tourism product and service innovation to avoid ‘strategic drift’

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ABSTRACT Dealing with change in the external environment creates substantial challenges for tourism managers. Given the complexity of strategy formulation it is difficult for managers to analyse all aspects of their environment or establish precise objectives, consequently business strategies tend to be characterised by small strategic adjustments or ‘incrementalism’. However, these marginal adjustments of strategy within an organisation’s existing culture may lead to strategic drift reflecting strategies that are inconsistent with changes taking place in the external environment. The paper begins with a brief overview of the global trends that comprise the remote environment of tourism organisations. It argues that the standard response of tourism organisations to changes in the remote environment can be characterised as ‘strategic incrementalism’. The paper also addresses the concern that strategic incrementalism can give rise to ‘strategic drift’. In the face of changing global trends the paper explores some of the barriers that must be overcome, discussing seven areas of importance on which managers can focus to assist them to avoid strategic drift. Copyright © 2008 John Wiley & Sons, Ltd. Received 16 April 2008; Revised 22 July 2008; Accepted 18 August 2008 Keywords: global trends; strategic drift; incrementalism; management. INTRODUCTION A major challenge for tourism managers is to understand the external environment in which their organisation operates. They can then identify key issues to which they need to respond. Substantial change is taking place globally that will influence the types of experiences that tourists seek in the future. The next decade and a half will see major shifts in the wider leisure and tourism environment reflecting changing consumer values, political forces, environmental changes and the explo- sive growth of information and communication technology (ICT) (Dwyer et al., 2008a). An understanding of the key trends affect- ing tourism demand and supply improves managerial decision-taking and reduces uncer- tainty. As the environment changes, business strategies must be modified to take account of newly emerging opportunities and threats (Fahey and Narayanan, 1986). The specific challenge for tourism stakeholders in both private and public sectors is to account for these changes proactively to achieve and main- tain competitive advantage for their organisa- tions. In this way, tourism stake-holders can act strategically as ‘future makers’ rather than ‘future takers’ (Ellyard, 2006). This requires tourism stakeholders to ask, not ‘what will the future be?’, but rather ‘what should the future be’ and ‘how can we meet that future’? In recent publications (Dwyer et al., 2008a, 2008b) it was argued that a key element of a successful tourism industry is the ability to recognise and deal with change across a wide range of key global trends and the way these trends interact. One undeniable implication of Copyright © 2008 John Wiley & Sons, Ltd. INTERNATIONAL JOURNAL OF TOURISM RESEARCH Int. J. Tourism Res. 11, 321–335 (2009) Published online 13 October 2008 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/jtr.690 Tourism Product and Service Innovation to Avoid ‘Strategic Drift’ Larry Dwyer 1, * and Deborah Edwards 2 1 Australian School of Business, University of New South Wales, Kensington, New South Wales, Australia 2 School of Leisure, Sport and Tourism, University of Technology, Sydney, Australia *Correspondence to: Larry Dwyer, Qantas Professor of Travel and Tourism economics, Australian School of Business, University of New South Wales, Kensington, New South Wales 2052, Australia. E-mail: [email protected]

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ABSTRACT

Dealing with change in the external environment creates substantial challenges for tourism managers. Given the complexity of strategy formulation it is diffi cult for managers to analyse all aspects of their environment or establish precise objectives, consequently business strategies tend to be characterised by small strategic adjustments or ‘incrementalism’. However, these marginal adjustments of strategy within an organisation’s existing culture may lead to strategic drift refl ecting strategies that are inconsistent with changes taking place in the external environment. The paper begins with a brief overview of the global trends that comprise the remote environment of tourism organisations. It argues that the standard response of tourism organisations to changes in the remote environment can be characterised as ‘strategic incrementalism’. The paper also addresses the concern that strategic incrementalism can give rise to ‘strategic drift’. In the face of changing global trends the paper explores some of the barriers that must be overcome, discussing seven areas of importance on which managers can focus to assist them to avoid strategic drift. Copyright © 2008 John Wiley & Sons, Ltd.

Received 16 April 2008; Revised 22 July 2008; Accepted 18 August 2008

Keywords: global trends; strategic drift; incrementalism; management.

INTRODUCTION

A major challenge for tourism managers is to understand the external environment in which their organisation operates.

They can then identify key issues to which they need to respond. Substantial change is taking place globally that will infl uence the types of experiences that tourists seek in the future. The next decade and a half will see major shifts in the wider leisure and tourism environment refl ecting changing consumer values, political forces, environmental changes and the explo-sive growth of information and communication technology (ICT) (Dwyer et al., 2008a).

An understanding of the key trends affect-ing tourism demand and supply improves managerial decision-taking and reduces uncer-tainty. As the environment changes, business strategies must be modifi ed to take account of newly emerging opportunities and threats (Fahey and Narayanan, 1986). The specifi c challenge for tourism stakeholders in both private and public sectors is to account for these changes proactively to achieve and main-tain competitive advantage for their organisa-tions. In this way, tourism stake-holders can act strategically as ‘future makers’ rather than ‘future takers’ (Ellyard, 2006). This requires tourism stakeholders to ask, not ‘what will the future be?’, but rather ‘what should the future be’ and ‘how can we meet that future’?

In recent publications (Dwyer et al., 2008a, 2008b) it was argued that a key element of a successful tourism industry is the ability to recognise and deal with change across a wide range of key global trends and the way these trends interact. One undeniable implication of

Copyright © 2008 John Wiley & Sons, Ltd.

INTERNATIONAL JOURNAL OF TOURISM RESEARCHInt. J. Tourism Res. 11, 321–335 (2009)Published online 13 October 2008 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/jtr.690

Tourism Product and Service Innovation to Avoid ‘Strategic Drift’Larry Dwyer1,* and Deborah Edwards2

1Australian School of Business, University of New South Wales, Kensington, New South Wales, Australia2School of Leisure, Sport and Tourism, University of Technology, Sydney, Australia

*Correspondence to: Larry Dwyer, Qantas Professor of Travel and Tourism economics, Australian School of Business, University of New South Wales, Kensington, New South Wales 2052, Australia.E-mail: [email protected]

322 L. Dwyer and D. Edwards

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the trends in the wider, remote, ‘environment’ is the way in which they effect changes in the circumstances of customers requiring both destination and individual operators to place a renewed emphasis on new product (includ-ing service) development to meet changing circumstances. Those destinations and indi-vidual operators that make decisions on the supply side that do not match changing customer needs will experience ‘strategic drift’ (Johnson and Scholes, 2008, p. 27). Strategic drift occurs when an organisation’s strategy gradually moves away from addressing the forces in the external environment with no clear direction (Johnson and Scholes, 2008), resulting in a temporary or even permanent competitive disadvantage. However, it is often not clear to tourism managers precisely what new products and services should be devel-oped, or the best way to go about this. In any case, the development of ‘appropriate’ prod-ucts in different destinations and by different operators will vary substantially in different markets and between industry sectors (Dwyer et al., 2008a).

Several questions emerge, including: What are the global trends affecting tourism? Given these trends, are tourism organisations experi-encing strategic drift? What are the challenges involved if tourism organisations are to avoid strategic drift? The answers are crucially important for tourism organisations in both the private and the public sectors.

The fi rst of these questions was addressed as part of a large-scale project on tourism and megatrends for the Sustainable Tourism Cooperative Research Centre (STCRC),1 under the leadership of the fi rst author of this paper (see Dwyer et al., 2008a). This project explored the way in which global trends could affect the Australian tourism industry, both international and domestic, to the year 2020. Implications were identifi ed through a series of work-shops involving Australian tourism industry representatives and were held in Sydney, Melbourne, and Brisbane during 2007 .While one might not wish to generalise too broadly

from the views of only a small number of prac-titioners, we believe that the ideas advanced in these workshops can also throw light on the question of how tourism organisations are meeting the challenges presented by these trends and by implication whether they are experiencing strategic drift.

This paper has several aims. First, it pro-vides a brief overview of the global trends that comprise the remote environment of tourism organisations. It will be argued that economic, political, social, demographic, technological and environmental trends will infl uence tourism demand and, on the supply side, have substantial implications for tourism manage-ment at both the destination (macro) and operator (micro) levels. Second, the paper argues that the standard response of tourism organisations in Australia to changes in the remote environment can be characterised as ‘strategic incrementalism’, with strategies developing in an adaptive fashion, changing gradually as they build on their strategic direc-tion. To set a context for this discussion, refer-ence will be made to the results from the tourism industry workshops. Third, the paper will address the concern that strategic incre-mentalism can give rise to ‘strategic drift’. Reasons are advanced as to why tourism organisations would seem to be particularly vulnerable to experiencing strategic drift. Fourth, the paper will explore some of the bar-riers that must be overcome if these tourism organisations are to avoid the slide into strate-gic drift in the face of changing global trends.

TOURISM MANAGEMENT AND GLOBAL TRENDS

Three workshops were held in Brisbane, Melbourne and Sydney with public and private sector participants representing destination management organisations (DMOs), small to medium tourism enterprises (SMTEs) and education institutions. In the workshops par-ticipants were asked to consider the implica-tions of the global trends for destination management, enterprise management and new product development to 2020. In total 80 persons participated in the workshops, split 40% each from the private sector and public sector and 20% from education.

1Team members were Larry Dwyer, Deborah Edwards, Nina Mistilis, Noel Scott, Carolina Roman and Chris Cooper. The results of the study were published as an STCRC Technical Report (Dwyer et al., 2008a).

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At each workshop, participants were broken into three groups: DMOs, educators and SMTEs. The format of the workshops was as follows. First, the authors provided partici-pants with a 15-minute overview of the global trends considered to comprise tourism’s ‘remote environment’ and to set the context in which tourism will develop in the future. Second, participants in their respective groups were asked to discuss the trends and develop an action agenda that tourism decision-makers in both the private and public sectors in Australia can undertake as part of a proactive strategy to achieve destination and operator competitive advantage internationally over the next 15 years. During the breakout session participants were encouraged to identify what is being performed and what could be done to develop an appropriate action agenda for tourism industry stakeholders and to highlight the implications for destination and enterprise management. Third, each group shared their outcomes in an open forum in which further discussion and clarifi cation of ideas took place. By this means the views and perspectives from representatives of industry and government organisations were obtained as to the perceived impacts of the global trends and the implica-tions for tourism planning, priority areas, new product development, barriers to success and marketing.

Ideas advanced in these workshops throw light on the question of how tourism organisa-tions are meeting the challenges presented by these trends and by implication whether they are experiencing strategic drift. A more detailed explanation of the methodology is reported in Dwyer et al. (2008a).

Global trends

The remote environment of an organisation comprises those factors over which it has very little or no control. As tourism is essentially integrated with other sectors in the economy, tourism trends cannot be considered in isola-tion from key drivers that will shape the world of the future. Some trends operate at a global level and may be referred to as megatrends. A megatrend can be defi ned as a large, social, economical, political, environmental or tech-

nological change that is slow to form (Naisbitt, 1982). Megatrends infl uence a wide range of activities, processes and perceptions, both in government and in society, possibly for decades (Beck et al., 2006). Dwyer et al. (2008a) categorised different forces of change and trends into fi ve areas — political, economic, social, environmental and technological.

Indicative literature on tourism forecasts includes European Travel Commission (2004); Nordin (2005); Viner and Nicholls (2005); United Nations World Tourism Organization (UNWTO, 2002). Indicative literature of global trends proposed by futurists include Glenn and Gordon (2000); Goldblatt et al. (2006); Hammond (1998); and National Intelligence Council (NIC, 1999, 2004). In drawing upon this literature the authors identifi ed global trends which could have signifi cant implica-tions for Australian tourism at least to the year 2020. These forecasts provided a basis for investigating in more detail the infl uences that wider trends have on tourism fl ows globally over the next 15 years.

For a detailed discussion of these key drivers of change see Dwyer et al. (2008a, 2008b). However, for the purposes of this paper they are briefl y summarised as follows:

Economic trends. The UNWTO (2002) forecasts tourism to grow at 4.1% annually at least to 2020, fuelled primarily by rising wealth inter-nationally. Factors expected to underpin widespread economic growth globally include political pressures for higher living standards, improved macroeconomic policies, deregula-tion and liberalisation of trade, rising trade and investment, diffusion of information technology and increasingly dynamic private sectors (NIC, 1999). As rising income is the most powerful generator of tourism fl ows (Crouch, 1994), the projected dynamic world economy (NIC, 2004) is forecast to provide the basis for increased international and domestic tourism. Large travel and tourism operators will continue to cater for a larger volume of tourist movements, accommodation, main-stream or mass tourism. At the other end of the scale niche operators will further offer special products and services, experiences to individ-uals, and collections of tourists with their eclectic tastes.

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Political trends. Populations are responding to the globalisation of economies, markets, systems and cultures by exploring their own identities (Dwyer et al., 2008a). This is likely to lead to the increasing questioning by residents of the form and scale of tourism development and type of destination marketing in those societies. On the other hand, there seems likely to be substantial opportunity for the develop-ment of tourism experiences related to the cul-tural and natural resources of these subsets of society. Peace, safety, security and political sta-bility are fundamental requirements for sus-tainable tourism development. Terrorism and internal confl icts can interrupt the process of globalisation by signifi cantly increasing secu-rity costs associated with international com-merce, encouraging restrictive border control policies, and adversely affecting trade patterns and fi nancial markets (Dwyer et al., 2008a). China and India are emerging as new major global players that will transform the geopo-litical landscape (NIC, 2004).

Environmental trends. The natural environment and climate conditions are very important in determining the viability and attractiveness of a region as a tourist destination. The main environmental trends include climate change, depletion of natural resources and loss of bio-diversity (Stern, 2006; Becken and Hay, 2007). Impacts of climate change include: rising sea level, changes to ocean currents, melting glacial and polar ice, loss of snow cover, rising tem-peratures and changes to precipitation pat-terns. Climate change will affect destinations differently, infl uencing both their viability and attractiveness, and tourist choice preferences. Fossil fuel-based energy sources will become increasingly more expensive as a result of ‘peaking’ in oil production, known as ‘Peak Oil’. ‘Peak Oil’ refers to the maximum rate, i.e. ‘peak’ of production of world oil ‘beyond which it goes into irreversible decline (Becken and Hay, 2007).The implication is that declin-ing oil production coupled with increased demand will result in higher fuel costs.

Policies to reduce greenhouse gas emissions will inevitably impact on operator costs and destination competitiveness particularly for long haul destinations. Because of ‘free rider’ problems the responses to climate change

(mitigation and adaptation) are being led by governments. Policies which seek to mitigate climate change are likely to have a dispropor-tionate effect on the aviation sector with sub-stantial consequences for the tourism industry globally.

Technological trends. Technology, especially ICTs, is considered to be fundamental to pros-perity in the knowledge economy, where the skills to transform knowledge and information into innovative products and services are a defi ning success factor (Gammack et al., 2004).

Technological developments create oppor-tunities as well as pose threats to the tourism and travel industry (Buhalis, 2003). The success of tourism enterprises will continue to hinge on their efforts to add value to products and services through the use of technology pro-ducing competitive advantage. ICTs can give operators a better understanding of consumer needs because of research interaction and data mining, thus allowing differentiation and cus-tomisation according to personal preferences. At the same time, interactive access to product offering via the Internet gives tourists unprec-edented control over how they spend their time and money.

Smaller players can benefi t from technology as the Internet makes it possible for marketing activity to be undertaken on a more level playing fi eld whereby small businesses can connect directly to consumers and compete for market share on an even footing with larger fi rms. It is also suggested that smaller tourism fi rms should form partnerships with Internet providers and online intermediaries to help them communicate their message via database marketing and information technology, a view also advanced by Yeoman (2005).

Faster and more comfortable modes of travel are increasing the accessibility of long haul destinations worldwide. However, as reduc-tions in greenhouse gas emissions are expected to be only incremental, the transport sector will continue to face the ongoing challenge of reducing social and environmental costs asso-ciated with travel.

Demographic and social trends. Major demo-graphic trends include: population growth and ageing; growing urbanisation worldwide;

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changing social structures diversifying away from the traditional ‘nuclear’ family in devel-oped economies; increasing concern for health and well-being, stress management and self-medication; changing work patterns allowing for more fl exibility of travel plans; women having increasing infl uence on all the key consumption decisions; improved education worldwide generating increased tourism fl ows; more highly skilled labour; and technological change and demands on social infrastructure. Changing work patterns will allow for more fl exibility of travel plans (Nordin, 2005).

In both developed and developing countries, the increasing expectations of people will gen-erate more demand for discretionary expendi-ture on travel and tourism. The growing urban congestion in both the industrialised and developing worlds leads to the increasingly felt need to engage in discretionary tourism to escape and/or to indulge (Willmott and Graham, 2001). The greater pressure on ‘time’ and rising ‘stress’ levels leads to growing emphasis on the means of ‘escape’ through holidays. The ageing of populations has impli-cations for the type of tourism experiences demanded by visitors and the types of prod-ucts and services that tourism businesses need to develop.

Characteristics of the evolving tourist include being money-rich, time-poor; having greater fl exibility in the taking of leisure time; being hedonistic, discerning, quality conscious and individualistic (Cetron, 2001; Nordin, 2005; Dwyer et al., 2008a). Tourists typically are becoming more critical, less loyal, seeking value for money, not necessarily low prices. Individuals, particularly those in the devel-oped countries, have an increased social and environmental consciousness, seeking ‘authen-tic’ tourism experiences. They wish to be involved as participators not spectators and seek a variety of optional experiences as a tourist. They are becoming more interested in self-improvement as part of the tourism expe-rience with an emphasis on health, well-being, education, skill development and cultural appreciation.

Three points should be considered in the examination of these drivers affecting tourism demand and supply. One, while the trends can be used to guide decision processes and

resource allocation, no single driver or trend will dominate the global future. Two, trends will vary in their scope and the way they affect particular industries, market segments or even particular fi rms. Three, each of these trends has sub-components as well as occasional counter trends of which the drivers can be mutually reinforcing in some circumstances while in other circumstances they will work at cross-purposes.

STRATEGIC INCREMENTALISM

Organisations constantly need to adapt to changing circumstances to remain competitive. However, given the complexity of strategy for-mulation it is diffi cult for managers to analyse all aspects of their environment or establish precise objectives (Evans et al., 2003). Thus, managers will attempt to be sensitive to it through constant scanning, evaluation and learning by doing (Quinn, 1980a). As a conse-quence business strategies tend to be character-ised by what might be called ‘incrementalism’ (Quinn, 1980b). Incrementalism results from the very challenge of decision-making in complex and unpredictable circumstances. When faced with pressures for change, managers often look for strategies which are familiar to them. This may involve improving the ways in which they operate, but only piecemeal. The hallmark of incrementalism is the consistency of changes in an organisation’s strategies with changes in its remote environment. Incremental change is sensible adaptation to the opportunities arising from a continually changing environment involving a realignment of corporate strategy with changes in the remote environment rather than a fundamental change in direction. Figure 1 provides a visual display of an organisation undergoing incremental change.

If such incremental development is proac-tively managed, the organisation will keep in touch with its environment and anticipate needs for change, which can be achieved through a process of tuning current ways of operating (Quinn, 1980a). Quinn concluded that incrementalism is logical because of the iterative character of strategic management processes and the need to adjust strategies continuously. Incremental change may thus be seen as an adaptive process to a continually

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changing environment, and in this sense it corresponds to what is referred to as the ‘fi t’ concept of strategic management.

In the workshops, participants reported a number of ways in which they responded to challenges arising from the external environ-ment. Some workshop participants empha-sised the importance of sticking to their competencies (‘sticking to the knitting’). A strategy which builds on the skills, routines and knowledge of those in the organisation and which is thus more likely to win com-mitment from their staff. Several workshop participants conceived their organisations as ‘learning systems’, continually adjusting their strategies as their environment changes. According to Sanchez (2001) learning is an incremental approach to strategy making, where the strategic actors, while experiment-ing and discovering, learn by doing. An appar-ently cohesive strategy may in fact develop stepwise from a series of strategic moves, each of which makes sense in terms of the previous steps. Over time, these incremental steps can gradually lead to quite signifi cant strategic shifts.

In many respects gradual change makes sense. There is a tendency towards ‘momen-tum of strategy’ once an organisation has adopted a particular strategy it tends to develop from and within that strategy rather than fun-damentally changing direction (Grundy and Wensley, 1999). No organisation can function effectively if it is constantly undergoing major revisions of strategy.

Participants also perceived themselves as ‘strategists’, as continually proactively

pursuing a strategic goal, countering competi-tive moves and adapting to their environment while not rocking the boat too much so as to maintain effi ciency and performance. Their strategic stance can thus be characterised as ‘incrementalist’ and may be no different from other (non-tourism) managers in this respect. Effective managers know that they cannot do away with the uncertainty by trying to ‘know’ about how the environment will change. Rather, they try to be sensitive to environmen-tal signals through constant scanning and by testing change in strategy in small-scale steps. Regular strategic reviews can help to assure management that a gap is not allowed to open between what the market wants, what the organisation provides and what competitors are offering. On this view, strategy is seen to be worked through in action. Key success factors vary signifi cantly from industry to industry and from market to market, and con-sequently there can be no common formulae for successful strategic positioning.

However, the outcomes of processes of this kind may not be an adaptive approach which keeps strategy in line with environmental change. While incremental change looks like sensible adaptation to the opportunities arising from a continually changing environment, it poses problems (Johnson and Scholes, 2008), and the danger is that improving little by little might not be enough. Management may need to adapt to all of the bigger changes in the environment of that business as well. However, managers may not perceive the need for major strategic changes but rather adapt the current ways of operating, and this may lead to a situ-ation of strategic drift. As we shall argue, tourism organisations are particularly vulner-able to suffer strategic drift.

STRATEGIC DRIFT

Strategic drift occurs when an organisation gradually loses touch with the business envi-ronment through these incremental changes and only realises that it has lost touch when it is too far removed to be able to retrieve the situation by incremental change. That is, the marginal adjustments of strategy within an organisation’s existing culture may lead to strategic drift refl ecting strategies inconsistent

Time

Incremental ChangeAmount of

Change

Figure 1. Incremental change.

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with changes taking place in the remote envi-ronment. Figure 2 displays such a situation (Johnson and Scholes, 2008).

Strategic drift is common in organisations unable to identify or struggle to respond to rapid and dramatic upheaval in the market-place. They have failed to recognise that incre-mental adjustments needed to be replaced with fundamental change (Mintzberg, 2001). Organ-isations in this situation often begin pursuing initiatives and opportunities that veer off strategy; and individuals begin spending time, attention and resources on activities that do not add — and may even destroy — value, with potentially serious consequences.

Typically, the drift is due to a multitude of small problems, and it is generally diffi cult to identify the exact reasons. But we can sum-marise them under the generic term ‘resistance to the change’ — a reliance on price or cost control as a basis of competing rather than delivering added value to customers; or a bias towards ‘selling what we make’ rather than responding to market and customer require-ments. It can also come from negligence from top management who do not monitor suffi -ciently the direction in which the organisation is heading and who neglect the implementa-tion of the appropriate strategy.

For several reasons an incrementalist approach to change may not prevent an organ-isation’s strategic drift.

(1) Faced with pressures for change managers typically try to minimise the extent to which they are challenge with ambiguity and uncertainty by looking for that which is familiar. In this way incrementalism can turn into a dangerously conservative

infl uence that is likely to prevent change and lead to strategic drift, as managers are captured by their own experience and con-strained by reliance on others.

(2) Organisational theorists talk of ‘bounded rationality’ or trial and error decision-making models when trying to capture what actually happens in organisations (Simon, 1976). Managers search until they fi nd a satisfactory solution to a par-ticular problem. Therefore, the outcome of decision-making processes is generally sat-isfi cing rather than optimising; fi nding a decision that is good enough, that is likely to be good enough in terms of what is prac-tical or expected in relation to what has worked in the past. This result, again, is incremental change because of what has gone before.

(3) Environmental change may not always be gradual enough for incremental change to keep pace. If such incremental strategic change lags behind environmental change, then the organisation may get out of line with its environment and in time need more fundamental or transformational change. Indeed transformational change tends to occur at times when performance has changed signifi cantly.

Few industries have experienced as many changes in their external environment in recent years as tourism. As discussed earlier, a sub-stantial amount of change is taking place glob-ally that will infl uence the types of experiences that tourists seek in the future. Yet, tourism organisations often seem content to aim for survival, operating in the most cost-sensitive sectors of the market, without suffi cient commitment or aspiration to innovation and improvement in business performance. Identi-fying when an organisation is at risk, or in a state, of strategic drift is a challenge to man-agement. Arguably there is a fi ne dividing line between the organisation which is running smoothly and effectively and an organisation which is at risk of drift.

It is important to gauge when incremental change has given rise to strategic drift and therefore in what circumstances more funda-mental change may be required. Thus, over time the organisation may become out of line

Time

Environmental ChangeIncremental Change

Amount of Change

Figure 2. Incremental change and strategic drift.

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with a changing environment eventually reach-ing a point of crisis. The later the organisation becomes aware of the drift and reacts, the harder it will be to catch up to the environ-ment. When senior management becomes aware of the drift, a period of fl ux generally arises. At this time more fundamental or trans-formational change may occur. In this trans-formation period, new types of capabilities may be developed, new clients engaged, new markets may be penetrated, and new customer needs and expectations created. If the actions are not suffi ciently drastic, then the spiral of decline may set in again, leading eventually to demise. This situation is displayed in Figure 3. None of the workshop participants considered that their organisation was experiencing this problem.

Avoiding strategic drift

There is no magic formula for avoiding strate-gic drift. Tourism organisations can help to ensure that their strategic direction is in harmony with changes in the remote environ-ment. Given the complexity of changes in the remote environment, organisations will expe-rience different degrees of drift depending on their strengths and weaknesses in various functional business areas, and the strategies that they adopt to pursue opportunities and counter threats. Whatever the specifi c circum-stances of the organisation, managers should recognise the need to minimise any strategic drift that may occur. We now highlight seven areas of importance that tourism managers

need to keep in mind. We present them next in no particular order. Each is important for the tourism organisation wishing to avoid strate-gic drift.

1. Sustainable yield as an objective of the tourism organisation. Participants from public sector organisations were strongly of the view that tourism managers should adopt sustainability principles to underpin their operations. This is consistent with the view that destination man-agers should measure tourism success not by numbers of visitors but by ‘yield’ per visitor, whether defi ned narrowly as an economic measure or more broadly as a ‘sustainable yield’ incorporating social and environmental dimensions in addition to the economic (Dwyer et al., 2007). This would require destination managers to foster a ‘spaceship culture’ within the industry as opposed to the ‘cowboy culture’ so prevalent in many countries and regions. The former refl ects awareness of the impor-tance of developing a tourism industry that delivers economic, social and environmental benefi ts on both the supply and demand side in contrast to a commercial growth ethic uncon-cerned with long-term sustainability.

If a destination is to achieve sustainable tourism development, then the actions of its constituent forms must be consistent with, and support, this objective. Participants from the private sector emphasised that fi rms should adopt a triple bottom line (TBL) approach to their operations to ensure that managers integrate social, environmental and economic information into their decision-making. TBL is ‘reporting that gives consideration to fi nancial outcomes, environmental quality and social equity’ (Gilkison, 1999, p. 2). On the TBL per-spective, three primary forms of capital con-tribute to the success of a business, and each should receive a ‘return on investment’. (Sau-vante, 2001). These are: fi nancial (cash) capital, natural capital and social capital. Sustainabil-ity from a corporate perspective results from producing a positive and balanced return to all three of these sources of capital (i.e. the TBL). Some researchers have argued that tourism organisations should include in their mission statements a concern for the social and envi-ronmental outcomes of their activities in addition to profi tability considerations (Dwyer,

Time

PHASE 1Incremental

Change

PHASE 2Strategic Drift

PHASE 3Flux

PHASE 4 Transformational

Change or Demise

Amount of Change

Figure 3. Transformational change. Source: Adapted from Johnson and Scholes (2008).

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2005). Of course, the question arises as to what extent tourism managers possess the long-term vision necessary to adopt socially and environ-mentally appropriate management strategies in the face of pressure for short-term profi ts.

The requirements for long-term sustainabil-ity in tourism development have been set out elsewhere (Weaver, 2006). For present pur-poses, it suffi ces to note that a concern with sustainable yield at either the DMO level (spaceship culture) or operator level (TBL reporting) requires organisations to carefully monitor the remote environment for changes that may affect their strategic direction. A sus-tainable yield focus would guide management decision-making and orientate an organisa-tion’s strategies towards a better understand-ing of changing environmental and social attitudes. Developers are increasingly required to demonstrate a range of economic, social and environmental benefi ts. Developing tools for measuring these aspects is crucial. Unless tourism organisations effectively monitor the global trends that were highlighted, they cannot be regarded as treating seriously the objective of sustainable tourism development, and strategic drift would seem to be inevitable in such circumstances.

2. Importance of customers. Customer needs are the most important driver of new product and new service development, and essential infor-mation for tourism organisations wishing to avoid strategic drift. One of the most prevalent reasons for strategic drift is inadequate assess-ment of customer needs and problems (de Bren-tani, 1995). Given the social and demographic changes taking place in tourism’s customer base, tourism organisations must develop a detailed understanding of tourist preferences if they are to create value for them. Indeed, new products and services cannot be developed effectively in isolation from customers.

Workshop participants expressed the concern that tourism enterprises in Australia are insuffi ciently customer-focused. A customer-oriented business continually creates superior customer value by exploring both expressed and latent customer needs through the use of traditional as well as more proactive research techniques such as customer observation, selective partnering and experimentation

(Slater and Narver, 1995). It seems fair to say, however, that while the tourism managers recognised the benefi ts of ‘customer orienta-tion’ in delivering better service quality and enhanced customer satisfaction, and while rec-ognizing the need for the industry to avoid a supply-driven cargo cult mentality (‘build it and they will come’), they generally did not have formal processes in place for innovating new product and service ideas. There was broad agreement, however, with the UNWTO (2002) view that tourism operators must inevi-tably shift from the promotion of the functional benefi ts of their products and services to the emotional benefi ts such as reverie/escape, status-enhancement, stress-alleviation, and reward and social-skill confi rmation.

Industry representatives had a broad under-standing of the traits that characterise the tour-ists of tomorrow. Participants noted that the tourism industry will need to serve not only a more demanding and knowledgeable con-sumer, but also one who is more able and adventurous, discerning, quality conscious, individualistic and desiring self-improvement. Therefore, they argued that operators should attempt to become ‘experience providers’ developing personal encounters, and authentic experiences, designed to create long-lasting memories, engaging travel and increased cus-tomer loyalty. This strategy can attract new customers as well as generate repeat visits (Nordin, 2005; Dwyer et al., 2008b).

A serious ‘customer orientation’ will greatly help tourism organisations to avoid strategic drift. The social and demographic changes taking place require a continual monitoring of tourist values, attitudes and needs if the organ-isation is to meet those needs satisfactorily. Understanding and meeting the needs of present and future customers is essential for maintenance of competitive advantage. The alternative is a slide into strategic drift.

3. Proactive adoption of new technology. Advo-cates of a stretch view of strategic management argue that it is not suffi cient just to be respon-sive to the environment, but that the strategist should be more proactively trying to create new products, or new opportunities, creating new customer needs and expectations (Viljoen and Dann, 2003).

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Workshop attendees agreed that tourism organisations need to identify changes in tech-nology that will affect the growth, quality and marketing of tourism. In particular, it was agreed that tourism organisations should monitor the extent to which new telework and video communication technologies affect routine forms of business and personal travel. Benefi ts were considered to include the open-ing up new (domestic and global) markets, removing intermediaries from supply chains, new or more convenient direct marketing and customer relationship options, cost reductions through transactional effi cacy gains, and enabling greater cooperation with allied businesses.

Participants strongly held the view that enterprises will need to be proactive in knowledge creation, product development and knowledge sharing to grow overall destination competitiveness. To this end, future industry leaders required a better knowledge of com-puter information systems, e-commerce and use of information technology to achieve competitive advantage. This is consistent with management theory that argues that knowl-edge management must be increasingly embed-ded and embodied in an organisation in order to be able to anticipate change; take informed action; and develop new products, services and marketing approaches (Buhalis, 2003). It was also agreed that operators need to be proactive in orchestrating technology to their benefi t rather than following the lead of others. Tourism managers should attempt to develop working relationships with key technology providers and developers so they become knowledgeable about the needs and opportu-nities within the tourism industry.

Destinations and tourism organisations that do not embrace the Internet and make the asso-ciated investments in information technology, expert systems and computer programmes will very likely lose competitiveness. The use of electronic technology will enable fi rms to more readily and accurately identify market segments and niches, and to communicate with them more effectively. This can also help to ensure consistency in the marketing message, as operators need to collaborate on the ‘fi t’ between destination products and visitor preferences. Environmental technologies are

also relevant in numerous tourism locations. Without sustainable water, energy and carry-ing capacity generally, destinations’ lifespans are limited. New technologies thus can play an essential role in helping tourism managers avoid strategic drift for their organisations.

Virtually all aspects of tourism organisations in all sectors are being changed signifi cantly by new technology. Historically, the tourism industry has tended not to take an active role in developing or adapting new technology. Despite the proliferation of new technology, the industry is sometimes reluctant to adopt new methods and tools. For example, despite their recognition of the benefi ts of adopting new technologies, only a very small propor-tion of organisations represented at the work-shops are taking advantage of online-engaged communities such as YouTube, Flickr, MySpace and Second Life. Tourism organisations must meet the challenges and opportunities offered by technological advances if they are to achieve and maintain competitive advantage.

Clearly, the success of tourism enterprises will continue to hinge on their efforts to add value to products and services through the use of technology-producing competitive advan-tage (Buhalis, 2000). Technological readiness is generally severely limited. Proactive adoption and use of the latest ICT is essential for manag-ers wishing to avoid either strategic drift or the transformation stage following recognition of strategic drift.

4. An innovation culture. Innovation can take the form of creative and successful new prod-ucts, innovative solutions for achieving cost reduction and higher quality service, or inno-vation as the source of competitive advantage to secure greater market share.

Workshop attendees stated the view that tourism managers should be more proactive in developing strategies to address global trends. If tourism organisations are to be effective innovators, they need to foster what may be labelled as an ‘innovative culture’. Thompson (1999) has shown how effective strategic management implies congruence between an organisation’s environment, its resources, and its values and culture.

Susman et al. (2006) examined the cultural factors that separate excellent, innovative small

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to medium enterprises from their competitors. Inter alia, an innovative culture is one where the interests and actions of each employee support the clearly stated and communicated goals of the organisation; where there is good communication within the organisation verti-cally and horizontally; where employees are empowered, customer-oriented and ethical in their dealings with all stakeholders; where risk is encouraged to support innovation and suit-ably rewarded; and where there is manage-ment support for individual initiative (Susman et al., 2006, p. 45). Space limitations preclude a detailed discussion of these attributes or their relevance to the tourism organisations repre-sented at the workshop. However, taken together, they comprise an ‘innovative culture’ that fosters new ideas and new product and service development to better penetrate exist-ing markets and develop new markets.

To avoid strategic drift, managers within organisations have to embrace change fully. This means building a responsive organisa-tion. But the time that managers can really make a difference — when they really matter most — is at the moment when the organisa-tion begins its drift, before performance suffers and before most people inside and outside the organisation realise that there is a problem. In this perspective, the exceptional manager may be one who can see what others cannot and can persuade them to do something about it (Susman et al., 2006).

Perhaps only a small minority of tourism organisations possess the attributes of an ‘innovative culture’. A recent investigation of Australian tourism fi rms concludes that the research and development culture in small to medium enterprises in Australia is very limited (Gammack et al., 2004, p. 83). New product development is generally handled poorly by new entrants and often even by large and established players who by contrast have the fi nancial resources to develop new products. The report also concludes that new product development is also limited by a lack of mar-keting/strategic appreciation (Gammack et al., 2004, p. 83). Whatever the circumstances of Australian tourism organisations in this respect it is clear that the more elements of an innova-tion culture that exist, the greater the capacity of the organisation to avoid strategic drift.

5. Risk management. Tourists’ perception of safety and security in the destination will con-tinue to constitute an important competitive advantage for the destination as a whole and its constituent fi rms (Ritchie, 2008). Workshop participants claimed that more attention by both public and private sector organisations must be given to risk management in business strategy formulation and implementation. Tourism managers at the workshops recog-nised that destination policy, planning and development must be carefully created and balanced so that tourists are not only safe and secure so far as is possible but also com-fortable with the level of both their security and their privacy. They also agreed that com-municating a destination’s risk management strategies will be important to maintaining visitor attractiveness and that cooperation between governments and operators was important to succeed in this endeavour.

In the view of many of the industry repre-sentatives, a major challenge for tourism organisations is to implement risk manage-ment strategies, including staff education and training, so they are prepared for any incident and can respond swiftly, confi dently and appropriately — thus minimising loss of cus-tomers and sales. These should be part of their business management plans and driven by the highest level of management.

Workshop participants noted that the ability to deal with continuous but unpredictable change requires fl exible and agile decision-makers and that the development of risk man-agement strategies is crucial to sound business management in the face of uncertainties. In order for this to be effective, organisations need to carefully monitor the context in which travel and tourism is operating at any given time. This strategy also helps to correct for any strategic drift that may be occurring.

6. Importance of collaboration. There was a common view among the industry representa-tives, that some changes in the remote environ-ment will require enterprise managers to improve networking capabilities with other enterprises, government agencies and industry associations. A strongly supported view was that tourism operators will need to be more proactive in approaching enterprises that are

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developing, expanding, or franchising new entertainment or tourism products that fi t with their market segments. A similar view was proposed for destination management, who, it was argued, will need to liaise more effectively with private sector organisations in tourism planning, policy and development. There was a unanimous view that destinations need to develop a comprehensive government and industry response to climate change. Some participants went further, arguing that organi-sations that do not explore the possibilities for strategic alliances may well place themselves at a competitive disadvantage. This view is supported in the tourism research literature (cf. Bramwell and Lane, 2000).

Workshop participants also observed a growing tendency for fi rms to access more of the value chain. Increasingly, business manag-ers are looking beyond their enterprises and think and act in terms of ‘value-chains’. Value chains are a way of representing the series of transactions from the provision of inputs for a primary product to primary production, trans-formation, marketing to fi nal consumption and subsequent recycling (Braun, 2007a). Value chain management is increasingly associated with the development of clusters and other co-operative arrangements (Braun, 2007b). It is likely that tourism enterprises all along the value chain that implement best management will achieve better economies of scale, market intelligence and market feedback, quality control and cooperation. An additional advan-tage of value chain management is that it requires a careful monitoring of the strategies of other organisations. The market intelligence and market feedback are of particular relevance as an aid to decision-making to avoid strategic drift.

7. Education and training. Education and train-ing can foster a more innovative tourism workforce to achieve destination competitive advantage. Workshop participants advanced a host of ideas relating to industry education. In particular, it was claimed that the tourism industry must improve its knowledge and skill base in order to improve its innovative capa-bilities. Participants felt that training would be required to provide people with the skills to work in different cultural environments and

integrated workplaces. However, despite the increasing awareness in the industry of the importance of skilled personnel to deliver quality services to customers, workshop par-ticipants observed that only a small proportion of tourism businesses invest in tourism educa-tion and training for employees. The problem here is that tourism businesses tend to be small, operate at marginal profi tability, and have little by way of a career path to offer employees.

Another view widely upheld by participants was that there is a need for employees to have a broader understanding of the tourism indus-try and how it operates across all sectors. They argued that tourism/hospitality education must prepare students to play a proactive, leadership role in an industry that is undergo-ing rapid changes on both the demand and supply sides. It is leaders who can make the dramatic reorientations often required to restore fi t (Lord, 2001). In contexts of continu-ous change, it is important that students be instructed in decision-making tools that can aid ‘best practice’ management in different tourism and hospitality sectors. The new breed of managers emerging in the tourism and hos-pitality industries must have the knowledge content, but, more importantly, must have the adaptive capabilities to apply their knowledge in contexts of change. This requires instructors to enhance students’ problem solving ability by emphasising the role of theory in helping to solve real world problems in dynamic contexts. The ability to deal with continuous but unpre-dictable change requires fl exible and agile decision-makers, organisational improvisa-tion, weak signal monitoring and the ability to undertake appropriate action. Students’ problem solving ability will help them as future tourism managers to achieve competitive advantage and play their part in avoiding stra-tegic drift for their organisations in an industry experiencing continued rapid change, and educational curricula must recognise this.

Workshop participants agreed that the content of tourism/hospitality marketing, planning and policy subjects needs to refl ect awareness of these longer term trends. There is too much short-term emphasis in addressing current industry needs, without much long-term perspective. In their view, tourism and

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hospitality education in Australia (and else-where) is typically not providing the necessary wider skills base for students. Course content needs to address cultural sensitivities, lan-guage skills and a perceived lack of student ‘worldliness’ as part of the education package. In particular, there was strong support for the view that the principles and practices of sus-tainable tourism should be placed fi rmly into tourism and hospitality course curricula. A major challenge for tourism education and training is to convey to students and hence the future leaders of the tourism industry the nature of these ‘environmental infl uences’ and their implications for sustainable tourism development. Such understanding will enhance managerial decision-making to avoid or elimi-nate strategic drift.

CONCLUSION

Faced with pressures for change, managers typically try to minimise the extent to which they are faced with ambiguity and uncertainty by looking for that which is familiar. This raises diffi culties when strategically managing (future) change because it may be that the action required is beyond the scope of their core assumptions and routines. Those organi-sations that seek to stretch what they regard as their core competences to create new opportu-nities could also confront problems resulting in transformational change only when it is too late.

The social environment; the economic, polit-ical and legislative requirements; competition (both domestic and global); and technology continue to advance at a rapid uncomfortable pace. Organisations evolve each day through changes in personnel, knowledge, customer base and stockholder value, but it is imperative that they evolve at the same pace as the exter-nal environment. How different organisations innovate will be context specifi c and depend on the resources and capabilities.

A series of industry workshops held in Australia to assess how tourism managers are responding to the global changes affecting their industry reveals that achieving com-petitive advantage in times of rapid change requires tourism stakeholders to have a clear understanding of the direction of change and

its implications for business or destination management. The workshops were very useful in highlighting the fact that tourism stakehold-ers, public and private sector, need to ensure that tourism policies and planning, product development and marketing strategies are consistent with the trends and environmental factors that are shaping the behaviour of future tourists. Staying abreast of research in these areas can assist agencies and organisations to address the forces in the external environment; develop innovative strategies in their opera-tions; undertake new product development, business management and marketing activi-ties; and thereby avoid strategic drift.

Investing in seven key areas — sustainable yield, customers, proactively adopting new technology, innovative culture, risk manage-ment, collaboration, and education and training — can assist organisations to maxi-mise their resources and capabilities that will assist them to confront future challenges and avoid strategic drift and corporate demise. The issues addressed herein can form the basis of an action agenda that tourism decision-makers in both the private and public sectors can undertake as part of a proactive strategy to achieve competitive advantage internationally in the future.

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