On tour with KM

As a sector heavily reliant on tacit knowledge and experience, KM clearly has a great deal to offer the tourism industry. Michael Mannington describes how ID Tours sought to implement a knowledge management programme in it Special Interest Tours division, in a pilot project designed to pave the way for a company-wide roll-out.

ID Tours South Pacific is an Australian inbound tour operator (ITO), which manages travel arrangements for overseas visitors to Australia. The company is privately owned and has been operating as an ITO for 25 years. It is based in Sydney and has operational offices in Melbourne, on the Gold Coast and in Cairns. It has sales offices in Japan, North America, UK and Europe, and employs just under 100 people, the majority being based at the Sydney head office.

Tourism is Australia’s largest export industry, accounting for the jobs of one million people, or 12 per cent of the workforce. Competition in the world tourism market is intense and many governments around the world are looking to tourism to provide export earnings. In Australia, the Australian Tourist Commission (ATC) is the governmental organisation responsible for promoting Australia as a holiday destination. The industry itself is dominated by SMEs, but airlines and major hotel groups tend to dictate policy direction.

Tourism as a knowledge-intensive industry

Tourism is an intangible discretionary purchase, dependent on a number of influences and certainly not just on price or availability. Arch Woodside established the link between knowledge of a destination and ‘spend’ – the amount spent in that destination – in June 1997. His findings describe the direct association between customer knowledge of a destination (Prince Edward Island) gained from information provided by tourist guides, and levels of increase in visitation to the island. This association is particularly important when considering the potential of increasing visitation and the subsequent economic benefits. An example of this could be marketing Australia in Europe, where the ATC has a large advertising expenditure. In Australia, the commission handles 187,000 calls from consumers and travel agents in Europe. The possibility of increasing the conversion on this number of inquiries into visits has an obvious attraction.

The tourism industry creates and uses large amounts of data, information and knowledge. Data can come in the form of timetables, schedules, rates and charges, and so on. When planning and purchasing holidays, having access to this type of data is essential. However, raw data will not be sufficient to construct a holiday itinerary. If the holiday is to be more than just a list of things to do, tacit knowledge of how individual requirements can be incorporated into the package is essential. A travel agent, who is able to rely on experience to translate the prospective traveller’s desires into a tangible experience, has traditionally performed this function. The agent would most likely know where to go, what products to use (hotels, airlines, etc) and, most importantly, how to assemble the items and then add value with additional suggestions, perhaps where to shop or what to see.

The industry is undergoing a number of changes brought about through the availability of new technologies. The sector will continue to be knowledge intensive, and these technological developments may well make knowledge even more important. The internet may be used to push travel information out to potential users, but without tacit knowledge, the full value of this information cannot be achieved.

The value of KM to SMEs

The introduction and use of knowledge management offers a number of advantages specific to an SME environment:

SMEs move fast. For an SME to survive, its managerial staff must take immediate action when faced with a given threat or opportunity. The ability to make quick, well reasoned decisions could certainly be enhanced through the use of a KM system;
While SMEs will have some understanding of the value of knowledge to their operations, they will probably not describe the concept as ‘knowledge’, instead choosing labels such as ‘experience’ and ‘know-how’. The term experience, however, implies that a length of time is necessary to acquire knowledge, yet KM has the capability to allow non-experienced staff to use knowledge to make immediate, informed decisions;
Dealing with tacit knowledge poses the largest challenge for any organisation, and according to O’Dell and Grayson, tacit knowledge can form as much as 80 per cent of organisational knowledge[1]. For SMEs there are limited ways to codify knowledge, so this percentage may be even higher;
SMEs tend to be driven by short-term goals and influenced by immediate threats. It is also possible for SMEs to survive with minimum business plans and strategic planning. This can result in the SME not understanding the fundamentals of its current success or recognising possible future threats;
Current accounting practices among SMEs do not encourage showing knowledge as assets in financial reporting. SME stakeholders are often slow to acknowledge this organisational strength. In addition, a lack of time to collect data will often make it difficult to undertake tasks that have no immediate benefit to the organisation’s processes. The SME may also lack support from a dedicated IT department, and in some cases information overload may become overwhelming, resulting in a de-motivated workforce. A well selected KM system may help overcome these problems;
Many organisations fail to capture or retain the knowledge that may be available to them. This could occur through the loss of staff, and within an SME an individual staff member may be the sole store of knowledge relating to a given area. Loss can also occur when knowledge becomes out of date or can no longer be verified. Most KM systems provide user-friendly data entry, but do not provide the means for identifying and isolating data that needs to be deleted. When designing or choosing a KM system, thought should be given as to whether a means to regularly purge the application of obsolete information is included. This is particularly important to the tourism industry, where validity of dates and associated inventory and prices is crucial. Once a source of data is found to contain information that cannot be trusted, user confidence is lost.

Starting knowledge management at ID Tours

Like most organisations, ID Tours had always recognised that knowledge is an essential prerequisite to its success. Indeed, in the organisation’s early years when means of communication were far less advanced than they are now, its clients relied on the basic information that ID Tours provided. Much of this information was explicit, however, and the introduction of cheap communications tools halted the opportunity for ID Tours to provide this information as a chargeable product. At the same time, the organisation was creating tacit knowledge about how it used tourism-related products and client information. Yet this knowledge was not recorded, left instead to reside in individual employees. As the organisation grew, this became a problem, as staff turnover was particularly high (at one point reaching 18 per cent).

The need to store and re-use knowledge was recognised by management, but the firm’s existing systems were not up to the task. The organisation had a strong belief that IT could be used strategically and in 1983 became the first ITO to establish it’s own dedicated IT department. In 1993, the department began using Lotus Notes as a means to manage the information generated inside and outside the organisation. Predictably, the department’s first project was to create an IT knowledge base, which was an immediate success, with all four members of the IT team becoming willing contributors. Yet the success within the IT department was not so easily duplicated across the firm as a whole. Users did not readily take to the Notes interface, seeing it as another imposition on their already crammed working lives. Management regarded databases that could collect information on geographic regions or specific venues as highly desirable, yet the majority of staff members did not see the value added as equating to the extra work involved.

The IT department nevertheless persisted with Notes and eventually users began to accept a number of Notes databases. At the same time, the IT department gained skills in developing bespoke applications and soon had the ability to provide the IT component to a KM system. Experience had already shown, however, that simply providing the technology would not act as a suitable starting point. A well constructed proposal and value proposition was vital, which in turn had to be sold to the CEO.

The proposal for a KM system

The proposal put to the CEO was based on:

The organisation’s heavy reliance on knowledge. Unlike travel agents, who process information based on airline information, which in turn comes direct from the airlines via central reservation systems, tour operators are required to be knowledgeable about a number of different products, most of which are not defined in brochures or manuals. For example, an intimate knowledge of the pick-up or drop-off procedures for coaches at airports may be essential for ITOs. Such information is unlikely to be documented, but may well be handed on from coach operator to ITO or its ‘meet and greet’ staff in an informal manner;
The value of knowledge as a source of competitive advantage. The ability to increase the range of products on offer and to deliver a high-quality service is directly proportional to a firm’s experience and understanding of how best to utilise existing products;
The understanding that tacit knowledge is invariably the most valuable, and that the majority of tacit knowledge lies in people’s heads. It is therefore also highly mobile, often heading straight to a competitor when an employee leaves the company;
The ability of IT to support the initiative by providing a low-cost platform, based on previous experience, and using a product that could be easily adapted. The cost of a full KM system was prohibitive due to the company’s size.

The objectives of the proposal were to:

Introduce senior company decision makers to KM. The challenge was to present KM as a tool with clearly identifiable benefits that would address the major concerns of the company, including the problems associated with long working hours, the inexperience of more junior employees and high staff turnover;
Enlist top-level support. In this case, just two or three people needed to be convinced, but the CEO’s support was critical if we were to secure the budget and succeed in driving the initiative across the company as a whole. Other management and user support would, if all went to plan, follow on. A suggested strategy for the introduction of a KM initiative was essential at this early stage, in order that the CEO could see how the project would provide rapid returns. We also needed to demonstrate that KM was not just an academic exercise, as even the term ‘knowledge management’ appeared to be incongruous with the ultimate aim of improving the bottom line of a small business.

The knowledge management implementation strategy

The implementation strategy had the following main components:

Align KM with the business strategy. In particular, the key areas to consider were identified as innovation, adding customer value, product differentiation and best practices. Manager readily accepted these fields, but there was much work to be done in consulting with staff to discuss individual opportunities. It was imperative that the potential associated benefits were communicated clearly, and that fears as to the positions of individual employees were allayed;
Create the culture needed for KM. It was clear that it was necessary to develop an in-depth understand of the existing culture in the firm in order to identify which changes would be necessary to create an organisation that would more readily support KM. However, if this process was too drawn out, the whole programme could be at risk. Small companies are by nature impatient to achieve results, and this fact re-enforced our belief that we should implement KM tools using our existing skill-set and use training programmes that were already in place. We aimed to start with a pilot programme, which would have a better chance of success than a full-scale roll-out, but would also be sufficiently comprehensive to be useful in demonstrating the benefits of KM to both the company as a whole and to key individuals.

Using the framework

A framework was used to define the required tasks, areas of responsibility and potential outcomes. This framework was designed to reflect the structure of the organisation, and would vary greatly according to the characteristics of the company in which it is applied. The main components of the framework were problem identification, associated solutions, changes required and tools that could be used. The framework also needed to identify which area of the business would be the most suitable for the pilot programme.

The changes that would become apparent from the framework were to be the responsibility of HR and the department managers. Two one-day workshops were scheduled with the aim of identifying the key requirements of a learning organisation and a collaborative culture, and with locating the individuals who held specific knowledge and understanding that could be considered a strategic asset. Perhaps with good reason, the HR department wanted more than two days to cover these major topics, but management was concerned that the department managers would lose focus unless some tangible outcomes were produced quickly. In circumstances such as this, it is crucial that the period of implementation is not longer than necessary, in order to ensure that no momentum is lost.

Selecting the pilot programme

The initial project had to be based on a high chance of success if it was to serve as a demonstration to other departments and employees of the potential benefits associated with KM. To determine the levels of return, it was first necessary to outline the pilot’s objectives. For example, who uses tacit knowledge, and what happens if tacit knowledge is not available? How much would it cost to re-create lost knowledge? What competitive advantages could be gained by enhancing existing knowledge through further experience? There were a number of possible projects that would potentially meet the criteria set down in the implementation strategy. We finally settled on implementing a KM system for the Special Interest Tours (SIT) area of operations, primarily because this division was internally-facing only, with no customer involvement. Management within the division also had a thorough understanding of the knowledge requirements necessary to meet customer expectations, while users understood the value of being able to recall and learn from the past experiences of co-workers.

Implementing the pilot system

A ‘special interest tour’ is for groups sharing a common interest who wish to visit sites relating to that interest as part of their holiday itinerary. Special requests are passed on from local agents in the holidaymakers’ own country (the department handles a high number of SIT requests originating in Japan, for example) to the ITO, which then arranges the holiday itinerary accordingly. The process can be represented as a simple flow diagram: group of travellers > local holiday agent (eg, in Japan) > ITO in Australia > relevant technical contacts.

While the financial returns to the ITO can be high, these depend on the time and effort required to arrange the technical visits. The holidaymakers do not expect to pay an additional charge for the extra arrangements, as such requests are regarded in the industry as an overhead covered by the revenue earned on the standard travel arrangements, for instance from accommodation and transport.

In the pilot programme, the knowledge management system would be required to source the possible locations for the technical visits. This could include extensive research into matching the travellers’ interests with possible sites for the visits. Not all sites welcome tour groups, and not all sites are suitable to handle a group of non-English speaking holidaymakers. In addition, some locations may require special travel or hospitality arrangements, particularly for larger groups of tourists.

The knowledge base needed to handle a diverse range of special interest requests, incorporating agriculture, education, medical, leisure pursuits, and so on. It would also need to detail contacts that could help arrange technical visits, including government agencies. A good network of contacts can open doors to otherwise unavailable locations or institutions.

The design of the knowledge repository, in this case a Lotus Notes database, was relatively straightforward, and was aided by an existing written card system. The actual coding generated more work than was necessary, however, primarily due to our own inexperience. The volume of information eventually incorporated spanned around 80 different types of special interest tours and several hundred tours handled over recent years, which in turn involved more than a thousand individual technical visits.

The results

The system presented the SIT division with a number of immediate benefits:

Users felt they were much more in control;
There was no need to re-invent the wheel every time a special request was made;
Customer queries were answered in substantially quicker timeframes;
The quality of customer service became far more consistent;
Costs were reduced as less time was required to construct individual itineraries.

These advantages were anticipated, however, and the more interesting results related to tacit knowledge exchange. Users began to log improved working practices, and were enthusiastic about sharing their knowledge. A culture developed that was more conducive to knowledge management. There was now a place where employees could record their knowledge, and they enjoyed receiving recognition for their contributions.

Rolling out KM across the organisation

The success of the pilot project was documented and distributed throughout the organisation. This was complemented by a ‘show and tell’ session, involving the users who took part in the pilot and those from other departments who were to be involved in future projects. Direct communication from those who had been involved in the pilot proved remarkably powerful, far more so than the distribution of documentation about the programme. In addition, consultation with managers and users from within the SIT department on the strengths and weaknesses of the pilot revealed a number of potential improvements to the system. For instance, it was suggested to the IT department that the interface be presented as a web page (which was possible using Notes), and that the system be extended to the customer extranet. It was also clear that the interface and search capabilities could be improved, while knowledge could perhaps be linked to corporate data so that operational profitability could be more easily reported.

The bottom line

Determining ROI was always going to be difficult. The CEO gave the go-ahead for the project based on the arguments put forward in the planning stages of the pilot. One of the measures identified was the extent to which the knowledge lost through staff turnover was reduced. But the events of 11 September had their own impact on this measure, as the immediate downturn in business dramatically reduced job opportunities. In typical SME reaction to the subsequent 30 per cent decrease in sales, ongoing development of KM was put on hold. There is, however, a tangible body of evidence now in place, particularly relating to quality improvement, innovation and increased competitive advantage, that will support a recommencement of the roll-out of the KM programme as soon as market conditions improve.

Reference

1. O’Dell, C. & Grayson, C.J., If Only We Knew What We Know (Simon & Schuster, 1999)

Michael Mannington is the director of ID Tours South Pacific. He can be contacted at m.mannington@idtours.com

Factfile: ID Tours South Pacific

ID South Pacific is an inbound tour operator and destination management company for agents and incentive houses that arrange holiday packages, special event parties or tours for visitors to Australia. Celebrating 30 years of service in 2003, ID Tours is a privately owned Australia-based company, offering a comprehensive service incorporating research, product development, tour planning, operation and quality control. The company has seven overseas sales offices in its major markets of North America, Europe and Japan.