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Why Authenticity Matters in Innovation

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At the first glance, the concept of authenticity and the practice of innovation may not seem to be highly related, and even perhaps a bit contradictory to each other. Innovation, to various degrees, is disruptive (Christensen, 2006; Rindova & Petkova, 2007) and discontinuous in nature (Garcia & Calantone, 2002). As innovation helps service organizations seek for new business solutions in aspects of value proposition, value delivery, customer treatment and interaction space, it also brings about change to the status quo, breaking of traditions and a departure from old practices. Authenticity, on the other hand, often results from a firm’s persistence on its own heritage and identity (Balmer, 2011). As such, the concept of being authentic to the firm’s tradition may be perceived as incompatible with the disruptive nature of innovation. Contrary to such intuitive perceptions, our argument posits that, while embracing innovation, service firms should stay authentic to their own fundamental values and identity. In fact, authenticity could be the key factor determining whether service firms’ innovations will result in positive reactions of their stakeholders, particularly, consumers. The reasoning to this argument is three-fold.

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First of all, the growingly fierce market competition in the service sector determines that firms need to stay authentic in establishing a prominent and distinctive firm and brand identity in order to communicate their roles and distinguish themselves from the competitors in the market (Ashforth & Mael, 1996; Ghodeswar, 2008), especially when employing innovative changes (Kogut, Zander, 1996; Ghoshal, Bartlett, & Moran, 1999). The contemporary marketplace of tourism and hospitality services is becoming an overly crowded space with new business and brands emerging at an unprecedentedly fast rate. The past few years in the history of the global hotel industry has witnessed a wave of brand proliferation pushed by major hotel chains such as Marriott, Accor and Wyndham (Ting, 2018).

According to STR, 2017 alone witnessed a growth of chain hotel brand from 997 to 1075 (STR, 2017; 2018). In the restaurant industry, according to The NDP Group (2017), “density of chain restaurants grew from 860 units per million population in fall 2007 to 922 in fall 2016” (The NDP Group, 2017, para. 2). with the first-year failure rate of new restaurants staying around 30% (Brannigan, 2017). Given such a backdrop of growingly fierce market competition, developing firm and brand identity that is prominent and distinctive is becoming key to the survival of service business. Authenticity is central to brand identity and equity (Beverland, 2005; Gilmore & Pine, 2007). Brands that stay true to their essential identity across their service portfolios are more likely to be recognized, remembered and preferred by the market. As innovation inevitably produces cues of change in consumer perceptions (Rindova & Petkova, 2007), it also brings on the risk of identity dilution, which may hurt brand prominence and market leadership (Brexendorf, Bayus & Keller, 2015), especially if the innovative practice was not well designed and implemented. As such, we argue that service firms’ innovation practices should not come at the cost of weakening brand identity, which will consequentially lead to unfavorable market responses.

Secondly, the importance of authenticity for today’s consumers makes it crucial for service firms to stick to their heritage and values at the time of innovation. The quest for authenticity is becoming an increasingly important factor in driving consumers’ service purchases (Beverland & Farrelly, 2009). In the postmodern era which is marked with globalization, deterritorialization, and hyperreality, consumers continuously seek authenticity to find meanings and self-identity in consumption experiences (Beverland & Farrelly, 2009). Unlike in previous decades where standardized brands and quality services equate business success, today’s consumers prefer brands that can communicate authentic identity and provide authentic experiences (Arnould & Price, 2000) so that they could link the meanings of consumption to the stories of the self through a self-authentication process (Beverland & Farrelly, 2009). When developing innovative strategies, service firms, for which strong customer relationship is vital to business success, should not deprive their consumers from this meaningful process of self-brand attachment. Innovations that are authentic to the firm’s values and heritage, can reinforces consumer’s previous brand associations and bring in new meanings in the relational connections with the brand (Beverland, 2005; Beverland, Napoli, & Farrelly, 2010; Lockwood, 2010).

Last but not least, staying authentic in the innovation process can help service firms achieve competitive advantages that are more sustainable in the industry. Innovations can be contagious (Wejnert, 2002). Innovations that receive positive business outcomes can easily catch on and spread across the industry landscape, especially in the tourism and hospitality service sector where most innovations, particularly technological innovations, rely on the assistance of third-party suppliers (Wang & Qualls, 2007). We argue that it is important for service firms to stay authentic to their own values and identity in the innovation process and avoid adopting innovations that are merely a reproduction of competitors’ good practices. Sticking to the authenticity rule, service firms are more likely to stamp its firm culture and heritage on the innovative products and services. Such genetic inheritance is more likely to make the innovative products and services less replicable and more distinctive from its following replicas, gaining sustainable competitive advantage from the innovation.

Innovations that lack authenticity may result in failure

To further illustrate our argument, we next present examples where innovations lacking authenticity result in failure. After all, not all innovations are equally successful. Product and service innovations that fail to echo the firm’s heritage and unable to deliver authentic experiences may receive unfavorable responses from the target market, resulting in negative business outcomes. In 2010, Starbucks launched its innovative “Evenings” program to introduce beer, wine and small plates to capture the late afternoon and evening business/leisure market in the brand’s metropolitan locations (Trefis Team, 2017). The globe’s number one coffee retail giant designed the “Evenings” program, integrating efforts of change across all aspects of innovation: value proposition, value delivery, customer treatment, and interaction space. Specifically, the program offers an extended line of food and beverage products (e.g., wine, beer and small plates) with sit-down table service delivery procedures and customer treatment experiences in a well-crafted interaction space highlighting theme-appropriate evening atmospherics.

While the original idea was thought to be “smart” (Berger, 2015) and “impressed” (Teague, 2015), the innovation of the “Evenings” program ended up not as successful as how it was envisioned. After seven years of trial, Starbucks announced to stop the experiment of “Evenings” program in more than 400 of its regular coffee shops in the United States on January 10, 2017. According to media press, this innovative effort conflicted with its deep-rooted “early-morning wake-up”, “mid-morning ramp up”, and “post-lunch pick-me-up” coffee identity (Baird, 2017; Campell-Schmitt, 2018) and the new customer treatment of table service also conflicted with the signature Starbucks experience of self-service and over-the-counter pick-up (Trefis Team, 2017). Many consumers perceive a departure from their authentic Starbucks experience and refuse to accept the service innovation (Trefis Team, 2017). With the lesson learned, Starbucks went back to focus on the firm’s roots and prompted the majority of its stores to “focus on the core business” and continuing to deliver the authentic and refined coffee experiences for its customers and shift the innovation in its Roasteries and Starbucks Reserve stores (Friedman, 2017) to “elevate the Starbucks brand and customer experience” (Starbucks Newsroom, 2016). While the business outcome of this innovative strategy is yet in the process to be confirmed, The Starbucks Reserve Roastery in Shanghai has already demonstrated preliminary evidence of market confidence (Jacobs, 2018).

Another example demonstrating how lack of authenticity halts the success of innovation comes from TripAdvisor, the world’s largest user-generated review site in the travel and service industry (Ayeh, Au, & Law, 2013). Early 2015, recognizing the business value of their enormous user base in the contemporary travel and service industry, TripAdvisor introduced the “Instant booking” service that allows customers to book hotels directly through TripAdvisor. This major innovation of TripAdvisor’s focuses on making a positive change in its value proposition to offer customers a one-stop shop service experience connecting information search with online booking.

Yet, this innovation, given its lack of authenticity in manifesting TripAdvisor’s essential identity, was not well acknowledged by consumers and investors. TripAdvisor was widely known as a stance-free, consumer-centered community “to give travelers a voice to share their experiences, promote consumer choice and encourage a level playing field for everyone in the industry — all within a free forum for sharing open and honest opinions” (Hunter, 2012). The innovative introduction of “Instant booking” services, however, shifts TripAdvisor’s business model from the stance-free, consumer-centered review and meta-search site model to a hybrid model mingling the positioning of consumer review site and Online Travel Agent (OTA, which collects margins from hotels and business per booking in various forms) and overstates its own service even when it does not necessarily provide consumers with the best purchase option. As such, consumers started to question the genuineness of information presented on TripAdvisor. The lack of authenticity of the monetized Online Travel Agent business model in light of TripAdvisor’s original identity as a neutral and customer-centered review site lowers the market acceptability of this innovation (Biesiada, 2017). With TripAdvisor becoming “agnostic”, to quote from Adam Medros, senior vice president of product at TripAdvisor at the time (Vynck, 2017), consumers, and particularly some of its most loyal users, resisted to adopt “Instant booking”, resulting in a cut into revenue (TripAdvisor, 2016). As TripAdvisor realized that their innovation was overambitious, they made the “Instant booking” service function less prominent on its website, and the market instantly witnessed an 8% jump of the stock price (Vynck, 2017).

Authentic innovations go a long way

On the contrary, it has been proved in history that product and service innovations that extend the firms’ product and service portfolios in an authentic way will receive greater recognition from consumers and therefore lead to business success. With a steady focus on delivering “exceptional experience – every hotel, every guest, every time” (Hilton Newsroom, 2018a), the Hilton Group has been a constant leader of customer-driven service innovations in the hospitality service industry. In year 2017 alone, Hilton unveiled the customer-facing innovations of Connected Room. First of its kind, Connected Room allows consumers to control and customize every bit of their stay at the tip of their fingers via the Hilton Honors app. Unlike many of its competitors, Hilton has been a strong advocate to the internally-driven process of service innovation. Rather than simply adopting well-developed innovations via a “purchase and integrate” approach, Hilton always focus on developing innovations that are of, by and for Hilton. A direct exemplification is their development of Connie, the inception of Connected Room (Hilton Newsroom, 2016). Compared with the approach of directly integrating AI-driven control systems with more generic functions such as Amazon Echo (Zimmerman, 2018), Hilton’s chosen approach of developing their own system on the enterprise-driven artificial intelligence platform of IBM Watson empowers customers with more specific information to customize their trips (Hilton Newsroom, 2016). This approach of innovaton enables Hilton to devliver exceptional and distinctive brand experience for its mobile-centered and technology-savvy hotel consumers while authentically maintaining its core value of ever-present personalized care as posited in its own mission statement: “exceptional experience – every hotel, every guest, every time”. Such an authentic approach of innovation leads to remarkable level of business growth and expansion for Hilton, achieving record-high numbers across all developmental metrics (Hilton Newsroom, 2018b).

The Japanese automobile innovator, Nissan, recently combined its autonomous parking technology with traditional Japanese style hospitality in the ProPILOT Park Ryokan hotel (Springer, 2018). By providing innovative automatic amenities such as self-parking shoes, tables, and cushions in the traditional Japanese wooden houses and tatami rooms, Nissan successfully boost its technological profile and Japanese heritage through authentic brand experiences. Similarly, Aman resort, as one of the iconic hotel brand which is known for its perfect blend of luxury resort with the local cultural and natural legacy, opened a new resort in Shanghai early 2018. Staying in the Ming and Qing dynasty antique villas, guest can experience the most advanced technologies, from bio resonance profiling to Accu Laser Light Therapy (Junker & Kroslakova, 2018). The service innovation equipped with latest wellness amenities, together with Chinese healing traditions and medicines, extend and maintain the value of Aman brand and provides an authentic brand experience for customers. All of these examples showcase that it is key for service firms to maintain authentic while embracing innovations.

Essentially, our discussion on innovation and authenticity centers around a key strategic question: for service firms around the globe, what kind of innovations should be strived for and what kind of innovations should be averted? We believe that the answer to this question lies in the core concept of authenticity. Being authentic means that, when it comes to innovation, rather than simply catching up with the trend, service firms should focus on being themselves and work on innovations that reflect and positively extend their fundamental values and identity. Needless to say, innovation is a dynamic learning process that caters to the changing internal and external business environment. Potentially, this indicates that no innovation could be flawless. Examples showcased in our above argument that are currently viewed as smart could be proven as lacking effectiveness along the progress of time. Given that said, service firms should adopt an iterative approach of constant reflection and revision during the innovation process in seeking for their growing and extended identity. As shown in the above cases of Starbucks and TripAdvisor, it is conscious introspection and prompt self-correction that extends the vitality of great firms in the process of innovation. Such innovation competency, rooted in a firms’ persistence for authenticity, will enable positive changes that are not only temporarily eye-catching but more importantly classic and enduring, enriching the meanings and values of the firm, and positioning the brand to an upgraded level. On a global level, a stream of such authentic innovations will together transform the industry landscape, cultivating sound changes around the market, and making our world a better place.

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