16 Introduction to Smart Management
In light of the strong impact that the smart technologies are having on tourism firms, there is no choice but to find new ways to transform organizations to remain competitive. Smart technologies offer endless opportunities that can be game-changers for many tourism activities, but they also present daunting new challenges that can threaten the very existence of many businesses. Therefore, the need to transform is not only an endogenous phenomenon that arises in response to the opportunities offered by smart technologies, but it is also a broader exogenous phenomenon that, by altering the competitive environment of the firm, calls for bold responses from tourism firms to stay alive in the market. Technologies such as Big Data, data analytics, artificial intelligence (AI), the Internet of Things (IoT), cloud computing, and social media are making new smart organizations possible by offering new capabilities focused on consumer needs and innovation, and streamlining response processes to environmental changes. The role of these data-centric technologies has reached such relevance that how they are integrated and managed by the organization has become a vital issue for tourism firms of all kinds, regardless of their activity, size, ownership, or nationality.
Tourism firms see that smart technologies offer unprecedented opportunities to: 1) create value from products and services that are delivered to consumers right when, where, and how they need them; 2) develop new business models that exploit new and innovative sources of revenue; and 3) access markets that were previously too difficult or expensive to enter. However, in the new smart era, business owners and managers must be aware that firms will no longer be competitive by the simple fact that they implement this or that smart technology, thinking that this will make them extraordinary. Smart transformation goes far beyond mere technological change. Technology is just one part of the intricate puzzle that organizations must learn to solve to stay competitive in the new smart era.
Organizational transformation becomes a key driver when it comes to increasing the competitive capabilities of the firm and improving its profitability. Be aware that transformation is aimed at generating deeper knowledge of the changing needs of the customer that can be leveraged into faster and more accurate business actions. The secret sauce lies in the organization’s ability to continually learn from data, extract meaning from it, and inform decisions. In short, the smart organization is one capable of adopting a data-centric culture and using information technologies to accelerate the production of knowledge and engage customers in new and innovative ways, learning in the process. Therefore, it will not be enough for tourism firms to use new technologies and think of new strategies to do things digitally, but they will need to emphasize changes in their organizational structure, in their core processes, in their business models, and in their own culture to find new ways to create value (Mahraz et al., 2019; Vial, 2019). This is called deploying a smart transformation strategy, which encompasses the set of far-reaching responses that the organization will need to give in the functional, operational, and technological fields simultaneously to address the challenges posed by the Smart Revolution. The end result is the creation of value to both the consumer and the organization itself.
16.1 Transformation and Value Creation
One of the most significant consequences of the growing incorporation of smart technologies in tourism firms is the change that occurs in the way organizations create and capture value. The creation of value has become a crucial factor for the sustainability of tourism firms, on which the generation of profits, customer retention, and the achievement of goals depends. However, value creation is a difficult and quite complex process, especially when it involves internal and external factors to organizations, and one that most tourism firms find difficult to tackle when smart technologies come into play (Mirarab et al., 2019). The smart tourism firm can create value through two main data-driven modalities (Zeng & Glaister, 2018):
From internal data: This mode allows the firm to focus mainly on the analysis of transaction data to generate differential advantages that only the organization can enjoy.
From open data: This allows the firm to focus mainly on the analysis of the data obtained through the collaborative relationships it maintains with the outside world to generate differential advantages that the firm and its partners can enjoy together.
Firms can be very different when it comes to harnessing data, putting a data strategy in place, and deploying smart technologies to create value. But, as far as a firm transformation. The value created from smart transformation does not depend solely on the firm’s IT and analytics capabilities. Strategic and organizational practices are also critical to maximizing business value, hence the need for the tourism firm to develop a smart transformation-specific value creation framework that takes into account key factors such as the dynamic capabilities and ambidexterity of the organization. Figure 16.1 encapsulates the main management vectors that come into play when driving the smart transformation of the tourism firm.
16.1.1 Dynamic capabilities
In the new smart era, the consumer is king when firms must decide on technologies and products/services. Tangible resources (including products) lose relevance with respect to intangible assets and services, and the firm’s ability to open up to the outside world and interact with other players in the tourism ecosystem becomes more important. These new rules of the game are having a strong impact on the very configuration of the value networks, which are increasingly wider and more complex. Consequently, tourism firms must operate in a much more turbulent, uncertain, and hypercompetitive environment. To manage all the complexity that surrounds them, firms must devise mechanisms to sense what is happening and quickly adapt to the changes that occur inside and outside their competitive environment, optimizing the organization’s key processes (i.e., with robotization, automating tasks), creating new sources of revenue (i.e., personalized services), or developing new business models (i.e., Uber, Airbnb). In fact, these circumstances are not much different from previous times when disruption was also the general trend, for example, when the internet revolution began. What is different this time is the different way firms must act to achieve their goals, and the much larger size of the opportunities that lie ahead for organizations that know how to seize them.
A long-term challenge facing tourism firms is how to stay relevant in front of increasingly digital and savvy customers, and how to build deeper and more lasting engagement with them that will earn firms more pocket share (Bala, 2018). A consistent way to achieve this is through dynamic capabilities, i.e., by strengthening the ability of firms to deliberately modify their resource base, and by acquiring ever-higher levels of digital maturity through successive waves of digital and organizational innovation. Dynamic capabilities support the way in which firms create, implement, and protect the intangible assets that drive superior long-term business performance, helping to develop mechanisms that allow them to increase their adaptation to the environment and ensure their competitiveness. These dynamic capabilities are difficult for other firms to replicate and make all the difference when it comes to adapting to customer changes and harnessing the potential of new smart technologies. Dynamic capabilities development can be accomplished through three main mechanisms (Teece, 2007):
Sensing and detecting opportunities and threats: Smart firms must constantly explore their environment in search of new technologies and business opportunities, both local and distant. This requires informational resources, analytical and organizational skills, and a culture aimed at acquiring, analyzing, and using data. The speed in acquiring information assets and converting them into useful knowledge becomes the key to maximizing value for the firm.
Seizing the opportunities: Once the firm detects a new (technological or market) opportunity it should be addressed through new products and services and agile processes. Maintaining and enhancing technological competencies and complementary assets is also key to seizing opportunities. Later on, when the opportunity is more mature, the firm may decide to invest heavily in the particular technologies and value offerings that are most likely to gain market acceptance.
Sustaining competitiveness: Enhancing, recombining, and protecting the organization’s tangible and intangible assets (including organizational structure) as the firm grows and markets and technologies evolve.
However, in most cases, firms do not have the capacity to develop dynamic capabilities and innovate on their own, and must rely on multiple parties to design new mechanisms to create and capture value (Vial, 2019). In such cases, firms need to open up and start collaborating across the platforms and ecosystems they operate in, whether with customers, partners, or even competitors. The integration of smart technologies, provided or co-developed with partners, can move the tourism firm steadily forward in the process of smart transformation while meeting its business objectives.
16.1.2 Ambidexterity
Addressing smart transformation involves developing capabilities to quickly adapt to predictable and unpredictable environmental changes and create and capture new value. Events such as the appearance of new technologies and disruptive/innovative business models, the shortening of product life cycles, and a more dynamic competitive landscape require new strategic responses from business firms. Those organizations that take a step forward and are committed to smart transformation do so by adopting different combinations of information technologies, processes, and resources that end up impacting the entire organization and leading to profound changes in its structure, culture, and behavior.
These transformation initiatives deliberately introduce organizational changes that are global and pursue ambidexterity, namely, the simultaneous combination of two different modes of operation within the firm (Jöhnk et al., 2020; Olszak & Zurada, 2019). On the one hand, the exploitation mode, focused on the most efficient and flexible use of the existing organizational knowledge base. On the other hand, the exploration mode, which seeks to go beyond the current base of knowledge and skills of the organization and focuses on the search for new sources of knowledge, resources, and the acquisition of new skills that encourage speed, experimentation, and innovation. Both modes differ in terms of the strategy, structure, processes, and culture, so the smart organization will need to find an adequate balance between the two, avoiding overweighting one mode over the other.
There are many approaches to achieving ambidexterity in the firm that usually encompass different initiatives at various levels, these basically can be grouped into the following:
Cultural change initiatives.
New organizational structures, including new roles and responsibilities.
New processes aimed at continuous innovation and collaboration with partners.
In general, firms use different approaches in their exploration and exploitation approaches. For exploitation, firms typically implement traditional strategies that establish the strategic direction to be followed by the firm, allocate resources, and set up priorities. This highly programmed way of introducing change into the organization can slow down (if not prevent) the exploration of new transformation scenarios. For this reason, firms usually use open and agile strategies for exploration that guide the discovery of new possibilities.
Organizations sometimes create dual structures to make ambidexterity structural, meaning that they simultaneously maintain a traditional organizational structure for the exploitation mode and another open and agile structure for the exploration mode. On other occasions, firms establish hybrid configurations when justified by the need to combine both approaches. Very often this means that multiple transformation initiatives come together in the same organization, adding even more complexity to the transformation process. In these cases, it is crucial that each transformation initiative is aligned with the overall strategic vision of the firm. To do this, the organization can create a specific unit with people dedicated to coordinating all initiatives and ensuring synchronization and collaboration in accordance with established business objectives.
Most of the time managing multiple concurrent transformation initiatives and the consequent structural and cultural changes is a challenge for organizations, even more so the smaller the organization. This explains why, in today’s highly complex business context, it is crucial that the firm has a governance framework in place for transformation initiatives that regulates resources and responsibilities and manages to seamlessly integrate them with the business, IT, and people functions. This is maybe the best way to reduce resistance to change and overcome the inertias that often impede organizational change, replacing them with new innovative and more collaborative capabilities instead.
Ultimately, owners and managers should not forget that the transformation of a business organization is made by and designed for people, so employees must always be at the center of any smart transformation strategy. Interpersonal and cultural aspects play a crucial role in a successful organizational transformation strategy, which must be based on communication and leadership as tools that facilitate the collaboration of employees in the business and IT areas. In this vein, maintaining continuous personal interaction at all levels, understanding the objectives pursued, and sharing the necessary knowledge not only helps to reduce the economic and social costs of organizational transformation, but also contributes to accelerating the whole transformation process.
16.2 Value Creation
The creation of new value is the leitmotif that drives all the efforts that the tourism firm dedicates to achieving smart transformation. However, this is not a quick or easy path; rather there are numerous challenges that run through the entire value creation process, including creating, delivering, and capturing value, and to which owners and managers need to pay careful attention. Let’s see below the main challenges that can be found in each of the value processes.
16.2.1 Challenges for value creation
In the context of smart transformation of tourism firms, value creation is about providing tourists with a “smart experience” that is fast, accurate, personalized, and can be tracked in real time. Making an experience smart depends on the firm’s ability to collect information, process it, analyze it, and make decisions quickly and effectively. The Big Data life cycle management thus becomes one of the main engines for value creation in the smart firm. This requires a set of skills associated with data literacy and interpretation of results that should enable employees to make valuable contributions to the business, and that includes data management, analytical tools, and business and decision-making processes (Brinch et al., 2021). In addition, value creation must be driven by the firm’s business strategy, which makes smart technologies coordinate with the rest of the firm’s ICT to support continuous improvements.
To harness these sources of potential value for the business, the tourism firm must be able to manage mixed offerings made up of products and services based on smart technologies and “conventional” products and services (Vaska et al., 2021). This may confront firms with important decisions about whether to cannibalize “conventional” products and invest in the most advanced smart products and services, or maintain a balance between the two value propositions. These decisions may also affect the speed at which the firm must transition from one value proposition to another, and the impact on the existing business model.
Another key challenge is related to the impact that smart technologies have for the co-creation of value with customers and stakeholders, and the new opportunities that arise as data analytics is integrated into consumer devices and tourism products and services. While these implications remain to be seen, tourism firms need to remain vigilant about new media and emerging opportunities to co-create value to quickly deliver the best value propositions to customers.
Finally, incorporating greater organizational agility is another important challenge that the firm must address to achieve a faster and more accurate operational framework to respond to changes in the environment. By implementing agile practices, tourism firms can increase their ability to offer solutions to customers quickly and in a personalized way, creating new value for the customer and the organization. However, gaining organizational agility in the context of highly complex ecosystems such as tourism is a crucial challenge that tourism firms must learn how to address.
16.2.2 Challenges for value delivery
Value delivery describes how the firm’s processes and activities are used to deliver the promised value to the customer. As smart transformation challenges conventional core business competencies, activities, processes, and technologies, and brings the threat of new players to market, the way organizations deliver value to customers and stakeholders is deeply impacted. In the smart firm, the activities and processes focused on delivering value change and become governed by the data and knowledge that the firm generates from customers and the environment. This new way of operating internally requires the firm to work in an agile manner and take advantage of all its internal knowledge, extending it to all levels of the organization to ensure that it can act quickly and accurately.
However, delivering value in new tourism ecosystems dominated by increasingly complex value networks is a significant challenge. Firms seeking to transform must relearn how to deliver value using the new relationships, roles, and activities emerging in smart ecosystems, orchestrating their resources accordingly, and making smart decisions about what skills and capabilities to develop and what investments to make first. Additionally, tourism firms must be open to continuously incorporating new smart technologies and adapt to the new business models that emerge. This makes it necessary to delve deeper into the knowledge of smart technologies and better understand the opportunities they offer to deliver value to the customer in a close, direct, and more efficient way.
16.2.3 Challenges for capturing value
Smart transformation also brings significant impacts on the way firms capture value. For example, there are impacts on revenue models, cost structures, and the financial viability of tourism firms, as well as on the capacity of the firm to reduce the uncertainty associated with decision-making. Through the implementation of smart technologies, tourism firms can optimize their work processes and increase the quality and efficiency in the delivery of products and services to the customer. Tourism firms capture value when they can offer experiences to customers that respond to their preferences, in the place, time, and through the channel of their choice, or when they personalize their products and services quickly and seamlessly. Technologies such as Big Data and data analytics help firms identify new sources of value in the markets and design superior value propositions, while reducing the costs of delivering customer value over time. Smart technologies also enable tourism firms to capture value through platforms, leveraging the abundant knowledge they generate about customers and the close and direct relationship they allow with the customer.
Notwithstanding, tourism firms must make investment decisions in smart technologies with caution and intelligence. They must carefully weighup the pros and cons of investing in certain smart technologies and undertaking deep organizational changes, as well as assess the impact that all these changes may have on the value to be captured by the firm and its business model. Business owners and managers must be aware that many times the value captured from investments in new technologies does not reach the income generated and may not compensate for the risks assumed by the investments made. This is perhaps more evident in ecosystems dominated by platforms where each actor will surely end up capturing part of the value of the investments made by the firm. That is why it is key for tourism firms to build a well-thought-out revenue model, in which the value captured is adjusted to forecasts throughout the life cycle of technologies and products and services.
16.3 Creating a Transformation Strategy
Creating a smart transformation strategy based on the organization’s dynamic capabilities and ambidexterity through the implementation of multiple concurrent projects is an effective way to reduce risks and costs. In a scenario like this, organizations are constantly changing, adapting their structures, resources, and objectives as they evolve and overcome the inertia that impedes change. This is different from those organizations that perceive the need to transform as a result of episodic external events (or disruptions) that alter a previous equilibrium situation and that affect the internal structures of the organization, which are then replaced by others.
The continuous change approach entails a micro-level perspective (as opposed to the macro-level of the episodic change approach), according to which transformation does not only respond to external changes that abruptly shake the organization at specific moments (i.e., when a new technology appears), but is substantially driven by the continuous evolution of the contextual conditions in which the firm operates (i.e., by the continuous interaction with customers, the evolution of customers’ consumption expectations, etc.). It is precisely the constant evolution of the contextual conditions, and the complexity arising from the growing interconnection between the actors of the tourism ecosystems, that determines the degree of transformation that the firm will require, from continuous incremental micro-adaptations to more profound selective changes that introduce new organizational configurations. Ultimately, the organization should always remain aligned with the contextual conditions in which it operates, seeking an adequate balance between continuous and episodic change.
Unlike what may happen in other business environments, equilibrium situations are not expected to be reached any time soon after external changes or disruptions occur in the tourism ecosystem. Rather, in tourism changes often occur in cascade and their consequences are unpredictable. For this reason, owners and managers should better approach the smart transformation strategy from the paradigm of continuous change, which means that the organization and its structure become malleable and are always prepared to face endless micro changes that are going to occur continuously over time (Hanelt et al., 2021). However, despite the predominance of the continuous change approach, this does not rule out the need for the tourism firm to respond to episodic or disruptive changes that may occur in its environment, even more so when these episodic changes can be the precursors of continuous changes.
All activities aimed at implementing a smart transformation strategy and creating value for the tourism firm must be converted into concrete actions. Hence, owners and managers should always remember that deciding to implement technologies is not going to add direct value to the organization on its own. Only when owners and managers are aware of the specific context in which these technologies operate and pursue specific and ambitious transformation goals can the firm discover new ways to create value. Therefore, a successful smart transformation strategy will depend on the emphasis that leaders place on preparing the organization’s value creation processes for change, acting more specifically in the five areas that are discussed below (Vial, 2019):
Value offerings.
Value networks.
Digital channels.
Business model.
Organizational agility.
Acting in these areas can be a source of inspiration to create innovative products and services, optimize key business processes, improve decision-making, and evolve to an agile culture that leads to a smart data-driven organization.
16.3.1 Value offerings
Smart technologies provide the ability for tourism firms to create new value offerings from reviewing or expanding their existing portfolio of products and services. These new value offerings are determined by the firm’s ability to collect and analyze data on customers from their interactions with the products and services, as well as by incorporating increasingly innovative elements into them. A paradigmatic example of the creation of new value offerings through smart technologies is Airbnb, whose business model is based on the ability to collect information from customers and partners and use data insights to better understand how customers travel and what accommodations they prefer when visiting a travel destination. Putting this knowledge into action means that Airbnb provides customers with real-time solutions in the form of accommodation recommendations that best suit their preferences. When tourism firms equip themselves with the right smart technologies and capabilities, they are opening up new possibilities to better understand customer needs and preferences and deliver the experiences that customers want, how, where, and when they demand them. Furthermore, firms are much closer to creating personalized value offerings and implementing value co-creation initiatives aimed at deepening customer engagement.
16.3.2 Value networks
Smart technologies make it possible to redefine value networks across the tourism ecosystem. On the one hand, smart technologies give customers and users the ability to become co-creators of value, facilitating continuous communication and interaction between them and firms through online platforms, communities, social media, or online channels enabled by the firms themselves. On the other hand, smart technologies facilitate interaction and direct exchanges between value network participants (i.e., customers, users, firms) bypassing intermediaries and favoring new collaborative relationships between the different actors focused on value creation.
As the collaborative ties and coordination between the actors are strengthened, increasingly complex and omnidirectional relationships emerge between the stakeholders of the ecosystem that can end up creating more value for the customer. In view of these positive effects, it is key that business owners and managers encourage stakeholders to engage with smart technologies that promote the joint creation of value.
16.3.3 Distribution channels
Smart technologies have a significant impact on distribution and sales channels, through which many tourism firms are redefining the way they deliver value to the customer. Tourism firms use smart technologies to create new direct and bidirectional touch points and communication channels with their customers and users (i.e., social media, chatbots, IoT, communities) that foster continuous dialogue with them and close the gap between the physical and digital world. Likewise, the use of sensors and technologies based on IoT, although still at an early stage, could contribute to making the operation of supply chains and the provision of tourism services more efficient through the automation of tasks and data-driven decision-making.
16.3.4 Business models
Business model transformation can create new value for the tourism firm, especially when the new models are based on emerging technological developments and the provision of innovative services to customers. In some cases, the new business models completely transform the way firms behave and compete until they practically become technology firms, such as those that offer to connect firms with users, or users with other users. In other cases, business models provide value offerings aimed at satisfying certain customer needs, such as those with lower incomes or those seeking a very particular or specialized tourism experience.
There are also business models that aim to create new value using disruptive technologies to find solutions to problems related to sustainability or the shared economy. This is the case, for example, of the new business models arising from sustainable mobility (i.e., car and bike sharing), which lead to new tourism products and services that improve the customer experience. In recent years, business models based on digital platforms have also emerged that facilitate communication and connection between the different actors in the tourism ecosystem. An example are reservation and exchange platforms in the accommodation sector (i.e., Booking.com, Airbnb), which create new value propositions for customers based on cost reduction and the integration of value-added services.
16.3.5 Organizational agility
Smart technologies can help tourism firms cope with changes in their environment and adapt more quickly to them. This is possible when firms speed organizational agility, which means developing the ability to acquire knowledge about the environment, detect opportunities, and be able to coordinate responses quickly and accurately. Systems combining Big Data, data analytics, AI, and IoT provide a huge amount of information and processing capacity that can be used by the tourism firm to detect untapped opportunities, increase customer knowledge, and, ultimately, create new customer-centric value. For example, a tourism firm can anticipate the preferences of its customers and offer personalized experiences based on the accumulated knowledge of the customer and the conditions of the context. In this way, smart technologies can drive ambidexterity in the tourism firm, as they encourage exploration through smart innovation and exploitation of existing resources.
16.4 Smart Decision-Making
Smart transformation is becoming a key competitive driver for tourism firms, as the implementation of smart technologies and the transformation of organizations provide real-time insights to make faster and smarter decisions. Decision-making is about choosing among several alternative courses of action to achieve specific goals and is at the core of all business management functions. Therefore, developing a process and systems for smart decision-making is critical to the success of smart tourism firms that need sound decisions to create and maintain competitive advantage (Forman & Selly, 2001).
Effective use of smart technologies, as well as speed of action, are key factors that distinguish smart tourism firms and have a high impact on the decision-making approach adopted by organizations. Yet, despite the wealth of data now available to tourism firms that could support better decisions, many owners and managers continue to rely too heavily on their experience, opinion, and intuition (or a combination of all of these) to make decisions that affect the functioning of organizations. Consequently, many decisions, instead of being driven by creating value and seizing the opportunities for the organization, are too influenced by personal or political interests.
With data growing at an unprecedented rate, new data science techniques are appearing at an accelerated pace together with a renewed interest in AI and machine learning, thus increasing the capacity and power available for decision-making in tourism firms. The days of decisions being subjective and often lacking in evidence seem to be numbered. In this context, although beliefs and intuition may continue to play a role in everyday decision-making, the strategic and operational decisions of smart firms cannot be based solely on them. In this new smart context, conventional tourism will be compelled to adapt existing decision-making structures and processes to seize the big opportunities offered by smart transformation and enable owners and managers to make decisions based on “what they know” rather than on “what they think”.
However, owners and managers must bear in mind that it would be too simplistic to say that the quality of smart decisions depends solely on the amount of data. Good decisions are closely tied to the organization’s strategies and capabilities to extract value from data. This means that tourism firms need to develop new capabilities to exploit the unprecedented opportunities offered by smart technologies and address the new complexities that arise. Ultimately, firms need new resources, tangible and intangible, including human resources, culture, technology, and managerial and technical skills (Shamim et al., 2019). The objective is for decision makers to improve their knowledge and make increasingly higher quality decisions that lead to the creation of value for the customer, the firm, and the stakeholders.
16.4.1 Decision-making process
The process to implement a smart decision-making framework is not easy, nor does it happen overnight. Not only does it require business owners and managers to decide which techniques and tools must support data processing, but they must also focus on the quality and quantity of data that is needed. In fact, the basis of smart decision-making lies, first, in the ability to identify and understand the decisions to be made and, second, in collecting the data and knowledge (from inside and outside the organization) that are necessary to support these decisions and turn them into actions that create value, for example, decide what product the firm should offer to a specific customer, or what improvements should be made to the next product or service (Berntsson Svensson et al., 2019; Chiheb et al., 2019).
However, many organizations systematically collect more information than they use, and the excess of information, together with the poor quality and irrelevance of the data managed by the organization, negatively affect smart decision-making. At this point, it is important that owners and managers avoid underestimating the costs of collecting information in relation to the benefits, and put an end to the illusion that by collecting more data they will better manage uncertainty (Kaivo-Oja et al., 2015). In real life, information is never neutral, but always reveals some aspect of the issue at stake at the cost of hiding other aspects of the same issue. Therefore, it is highly important that analysts and data teams work on improving data quality and processing techniques. They should also focus on the quality of the visualizations used to present the results to the leaders of the organization and to facilitate the interpretation of the analysis and make its consequences understandable. Figure 16.2 outlines a smart decision-making process based on four stages: intelligence, design, choice, and implementation.
Once the firm is clear about the decisions to be made and has the necessary data and insights to support these decisions, it must continue to develop and analyze possible alternative courses of action to address the problem or the opportunity that requires a decision. After the alternatives have been formulated, it is necessary to evaluate them according to pre-established evaluation criteria to determine the impact that each of the alternatives can have on the business. Based on the results obtained from the evaluation, those people making decisions must choose one of the alternatives (or set of alternatives) that best solves the problem. Finally, the organization must focus on implementing the selected alternative, after it has been communicated and made known by the decision makers to all stakeholders. After this, the decision process will resume once new information has been collected on the results achieved and the real effectiveness of the decisions made has been evaluated.
As can be seen, the smart decision-making process allows the integration of Big Data analytics throughout the different stages of the decision-making process and promotes communication and collaboration between decision makers and the analytics team, with the former establishing the decisions to be made and the latter identifying knowledge that may be useful in supporting the decisions. Both should have a common understanding of the decisions to be made and its requirements, and document the decision-making process to ensure reuse of knowledge from one decision to another.
16.4.2 Decision-making capabilities
Implementing a smart decision-making framework involves significant management challenges, especially when it comes to new capabilities. Smart firms need to reconfigure and upgrade existing capabilities, which depends on effective resource management practices. In this context, leadership, talent management, technology, and organizational culture are among the most relevant capabilities for making smart decisions (Shamim et al., 2019).
Especially relevant to driving smart decision-making is organizational culture, followed by leadership and talent management. The role of technology is comparatively less important, which does not mean that it is not important to have the adequate technologies, but rather that its relevance does not reach the importance of others. In other words, in the new smart era, tourism firms are not going to be successful in the process of transformation just because they have access to a large amount of data or tools, but they need leadership with a clear vision, adequate talent management practices, and, above all, an organizational culture that fosters smart decision-making. Business owners and managers should be those who provide a clear vision and the goals that guide the organization in the process of fostering smart decision-making. They must know how the Big Data life cycle works and the opportunities offered by data analytics, and be a role model in the use they make of data in decision-making. The quality of decision makers is key for the firm to improve its smart decision-making capabilities. As for talent management activities, these must provide the organization with the skills that enable smart decision-making by hiring and retaining experts in Big Data and analytics techniques.
16.5 Knowledge Management
Information and knowledge play a critical role in smart decision-making. Surely this will have been the case since the first tourism firms emerged. However, the advent of Big Data and smart technologies have completely changed things: today they are the basis for scaling decision-making to a higher and smarter level. Through the wealth of information and knowledge they produce, tourism firms can make more informed decisions, which in turn helps improve internal trust and preserve external legitimacy (Kaivo-Oja et al., 2015).
Value creation in smart firms is increasingly the result of the management of information and knowledge assets that improve decision-making and create competitive advantages. In other words, the competitive advantage of the smart firm is based on the ability to effectively apply the organization’s new and existing knowledge to create differential advantages, for example, through new products, services, and processes (Thrassou et al., 2012). Knowledge has become an essential asset in terms of organizational competitiveness, and the ability to quickly recognize the meaning of new information, assimilate it, apply it, and integrate it with the rest of the organization’s knowledge assets is part of highly valuable management practices. However, there is always a “but”, because all these capabilities are only possible when the firms takes knowledge management seriously.
Knowledge management has three key dimensions: processes, enablers, and knowledge management systems (KMS). Knowledge management processes include those that organize and coordinate knowledge for its collective use in the organization (i.e., the creation, exchange, storage, and application of knowledge). Thanks to these processes, the firm develops competitive advantages, speeds up innovation, and increases its ability to respond to changes in the environment. Enablers are those mechanisms that allow knowledge management activities to be carried out, such as the coding and sharing of knowledge between people and teams. These mechanisms provide the necessary infrastructure to improve knowledge management processes, promoting the creation, exchange, and protection of knowledge. KMS are to IT infrastructure (i.e., hardware, extranets, intranets) and collaborative technologies (i.e., shared databases, document repositories, discussion forums) that help manage and apply knowledge effectively in the organization (Santoro et al., 2018). Therefore, a KMS is a facilitator of effective knowledge management as it aims to capture people’s knowledge so that everyone in the organization benefits from it.
KMS allow greater freedom and precision in decision-making by combining both the traditional internal view of knowledge management, based on the integration of internal databases that facilitate access to knowledge, and the external view supported by the open innovation paradigm, which suggests that firms must promote new forms of interaction and collaboration with third parties. Implementing a KMS can be a good starting point for collaboration and the exchange of knowledge between the departments of an organization. They can also create open and dynamic collaboration spaces with external partners where the exchange of information and knowledge drives innovation capabilities.
Business owners and managers must be aware that knowledge management technologies and infrastructure alone are not enough to increase the organization’s capacity for innovation. The firm must also strengthen its connections while exploring the environment in search of opportunities and selecting the most suitable partners with whom to establish relationships of different intensity and scope. Furthermore, the organization’s leaders need to understand the ICT framework that can support knowledge management and how they will collect the knowledge they need to create value. Ultimately, the multidimensional relationships that the tourism firm establishes between Big Data, data analytics, knowledge management, KMS, and open innovation will depend on building an “open knowledge system” in which information and knowledge flow freely throughout the organization to improve innovation capabilities.
16.6 Recommendations
Some of the main recommendations that can be made to owners and managers that intend to tackle the smart transformation process are summarized in the following points:
Dive well below the surface: Successful smart transformation is not about creating a new web store or developing a new mobile application, while seeking to maintain a balance between traditional business and new digital business. Very often business owners and managers are confused about smart transformation and fail to understand that what has really changed are the basics of doing tourism business. Digital platforms that bring together buyers and sellers have radically changed the very idea of the tourism ecosystem, turning it into a much more liquid and diffuse concept in which control of data and, above all, what to do with data have become the main competitive drivers for tourism firms. Smart transformation goes far beyond scratching the surface, it means reinventing or readapting the entire business model to create real value from data and customer insights.
Never stop innovating: In a world dominated by platforms, learning to orchestrate relationships is much more relevant than owning or controlling tangible resources, i.e., Uber connects drivers and passengers without a car, and Airbnb connects hosts and guests without rooms (Reddy & Reinartz, 2017). Creating value no longer depends on having a large capital base to undertake big equipment, network, or infrastructure projects, but rather on the ability to integrate capabilities around a new idea or innovative project in which the participants collaborate to achieve their individual goals. The ability to innovate has become more important than ever. But if you don’t have the resources, people, or ideas to be a champion of innovation, open your mind and let fresh air into your organization from the outside. Avoid the old cliché “I know what the market needs but I don’t have the resources to do it” and be open to new ideas and insights from the outside world. Find in collaboration and open innovation an efficient, faster, and less risky way to innovate and bring your value offering to the market.
Don’t stop doing things and speed up: Everything in the new smart era happens at an incredible speed that has never been seen before and which tourism firms are not used to. Speed marks the difference between market participants and is a key factor that determines how organizations approach projects, execute processes, and even hire people. Having the best technologies and data is worth nothing if the firm is not able to process it quickly and deliver new products and services just when and where the customer wants them. A single minute sooner or later can make a difference, so business owners and managers must reflect on the new value of speed and what they stand to gain (or lose) by speeding up the pace of getting things done. Organizations need to break with the old rules of doing things, tear down silos within the organization, and make everything work in a more agile and flexible way. Smart technologies open up a universe of new possibilities for organizations to become more agile and customer-centric, and learn to extract value from data faster and more efficiently. But this does not happen overnight. Firms need organizational agility and agility applied to their data initiatives if they want to keep pace with customers and deliver products and services that their customers will continue to be willing to pay for.
16.7 Discussion Questions
What differences exist in the management of smart transformation between big and small tourism firms?
If value creation is the main objective of the smart firm, how is the notion of “value” defined? How can it be measured?
How can the tourism firm make sure that multiple initiatives geared towards smart transformation are aligned into a single agenda?
What factors can make the tourism firm opt for a transformation approach based on continuous or episodic change? What role do smart technologies play in this decision?
Is ambidexterity a transitional solution while the organization reaches a higher level of digital maturity, or is it a permanent solution to address smart transformation?
What is the relationship between the three management approaches described in this chapter: dynamic capabilities development, ambidexterity, and continuous change vs. episodic change?
How can an owner or manager lead a tourism SME that considers smart transformation as something out of reach or that will not generate enough value for the firm?