message that fosters an understanding of the company as its management and employees want it to be understood, but it also means that key audiences are addressed in terms of the stake each of them holds with regard to the organization” (Heat, 1994, p. 55). 12 For Cornelissen and Thorpe (2001, p. 414) “the future of a company depends critically on how it is viewed by key publics such as shareholders and investors, customers and consumers, employees, and members of the community in which the company resides”. The same authors (2001) developed a study identifying the dimensions and environmental parameters to be considered in the organization of a company’s external communication in large companies in the UK. The study raised some important issues:  the existence of structural relations between internal and external environmental conditions on one hand, and the organization dimension on the other;  in certain companies, it seems relevant to outsource some of the communication activities to external agencies;  the social context may affect the organization of a company’s external communication (for example, the degree of governmental regulation of the economy). But even if they may be constrained by several uncontrollable external factors, companies still try to manage the external communication in the most effective way to reach the consumers. This can imply managing all the communication strategy with a specialized department. That is why they bet on “integrated communication” solutions. “Integrated communication may be commonly considered a management process of coordinating communication, but underlying integrated mechanics is a philosophy or spirit that enables the integrated “mechanics” to operate effectively” (Smith, 2012, p. 606). All these strategies can be useful for the purpose of this research. Innovations seem to be the key for enhancing the performance of a society and fostering its progress, and the communication of new ideas, technologies, products and services plays a crucial role in the process of innovation. For the diffusion of innovations it is essential to make them popular both among the experts and within broader parts of society (Mast et al, 2005, p. 3). 13 2.3. Communication of innovations Since it is so important for companies to know how to promote their products or services, and even to show themselves as credible and reputable organizations, external communication of innovations has a particular relevance. This is clearly a really recent reality that needs to take into account the very specific target audience under consideration. In fact, due to the peculiar nature of this target, informing properly and rigorously is critical to this kind of promotion. “Marketeers who launch innovative products need to identify consumers who are willing to learn about, buy, and use these innovations. To optimize marketing campaigns, practitioners need to know the characteristics of this key segment in the diffusion process. Only if marketeers know about the needs and the behavioural patterns of consumers who are most likely to buy innovations, they can tailor their marketing mix” (Hoffmann and Soyez, 2009, p. 778). Hoffman and Soyes (2009) define this segment as “innovative consumers” – the most important target group in the diffusion process. These are consumers with a high degree of domain-specific innovativeness that make an effort to understand the details of technical innovations. Because of this background, the authors conclude that advertising campaigns for utilitarian innovations should provide product information rather than appealing to emotion: “Innovative consumers seek information in special interest media and use products of a certain category very often” (Hoffmann and Soyez, 2009, p. 7). Those individuals are more likely to be opinion leaders and presumably buy innovative products earlier than others to keep their social roles as consultants and advisors for opinion seekers: their public use of products stimulates other consumers to follow their example and buy these products as well. The analysis has shown that innovativeness is extensively influenced by opinion leadership and special interest media usage (Hoffmann and Soyez, 2009). Knowing this kind of target is, therefore, the first step for the promotion of the innovations by companies. Then, they have to adjust their communication strategies. The communication of innovations can be described as “symbolic interactions between organizations and their stakeholders, dealing with new products, services and 14 technologies” (Mast et al, 2005, p. 4). Mast et al (2005, p. 10) also considered that this kind of promotion “prepares the ground for the successful development, implementation, and enforcement of technologies, products, and services. Entrepreneurs are interested in making their innovations public in order to position their company as a first mover and accordingly strengthen their company’s image”. Duboff (2008) presents some assumptions about the process of communicating innovations:  The more innovative a product/service, the more important and difficult it is to communicate and promote it.  Estimating the potential of the product/service is linked to how it is communicated. If the market research test is based on an overpromise, as it is often the case, the test is not valid. Most market research tests completely inform the test subjects (respondents) of what the product is and what its function is, before asking the critical questions of level of interest and intent to purchase.  Even if there is no overpromise, the results will vary depending on the communication. Thus, if a market research uses communication A, but the actual marketplace introduction uses communication B, results in the latter will differ from the former (as it is typical when marketeers are testing two alternative communications about the same product).  Cross-functional, diverse teams produce the best results. It is also important to quote Liao and Cheng, who introduced the concept of “product preannouncement” as formal, deliberate communication before a firm actually undertakes a particular new product development action, such as making changes in a product function or product line. Firms mostly use new product preannouncements as a strategic marketing tool (Liao and Cheng, 2012). In order to make innovations public, expert journalism can also be essential. As such, “innovation journalism covers technical, business, legal and political aspects of innovations. Furthermore, it evaluates and presents them to the public in a comprehensible way” (Mast, Huck, & Zerfass, 2005, p. 3) But the role of journalists is not the only one crucial to potentiate a proper communication: “those in charge of 15 communication in companies and research institutions play a decisive role for communicating innovations” (Mast et al, 2005, p. 3). Barriers to the communication of innovations “Nowadays, the notion of innovation is virtually used everywhere. In everyday life it sometimes describes completely different matters. In particular marketing people tend to use the label “innovative” for products or services which are far from new” (Mast et al, 2005, p. 5). Mast et al (2005) presented the survey INNOVATE 2004, the first nation-wide study on Innovation Communication, based on answers from 84 journalists from all media formats, and 376 communication experts from companies, agencies, research institutions, universities, politics and administration in Germany. They realized that just about one percent of press coverage of companies’ deals with innovations. Of those interviewed, 90% of the communication experts and 95% of the journalists stated that the huge use and misuse of the term are responsible for the low media attention. Only very few of those products labelled innovative actually show a significant improvement or an obvious progress in relation to the already existing products. In addition, editorial offices usually have no specialists on this topic. In fact, in Germany there are neither “innovation departments” nor “innovation journalists” in the same way as there are journalists for business, technology or research (Mast et al, 2005). Another reason for the lack of innovation reporting is the presence of “real” information barriers in organizations and companies themselves. It is not unusual that the communication office does not come to know about news directly from specific departments and, therefore, the need to communicate the innovation is not addressed by the company. 16 2.4. The influence of communication in the success of innovations Effective communication requires a careful and detailed planning, and in general, project planning should be considered to be critical for reaching success. However, “the importance of planning depends on the level of project risk and the success measure being targeted” (Zwikael et al, 2014, p. 435). Nevertheless, a study developed on May 2013, the “Pulse Study”, reveals that consistent communications is critical to any successful project, too. “The most crucial success factor in project management is effective communication to all stakeholders - a critical core competency to all organizations. In a complex and competitive business climate, organizations cannot afford to overlook this key element of project success and longterm profitability” (Project Management Institute, 2013, p. 2). Executives and project managers around the world agree that poor communications contributes to project failure. The Forbes Insights 2010 Strategic Initiatives Study (“Adapting Corporate Strategy to the Changing Economy”) found that nine out of ten CEOs believe that communication is critical to the success of their strategic initiatives, and nearly half of respondents cite communication as an integral and active component of their strategic planning and execution process. And project managers see it similarly from their side; according to PMI’s Pulse research, 55 percent of project managers agree that effective communication to all stakeholders is the most critical success factor in project management. However, the Pulse communications research finds that only one in four organizations can be described as highly effective communicators. “Not all projects succeed. On average, two in five projects do not meet their original goals and business intent, and one-half of those unsuccessful projects are related to ineffective communications” (Project Management Institute, 2013, p. 6). This research argues that ineffective communication leads to fewer successful projects; organizations that are minimally-effective communicators report significantly fewer projects that meet original goals, come in on time, and complete within budget. Organizations must take ownership of this problem and spearhead initiatives that will 17 improve communications and prevent additional project failures (Project Management Institute, 2013). According to the same Institute (2013), many organizations recognize that they are currently not placing adequate importance to the statement of the most important aspects of innovations, such as the correct explanation of their benefits. In what concerts to innovations, it is important to consider that “Successful launches were found to be related to perceived superior skills in marketing research, sales force, distribution, promotion, R&D and engineering. Having cross-functional teams making key marketing and manufacturing decisions, and getting logistics involved early in planning were strategic activities that were strongly related to successful launches” (Benedetto, 1999, p. 530). The same authors found out that a strong product launch greatly improves the chances of success, and highlight the importance of advertising and communication tests. “Empirical studies demonstrate a close relationship between product performance, value delivered to customers, and success rate” (1999, p.531). 2.5. A framework for the communication of innovations This chapter has addressed the concept of innovation in a comprehensive way, especially focused on the added value for the consumer. Having analysed the most relevant existing literature concerning to innovations and their promotion, the main aspects that companies have to take into account to communicate innovations properly have been analysed. Thus, a theoretical framework was created, considering eleven categories (Figure 2). The Communication Strategies (1) will define the obtained Results (3) in the communication of innovations. However, external factors (3) will have a great impact obtaining these results, by changing the conditions previously adopted. This framework is one of the main contributions for this research. 18 Figure 2 - Framework for the communication of innovations Source: own elaboratio 2.5.1. Communication strategies Defining the Target Audience Knowing the characteristics and needs of the clients is the best way to create value, in this way being able to meet their expectations. “Only if marketeers know about the needs and the behavioural patterns of consumers who are most likely to buy innovations, they can tailor their marketing mix” (Hoffmann and Soyez, 2009, p. 778). 1. Communication Strategies - Defining the target audience -Recognize innovative consumers - Communication with opinion leaders - Planning communication activities - New product preannouncement strategy - Relation between internal and external communication - Integrated communication 3. Results - Audience’s perception of information - Perception of value creation to the consumers - Achieve success 2. External Influence - Outsource communication activities - The role of media - Social context influence 19 Recognize innovative consumers In the process of promoting an innovation it is crucial to identify the most innovative segment – the “innovative consumers”, and guide the communication strategies to influence those consumers (Hoffmann and Soyez, 2009). Communication with the opinion leaders It is also important to identify the opinion leaders - especially in the innovation dissemination phase. These individuals buy innovative products earlier than others, to keep their social roles as consultants and advisors for opinion seekers: their public use of products stimulates other consumers to follow their example and buy these products as well (Liao and Cheng, 2012). Planning communication activities A timely planning of the communication strategy to adopt can be essential to achieve its success (Project Management Institute, 2013). “New Product Preannouncement” strategy The “new product preannouncement” strategy is a versatile communication process that companies utilize to send messages to target groups before launching the new product (Su and Vithala, 2008). It can be useful in the launching of innovations, as it is defined as “a formal, deliberate communication before a firm actually undertakes a particular marketing action such as a price change, a new advertising campaign or a product line change” (Jehoshua and Robertson, 1988, p. 282). Relation between internal and external communication Internal and external communication are closely related (Cornelissen and Thorpe, 2001). The information perceived by the members of the organization should be close to the information understood by the consumers. 26 from the literature to the data and back to the field to validate, expand upon or refute their emergent understanding. These researchers tried to reduce the probability that their preconceived ideas would inhibit the collection of useful data and the detection of unanticipated patterns, or obscuring reality by forcing data into in-appropriate categories. However, they noted that doing research in this way, when a wide range of different data types are in play, requires substantially more time and effort than other approaches. And they thereby concluded that special care must be taken when analysing this type of material if an appropriate level of objectivity is to be achieved (Caldwell and Heny, 2010). In the study described in this dissertation, the data were obtained through 13 interviews with the staff of 7 hostels, news available on the internet (media and blogs) and by the analysis of the hostel’s websites. The news accessed on the Web and the information available on the hostel websites served to validate the information obtained through interviews, as an essential complement when studying communication strategies. To ensure the validity of the sample, two interviews were conducted in each hostel. First, the person considered the most knowledgeable in terms of the communication strategy of the hostel was interviewed: the owner, or the communication manager. In a second phase, the receptionists were interviewed, so that it was possible to get another perspective by the staff (expected to be in accordance with the first one). The exception was Rivoli Cinema Hostel: in this case, only the owner was interviewed - despite all the efforts to gather a different perspective from other staff members, no one else was allowed to answer the questions. Regardless this obstacle, this “triangulation” strategy (between the interviews to different people, the information on the website and the news) has proved to be a crucial tool to ensure the reliability of the collected data. It could be defined as “a method used by qualitative researchers to check and establish validity in their studies by analysing a research question from multiple perspectives” (Guion et al, 2013, p. 1). 27 According to Yin (1994), the use of multiple data sources to build a case study allows the researcher to consider a more diverse set of topics for analysis and simultaneously to corroborate the same phenomenon. To understand and group the collected data, the computer program QSR NVivo 10 has been used. NVivo 10 for Windows is a software application that supports qualitative and mixed methods research. It allows gathering, organizing and analysing the contents of interviews, surveys, audio, social media and web pages 9 . The information was organized in folders (interviews, news and website previews) and grouped in two different ways: by hostel, and by the questions asked on the interviews. This process enabled the intersection of data and obtaining the results presented in chapter 4. 3.1. Selection of cases In a qualitative study such as the one developed in this dissertation, choosing the most appropriate sample becomes a key point for the credibility of the analysis. Eisenhardt (1989, p. 532) pointed out the importance of the way cases are selected for the case study research. “Selection of cases is an important aspect of building theory from case studies. As in hypothesis-testing research, the concept of a population is crucial, because the population defines the set of entities from which the research sample is to be drawn. Also, selection of an appropriate population controls extraneous variation and helps to define the limits for generalizing the findings”. As this author suggests, the case may be chosen to replicate previous cases or extend emergent theory, or it may be chosen to fill theoretical categories and provide examples of polar types. In some occasions, given the limited number of available cases, it makes sense to choose cases such as extreme situations and polar types in which the process of interest is "transparently observable”. Thus, the goal of theoretical sampling is to choose cases which are likely to replicate or extend the emergent theory (Harris and Sutton, 1986). 9 Source: QSR International: http://www.qsrinternational.com/other-languages_portuguese.aspx, accessed in 16th September 2014. 28 Therefore, when using a Systematic Combining approach, “the main concern in this kind of sampling is to arrive at an appropriate matching between reality and theoretical constructs. Sampling, thus, becomes more of a continuous process than a separate stage in the study, resulting in a preset sample on which data collection is based” (Dubois and Gadde, 2002, p. 559). Thus, for the choice of this sample, the analyzed literature on the main types of innovation in services was taken into account, in particular through a deep analysis of the Innovation Radar. Furthermore, the analysis aimed at representing the most common cases of innovations for hostels in Porto, and at covering the main categories of innovations studied. Following the guidelines from the literature review about innovations and communication strategies, seven hostels have been considered for the purpose of this study. They were chosen for presenting innovative and differentiating features, compared to traditional hostels (see Table 1). 29 Costumer Experience Process Costumers Offerings Solutions Value Capture – Design Innovation 1. Tattva Design Hostel 2. Rivoli Cinema Hostel 3. Gallery Hostel 4. Oporto Excentric Design Hostel 5. Oporto City Hostel 6. Oporto Sky Hostel 7. Invictus Hostel Innovative Design – Comfort Environment Thematic Hostel (Cinema Hostel) Has its own art gallery Has its own surf school and design agency Private WC and lockers A room only for women and bathrooms by genre Powered by solar panels Innovation Table 1 – Innovative hostels by the way they innovate Source: own elaboration (according to QREN’s definition of innovation) 3.2. Innovation through Costumer Experience 3.2.1. Tattva Design Hostel (Case 1) Two beautiful buildings have been recovered and have been fully refurbished to become the biggest Hostel in Porto, with stunning views from the highest levels. It actually won three Hoscars, the awards organized by the Hostelworld booking website: for being the best large hostel, best facilities and best value for cost-benefit relation worldwide. 30 Figure 4 – Facilities of Tattva Design Hostel Source: www.tattvadesignhostel.com Tattva Design Hostel is also a reference in the famous international design magazine, Wallpaper (14th June 2012). “Porto's largest hostel has moved into a reinvigorated world heritage building in a neighbourhood of Porto known for its burgeoning design scene. Local architect Miguel Nogueira of NN Arquitectura helmed the building's redesign, while interiors were tackled by Porto-based Mundano, who placed emphasis on feature lighting and bold colour. Rooms offer luxuries previously unknown to hostelgoers, like en-suite baths, high-pressure hot showers and in-room heating” 10 . At the entrance, there are vessels that fall from the ceiling over the counter, handshaped brackets and, in the four floors, there are perfect conceived pieces (lamps, chairs and furniture). However, through the interview with the communication manager, Renata Seabra, it is clear that this concept goes far beyond aesthetics. “Design” is seen as synonym of “comfort”, in a way that distinguished itself from the traditional hostels. The main purpose of the "design hostel" is to make guests feel at home, comfortable, 10 Source: Walpaper, http://www.wallpaper.com/travel/the-new-breed-of-designer-hostels/5826, accessed in 16th September 2014 31 and willing to pay more for a premium service: all rooms have curtains around the bed for added privacy; all beds have an individual fan and an outlet, and the mattresses are orthopaedic. It is in this sense that Tattva innovates by providing a unique experience to its guests, through its appealing, yet functional, design and all the associated amenities – innovation through consumer experience. 3.2.2 Rivoli Cinema Hostel (Case 2) This hostel innovated in the same area as Tattva Design hostel: through its decor. But in a different way: it is the first Cinema themed Hostel in Portugal. The hostel has 13 rooms, each one about a different film. It is possible to choose a room by a Director or by a Film, and the interior of the room has its own decoration, related to the choice. As stated on the Rivoli Cinema Hostel website, “it is possible to find movies from Tim Burton, Tarantino, Ridley Scott, Almodovar, Jean-Pierre Jeunet, Godard, Manoel de Oliveira, David Fincher, Alejandro González Iñárritu, Michael Radford, Mira Nair, Steven Spielberg, Stanley Kubrick, Jonathan Demme, and Ang Lee”. Figure 5 – One bedroom of Rivoli Cinema Hostel “Corpse Bride” movie Source: www.rivolicinemahostel.com 32 This organization goes clearly beyond traditional hostels, making it appealing for its difference. A clear attempt was made to meet client’s specific need. In fact, in the beginning, the owners had a vision: to promote quality films, that were a reference for filmgoers. As Rui Pina, the owner, explained, later they found out that it was not what the public wanted: most of the clients found the thematic decoration funny, but did not know much about the cinema world. In order to redefine the costumer’s experience (rethinking the interface between the organization and its customers (Sawhney et al, 2006), they tried to make a "mix" between these reference works and more popular and known films, albeit with less quality. In this way, they can create a nice experience to costumers, who can literally “dream” surrounded by their favourite movie or director. 3.3. Innovation through Offerings / Customers / Customer Experience / Value Capture - Design Innovation 3.3.1 Gallery Hostel (Case 3) Figure 6 – The gallery of Gallery Hostel Source: www.gallery-hostel.com 33 As mentioned in the literature review, the Innovation Radar explains that a company can innovate through its offerings. “Innovation along this dimension requires the creation of new products and services that are valued by customers” (Sawhney et al, 2006). As Gonçalo Castanho, owner of the Gallery Hostel, explained, the hostel “has created a new service to offer the clients, by merging the hostel concept with its own Art Gallery, and contributes with its bi-monthly changing art exhibitions, concerts and other cultural and artistic initiatives to the whole community”. But the innovation goes beyond that: the staff has a project, “We Care”, which represents the effort to protect the environment through different green initiatives such as recycling, solar water heating and much more. In this way, the hostel also innovates in its target audience (the customers): not just the hostel guests, but the city residents who attend the hostel to visit the exhibitions and adhere to cultural initiatives. On the other hand, the costumers’ experience also changes: hostel guests have the opportunity to engage with citizens and participate in local actions; and citizens begin to view the hostel as a different, more interesting space, worth of regular visits. These opportunities mean in new sources for capturing value. The hostel can discover untapped revenue streams, develop novel pricing systems and otherwise expand its ability to capture value from interactions with customers and partners (Sawhney et al, 2006). It creates, thus, a new business model: a restructuring of the traditional "hostel" concept, as a space chosen only for staying overnight - on the contrary, the Gallery Hostel presents itself as a place where guests coexist directly with art, culture and local inhabitants. This is, then, as supported by the literature mentioned in the first chapter, a case of innovation through design. 3.2.2. Oporto Excentric Hostel (Case 4) Oporto Excentric is much more than a place chosen by guests just to spend the night. The business model is totally different from the traditional hostels, the offer going far beyond what is typically available in this type of accommodation. 34 Indeed, Oporto Excentric works not only as a hostel, but also as a design agency, a surf school and as a promoter of sports activities. As Dário Ferreira, the manager, explained, this hostel addresses a very well defined market segment, distinguishing itself from traditional hostels: "Surf lovers are, undoubtedly, most of our guests. We have special packages with surf lessons, the most sought after by foreigners". This is, clearly, an asset as a differentiated offering and an innovative business model to capture value – the design innovation. It also provides the costumers with the experience of an innovative and surprising environment, especially created by its own design agency. They have decorated each room with a diverse theme, related to Porto’s culture and representing emblematic places of the city. 3.4.Innovation through Customers / Customer Experience / Solutions 3.4.1 Oporto City Hostel (Case 5) The website of Oporto City explains that the hostel comes from an old guest house, which was completely rehabilitated. The entire building was recently rebuilt, and the facilities are new and equipped with modern applicances. What stands out about this hostel are their infrastructures. Unlike the traditional concept of hostel, all the rooms in Oporto City Hostel have private bathrooms and personal storage places, “which ensures greater privacy”, Márcio Marques, the owner, mentions. As Sawhney et al pointed out (2006, p. 31), “solution innovation creates value for customers through the breadth of assortment and the depth of integration of the different elements”. With the private bathrooms and lockers, customers who do not want to give up their privacy and prefer not to share the bathroom with strangers solve a problem they face when seeking for a room in a traditional hostel. And this can lead a certain segment of customers to choose this hostel, instead of another. 35 These features may therefore promote a greater sense of security and privacy, improving the consumer experience. 3.4.1. Oporto Sky Hostel (Case 6) When Alda Catarino opened the Oporto Sky Hostel, she decided that it should have one room only for women. From her point of view “so is how it should be”, a contrary concept to traditional hostels, where there is no separation by gender. As mentioned before, this hostel also provides a solution for one of the problems guests can face when looking for accommodation. If a woman does not mind to share the room with other people in order to pay less, but does not feel much at ease on sharing it with men, she now has the solution for her problem. Benefiting from a more private setting, this room reserved for women provides an alternative experience when compared to other hostels, ensuring a different female consumer experience. 3.5.Innovation through process 3.5.1. Invictus Hostel (Case 7) In the Invictus Hostel website one can see that the staff “try to be as environmentally friendly as possible”. This is why the hostel is fuelled by solar energy, through solar panels, and has bicycles for rent. As Loreta Sá Pereira, the receptionist, explained, “as well as being environmentally friendly, solar panels are more powerful every day while their cost is decreasing. This makes solar energy an increasingly economically viable solution”. Though solar equipment requires a more substantial initial investment, this investment is quickly recovered, thanks to money saved in electricity bills, water and gas. This is, then, an innovative, cost effective and efficient alternative, which can be described as an innovation in the process. According to Sawhney et al (2006, p. 32), 42 Chapter 4 Main Results and findings 4.1. General findings Table 4 summarizes the main results obtained from the data collected in interviews, in the news on the web and on the hostels’ websites, taking into account the selected variables. 43 Table 4 – Main results of the research Source: own elaboration Costumer Experience Process Tattva Design Hostel Rivolli Cinema Hostel Costumers Offerings Solutions Value Capture – Design Innovation Gallery Hostel Oporto Excentric Hostel Oporto City Hostel Oporto Sky Hostel Invictus Hostel Pre-planning Yes No Yes Yes No No No Pre-promotion No No Yes No No No No Communication to a target No Wider audience Yes Cinema lovers No Wider audience Yes Surf lovers Yes higher education students No Wider audience No Wider audience Website Yes Yes Yes Yes Yes Yes Yes Social Networks (Facebook) Yes Yes Yes Yes Yes Yes No Booking Channels Yes Yes Yes Yes Yes Yes No Blogs Yes Yes Yes No No No No Media Was contacted Was contacted Was contacted Was contacted Was contacted Was contacted Was contacted Sent press release _____ _____ Sent press release _____ _____ _____ International media International media International media _____ _____ _____ _____ WOM Yes Yes Yes Yes Yes Yes No Outsource of communication activities Yes No No No No No No Audience’s perception Yes No Yes Yes Yes Yes Yes Staff’s perception Yes No Yes Yes Yes Yes Yes Role of communication in the success of the innovation Yes Yes Yes Yes Yes Yes No External factors influence Yes International Events Yes Ryanair flights to Porto and Festivals Yes Opening of art galleries in the street Yes The recent disclosure of the city at an international level Yes Festivals Yes Festivals Yes Events and Festivals Barriers to communication Competing with the other hostels Defining the target audience No No Measuring its results No Reach the public in the low season 44 In what concerns the pre-planning of the innovation’s communication strategy, it is not possible to establish a relation between the type of innovation and planning a communication strategy. This pre-planning has been done by the Tattva Design Hostel, Oporto Excentric Design Hostel, the Gallery Hostel and the Oporto Sky Hostel. Only the Gallery Hostel made a pre-promotion of its innovation. The owner announced the art gallery in an arts exhibition website even before it was opened. Around one thousand people were present at the gallery opening. About the target audience, most of the hostels have defined a specific public, and addressed the communication in order to reach it. The Oporto Excentric Hostel, the Oporto City Hostel, and the Rivoli Cinema Hostel orientated their communication specifically for young people (up to 30 years old), communicating with the clients in an informal way, to create a more welcoming and pleasant environment. The Oporto City Hostel also mentioned that the guests are, usually, higher education students. The guests of the Oporto Excentric and the Rivoli Cinema Hostel are also a specific public: the first are passionate about surf, and the others are cinema lovers (although they are not necessarily experts in the area). These results are justified by the fact that the mentioned hostels are Thematic Hostels: one for its innovative design in the decoration of the rooms, providing a unique experience to the consumer, and the other by the innovative offering of the surf school. The other 4 hostels orientated their communication for a wider audience: young people, families, pilgrims, with the communication strategy aiming at reaching all kind of people, without a specific focus. With regard to the ways of communicating innovations, all the hostels have communicated it in their websites, and, with the exception of the “Invictus Hostel”, in the social network. However, the most important communication channel pointed out was the Booking Channels: the most quoted were the “Booking”, the “HostelWord” and the “HostelBookers”. As it was mentioned in the interview in the Tattva Design hostel, “most people search for a “hostel in Porto” in the reservation channels, most of our clients come from there, not from our name”. 45 In the Gallery Hostel, the “Trip Advisor” was also mentioned, and the importance of the positive reviews by the guests. And the staff of the Oporto Excentric Design Hostel believe it is important to be mentioned in the travel agencies and in the specific platforms for those looking for sport holidays, as “Luex”. Blogs, in turn, do not seem to have much relevance: only the Gallery Hostel mentioned that sometimes bloggers sleep in the hostel and write about it. The staff of Tattva and Rivoli also explained that they are mentioned in travel blogs. Regarding the contact with the social media, only two hostels had sent press releases: Tattva and Oporto Excentric. However, all the hostels were, at least once, contacted by the social media. It happened mostly because of the significant growth of hostels in Portugal and, specifically in Porto, and also because of the music festivals that gather many foreigner people. Only the owners of 3 hostels mentioned the presence in international social media: Tattva, Rivoli and the Gallery, which is consistent with the international news found on the internet. The “word of mouth” communication was considered by almost all the studied hostels studied the second most important vehicle for promotion, just behind the booking channels. Only Oporto Excentric and Invictus believe it is not a crucial aspect to reach the public. It was also noticeable in this study that the communication was carried out completely by the hostel staff, without outsourcing this kind of services. The exception is the Tattva Design Hostel: the company "Guia Sentido" was hired to develop all the communication strategy of the hostel, as Renata Seabra, communication manager, explained. The information provided in the communication channels is, according to the respondents, very clear and noticeable to the public. The exception, this time, is the Rivoli Cinema Hostel: the first communications in the website, facebook and booking channels aimed to distinguishing the hostel as the ideal accommodation for cinephiles, auteur movies and award winning films lovers. Yet, the actual customers are not as 46 those for which the communication is addressed: they are people who appreciate the concept of a themed hostel dedicated to cinema, but often do not know much about it. The staff’s perception about the innovation, according to the responses obtained, is fully in line with what is communicated and what the public perceives (except, as it was pointed out above, the initial case of Rivoli Cinema Hostel). The interviews of 6 of the 7 hostels studied express the idea that the considered innovation is an asset to the hostel, and its communication to the public represents a large part of its success. However, it seems more can be done in this direction. A completely different case is the one of the Invictus Hostel. The owner admits that the solar panels, which produce energy for the hostel, though mentioned on the website, are not, definitely, the main factor that attracts guests – contrary to what happens in the other hostels, the innovation is not relevant for the choice. This can be a communication problem, as the only channel used to communicate the innovation was the hostel’s website. But this assumption cannot be proved: it may well be the case that the public simply does not value this innovation. Regarding the influence of external factors to achieve the target audience, all respondents agreed that, indeed, it exists. However, it does not influence each hostel in particular, but all hostels in Porto, as a whole. Summer festivals, international events, the global agreement that Porto is one of the cities that should be visited by tourists, and the cheap flights are some of the factors mentioned by the respondents. These factors do not directly influence the success of innovation, but the growing demand for a hostel. Moreover, the majority of the respondents do not assign too much importance to the difficulties in the innovation’s communication process, as they consider the main purpose of a hostel is to get customers - and this goal has been fulfilled. “Everything has gone well” is the most common answer. However, the owner of Invictus admits that it is more difficult to reach the public in the low season; the owner of Rivoli had difficulties in defining the target audience, and Tattva Design Hostel finds increasingly difficult to compete with the emerging hostels. The owner of Oporto City 47 also points out how difficult it is to objectively measure the results of the communication actions, making it hard to allocate human resources for these services, given the associated costs. In the next sections, the most important issues raised by the interviews are briefly presented. 4.2. Innovation through Costumer Experience 4.2.1. Tattva Design Hostel (Case 1) The Tattva design hostel, as the name suggests, stands out for its innovative decoration: associated not only with aesthetics but, above all, with the comfort provided to the guests. Regarding to its external dissemination, this hostel stands out for having hired an agency, "Guia Sentido", to manage all the communication processes. The communication strategy was planned in advance, in order to "sell" the idea of functionality, aiming a more selective target, which includes people of all ages and even with disabilities. The website, the booking channels and the social networks were the main means used to show the design concept, through constant updating of accurate photographs, and by gathering many positive "reviews". On the other hand, sending press-releases to the media was a valuable strategy which resulted in the presence in national and international publications, such as the reputable arts magazine, Wallpaper. Renata Seabra, the communication manager, and the receptionist Rita Gonçalves agree that the information they intended to disclose was well assimilated by the public and the entire staff, and the fact that "Porto being trendy" is an asset not only to Tattva, but for all other hostels. 48 4.2.2. Rivoli Cinema Hostel (Case 2) The Rivoli Cinema hostel is one of the "coolest" hostels of Europe, according to an analysis developed by the hotels website, Trivago. Rivoli is a thematic hostel, where the decoration is designed to meet the taste of the seventh art lovers. No specific divulgation strategy for this concept was adopted, and no pre-promotion was planned. The audience was expected to be young people up to 25 years, but, eventually, the hostel also hosts quite older people. The communication was addressed to cinephiles and auteur cinema lovers; however, this strategy was not well succeeded. Contrary to the owners, guests are not necessarily knowledgeable in cinema, they just appreciate the interesting decor. So, a restructuring in the decoration of the hostel had to be done, now including the allusion to films of lower quality, but more popular, in order to capture the attention of a broder public. Rui Pina, a founding partner, believes that the main means of divulgation are the website, the facebook page and the booking channels. He also admits that word of mouth is very important to spread a positive image. Moreover, despite he has never sent press-releases, the media often seek them for interviews. 4.3. Innovation through Offerings / Customers / Customer Experience / Value Capture - Design Innovation 4.3.1. Gallery Hostel (Case 3) The communication strategy of the Gallery Hostel was carefully planned to encompass not only the guests but also local art enthusiasts, through a language accessible to everyone. The promotion was made six months before the hostel opened, on an external site and through a flyer. A thousand people attended the hostel opening. Currently, the communication is made at the hostel's website, the reservation channels and social networks. Trip Advisor is also a good source of positive "reviews" that 49 enhances the visit of new guests, and both the owner of the hostel, Gonçalo Castanho, and the receptionist, Catarina Ribeiro, believe that word of mouth is undoubtedly the most important vehicle for promotion. The information is well understood by the public and the entire staff shares the taste and knowledge about art. Although no press releases have been sent, the media often approach them. This happens not only with national but also international newspapers: the New York Times once mentioned the hostel in a report. The different artistic initiatives taking place in Miguel Bombarda street, where the hostel is located, are, according to Gonçalo, a very important factor to attract new customers. 4.3.2 Oporto Excentric Hostel (Case 4) Oporto Excentric is not just a hostel. It is a hostel, a design agency and a surf school. The promotion was geared mainly towards surf lessons, the offering most sought after by guests: 95% of the audience are foreigners who want to learn the sport. Both, the sports offer and the innovative design of the rooms (representing different places in Porto), were published on the hostel’s website, in social networks, in reservation channels and on specific platforms for the public who is looking for specific sportholidays, such as the website Luex. The manager, Dário Ferreira, has now access to a very comprehensive data base with Scandinavian, British and Dutch contacts. The divulgation strategy started with the promotion of “the only surf camp in the centre of Porto”, through Inezz, the design and advertising agency located in the same site. Furthermore, sending press releases allowed the hostel to be contacted by several media, for interviews. 50 4.4.Innovation through Customers / Customer Experience / Solutions 4.4.1. Oporto City Hostel (Case 5) Private bathrooms and lockers make Oporto City different from a traditional hostel, as it provides a higher of privacy for its guests. Directed to a mostly young audience (high education students), the communication on the website, facebook and booking channels was made in a very informal way, with a simple and accessible language. A standard text has been published in these channels, and it is also sent by email to the clients: it is a very synthetic text, with only two paragraphs, where there is a reference to the private bathrooms and the cost of the stay. Members of the staff get along very well, because they are part of a very small and relaxed team, and they all know the necessary information to communicate. The greatest difficulty in the communication process is, in the opinion of the owner, Márcio Marques, measuring the results of the adopted strategies, to know the effectiveness of each promotion action. On the other hand, to allocate the human resources required for the development of these strategies is also seen as an obstacle, because of the associated costs. It seems they have never contacted any media, but they have been approached by them at the time of music festivals that took place in the city, when the Porto hostels were full. 4.4.2. Oporto Sky Hostel (Case 6) In the Oporto Sky Hostel, the promotion of a room just for women is an asset, especially for certain nationalities: South Korean and Turkish, for example, have much in mind this separation by sex, when choosing a hostel. However, communication is not a very developed area in Oporto Sky. Without a welldefined strategy, divulgation is done primarily through the website and booking channels, and it has not been updated since a long time. It is made in order to reach people of all ages, and through an informal and perceptible language. 51 Word of mouth is considered a very important factor: pilgrims who are walking the “Caminho de Santiago”, for example, recommend the hostel to the following travelers. There is no effort to contact the media and, often, the owner of the hostel, Lucia Moreira, is not willing to give interviews or to welcome the several publications that already contact her – this can be a barrier to the communication of the innovation. 4.5. Innovation through Process 4.5.1. Invictus Hostel (Case 7) The Invictus Hostel is powered by solar panels. This information is appended to the hostel’s website and in the booking channels where they appear, but it is not considered relevant to attract guests, who are supposed to be people of all ages. No strategy to communicate with the target audience has been developed, and no steps have been taken to publicize this environmental initiative. The information is accessible to guests through the Internet, and the media sometimes contact them to learn more about the hostel, but no effort is made by the owner to contact them. Photos in the website are not updated but, still the owner of the hostel, Alda Catarino, and the receptionist, Loreta Sá Pereira, consider the desirable information is understood by the public, and that the entire staff is prepared to adequately answer questions from customers. 4.6. Conclusion The results of this research show that there is no obvious relationship between the way hostels innovate and the success of the communication of innovations. However, one may conclude that innovations in hostels are seen mainly as differentiating factors in the industry they operate; and their communication can have a decisive impact on customers’ choice. 58 Mast, C., Huck, S., & Zerfass, A. (2005). Innovation Communication - Outline of the Concept and Empirical Findings from Germany. 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