Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case
Hugo Skaalsvik 1* and Jon-Arild Johannessen 2
Received: 14/02/2012 Accepted: 02/11/2012
1 Department of Business Administration and Social Sciences, Harstad University College, Havnegata 5-7, 9480 Harstad, Norway; e-mail: [email protected] 2 Oslo School of Management, Oslo, Norway, and Harstad University College, Harstad, Norway * Corresponding author
Abstract
This paper reports research on a service development study carried out on the prestigious Norwegian Coastal Voyage (NCV), also known as the Hurtigruten, which is the brand name. The primary research instrument employed in the research was in-depth interviews with service managers and service personnel employed on the Hurtigruten. This paper reports on findings on influencing factors to service development and suggests how the identified factors influence service development on the Hurtigruten. A model is suggested that depicts these factors, which are grouped into company internal, company external and system factors. The study advances the knowledge field of service development particularly relevant for a high-contact service such as a cruise operation.
© 2013 International University College. All rights reserved
Keywords: service development, service innovation, qualitative research, case study research, Norwegian Coastal Voyage (NCV), Hurtigruten
Citation: Skaalsvik, H. & Johannessen, J.-A. (2013). Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case. European Journal of Tourism Research 6(1), 53-73.
Introduction the “third wave” (Toffler, 1981), the service Substantial innovation research has been sector has increased in importance carried out in mostly large manufacturing (Kandampully, 2007). The shift from a organisations over the last few decades, but production- to a knowledge-oriented economy studies on innovation in the service sector have (Kim and Mauborgne, 1999) has been given received relatively little attention from academic various labels in the research literature such as researchers (Johne and Storey, 1998; de the information economy, the service economy, Bretani, 2001; Oke, 2007). However, as or even the “new economy” (Grönroos, Western societies in particular have moved into 2000:11). Today, the importance of services in
RESEARCH PAPER 53
Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case. industrialised countries is substantial since study of innovation (Rothwell, 1992; Trott, more than two-thirds of the entire “workforce is 2005). employed in services” (Gummesson, 2000:7). Hence, service industries constitute a major Service development is considered to be a part of the total economic activity and major challenge, as well as an opportunity employment in Western economies, and the faced by service management and marketing service sector offers a tremendous potential for managers (Eastingwood, 1986; Johne and growth and profitability (Martin and Horne, Storey, 1998; Sundbo, 1997), due to the 1992; de Jong and Vermeulen, 2003; Oke, process of internationalisation and enhanced 2007). In this situation, the requirements for competition in an internationally oriented and flexibility, speed, renewal, change and growing service sector (de Bretani, 1995; Bitner innovation in enterprises have enhanced in et al., 2000; Lovelock et al., 2001). In order to order to compete effectively in the new stay ahead in fierce and global competition, marketplace (Trott, 2005). service enterprises have to constantly plan for, develop and implement new services As associated with economic growth, (Edvardsson et al., 1995). However, innovative employment and prosperity in society (Drucker, progress is difficult to accomplish in services 1985), innovation has become one of the (Dörner et al., 2011). One reason for this is that fastest growing research fields within the many innovations in services are quite easy to management area. Innovation research is a imitate (de Jong and Vermeulen, 2003), with fundamental study of change processes, another reason being that the barriers to entry knowledge development and knowledge in many services are relatively low (op.cit.). integration in social systems (Johannessen et Consequently, service managers need al., 1997:668-669). However, today a new knowledge, skills and competencies on how stream of innovation research has gradually innovations in services are adequately planned, emerged in relation to service innovation or organised, managed and implemented in their service development that reflects the own businesses. movement of societies into communities of services (Droege et al., 2009). However, The aim of this paper is to enhance the according to de Jong and Vermeulen (2003), knowledge base on service development, as many service firms struggle with their more research on this topic in service innovative efforts in competitive environments, enterprises is called for (Alam and Perry, 2002; which, in its extreme form is termed “hyper- Dörner et al., 2011), which is done by exploring competition” by D’Aveni (1994). Today, service service development on the famous and firms are at the heart of many modern prestigious Norwegian Coastal Voyage, also societies, but still, many service firms are not known as the Hurtigruten, which is the brand very innovative (de Jong and Vermeulen, name. As a high-contact- and consumer- 2003). oriented service, the Hurtigruten is an interesting research setting as the most famous The concepts of service development and and important tourism attraction product in service innovation have been applied Norway. In order to examine service interchangeably in the research literature development on the Hurtigruten, the research (Menor et al., 2002). In this paper, for the most must encompass an historic dimension. As a part, the concept service development is result of the fact that the tourism dimension of employed. The core of the concept is similar to the Hurtigruten increased in importance by the what Leiponen (2005) perceives as a service introduction of new and modern explorer cruise innovation, which is “new service development ships in the early 1990s, the context of this which involves changes in the process of paper encompasses two shipping lines, which delivering existing services and the generation at that time were operating in the Hurtigruten of new services”. This definition implies a trade: the Troms Fylkes Dampskipsselskap A/S process view of service development, which is (TFDS) and the Vesteraalen and Ofoten consistent with a systemic approach to the Dampskipsselskap A/S (OVDS). Since the two shipping lines successfully merged in 2006, the 54
Skaalsvik, H. & Johannessen, J. (2013) / European Journal of Tourism Research 6(1), 53-73. research context also encompasses the and reported in this paper will be presented merged shipping line: the Hurtigruten, ASA and discussed. The research reported on is (see Appendix 1 for informative details on the being carried out at the firm level, with the Hurtigruten). The choice of a cruise line context literature review being organised into three for the study is highly relevant, as this industry parts. First, the schools of thought in new is in “an early stage of development” service development will be described. Second, (Biederman, 2008:197), with the growth perspectives and models of innovations will be potential being high. reviewed, and lastly a section on success factors to service development will end this part The research addresses two important of the paper. questions: 1. What key factors influence service Schools of thought in new service development development on the Hurtigruten? How scientific knowledge on service innovation 2. How do the identified factors influence develops is at the heart of service innovation service development on the Hurtigruten? research (Droege et al., 2009). As one example, Coombs and Miles (2000) suggested To answer the questions posed, the paper is three schools of thought in service innovation organised in six parts. Following this research: those of assimilation, demarcation introduction, Part 2 entails a discussion on a and synthesis, all of which have been applied selection of the research literature on service by other researchers as well (e.g. Drejer, 2004; development in service enterprises. In Part 3, de Vriess, 2006). Similarly, Gallouj (1998) and the research methodology is presented and Sundbo et al. (2007) have suggested three discussed, while in Part 4, the findings are distinct phases of knowledge development on presented. Part 5 involves the discussion part, service innovation: those of a technologist-, a whereas Part 6 outlines the implications and demarcation- and a synthesis phase. The core conclusions to be drawn from the study. The idea of the typologies suggested is to outline limitations of the study are outlined in this part and describe the differences which exist on and further research is suggested. how innovation in services develops and progresses. Literature review A review of the extant literature on service In a review of the literature on service development reveals a picture of incomplete innovation, Droege et al. (2009) suggest four knowledge (Alam and Perry, 2002). While the schools of thought on service development, a academic literature on tangible product technologist-, assimilation-, demarcation- and development is quite comprehensive and rich, synthesis perspective. As is inherent in the the academic literature on intangible product name itself, a technologist perspective is linked development is fragmented, short and poorly to the development of technological knowledge developed (Dörner et al., 2011). One reason for and competencies, particularly in relation to this could be that the intangible and progress in information technology (IT). simultaneous nature of services makes the According to Droege et al. (2009), this school impact of service development and innovation of thought is the beginning of a service harder to trace in services than in innovation research stream coupled with manufacturing (de Jong and Vermeulen, 2003). Barras’ (1986, 1990) reverse product cycle Thus, relatively little academic knowledge model, which several authors have termed as a exists on how service development actually technologist approach to knowledge works in service enterprises (Drejer, 2004; development on service innovation ( Gallouj Adams et al., 2006; Spohrer, 2008). and Weinstein, 1997; de Vries, 2006 and Consequently, the knowledge base on service Sundbo et al., 2007). Nevertheless, according development needs to be further developed to Droege et al., (2009), this stream of research and advanced (Droege et al., 2009; Dörner et has been subject to critiques because of the al., 2011). In this part, theoretical- and close connection to technology, as many empirical contributions to service development innovations in services are of a non- for the relevance of the research carried out technological character (Gallouj, 2002). 55
Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case.
In the service research community, there is an perspectives have been given particular ongoing discussion as to whether concepts and attention over the past 15 years, those of a theories developed in manufacturing settings market- and a resource-based view (Trott, are applicable and transferrable to innovations 2005). in services (e.g. Coombs and Miles, 2000; Drejer, 2004 and de Vries 2006). However, at According to the market-based view, market present the “assimilation perspective” seems to conditions provide the context which facilitates be in decline (Droege et al., 2009). One or hampers the extent of a firm’s innovative argument is the key role of technological performance (Narver and Slater, 1990; Slater drivers for innovations in the manufacturing and Narver, 1994; Porter, 1985, 1994; Matear sector, while most innovations in services are et al., 2004), with one key issue being the role of a non-technological nature (Gallouj, 2002). of customers in service processes (Ulwick, The assimilation stream of research is 2002), as customer involvement in services contrasted by a parallel direction, that of a seems more important than in developing demarcation perspective. The core argument processes in manufacturing (Langeard et al., for this perspective is that the distinctive 1986; Martin and Horne, 1995; Normann, 1991; characteristics of services (Hoffman and Vermillion, 1999; Edvardsson et al., 2006). In Bateson, 1997; Lovelock and Wright, 1999; order to be innovative, a firm must be able to Kandampully, 2007) make it difficult to transfer identify opportunities in the market(s) in which it knowledge acquired from the manufacturing operates, because in a market-oriented sector to the service sector (Fitzsimmons and organisation interaction with customers is Fitzsimmons, 2000). Researchers within the regarded as a key factor for successful demarcation stream of research rest their business survival (Ennew and Binks; 1996; research on the idiosyncrasies of services, Martin and Horne, 1993; Ulwick, 2002; which implies the creation of unique models of Edvardsson et al., 2006). innovations that are valid for services only (Martin and Horne, 1993; de Bretani, 1995; The resource-based view contradicts that of the Eastingwood and Storey, 1995). Even so, market-based by claiming that the essence is some researchers argue that the insights and not to identify and exploit opportunities in the knowledge obtained from research on market place, but to possess rare, scarce and innovations in services are also applicable and unique resources that enables a firm to develop useful to some extent for product innovation in its innovation potential and innovation activities the manufacturing sector (e.g. Gadrey et al., (Penrose, 1959; Wernerfeldt, 1984; Grant, 1995; Den Hertog, 2000; Djellal and Gallouj, 1996; Prahalad and Hamel, 1990; Connor and 2001). Nonetheless, an emerging trend seems Prahalad; 1996 and Eisenhardt and Martin, to be an integrative or systemic one. This 2000). The core of the resource-based view is stream of research is termed as a synthesis that a firm’s innovation ability is grounded in its perspective, as the research aims to bring resources, skills and capabilities, which may together innovations in services and fuel innovation processes and activities. manufacturing sectors instead of separately studying the fields (Gallouj and Weinstein, The perspectives on innovations may be 1997; Coombs and Miles, 2000, Drejer, 2004; subject to debate and contradicting views in the Howells, 2006 and Nijssen et al., 2006). Thus, research community, although there is a the present state of knowledge seems to be consensus that “innovation is at the heart of that of a synthesis perspective, as development many companies’ activities” (Trott, 2005:5). in manufacturing and services are filtered Despite this consensus, different conceptual together. frameworks (models) have been suggested as to how innovations actually work at the firm Perspectives and models of innovation level, including those of linear models of As innovation has been argued to be the innovation, simultaneous coupling models and engine of growth for a long time (Tidd et al., interactive models of innovations (op.cit.). One 2005; Trott, 2005), what “drives” innovation has prevailing view is that of a process view of been a key issue in innovation research. Two innovation, which, according to this line of 56
Skaalsvik, H. & Johannessen, J. (2013) / European Journal of Tourism Research 6(1), 53-73. thought, perceives innovation within firms as a research (op.cit.). Similarly, front-line management process (Tidd et al., 2005; Trott, employees are crucial for developmental 2005). According to this view, a firm’s purposes, as the involvement of these knowledge base within its core functions, employees enhances the possibility of including marketing, research and technology, successful development and the in addition to finance and business planning implementation of innovative services (de Jong over time, will impact on the innovation and Vermeulen, 2003). Therefore, a firm’s potential of a firm. Similarly, a set of external front-line employees are at the heart of the inputs will influence the innovation process innovation process (Martin and Horne; 1993; (Tidd et al., 2005). de Bretani, 2001) due to their interactive and intensive personal interactions with the Thus, the research on service development customers since they are the first to know when and innovation seems to be in an early stage of the customers are satisfied or dissatisfied with knowledge development since relatively little the core service offerings and supplementary research has been carried out (Johne and services (Lovelock and Wright, 1999). The role Storey, 1998; de Bretani, 2001; de Jong et al., taking of service management is also a critical 2005 Oke, 2007). Thus, how to enhance a factor to success in service development firm’s innovative potential is a complex issue (Dörner et al., 2011). Top management must that involves the effective management of a establish a firm’s corporate vision (Daft, 1999) variety of different activities within an that encourages and supports innovation enterprise. So, according to research literature, initiatives and actions, as well as the creativity what are the success factors to service processes by the service employees across development? organisational layers. Similarly, service management must encourage and stimulate Success factors to service development the work of multi-functional teams in the In the research literature, the identification of processes of innovating a firm’s service success factors is a topic of primary concern in offerings. Finally, the back-stage personnel relation to service development (de Bretani, may also play a role in service developmental 1991; Dörner et al., 2011). According to Dörner processes (Lovelock and Wright, 1999). Even et al. (2011), from a firm perspective, the though they do not have direct customer success factors can be grouped into either contacts, they possess knowledge into many people-related- or structural factors (de Jong technical- and operational aspects of the and Vermeulen, 2003). service offerings, and in this way possess valuable ideas of how to develop the service People-related factors refer to the human offerings. element in the developmental stages of services, with concern to the role of customers, From a firm perspective, structural factors the role of front-line employees, the role of concern the character of the service service management and the role of back- development process (systematic vs. an stage personnel (op.cit.). The role of customers unsystematic process), the concrete innovation refers to how a service provider understands tools, the use of multi-functional teams and the and transforms the needs, wants and availability and use of specific resources in preferences of the target customers into the addition to market research and market testing service development process (Matthing et al., (Dörner et al., 2011). In contrast to a 2004), with the essence being to know the systematic development process consisting of markets in which the firm operates and what defined stages (e.g. Scheuing and Johnson, offers are viable. Contrasting the product 1989; Hart and Baker, 1994), an unsystematic development process in manufacturing process is more “ad hoc” in its orientation with industries, the customers in service some researchers arguing that service development usually play a more important role enterprises have a limited use for a systematic- (Matthing et al., 2004; Edvardsson et al., 2006). or formal process to manage service However, how to integrate the customers into development (e.g. Martin and Horne, 1992, service development processes requires more 1993; Jones, 1995; Kelley and Storey, 2000). 57
Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case.
On the other hand, Dörner et al. (2011) structural factors (de Jong and Vermeulen, perceive a structured innovation process for 2003) seem useful as a frame of reference. services as consisting of three phases: the definition-, the development- and the market Methodology launch-phase. Innovation tools concern the The research reported in this paper is a single remedies or instruments that are available case study (Merriam, 1998; Yin, 2003), and throughout the service development process according to Gummesson (2000:87), “case such as e.g. the use of lead user workshops, study research has received growing blueprinting and customer workshops. The use recognition among groups of management of multi-functional or cross-functional teams researchers”. The case study is particularly concerns the composition of the teams that applicable and useful when examining a may impact on services development and phenomenon about which relatively little is innovation, while a firm’s resources may also known (Mehmetoglu, 2004; Merriam, 1998; Yin, be decisive for obtaining success in services 2003). Hence, the case study approach is an development. The core argument to this line of appropriate research methodology to employ thought is that the better the “quality” of the when examining service development on the firm’s resources, the better a firm’s potential for Hurtigruten. innovation will be. The assumption is that a firm may develop a sustainable competitive In this paper, service development is the case advantage by combining the heterogeneous, to be examined, with the Hurtigruten serving as unique bundle of the firm’s resources in the research setting. A qualitative approach innovative ways that its competitors cannot was chosen to examine the research easily imitate (Barney, 1991; Connor, 1991; phenomenon because qualitative Wernerfelt, 1984). In the research literature, a methodologies are particularly useful when set of resource typologies is suggested examining changes and change processes in (Barney, 1991; Dollinger, 1995; Hofer and enterprises (Veal, 2006; Yin, 2003, Schendel, 1978). From a knowledge Gummesson, 2000). For this reason, perspective, a firm’s knowledge resources are examining organisational changes such as decisive in order to foster innovation initiatives service development requires a “richness” and and actions and in this way obtaining a “depth” in data that a qualitative research competitive advantage (Foss, 1997). A key design may provide (Gummesson, 2000). This characteristics of knowledge as a resource is implies a research paradigm of induction, which that it is not reduced by usage, but can grow is closely associated with a social (Widding, 2003). Obviously, the quality of a constructionist viewpoint of scientific firm’s entire resource base is crucial for what knowledge development (Easterby-Smith et al., management can do in order to foster 1999). In the research literature induction is innovation in the enterprise. perceived as “the process of observing facts to generate a theory” (Ghauri and Grønhaug, The conclusion on this part is that even though 2002:14). However, this study does not aim to research on service development and suggest a theory on service development which innovation is in an early stage of development, is applicable in industries across the service the topic has gradually caught the attention of sector, but instead aims to make a contribution several management researchers with this to knowledge development on service interesting field of innovation gradually growing development in a specific research context: in and progressing. Thus, how the knowledge- an explorer cruise line setting. base on this topic advances in the future is of vital academic interest. Several schools of An examination of previous empirical studies thought have been suggested, though to date that examines service development reveals the (2011), the synthesis perspective seems to be use of multiple research methodologies, which the preferred one. In order to trace influencing entails both primary- and secondary research factors on service development and innovation, information (Booth et al., 2003), and this study the group categories of people-related- and is based on both sources of information. Archival information such as annual- and 58
Skaalsvik, H. & Johannessen, J. (2013) / European Journal of Tourism Research 6(1), 53-73. internal reports from the shipping lines, served the study (see Appendix 3 for informative as useful secondary data. Illustratively, an details). During the course of the interviews, internal report entitled, “Strategic choices after each one lasted for approximately one and a 2001” (Hurtigruten, 1999), provides the half hours, it was essential that the rationale and arguments for moving into the respondents could describe both the totality competitive international explorer cruise line and details on service development on the market. Still, according to Kinnear and Taylor Hurtigruten in their own words. In this way, the (1991:182), “secondary data often has a “data interviewees could provide extensive data that fit” problem”, while primary research served as a basis for the analytical procedures. information usually offers more specific, The long interviews with the service managers targeted and extensive information from were conducted during the spring and autumn respondents who can provide more of 2006 and the winter and spring of 2007. understanding and insight into the topic under study. According to Ghauri and Grønhaug (2002), Mehmentoglu (2004), Merriam (1998), and Primary research information was obtained Johannessen et al. (2004), qualitative data may from nine service managers and service be analysed in various ways. In this research, personnel including six men and three women. the in-depth interviews were tape recorded and The nine respondents were identified by means transcripts were made, with the transcripts of a non probability sampling procedure, that of serving as a basis for a thorough content convenience sampling (Berg, 2007; Finn et al., analysis of the information that was collected. 2000; Saunders et al., 2003), a procedure An extensive examination of the transcripts which “makes no attempt at representativeness was required in order to provide a at all” (McQueen and Knussen, 2002:75). The comprehensive understanding of service participants were judged to be the most development as perceived and reported by the knowledgeable and accessible persons on interviewees. Nonetheless, according to service development from the time the Mehmetoglu (2004:139), “there are no distinct Hurtigruten’s top management and board of and recommendable procedural steps for directors decided to strategically enter the analysing case study data” (author’s highly competitive explorer cruise line industry. translation). Therefore, a challenge would be to employ an analytical procedure that provides a In qualitative research, the personal interview is comprehensive account of the results obtained the most commonly used method of data in the study (Gummesson, 2000). In this study, collection (Fielding, 1997; Easterby-Smith et the Merriam’s (1998) analytical procedure of al., 1999). The personal interview has its three distinct phases was considered useful strength in securing a “depth” and “richness” to and applicable in the analysis part of the the data. In order to carry out long interviews research: intensive analysis, the development (Berg, 2007), the advices of McCracken (1988) of categories and theory development. were carefully followed. One important issue, for example, is that the investigator “allows the The intensive analysis phase was carried out respondent to tell his or her own story in his or by an extensive analysis of the interview her own terms” (McCracken, 1988:22). This transcripts, which provided both insight and implies that flexibility is encouraged in the understanding on the totality, as well as the course of the interviews, thus implying that the details of service development on the interview guide is not necessarily strictly Hurtigruten. The intensive analysis phase then followed if relevant information comes up served as a basis for the attempts to develop a during the interviews. The interviews were set of categories (Merriam, 1998), which were carried out at the headquarters of the shipping termed “factors”. The identified factors were lines in Tromsø and Narvik. identified as the set of categories which, according to the interviewees, influenced A semi-structured interview guide (Jennings, service development on the Hurtigruten, 2001; McQueen and Knussen, 2002; Saunders whereas the theory development phase was et al., 2003) was developed and employed in covered by an attempt to model how the 59
Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case. identified factors influenced service not under any pressure to participate in the development according to the interviewees’ research and they joined in voluntarily with both information. interest and enthusiasm. In the course of the in-depth interviews, they told their “stories” on According to Gummesson (2000), the issue of how service development was carried out on quality in empirical studies needs to be taken the Hurtigruten with no interruptions from the into consideration. Nevertheless, there are researcher. Each participant was also informed several opinions on how to obtain and secure that he/she could decide to leave the interview quality in quantitative studies (Johannessen et for any reason and that the information that al., 2004), and Veal (2006) discusses two was provided would be treated anonymously. axioms of research quality, validity and To the best of our knowledge, the research did reliability. Validity is perceived as “the extent to not harm the respondents in any way. which information collected by the researcher truly reflects the phenomenon being studied” Findings (Veal, 2006:41). The research phenomenon is service development, which is examined in an Findings for Research Question 1: What key explorer cruise line context: on the Hurtigruten. factors influence service development on The validity of the research findings is closely the Hurtigruten? linked to the recall, understanding and experiences of the respondents. As the The research identified eight influential factors respondents were given a sufficient amount of to service development on the Hurtigruten. time to recall and rethink how service According to Merriam’s (1998) analytical development was performed over time, the procedure, the identified factors constitute the information gradually formed a “pattern”, which categories of the study, which were developed demonstrated the factors that influenced by means of a content analysis of the interview service development on the Hurtigruten. transcripts. The factors belong to three main groups: Reliability is perceived by Veal (2006:41) as Company internal factors: new “the extent to which research findings would be leadership, management competencies, the same if the research was to be repeated at management preferences/priorities and a later date with a different sample of subjects”. strategic orientation; However, since the intention of a single case Company external factors: study “is not to make generalisation but to competitive pressure and market preferences; investigate a “one-off situation” (Clark et al., System factors: political frame 1998:103), the case study may contribute to conditions and industry frame conditions. the knowledge field of service development, though it is restricted to a specific context: on Company internal factors the Hurtigruten. Four company internal factors were identified in the research, including those of new A study that involves people always needs leadership, management competencies, ethical considerations (Johannessen et al., management preferences/priorities and 2004), and Nerdrum (1998) discusses three strategic orientation. The factors will be issues that researchers need to take into described in turn. account when collecting information from interview subjects. The first issue is the rights New leadership of the interviewees to self-determination and New leadership has been a dominant trait on autonomy. The second issue is to respect their the Hurtigruten since the mid 1990s. New privacy, and finally, the third issue is to avoid leaders have joined the organisations at both any personal damage to the respondents. In the strategic- and operational levels, and “old” the research reported in this paper, the first leaders have left for several reasons. These issue is particularly relevant, which, according frequent shifts in leadership positions may to Silverman (2005:258), concerns a principle create organisational pressure and stress of “informed consent”. The respondents were within the organisations (Hunt, 1997). However, 60
Skaalsvik, H. & Johannessen, J. (2013) / European Journal of Tourism Research 6(1), 53-73. organisational turbulence can create energy company.” In this way, service development, towards developmental processes (Handy, which is often initiated, planned and driven by 1993). As one interviewee put it, “A new leader service- and marketing managers, came under will introduce new ideas and plans to the pressure, with the service managers having to organisation”. On the other hand, another adapt to the dominant economic thinking or interviewee expressed the view that, “The “logic of economy” of the top leadership team. continuous shifts in leadership positions took As another interviewee said, “In a dispute attention away from the product development between an economist and a service marketer process and instead focused on economic in this enterprise, the economist will always be generating processes, especially how to reduce the winner.” For this reason, economic costs”. Thus, new leadership may have a reasoning was the prime driver for positive as well as negative influence on organisational changes to be made in the service development in an enterprise. enterprises in times of economic turbulence and change. However, gradually, particularly Management competencies through the 2000s, service development has Several interviewees mentioned “management been given more of a priority. competencies” as a factor that influenced service development on the Hurtigruten. The Strategic orientation core competencies of the Hurtigruten shipping The research identified strategic orientation as lines before the strategic choice of moving into an influential internal factor to service the explorer cruise line market were on development on the Hurtigruten. Over time, the technical and operational shipping line continuous merger plans of the shipping lines management. As expressed by one seemed to draw intellectual capacity and interviewee, “Why think about markets and interest away from service development toward travellers when the capacity of the ships was the economic synergies to be obtained from the paid for by the Norwegian authorities?” merger process. As one interviewee said, Following a heavy build-up of capacity which was approved by others, “The merger (tonnage) and fewer subsidies from the plans gave priority to strategic thinking about Norwegian government, even more economists alliances and were at a level far beyond moved toward the shipping lines giving priority thinking about how to improve and develop to “cost effective management”, as was new services”. Even so, a merger attempt emphasised by several interviewees. However, failed in 2004 that created a rather hostile in the merged shipping line, the Hurtigruten relationship between the shipping lines TFDS ASA (2006), a shift in direction is observed, as and OVDS. One respondent said that “After the more emphasis was placed on service merger failure, the entire organisation was development. As one interviewee said: “A new exhausted and no one took any initiatives to culture seemed to emerge, a culture of focus on developing new services.” However, services. In this highly new service culture, as emphasised above, a shift was observed services and market competencies were more after the successful merger in 2006. valued than before”. Hence, as a consequence of the merger in 2006 and an aim to become a Hence, in the research, a set of company world leader in explorer cruises, there has been internal factors was identified as being a move towards becoming a more innovative influential to service development on the and market-oriented enterprise. Hurtigruten. Nevertheless, a set of company external factors were identified as well that will Management preferences/priorities be described next. Management preferences/priorities were an influential factor that was mentioned by several Company external factors interviewees. Due to the economic turbulence Two company external factors to service in the shipping lines, top management had development were identified in the research, given a priority to cost reductions at all those of competitive pressure and market organisational levels. As one interviewee said, preferences. “The economists were really driving this 61
Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case.
Competitive pressure “Customer feedback is important in the further Over the last few decades, some international development of the Hurtigruten product. carriers in the cruise line industry have paid However, what we lack is a systematic plan for more attention to the Norwegian coastline as how to collect customer information.” Another an arena for cruise operations. Tromsø, as one interviewee expressed that “Compared to the example, has approximately 70 cruise ship old times when we did not give any attention arrivals annually (Cruise Statistics, Norway) and priority to the tourists, a change came with (see map in Appendix 1 for geographical the new ships, and the tourists became more orientation). Thus, the competitive pressure in important compared to the transport of locals the cruise industry along the Norwegian coast and goods”. One conclusion that can be drawn has increased, but although some international from this part is that more emphasis has cruise line companies use Norwegian harbours gradually been placed on markets and as part of their sailing routes, the operations customers in relation to business conduct. One are not fully comparable to the Hurtigruten’s example of this is that the merged shipping line sailing to 34 harbours from Bergen up north has employed a market analyst in order to and back from Kirkenes down south (see map enhance the customer focus and orientation of in Appendix 1). Although the core product the shipping line. As a result of this, in the offerings and supplementary services on the research two key factors in the research were Hurtigruten are somewhat different from those identified as being influential to service of the competitors, one interviewee said that development on the Hurtigruten. In addition, a “Obviously the more extensive use of the third group was also identified, which in this Norwegian coastline by international cruise line paper is termed system factors. operators has put pressure on the Hurtigruten’s management to pay more attention to the System factors competition from the international cruise line Two system factors were identified in the carriers”. Another interviewee said that “The research, political frame conditions and Hurtigruten product is assessed by the tourists industry frame conditions. as an expensive and high-class tourism product that is not like “ordinary” cruises”. An Political frame conditions inspection of the Hurtigruten “price list” Several of the interviewees commented on the confirms this statement, as the prices on the factor, “political frame conditions”. One Hurtigruten have increased substantially over interviewee said that “Obviously the political the last two decades. The upgrading of the signals were clear enough; the shipping lines Hurtigruten tourist product has put more had to generate more income on their own due emphasis on service quality issues, though a to the reduction of subsidies from the problem emphasised by one interviewee is government authorities”. Some interviewees “The problem of delivering high- class service also commented on a 10 % governmental on all ships in the Hurtigruten fleet.” Several withdrawal of direct economic support for the interviewees expressed the view that the building of new ships. As one interviewee said quality level varied too much on the 11 ships. A “The heavy build-up of new and modern cruise conclusion here is that the enhanced ships during the mid 1990s was influenced to competition from international cruise line some extent by the withdrawal of shipping yard carriers has exerted a positive impact on the economic support in Norway. The build-up service development onboard the Hurtigruten. programme was necessary but under normal Obviously, as shown in service research, circumstances should be carried out on a enhanced competition may help to gear the longer time basis”. The heavy build-up of processes of renewal and change. capacity (tonnage) over a short period of time stressed the shipping line’s management Market preferences personnel, particularly the sales force, which Last, but not least, the research shows that the had to sell the increased supply capacity to the market preferences expressed by the tourists national- and international markets in times themselves may influence service with restricted market budgets. Yet, in this development. One service manager said that situation, the sales and service personnel 62
Skaalsvik, H. & Johannessen, J. (2013) / European Journal of Tourism Research 6(1), 53-73. became more important. As one interviewee companies, although first and foremost the mentioned, “Gradually, instead of being viewed focus was on the construction of physically as next to economists, we suddenly solid explorer cruise ships, but gradually more experienced an upgrading in status, as the emphasis was also placed on supplementary company had to rely more on us, the sales services such as the quality of the excursion force, in order to obtain more sales”. Over time, programmes. the political frame conditions have changed substantially. However, still (2011), the An intensive analysis of the interview Hurtigruten receives a substantial amount of transcripts yields eight factors, or categories money from the Norwegian government for its (Merriam, 1998), within three main groups that role as an important means of transport have influenced service development on the infrastructure along the Norwegian coast. Hurtigruten. According to the interviewees, the most influencing factors to new service Industry frame conditions development on the Hurtigruten today are In the early 1990s, an economic recession competition, and particularly changing market period in Western economies was coming to an preferences. A statement from one interviewee end. In Norway, optimism gradually took the is quite common: “As new tourist groups decide lead in businesses after a period of cost cutting to travel on the Hurtigruten, their preferences and sales reductions, while in the Hurtigruten are quite different from the “traditional” shipping lines, strategic discussions were tourists”. As one example, the Germans do not carried out primarily concerning the physical require the same degree of luxury as the transformation of the Hurtigruten fleet from Americans, who have experiences of luxury “old” to “new” ships (see Appendix 2 which cruises word-wide”. The implication of this shows photos of ships within the two statement is that more of a focus on customer- categories). In this situation, several oriented service development onboard the interviewees pointed at changes in industry Hurtigruten is required. frame conditions as being influential to service development. One interviewee said that “A Findings for Research Question 2: How do move from negativism to positivism was the identified factors influence service experienced in the early 1990s. We now looked development on the Hurtigruten? ahead. What should the Hurtigruten be like in the future?”. This optimism was fueled by a Figure 1 below portrays how the identified supportive economic atmosphere, as the banks factors influence service development on the again were in a position to offer attractive Hurtigruten: loans, and the Norwegian government encouraged and supported the ship yards new The model depicted in Figure 1. is derived from building programmes. The same interviewee the research findings to Research Question 1. continued, “The shipping lines were also The model is contextual and shows that service favoured by supportive tax reductions”. Another development on the Hurtigruten is influenced interviewee expressed that, “Now it was time to by three primary groups, which are termed speed up again. Whole industries were on the company internal-, company external- and move ahead supported by the economic system factors. What makes the model establishment”. We entered a new economic contextual in particular is the system factor, atmosphere supported by attractive and political frame conditions, which demonstrates competitive industry frame conditions. This that over time the Norwegian government has highly new situation ought to be exploited by spent a substantial amount of tax payers’ our company.” A third interviewee expressed money in the buying up of the transport that, “Obviously, we had to take advantage of capacity on the Hurtigruten. the favourable economic conditions after the recession period”. As a result, the industry Figure 1 depicts that the three groups frame conditions after the recession period constitute a relational system as they interact. favourably supported the further planning and The system factors influence and are development of the Hurtigruten shipping influenced by the company internal factors, 63
Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case.
Company internal factors: New leadership influences and Management competencies is influenced by influences and Management preferences/priorities is influenced by Strategic orientation
Decisive for
SERVICE DEVELOPMENT
Decisive for Decisive for
Company external factors: Systems factors: Influences and is influenced by Competition/ competitive pressure Political frame conditions Market preferences Industry frame conditions
Figure 1. The influential factors for service development: The Hurtigruten case
while the company internal factors similarly by top management, new and modern explorer influence and are influenced by the company cruise ships gradually replaced the “old” ships external factors. Finally, the company external (see Appendix 2 for an illustration). This build- factors impact and are impacted by the system up in transport capacity not only became a factors. challenge, but also an opportunity to gear up developmental processes on the Hurtigruten. In The line of argumentation is that service these times of change, international carriers development on the Hurtigruten was initiated also observed the market potential of the as a result of the political signals of the early Norwegian coast and fjords that made the 1990s in relation to a substantial reduction in Norwegian coast line as a geographical area economic support (subsidises) from the for cruise operations. Thus, the competitive Norwegian government day to day operations pressure increased, which created even more of the Hurtigruten. Likewise, an economic pressure on the Hurtigruten’s management to recession in 1989 and 1990 also influenced the act in order to become more competitive in this development of the Hurtigruten fleet. In order to new competitive- and market situation. support the ship-yards and ship owners in Similarly, gradually and particularly through the times of economic set-backs, the Norwegian 2000s, new customer groups with shifting government changed the industry frame market preferences started paying attention conditions by economically supporting industry travelling on the Hurtigruten. Because of this, sectors. The Hurtigruten’s management utilised Hurtigruten management had to give even the situation by ordering new ships beyond more priority to developmental change what would have been done under “normal” processes such as the service development in economic circumstances. Consequently, order to cope with the environmental changes. system factors influenced management priorities and strategic orientation. The As emphasised, the model suggested in Figure alarming political signals forced the strategic 1 is contextual. What make the model top management of the shipping lines to act, contextual are the system factors that derive and they decided to become a world-leader in from the prevailing political “logic” of the social explorer cruises in polar waters. As a result of democratic government in Norway. Industrial the strategic reorientation initiated and planned development is not left to “market forces” only, 64
Skaalsvik, H. & Johannessen, J. (2013) / European Journal of Tourism Research 6(1), 53-73. but in accordance with a social democratic key role in service development by the hiring “logic”, is impacted by political initiatives and and staffing of market managers and actions. However, both company internal- and personnel, service development is, to a greater external factors may have relevance beyond extent, reflected by a change towards a market the research factors, as according to service focus and orientation. theory, customers, competitors and leadership influence change- and developmental According to theory (Trott, 2005), there are two processes. types of linear models, those of a technology push and of a market pull. In the period leading Discussion up to 2006, the model was that of a technology Innovation in enterprises is highly complex, push character, as the focus was on the which implies the need for effective appearance of the (physical) ship and the management of a variety of different activities construction of the ships prime facilities, and (Tidd et al., 2005), and, according to theory, this was done by an examination of explorer innovation needs to be viewed as a cruise ships already in operation in polar management process, and not as a single waters. The linear model on the Hurtigruten event (Trott, 2005). The process view of started with a competitor analysis phase, innovation is confirmed by the research carried followed by a design phase and ending with the out on the Hurtigruten, and a set of factors construction/manufacturing of the ships as the impact on service development, as portrayed in final phase. However, as a result of the merger the Figure 1. in 2006, the resource-based view was gradually replaced by a market-based view, the According to Trott (2005), two schools of competitors and customers impacted more on thought have been suggested as prime the company’s innovation activity (Slater and “drivers” of service development within Narver, 1994; Porter, 1985, 1994). Thus, innovation literature, those of a market-based- through the 2000s, service development on the and a resource-based view. The resource- Hurtigruten has been influenced by a set of based view, which focuses on a firm and its company external factors, such as those of resources, skills and capabilities, seems to competitive pressure and market preferences. apply well in the initial phase of service As a fact, the Hurtigruten has gradually faced development on the Hurtigruten, which was enhanced competition from international cruise started by the introduction of new ships in the line carriers. For example, the Crystal Cruises early 1990s and ended in 2006 by the merger has offered the product “14 Night Wonders of two shipping lines into one, the Hurtigruten under the Midnight Sun” on-board the Crystal ASA. During this period, the physical product, Serenity, while the Cunard has similarly the new ships with the core physical facilities, promoted and sold the product “14 Night Land constituted the renewal and changes on the of the Midnight Sun”, on the famous Queen Hurtigruten, in which the service development Elisabeth II. Therefore, as more cruise line process features the traits of a top-down carriers have exploited the market possibilities model. Strategic leadership took the lead in offered along the long Norwegian coast by its developmental- and change processes and as fjords and settlements, the competitive the Hurtigruten faced economic turbulence and pressure has enhanced. Obviously, enhanced substantial deficits in its accounts, the focus competition must be met by developmental and priority were on cost reductions and actions by the service management of the organisational issues in the shipping lines. Hurtigruten. Similarly, as the supply side of the Service development was not given a priority explorer cruise line industry has increased, a other than in physically and operationally change of markets (Biederman, 2008) has developing the ships. Nonetheless over time, subsequently followed. As evidenced by Poon and in particular after 2006, service (1993), customers’ needs, desires and development has gradually been upgraded to preferences changes and suppliers must adopt the current date by especially developing the accordingly. On the Hurtigruten, there has been supplementary services of the core Hurtigruten a gradual increase in the number of younger, product. Though top management still plays a adventure seeking people, which have resulted 65
Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case. in more supplementary services being included important means of transportation for the in the Hurtigruten’s product in order to cope scattered population along the long Norwegian with shifting customer preferences. This coast. However, because of a gradual change change is evidenced by new service offering and development of infrastructure, such as a today (2011), particularly in relation to a set of net of speed boats and airports, the role of the exotic events fitted into the service product Hurtigruten has changed. Still, the Norwegian portfolio. Thus, from 2006 to date (2011), a government has continued to buy transport move to a coupling model has been the case capacity, though there has been a slow by as the components mentioned above interact, steady decline in economic support. Similarly, with an important trend being that the role of the industry frame condition has changed over top management has gradually been reduced time as a result of the free market thinking and has been replaced by the role of service philosophy, which to date dominates in political mangers in the service development circles in Norway. processes. Implications and conclusions As outlined in the literature section, a set of Theoretical implications factors impacted on service development (de The present study has provided an Jong and Vermeulen, 2003). In this research, understanding and insight on service the key role of top management as a people- development in a cruise line context by related factor is confirmed as an essential examining this important topic in relation to the factor, which impacts on service development. Hurtigruten, including the acquisition of a series However, as evidenced in service development of invigorating insights that has theoretical research (e.g. Dörner et al., 2011), the service implications. employees are at the heart of innovation, although this is not a finding of the research on First, in connection to the research findings on the Hurtigruten. In theory, as emphasised, the company internal factors, the research role of competition and market orientation are supports the role of new leadership and in evidence with the role of the factors termed management when new leaders enter an company external factors, and these factors organisation. According to leadership theory are to some extent confirmed in the research (Daft, 1997), new leaders usually imply as the needs, wants and preferences of the changes and actions in business conduct. tourists have been particularly addressed after Because of this, the research carried out the merger in 2006. Similarly, in theory, a set of supports the contingency view of organisational structural factors are witnessed as important for change (Hunt, 1997). services development (de Jong and Vermeulen, 2003). First, the research carried Second, as a linkage to company external out reveals a top-down process, initiated, factors, the research confirms the role played planned and implemented from the top. In this by competition and market orientation in the way, the process portrays the features of a developmental processes of innovation (Trott, management process. Even so, the research 2005). As evidenced in innovation theory (de on the Hurtigruten was not conducted by multi- Jong and Vermeulen, 2003; Dörner et al., functional teams, but, up to 2006 in particular, 2011), a set of drivers to services development was a top management activity. However, after has been identified, out of which the role of 2006, by the employment of several service competition and a market approach has been mangers, middle-management has played an seen in this research. enhanced role in service development on the Hurtigruten. Finally, as shown in this research, Third, in conjunction with the research findings system factors have influenced service on system factors, the research shows the role development on the Hurtigruten, as the of contextual factors, which are factors beyond Norwegian government has spent an enormous the control of the company that play a role in amount of tax payers’ money to buy transport the developmental processes of services (Tidd capacity on the Hurtigruten. The logic for this et al., 2005). Hence, enterprises’ adoption to has been that the Hurtigruten has been an 66
Skaalsvik, H. & Johannessen, J. (2013) / European Journal of Tourism Research 6(1), 53-73. contextual boundaries is supported by this The political frame conditions are still operative research. today (2011), as the Hurtigruten’s transport capacity to some extent has been paid for by Managerial implications the Norwegian government, though the Thus far, the research has documented a set of government’s support has been gradually factors impacting service development on the reduced. Similarly, the industry frame Hurtigruten that has implications for conditions are changing as a result of the management. First, the company internal prevailing economic system, the free market factors depict the role of leadership and philosophy, although in these times of management in change processes. The factors economic turbulence (2011), the Norwegian identified on the Hurtigruten reveal that in large government has been attempting to stimulate part service development is carried out as a the economy by e.g. financial support to some top-down process, thereby implying that top export-oriented sectors. Therefore, as the role management decides what firm resources that of the systems factors declines, management are allocated to service development. needs to focus even more on those factors that Nonetheless, when top management prioritises are influential by their own initiatives and cost reductions across organisational layers, actions. According to innovation research, a financial- and organisational resources for new key success factor of business conduct is the service development may be scarce and ability to innovate (Trott, 2005). Consequently, limited. However, reducing the spending on the Hurtigruten’s management is advised to put new service development today may become a more energy into service development “cost” tomorrow as a result not having a processes in the future. competitive and qualitative service product as perceived by the customers and valued by the Conclusions service employees. Hence, in accordance with The research has provided insight and this research, more of an emphasis should be understanding into service development in a placed on service development, thus building cruise line context through the study of this up the process by using multi-functional teams, phenomenon on the Hurtigruten. The case as well as integrating the service employees study design has allowed a thorough more intensively in the process. examination of service development in a highly interesting research context: that of the Second, the research exhibited two company Hurtigruten. external factors that influence service development on the Hurtigruten. Since the In order to examine service development on competitive pressure has enhanced and the the Hurtigruten, a qualitative research design market preferences of the tourists are was employed in the study through the constantly subject to change, management is collection of primary research information from advised to put more of an emphasis on service managers and service personnel. The identifying and closely monitoring both their interviewees were assessed to be the most prime competitors and the prime travel knowledgeable persons in relation to service markets. Yet, as younger, more adventure development on the Hurtigruten from the time seeking people are increasing in numbers on the “new” ships entered the fleet in the early the Hurtigruten, the tourists have become more 1990s. In order to collect the information, the diversified. As a consequence and in line with data was approached inductively. The research this research, there is a need for a stronger identified eight influential factors on service build-up of market analyst competencies for the development within three main groups: those of Hurtigruten ASA shipping line. company internal-, company external- and system factors. By building on the influential Third, the research showed that two system factors, a model is offered that depicts how the factors, those of political- and industry frame different factors interact. However, since the conditions, exerted an impact on service research has been carried out as a single case development on the Hurtigruten. Nevertheless, study (Clark et al., 1998), the research findings these factors are subject to changes over time. 67
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Service development: Modelling influencing factors by employing the Norwegian Coastal Voyage (Hurtigruten) as a case.
Appendix 1. Informative details and the sailing Appendix 2: Examples of the “old” and the route of the Hurtigruten (2011). “new” Hurtigruten.
On the July 2, 1893, the Norwegian steamship MS Håkon Jarl (1952): An example of the ”old” D/S Vesteraalen embarked on a voyage from Hurtigruta. Trondheim to Hammerfest. Approximately 70 hours later, the ship successfully arrived in Hammerfest. Three weeks earlier the Norwegian Parliament had decided to establish a route along the Norwegian coastline from Trondheim to Hammerfest. This was a new and quite astonishing idea, to sail both day and night along one of the most weather-beaten coastlines in the world under all climatic conditions. Despite skepticism, and even severe resistance from experts in Norwegian sea transport, the Norwegian Coastal Voyage, or Hurtigruten, which is the brand name, became a logistical success in sea transport. In
1898, the route was extended to Bergen down MS Nord Norge (1997): An example of the ”new” south, and from 1908 to Kirkenes up north. Hurtigruta. Today, more than 100 years later, the Hurtigruten has become a tourist attraction product of significant importance in Norway, comprising 2500 nautical miles, 34 ports of call, 11 ships and an 11 return voyage Bergen – Kirkenes. Appendix 1 shows a map of the travel route as it is today (2011).
The sailing route of the Hurtigruten
34 ports of call Stop: Kirkenes
The Polar circle
Start: Bergen
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Appendix 3: What do you consider to have been the Interview guide: Information on service main barriers to new service development on development on the Hurtigruten the Hurtigruten? Please, elaborate more on what you 1. Introduction to the interview: This is about consider the most important barrier, the second the researcher, the research project, the most, etc. questions, the anonymity of the interviewee, Please explain in your own words what the rights of the interviewees etc. you consider to be the key 2. The research questions: characteristics/features/traits of service What key factors influence service development on the Hurtigruten. development on the Hurtigruten? Please elaborate more on the outlined How do the identified factors influence characteristics/features/traits. the service development? Please, explain how you perceive the 3: Questions to the interviewees: role of actors in services development on the Research Question 1 and 2: Hurtigruten (competitors, customers, service Please, tell about service development management/leadership and service on the Hurtigruten. employees – both front stage- and back stage Please, explain in your own words what personnel). factors you consider important in the process In your opinion, what should be done in of service development on the Hurtigruten. order to improve service development on the Can you please elaborate more on the Hurtigruten? most influential factor, the second most etc.? Please, can you go into more detail on 4. Ending the interview: each of the factors that you have mentioned? Is there anything the interviewee wants to add? Follow up questions: Thank the respondent for participating What do you consider to have been the in the research. most supporting factors to service development on the Hurtigruten?
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