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SERVICE INNOVATION CAPABILITY IN THE

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International Conference on Entrepreneurship (IConEnt-2016)
“How Innovation could Improve the Performance and Productivity in Entrepreneurship?”
March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia

SERVICE INNOVATION CAPABILITY IN THE HOTEL INDUSTRY

Evo Sampetua Hariandja1), Zoel Hutabarat2)

1) 2)
Business School of Universitas Pelita Harapan, Tangerang, Indonesia

1)
e-mail: evo.hariandja@uph.edu
2)
e-mail: zoel.hutabarat@uph.edu

Abstract

The hotel business in Bandung, Indonesia has demonstrated noteworthy development and addition more
noteworthy consideration in today's business surroundings. Hotel industry gets to be imperative when the
government chose to further push the service part and to expand the tourism segment. The hotel business in
West Java is confronting new difficulties because of outer and inside elements in a business domain that
influence their operation. In rivalry, the hotel business ought to have the capacity to offer imaginative services to
visitors through use their service innovation capability in giving excellent service. This study addresses to: (1)
investigate how the hotel business in Bandung (3-star to 5-star) can survive and succeed in accomplishing their
service excellence utilizing the service innovation capability, (2) test the conceptual framework that rose up out
of the audit of writing that delineates how service innovation capability functions through the exercises in the
hotel business in Bandung that will bolster in accomplishing service excellence and affirm in alternate hotels, (3)
contribute on the learning of the hotel business in Bandung. This study creates proposition: (1) service
innovation capability will bolster service excellence. The proposition created from the clear contextual
investigation that included five hotels (3-star to 5-star) then tried in an informative contextual analysis included
three hotels (3-star to 5-star). The aftereffects of the study demonstrate that the service innovation capability in
the eight hotels demonstrate a few similitudes in all exercises of sensing, seizing, and transforming.

Keywords: service innovation capability, service excellence, hotel industry

1. Introduction
Bandung is the greatest city and the capital 2010-2011, a lessening in 2012 then
of the West Java area. The city is found 140 expanded again in 2013.
km southeast of Jakarta, and is the third
biggest city in Indonesia after Jakarta and Table 1. Foreign & Domestic Tourist to Bandung
Year Foreign Domestic Total Occupancy
Surabaya. The city is topographically Rate (%)
situated in the focal point of West Java 2009 168,712 2,928,157 3,096,869 62
2010 180,603 3,024,666 3,205,269 61
territory. Accordingly, Bandung has a key 2011 194,062 3,882,010 4,070,072 67
worth to the encompassing zones. Bandung 2012 158,848 3,354,857 3,513,705 70
is an exceptionally fascinating destination 2013 170,982 3,726,447 3,897,429 66
Source: Bandung Culture and Tourism Department, 2014
for culinary, shopping, spa, golf, etc. Most
activity from Malaysia and Singapore came At present, keeping in mind the end
to 40% (Kompas, 2014). As a weekend goal to survive, hotels in Bandung
destination for neighborhood visitors, performed with a constrained promotion to
Bandung is likewise an alluring spot for adjust to quickly evolving market, do not
outside travelers who require an inn to sit have a system or worldwide co-operation
tight. It affects the development of the inn specifically neighborhood hotels, and
business. The travelers went by Bandung restricted service innovation. In rivalry, the
appeared in Table 1 underneath. There is an hotel business ought to have the capacity to
expanding pattern over the period offer inventive services to visitors through
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International Conference on Entrepreneurship (IConEnt-2016)
“How Innovation could Improve the Performance and Productivity in Entrepreneurship?”
March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia
use their service innovation capabilities and
do the best possible marketing system as per
its market section in a dynamic market
through using element marketing
capabilities in giving fabulous service. To
make due in the business rivalry and qualify
the operational, the hotel inhabitance rate
ought to be in any event of 70%. The
inhabitance rate of hotel is the estimation of
accomplishment in pulling in guests to a
specific hotel which the quantity of rooms
sold separated by number of rooms
accessible.
From the above conditions, brings up
the issues of how they improve in serving
their customers and what can be gained
from their innovation capabilities. The hotel
business in Bandung needs to use their
capabilities to make new esteem to
customers through service innovation and
convey esteem. This study locations to: (1)
investigate how the hotel business in
Bandung (3-star to 5-star) can survive and
succeed in accomplishing their service
incredibleness utilizing the capabilities of
the service innovation, (2) test the
theoretical structure that rose up out of the
audit of writing that represents how service
innovation capability functions through the
exercises in the hotel business in Bandung
that will bolster in accomplishing service
excellence and affirm in alternate hotels.
The applied structure serves as a device
for hotels in Bandung to recognize their
service innovation capability and decide the
crevices between the present state and the
sought condition of service innovation. In
this manner, this structure helps the hotel
business in Bandung to be more versatile to
market changes and urge them to be more
imaginative in accomplishing service
excellence for their customers.
2. Literature review
2.1. Service Innovation Capability
Service sector has ruled the world's
economy. In many nations, benefits these
days help more financial qualities than
horticulture, raw materials and
manufacturing all together. Service
economies' overwhelming position is clearer
in developed countries. Up to seventy five
percent of the riches and 85% of work are
created by services (Tidd and Hull, 2003),
and most new occupation development
originates from services.
The importance of service has been
perceived by enterprises, institutes, and
governments, and related research is
progressing. Inside different angles and
orders of Service Science, service
innovation along these lines turns into one
focal part because of its basic part. Since
Goods-Dominant Logic has been standard
rationale for quite a while, the extent that
innovation is concerned, the experience
from manufacturing will be reminded to
most corporations and customers firstly. On
the other hand, there are fundamental
qualifications between service innovation
and manufacturing or high-tech innovation.
With the movement from Goods-Dominant
Logic to Service-Dominant Logic, the
innovation concept and process require
likewise move from conventional viewpoint
to another services point of view.
As recommended by Edvardsson
(2005), “service is a perspective on value
creation rather than a category of market
offerings. The focus is on value through the
lens of the customer, and co-creation of
value with customers is key and the
interactive, process, experiential, and
relational nature form the basis for
characterizing service”. Thus, client focused
and process thought can likewise be seen in
one of the meanings from TEKES, a
Finland's research Agency. “Service
innovation is a new or significantly
improved service concept that is taken into
practice”. It could be for instance another
client collaboration channel, a dissemination
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“How Innovation could Improve the Performance and Productivity in Entrepreneurship?”
March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia
framework or an innovative idea or a combo
of them. A service innovation dependably
incorporates replicable components that
might be recognized and efficiently
recreated in different cases or situations.
The replicable component could be the
services result or the services handle in that
capacity or a piece of them. A service
innovation benefits both the service
producer and customers and it enhances its
developer’s competitive edge.
Services are the principle products
gave by the hotel. Canina et al. (2005) has
expressed that the intensity of labor,
immediate consumption, and an enjoyable
lodging experience are a few qualities that
are stressed by the hotel. With these
uncommon qualities, the hotel industry is
presently stood up to by the pressures and
challenges in giving better service than
customers. Particularly for international
tourists hotel, traveler markets globalization
has expanded the trouble for the hotel
management ought to give a positive
customer experience and straightforwardly
to customers of diverse cultures (Tang et al.,
2013).
O'cass and Sok (2013) expressed that
predominant value for customers made
through service innovation. With a specific
end goal to make the best customer value
and maintain competitive advantage, the
hotel must constantly create new services to
meet customer’s desires and necessities.
Service innovation ought to be connected to
give significant services to customers higher
than their prices. Enhanced nature of
services and products, expand customer
value services and expense decrease of
services, is possible by the hotel through
service innovation.
Pine and Gilmore (2011) has expressed
that the experience decides how customer
value is made. The agreeable convenience
and addition visitor experience is a huge
traveler hotel customer’s needs.
Accordingly, making a practical and
recreational value to live up to customer’
needs is the center of global traveler
lodgings. Procurement of amusement
services (ie. recreational offices and a
voyage through the encompassing
attractions), offers convenience and feasting
services is vital to the formation of customer
value. To please clients and meet the
utilitarian prerequisites, the hotel must use
imaginative ways and incorporate existing
services.
According to O'cass and Sok (2013),
customer value gave by the service
organization is emphatically impacted by
service innovation. The development of new
service not just gives clients an interesting
customer experience and excellent core
value (Moller et al. 2008; O'cass and Sok
2013; Paswan et al. 2009), additionally
permits hotels to separate themselves from
contenders and improves their service
quality and notoriety (Ottenbacher and
Gnoth, 2005). Consequently, to keep up a
heading position in the business, hotels must
have the capacity to ceaselessly overhaul
their services to stay in front of contenders
(Agarwal et al. 2003).
For service innovation capability, this
study adopted from Pöppelbuß et al. (2011),
that contains sensing, seizing, and
transforming (Teece et al., 1997). Sensing
refers to the distinguishing proof of the need
to change service operations or
opportunities for service innovation, seizing
alludes to investigating and selecting
plausible open doors for change, and
transforming is concerned with the
execution of changed (or new) benefits in
the organization. Adjust to this observation,
the models of new service development,
service engineering, service innovation, or
services design might be seen as particular
portrayals of the element ability service
innovation.
Sensing refers to the services of
distinctive knowledge and learning that need
to be deciphered into heading issues and
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March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia
unmet services needs before a more
centered conceptualization of new services
results follows in the seizing stage (Den
Hertog et al., 2010). Sensing principally
incorporate three key exercises: 1) checking,
2) assessment, and 3) enumerating.
Examining may require the consistent dialog
with clients, faculty, and innovation
suppliers. Assessing alludes to the capacity
of an organization to immediately screen a
specific open door or requirement for
administration development as to, for
example, the issue circumstance overall
(Chai, 2005), business targets (Bitran &
Pedrosa, 1998; Bernstein & Singh, 2006) or
general attainability (Majaro, 1988). The
enumerating movement alludes to decisively
characterizing the issue and explaining side
conditions (e.g., innovation, enactment and
social angles) that need to be considered
inside the advancement of conceivable
results, e.g., by method for new service
process (Basadur et al., 2000) or
administration ideas (Goldstein, 2002).
Seizing recognize three principle
exercises: 1) result improvement, 2) result
assessment and determination, and 3) result
enumerating. The result improvement
alludes to the action of administration
association's capability to produce
distinctive potential results and therefore to
distinguish conceivable ways it could take
in upgrading their administration offerings
as indicated by the long ago defined issue,
for example, administration methodology
plan, idea advancement, issues
determination, building option results, or
thought refinement. The improvement of
new results additionally comprise in
inventively modifying existing
administrations into creative bundles. The
movement of result assessment and
determination that take into account
educated choice making and hence for
selecting the most sufficient answer for a
particular issue. The result specifying
capability includes the last determination of
the to-be procedures, strategies, offices, data
frameworks, members, and practices that
need to be placed set up for the new service.
Here, the improvement of an extensive
undertaking arrangement for the execution
of the chose result needs to be advanced and
usage venture groups and in addition control
components must be set up.
Transformation isolated into three
exercises of unfreezing, changing, and
refreezing (Lewin & Cartwright, 1951).
Unfreezing alludes to separating existing
work structures which is a vital viewpoint
when executing new service methods and
interfaces to the client. The changing action
alludes to the genuine execution of the new
service. At last, the solidifying action
identifies with all errands important to
cultivate disguise of the recently executed
service process, for example, persistent
inspiration (Mento et al., 2002) and
trainings (Scheuing & Johnson, 1989).
Moreover, the utilization of data
frameworks (in light of the fact that product
meets expectations in a characterized
manner) and the utilization of
correspondence and advancement devices
(through which clients embrace
institutionalized desires) can help
solidifying another administration. The
objective of this movement is to attain a
routine; this implies that the staff receives
the new service offering and changes the
unequivocal information about what the new
service is similar to and how to convey it
into inferred learning (Stevens &
Dimitriadis, 2005).
2.2. Service Excellence
Organizations are increasingly providing
service excellence as an integral part of their
superior service to win the customers’ hearts
and stay competitive in the market (Berry &
Parasuraman, 1992). Service excellence,
which is viewed as being “easy to do
business with” (Johnston, 2004), delivers
promises and is as an expression of very
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International Conference on Entrepreneurship (IConEnt-2016)
“How Innovation could Improve the Performance and Productivity in Entrepreneurship?”
March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia

high satisfaction (Oliver, 1997). This orientation with innovative behaviors and
suggests that the service organization does processes (Hou, 2008). Meeting client needs
not only need to satisfy the customers but and providing innovative products are
has to delight them as well (Aziz & essential to deliver service excellence
Wahiddin, 2010). (Eisawi et al., 2012). Such activities as
Service excellence in this study is based being able to identify the needs; to change,
on service process and delivery, to explore, to select feasible opportunities;
service-scape, customer participation, and and to implement the new services in the
customer responsiveness. Flexibility and organization are supporting factors in the
customization in service process and hotel’s service excellence. This study
delivery are highly appreciated by proposes the service innovation capabilities
customers (Bettencourt & Gwinner, 1996). are determining factors for service
Well planned and designed service delivery excellence. Summary of the condition
may directly contribute to the whole service compiled in Table 2.
excellence. Service-scape is related to the
style and appearance of the physical Table 2. Position of the research
atmosphere and environment in a service Service Innovation Capability  Service Excellence
Hou (2008) Eisawi et al. This research
organization that has some impacts on (2012)
customers’ experience (Lovelock et al., Conceptual Review of Conceptual
2005). Dube & Renaghan (2000) also model with innovation within model with
hypothesis using the UK banking propositions SIC
confirmed the importance of architecture market sector using  SE using
and design as key value drivers that orientation and innovation and sensing, seizing,
influence the customers’ perceptions of dynamic service and transforming.
capability. excellence Using case study
service excellence. (service delivery) 8 hotels 3-Star to
Customers’ participation increasingly 5-star in Bandung
play active and even leading roles in service region.
production and delivery processes (Xue &
Harker, 2002) in most of the service Considering the Table 2 above, this research
organizations. The nature of service proposes a conceptual framework that
characteristics that is highly simultaneous involving the service innovation capabilities
requires customers to be part of the service in achieving service excellence as shown in
transaction or as a co-producer. The Figure 1 below. This study identify and
customer’s engagement in service as a explore specific activities using the case
co-producer is important in the cost study in the hotel industry context.
reduction and service quality improvement
(Heskett et al., 1997). Thus, the degree of Service Innovation
service success may depend very much on Capability (SIC): Service Excellence
the customer’s participation to make the -Sensing (SE)
service happens. In other words, in some
services, the customer is acting as a partial -Seizing
employee of the organization. -Transforming

Figure 1. Conceptual Framework

2.3. Service Innovation Capability and
Service Excellence
The conceptual framework developed in
Service innovation capability refers to a
this study is based on research literature and
firm’s ability to develop new services
the existence of the void can be filled to
through aligning strategic innovative
make the contribution of the academic sides.
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International Conference on Entrepreneurship (IConEnt-2016)
“How Innovation could Improve the Performance and Productivity in Entrepreneurship?”
March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia
This conceptual framework is tentative and
flexible to be developed in further studies.
This must be done to extend the findings in
subsequent research. This study is carried
out using the methodology described in the
next session.
3. Methodology
The philosophical assumptions underlying
this research come from the interpretive
tradition. This implies a subjective
epistemology and the ontological belief that
reality is socially constructed. The research
strategy adopted was to conduct multiple
case studies in eight hotels in two stages.
The fieldwork was conducted at the sites
during the period from October 2014 to
August 2015 and a steady correspondence
has been maintained with the different
informants at the sites. The main data
collection techniques used in this research
study were semi-structured interviews,
observation, and documentation analysis.
To explore and test the propositions,
this study gathered data from 5 hotels in
descriptive study (stage 1). To test the
propositions, this study re-gathered data
from 3 current hotels in stage 1 in order to
confirm the activities in service innovation
capabilities and service excellence and add
the 3 new hotels as a comparison. These
data were collected as part of a wider study
of hotels.
Case study methodology was used in
this study (Yin, 2003), as it allows the
questions what, why, and how to be
answered. Cases were selected from hotels
based on a literal replication logic, that is,
cases were chosen that were expected to
lead to similar results (Yin 2003). The
replication logic requirement of the
multiple-case design provides suggestions to
determining the number of cases. The initial
decision regarding a satisfactory number of
cases is between six to eight for a theoretical
replication and three to four for a literal
replication (Yin, 1994, pp. 46, 50). For a
theoretical replication, that prescriptive
number of cases is considered satisfactory
when "rival theories are grossly different,"
however, the number needs to be increased
when "rivals have subtle difference," (Yin,
1994, pp. 50). The final decision about the
number of cases is usually a judgmental
decision made by the researcher and is
positively influenced by the indifference
between rival theories, the high degree of
certainty the researcher wishes to attain and
the differences between the cases (Yin, 1994,
pp. 50).
A purposive sampling strategy was
used to select cases that offered the best
opportunities to build theory (Miles &
Huberman, 1994). As defined by Kerlinger
(1986), purposive sampling is another
non-probability based sampling also known
as judgmental, selective or subjective
sampling. Non-probability sampling focuses
on sampling techniques where the units that
are investigated are based on the judgment
of the researcher and will be based on the
researcher's practical knowledge of the
research area, the available literature and
evidence from the study itself. The main
goal of purposive sampling is to focus on
particular characteristics of a population that
are of interest, which will best enable the
researchers to answer the research questions.
Purposive sample sizes are often determined
on the basis of theoretical saturation (the
point in data collection when new data no
longer bring additional insights to the
research questions). Purposive sampling is
therefore most successful when data review
and analysis are done in conjunction with
data collection. Rather, it is a choice, the
purpose of which varies depending on the
type of purposing sampling technique that is
used. For example, inhomogeneous
sampling, units are selected based on their
having similar characteristics because such
characteristics are of particular interested to
the researcher.
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“How Innovation could Improve the Performance and Productivity in Entrepreneurship?”
March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia

Our main criteria for case selection based on: In order to guide the execution of the
1) Hotel star classification from 3-star to case study research, a research protocol was
5-star with independent or chain network, 2) created before data collection started. The
Hotel star classification from 1-star to 2-star research protocol uses the English but
not included in this study. Based on the overall the answers from informants in
preliminary interview, activities for service Indonesian. The content of the protocol
innovation capabilities in 1-star and 2-star includes the following aspects:
hotel are rarely done and not have -General questions about the hotel;
procedures and processes are well -Formation phase: about the current hotel
documented, 3) The key individuals have industry environment, marketing and service
had considerable experience in the hotel innovation strategy;
business with a variety of work that have -Operational phase: about the activities of
ever dealt with, 4) The hotel located in service innovation capability (SIC);
Bandung region and surroundings areas. -Evaluation phase: about service excellence
In this study, we have sent a (SE) compare to direct competitors.
participation letter to 17 hotels but only 5 The primary data collection was
hotels that provide answers and are willing interviews with managers involved in the
to be interviewed. This study does not hotels studied. The data were collected via
involve consumer of hotels directly due to semi-structured interviews using a research
the time limitation. Comments and reviews protocol (consist of competition, service
from guests who have stayed from Trip innovation capabilities, and service
Advisor and Agoda will be taken as a basis excellence) during October 2014 and
for data triangulation. From the hotels that February 2015 for stage 1 and during March
have contacted, five hotels agreed to 2015 and August 2015 for stage 2. Overall,
participate in the study stage 1 and six 5 interviews were conducted typically
hotels in stage 2. All of the hotels in our lasting 1 to 1.5 hours each in stage 1 and six
final list were tested with an expert to interviews in stage 2. Interviewees came
confirm that they were fulfilled as 3 to 5 star from a variety of positions in the
hotel classification. The names of the hotel organizations, and their job titles included
which is the object of this study changed to corporate operational manager, general
protect confidentiality between the hotel and manager, sales director and business
researchers. The study descriptions of the development director. In the interviews, the
chosen hotels are provided in Tables 3. propositions were not addressed directly in
order to prevent leading questions.
Table 3. Description of case in stage 1 and stage 2 It is common in case research to use
Name Star Network Founded triangulation to extend and validate the data
Category
STAGE-1 collection through the use of multiple
SCDH 3 Local 2009 sources of evidence (Eisenhardt 1989; Yin
SRH 4 Independent 1930 2003). In the present study, this was done
GFH 4 Local 2009
GPH 5 Local 1920
through the documentation in terms of
APH 4 International 2009 company profile, sales kit, websites,
STAGE-2 observation of and participation in some of
SCDH 3 Local 2009 the hotels studied. These were studied as a
SRH 4 Independent 1930
GPH 5 Local 1920 supplement to the interviews, enabling us to
DBH 3 Independent 2013 obtain further insights on the design
GRH 4 Independent 1990 approaches and to look for additional
PPH 5 Local 2011
corroborating or contradicting evidence. We
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International Conference on Entrepreneurship (IConEnt-2016)
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March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia
coded the interviews using a predefined
code list that was expanded during the
analysis to capture emerging themes. The
use of software and data coding makes
qualitative data analysis procedures more
systematic and guards against
information-processing biases (Eisenhardt,
1989; Miles & Huberman, 1994). The coded
interviews were then analyzed to identify
support (or lack of support) for our
propositions using software QSR N-Vivo 10.
Specifically, we examined each case for
evidence of the capability practices captured
in the propositions. To further ensure the
accuracy and validity of the data, the results
were written up in a report that was sent to
all respondents for approval, to check that
the conclusions accurately reflected their
practices.
The overall text on the interview for
each hotel thoroughly readable using
narrative analysis to get the main idea of
each of the constructs contained in the case
study protocol. The result of narrative
analysis is used to see whether the activity
of each capability found in each hotel and in
what form. Within-case analysis is used to
explore the characteristics, uniqueness, and
insights from each hotel. Then detailed
analysis is done using the case description
and the collected data.
Detailed analysis is used with the help
of the variables that have been
operationalized in the case study protocol.
For the specific questions of each construct,
the results of interviews of each informant
will be given mark bold, underlined, or
colored to indicate that there are those
activities in the hotel. The results of the
narrative analysis of each indicator on both
the capabilities and the interaction then
matched with the indicators contained in the
case study protocol, and then compared with
the indicators contained in the service
excellence, the results of the reviews from
guests who have stayed, and evidence of
internal documents such as photos, sales kits,
hotel profile, and others.
Operationalization of variable is the
process of translating or defining a variable
so that it can be measured. Service
innovation capability and service excellence
are operationalized and discussed below.
Service innovation capability is
operationalized through sensing, seizing,
and transforming. Sensing is measured as
the activity to identify the need to change
service operations and innovation. Seizing is
measured as the activity to explore and
select feasible opportunities for a change.
Transforming is measured as the activity to
implement the new services in an
organization. All items for service
innovation capability are based on
Pöppelbuß et al. (2011).
Service excellence is operationalized
through service delivery, service-scape,
customer’s participation, and service
responsiveness. Service delivery is
measured as the method and sequence in
which the service operating systems work to
create the service experience and outcome
(Bettencourt & Gwinner, 1996).
Service-scape is measured as the style and
appearance of the physical elements
encountered by customers at service
delivery sites (items based on Lovelock et
al., 2005). Customer participation is
measured as the actions and resources
supplied by customers during service
production and/or delivery (Xue & Harker,
2002). Service responsiveness is measured
as the ability of a hotel to respond individual
guest’s requirements (Gronroos, 1982).
4. Finding
The GFH hotel as a convention hotel sense
the market activity through guest’s
comments, information exchange with
competitors, PHRI, Riung Priangan,
telemarketers, mass media, and internal data.
From the guest’s comments, the GFH hotel
can obtain valuable information in order to
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March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia
anticipate the customer’s wants. The
information regarding the current trend,
market changes in hotel industry being used
to make and support marketing decisions.
Training is a media for developing staffs
and a tool for learning process. The learning
process will enrich the knowledge and skill
of staff. The idea sharing carried-out
formally in morning briefing and informally
in team discussions. The teams help and
back-up each other and supported by direct
supervisor. There is a shift of market
segment from government to corporate.
Currently, focus of the hotel how to build
and communicate their brand to
multi-national companies such as Chevron
and Petro China while maintain the frequent
independent traveler. The profile of guest
based on segmentation.
The objective of service innovation is
to fulfill and responsive to the customer’s
wants. The service innovation includes 30
Indonesian traditional cuisines and
Sundanese traditional uniforms. Service
improvements conducted in accordance with
reviews and comments from guests. The
physical facility in GFH hotel is still limited.
The screening process done formally
according to Kagum’s standard for
promotion materials and design of theme.
The menu development will pass through
internal test and market test before launch to
market. The market test conducted jointly
with media to promote that.
GPH hotel as a business and leisure
hotel sense the market activity through
guest’s comments, information exchange
with competitors, PHRI, Riung Priangan,
media, and internal data. From the guest’s
comments, the GPH hotel anticipate the
customer’s wants and get the feedback from
their customers. The management encourage
and support the staff in sport, training, and
seminars. From monthly meeting, the ideas
convey to the management and to motivate
them to take responsibility. The GPH hotel
positioned as 5-star heritage hotel.
The innovation programs are
measurable and conduct the survey before
programs begin. There are spontaneous
innovation programs for small portion of
budget. Integrated improvement coordinated
with head office. Innovation in saving the
energy collaborated with investors. The
hotel defines innovation programs based on
events and occasions. The overall service
carried-out by mystery guests and
management. GPH hotel conduct the market
test and review for new menu development
based on slow-moving and fast-moving
items.
The APH hotel as a conference center,
sense the market activity through guest’s
comments, information exchange with
competitors, PHRI, Riung Priangan, media,
and internal data. From the guest’s
comments, the APH hotel anticipate the
customer’s wants and get the feedback from
their customers through REVINET tools.
The hotel has innovation committee from
supervisor level up to general manager as a
mean to brainstorm and raise the new idea
to develop service. The APH hotel
positioning is a conference center for
corporate and government. The hotel got the
ISO-9001 for quality management process
so that the process and standard have been
recognized. The innovation were carried-out
such as a cooking class for kids that is called
little chef. The APH hotel, design the
service process flow. New menu
development tested, reviewed, and
compared by partners.
The SRH hotel as a resort hotel sense
the market activity through guest’s
comments, share the information exchange
with competitors, PHRI, Riung Priangan.
From the guest’s comments, the SRH hotel
anticipate the customer’s wants and get the
feedback from their customers. The idea
comes from staff and discussing it. The
SRH hotel positioned as a resort hotel.
Innovation programs come from guest’s
comments. The hotel does not define the
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March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia

service process and service audit clearly but The innovation made in GPH hotel is
conduct trial and error only. The hotel by providing a heritage museum and
conducts market test as regular basis for implementation of eco-green, while the
Ramadhan festival. innovation made in APH hotel is conducting
The SCDH hotel as a family boutique ‘little chefs’ and air soft gun program.
hotel conduct the market sensing activity Sensing activities allows hotels to formulate
through guest’s comments, share the different innovation strategies that can
information exchange with competitors and respond to customers and deliver their
PHRI. From the guest’s comments, the services to customers. Appropriate service
SCDH hotel anticipate the customer’s wants delivery and offering the best service-scape
and get the feedback from their customers. by involving customers will ultimately
The idea come from the staffs and share achieve service excellence in terms of
with the others departments. There is an meeting customer expectations.
audit service process. The service This study offers an interesting view
innovation being defined such as participant, for the general manager in hotel industry.
physical evidence, and process according to The reason is that the existing service
SCDH’s standard. The hotel conducts the excellence frameworks are mainly based on
screening process to get the feasible idea. service innovation capability, and therefore
Mostly the hotel in descriptive study, these frameworks have a limited application
encourage and support their staff to take the potential in a hotel industry context. All of
responsibility in various manners. The the three activities are work and exist in the
sharing idea carried-out in formal meeting hotels. General Manager in the hotels can
such as morning briefing, monthly meeting, use the proposed different activities for
and general meeting. The learning process service innovation capabilities as a list of
in the hotel allows the staffs will get and options that needed to achieve their hotels’
manage the relevant information that needed service excellence.
in achieving excellent service. The The Table 4 below summarizes how
dedicated staffs will serve the guests better. the three activities for service innovation
The sharing idea forum as a formal meeting capability exist in each hotel. Using the data
will give the staff flexibility to process and from 5 cases studied, the table below
deliver services. generates the proposition about service
Each hotel has a different strategy in innovation capability for service excellence.
serving their customers. Each hotel’s
innovation strategy formulation and new Table 4. Case study observation
Proposition SCDH SRH GFH GPH APH
service development are mostly done by its SIC  SE Stage-1
own department of marketing, sales, house- Sensing √ √ √ √ √
keeping, and F&B. Other departments are Seizing √ √ √ √ √
Transforming √ √ √ √ √
involved when it is related to events and SIC  SE Stage-2
occasions. Most of the innovations in the PPH GRH DBH
Sensing √ √ √ √ √
three hotels concern the menu development. Seizing √ √ √ √ √
Regular audit is conducted by inviting Transforming √ √ √ √ √
outsiders to assess the overall services to Note: A √ indicates that one or more examples of that activity
anticipate changes of customer’s needs, and were found in a particular case study hotel. The absence of a √
indicates that such examples were not observed in the hotel
to evaluate whether the technological studied.
options are in accordance with the standard
operating procedures and customer In aggregate, these points motivate the
expectations. following testable proposition based on

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Universitas Pelita Harapan, Tangerang – Indonesia
theoretical framework in previous section
and interview results of descriptive study.
Proposition: Service innovation
capability that involving sensing, seizing
and transforming will support in
achieving service excellence.
The explanatory study involved the six
hotels as a sample. In this study the three
hotels are current hotel in the descriptive
study such as: SRH, GPH, and SCDH. The
current hotel is being used as a comparison
in order to confirm the proposition. The
additional of three hotel are PPH, DBH, and
GRH. Three new hotels as additional in
explanatory study are used in order to see
whether the proposition put forward in
previous section is supported or not.
Respondent from three hotels is a general
manager with various experiences over 12
to 25 years in the hotel industry. The data
analysis of case study in stage 2 only
carried-out for 3 hotels as additional case.
The data analysis for the current case
referred to previous data analysis which
described same condition in descriptive
study.
The PPH hotel as a Meeting, Incentives,
Convention, and Exhibition (MICE) hotel
conduct the market sensing activity through
guest’s comments, share the information
exchange with competitors and PHRI. From
the guest’s comments, the PPH hotel
anticipate the customer’s wants and get the
feedback from their customers, especially
for VIP guests through Guest Experience
Manager (GEM). The idea come from the
staffs and share with the others departments.
There is an audit service process internally.
The service innovation being defined such
as participant, physical evidence, and
process according to Media Hospitality’s
standard. The hotel conducted the screening
process to get the feasible idea.
The DBH hotel as a new hotel conduct
the market sensing activity through guest’s
comments, share the information exchange
with competitors and PHRI. From the
guest’s comments, the DBH hotel anticipate
the customer’s wants and get the feedback
from their customers. The idea come from
the staffs and share with the others
departments. There is an audit service
process internally. The service innovation
being defined such as participant, physical
evidence, and process according to Dafam’s
standard. The hotel conducted screening
process to get the feasible idea and market
test for new menu development.
The GRH hotel as a business and resort
hotel conduct the market sensing activity
through comment of guest, share the
information exchange with competitors,
PHRI, and Riung Priangan. From the
guest’s comments, the GRH hotel anticipate
the customer’s wants and get the feedback
from their customers. The idea come from
the staffs and share with the others
departments. There is an audit service
process internally. The service innovation
being defined such as participant, physical
evidence, and process according to GRH’s
standard. The hotel conducted the screening
process and market test to get the feasible
idea.
Each hotel has a different strategy in
serving their customers. Each hotel’s
innovation strategy formulation and new
service development are mostly done by its
own department of marketing, sales, house-
keeping, and F&B. Other departments are
involved when it is related to events and
occasions. Most of the innovations in the
three hotels concern the menu development.
Regular audit is conducted by inviting
outsiders to assess the overall services to
anticipate changes of customer’s needs, and
to evaluate whether the technological
options are in accordance with the SOP and
customer expectations. The innovation made
in GRH hotel is by providing an eco-green
policy for guest room and kiddy land.
Sensing activities allows hotels to formulate
different innovation strategies that can
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Universitas Pelita Harapan, Tangerang – Indonesia
respond to customers and deliver their
services to customers. Appropriate service
delivery and offering the best service-scape
by involving customers will ultimately
achieve service excellence in terms of
meeting customer expectations.
The statements contained within the
case study protocol have been clustered in
terms of the service innovation capability
that would impact on service excellence.
These factors came to the fore during the
interview stage of the research. The
interview responses related to each of the
factors will be summarized in statements
according to the activities in each hotel. In
aggregate, these statements are considered
indicative of the service excellence within
the Indonesian hospitality sector.
In case study stage 1 and 2, all the
respondent states that they conduct the
service system audit. The audit conducted
by management, PHRI and mystery guest.
The sensing activities have similarity among
the hotels. Through the service system audit,
the innovation process in hotel will be
measurable and structured to its target
customers. Mostly the hotel in case study
stage 1 and 2 conduct the audit of service
process except The SRH only for financial
and accounting. The audit of service process
conducted in order to maintain the service
level to customers, to response, and to
design and prepare the facilities and
amenities in achieving service excellence.
Stage 1 and 2 in case study states that
they define clearly the new service system
that aligned with their target market. The
process, participant, and the extent of
change of new service system determine
how the service delivers to customers. The
seizing activities have similarity among the
hotels. Through the new service systems
that define clearly, the innovation process in
hotel will be useful and right on target. All
the hotels in case study stage 1 and 2 define
their new service system that involves the
process, participant and facilities according
to special occasions and activities in order to
fulfill the customers’ wants. The seizing
activities enabling the hotel to deliver the
service, to response quickly, and to prepare
the service-scape in order to achieve service
excellence and can attract the customers
return.
The SRH in stage 1 case study not
conduct the transforming activities
especially in service prototype test into the
market. In stage 2, all the respondent states
that they conduct the service prototype test
for menu development into market before
providing to customers. The transforming
activities have similarity among the hotels.
The transforming activities define
differently for each hotel. In stage 1 case
study all the case study conduct the service
prototype test into market by various ways.
The transforming activities enable the hotel
to deliver the service and to test their new
service development into the market in
achieving service excellence.
From the three factors that explained
above that involving sensing, seizing, and
transforming, the statements from
respondents said that service innovation
capability support in achieving the service
excellence in the hotel.
5. Discussion
The activity in service innovation capability
indicates that innovation process is carried
out have in common at each hotel. The
ability to define the process, participants,
physical evidence, and design factors, at the
most hotel are done by considering the
target market, events and occasions. Most of
the hotels in this study, conduct market test
for new menu development by inviting
media. This activity is done as a
promotional tool for the hotel to introduce
them to potential guests. This activity is also
used to communicate their brand and
reinforce their position in the minds of
customers. Market test is also carried out by
inviting the potential customers. Based on
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Universitas Pelita Harapan, Tangerang – Indonesia
the interview sessions from eight key
persons of hotel industry in Bandung region,
the all case studies indicate that service
innovation capability will support in
achieving service excellence. Through the
intense communication and coordination
with all departments in the hotel are
involved, it will support in achieving service
excellence. In order to achieve service
excellence, activities such as market
research, direct selling, event promotion,
and corporate branding, marketing, and
spontaneous innovations like amenities
according to seasonal and market demand
are communicated directly to customers.
The capability interaction occurs mostly in
the menu development, event development,
price setting, price comparison, and selling.
The propositions in previous section
along with conceptual framework for
analyzing the cases was developed based on
various theories and models about service
innovation capabilities found in various
literature sources. The results of the study
suggest that capability highly needed to
achieve service excellence. This study offers
an interesting view for the general managers
in hotel industry especially Bandung areas.
The reason is that the existing service
excellence frameworks are based on service
innovation capability and therefore this
framework has a limited application
potential of hotel industry context in
Bandung. All of the three activities are exist
and works in the hotel. General Managers in
hotels can use the proposed 3 different
activities for service innovation capabilities
as a list of options to affect their hotels’
service excellence. From this list, general
manager can then select the activities that
suit their hotels’ needs and service
excellence. Hotel has complex elements,
and their service excellence may depend on
these various elements or their interaction.
These case studies show, that service
excellence starts with building the
associations of both capabilities. A hotel’s
brand successfully positioned in the
consumers’ minds will become an asset of
the company that contributes to its service
excellence. To conclude, the results of these
case studies are limited to the hotel industry
only especially Bandung area.
6. Conclusion
This study expands research on the service
innovation capability that support in
achieving service excellence. The following
conclusions will be presented as follows: 1)
this study fills the gap in the service
innovation in hotel industry context; 2) the
conceptual model described in this study
examines the existence of activities in all
case study. All activities works for each
hotel through specific ways according to
hotel classification, the management system,
their positioning, and target market; 3) the
results of the study indicate that the service
innovation capability in the eight hotels
show some similarities. The difference lies
in the marketing strategies and innovation
strategies, which are tailored to the target
markets and occasions; 4) the service
excellence is highly depend on how the
hotels able to sense trends and events,
responds the market demands through the
learning process, sorts out the right target
markets, and communicate with the
customers. The service excellence is
achieved by defining the services,
participants, and physical facilities clearly;
continuously perform the audit services; and
conduct market test for the new services; 5)
the propositions generated in previous
section through the activities of service
innovation capability support in achieving
service excellence.
This exploratory research does not seek
to draw statistical inferences, therefore is
subject to the following limitations arising
from the case study methodology. The
application of the service innovation
capability in hotels is limited in Bandung
area only. The coverage of case study and
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International Conference on Entrepreneurship (IConEnt-2016)
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March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia
findings are based solely on the eight unique
classified hotels (3, 4 and 5 star-hotels),
which may not be generalizable to the other
classified hotels (1 and 2 star-hotels),
non-classified hotels, and in the other areas.
All hotels were very welcome to share their
insights, company profile and sales kit. This
study just explored the activities that related
to service innovation capability. The
information about financial and accounting
performance does not explored in this study.
The first key contribution of this work
is its inclusion of the concept of dynamic
capabilities; that hotels are able to compete
not only due to their ability to exploit their
existing competence and capabilities, but
also thanks to their ability to renovate and
develop their organizational capabilities
(Teece et al., 1997). Therefore, this study
argue that in order to maintain service
excellence it is not enough for hotels to be
in possession of valuable capabilities; hotels
also require dynamic capabilities to develop
and renovate their organizational
competence and capabilities (Teece et al.,
1997). The application of dynamic
capability theory has been done in the
various industries. This study applied the
dynamic capability theory for service
innovation in the hotel industry context.
This study seeks to provide the empirical
data for the hotel industry to reveal variables
service innovation capability such as:
sensing, seizing, and transforming. The
study by Eisawi et al. (2012) that revealed
the relationship between innovation and
service excellence using service delivery,
this study expand the service excellence
variables using service process and delivery,
service-scape, customer participation, and
customer responsiveness.
The findings of this work also could
improve current firms’ management by
enabling these hotels to achieve their
objective of achieving service excellence.
This study expected to contribute to the
development of conceptual model in service
innovation capability in order to achieve
service excellence for hotel industry in
Bandung. For the practice, this study is
aimed at helping hotel industry to better
plan and move towards greater service
innovation implementation. This study will
hopefully provide insights on some of the
factors of service innovation capability
which would assist hotel industry in
Bandung to prepare and create the activities
to achieve service excellence through the
co-ordination and communication among
department in the hotel and finally to satisfy
the customer and make the customer loyal.
This study could be the basis for policy
makers to prepare the regulation in the hotel
industry in Bandung.
Further research could apply this
conceptual framework to analyze hotels for
1-star and 2-star hotels and non-classified
hotel. Therefore, research on other
industries (financial service, airlines,
consulting, etc.) possessing interaction
capabilities is needed. The confirmatory
quantitative research is needed to test the
model and the causal relationship through
statistical inference by generating and
testing the hypothesis. From the case studies,
the strong brand names of the three hotels
seemed to contribute to their service
excellence. It is recommended that further
research on the causal relationship between
capabilities and service excellence to the
hotel performance could be applied.
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March 17, 2016.
Universitas Pelita Harapan, Tangerang – Indonesia

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