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Volume 7 Number 4 2004
ISBN 1-84544-018-8
ISSN 1352-2752
Qualitative Market Research An International Journal Papers from the Business Innovation in the Knowledge Economy Conference, 2003 Guest Editors: Lynn M. Martin and Julie Abbott
www.emeraldinsight.com
Qualitative Market Research: An International Journal Volume 7, Number 4, 2004
ISSN 1352-2752
Papers from the Business Innovation in the Knowledge Economy Conference, 2003 Guest Editors: Lynn M. Martin and Julie Abbott
Contents 238 Access this journal online 239 Abstracts & keywords 241 Guest editorial 243 Customer and company voices in e-commerce: a qualitative analysis Rachel McLean and Nigel M. Blackie 250 Qualitative issues in IT and organizational processes in implementing marketing strategies Ashok Ranchhod and Ca˜lin Gura˜u 257 Channel benefits portfolio management in the eBusiness era Panos Louvieris and Harmen Oppewal
265 V2C activity on a local level: qualitative cases – Tampere and Silicon Valley Hannu Jungman and Marko Seppa¨ 274 A qualitative sense-making classification of business incubation environments Paul D. Hannon 284 Enhancing customer service and organizational learning through qualitative research Peter R.J. Trim and Yang-Im Lee 293 Awards for Excellence
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strategies. This paper attempts to show how technology is changing the nature of marketing and then shows its interaction with people and processes. It also offers organisations an opportunity to undertake a self-evaluation exercise to determine how well integrated are their implementation policies. In general, the argument outlined indicates that for successful implementation of strategies an organisation has to integrate people, processes and IT.
Abstracts & keywords
Channel benefits portfolio management in the eBusiness era Panos Louvieris and Harmen Oppewal Keywords Consumer behaviour, Electronic commerce, Channel relationships Customer and company voices in e-commerce: a qualitative analysis Rachel McLean and Nigel M. Blackie Keywords Knowledge management, Electronic commerce, Shopping, Consumers Consumer knowledge is a very important asset for an organisation. Two types of consumer knowledge have been identified, “knowledge about customers” including customer segments, individual customer preferences, potential customers, and “knowledge possessed by customers” including knowledge about product ranges, companies, and the marketplace. Electronic commerce (e-commerce) offers an ideal medium for the creation and exchange of both types of knowledge. This paper presents the results of an initial phase in a research cycle that looks at e-commerce through the lens of knowledge management. It examines e-commerce provision made by organisations for customers across seven facets ranging from transactional to relational facilities. The results of a self-evaluation of companies’ e-commerce propositions are contrasted with customer expectations to determine divergence and alignment. Implications are discussed and conclusions proposed. Qualitative issues in IT and organizational processes in implementing marketing strategies Ashok Ranchhod and Ca˜lin Gura˜u Keywords Marketing, Internet, Marketing strategy, Technology led strategy Successful marketing strategies depend very much on an organisation’s ability to implement them. As the role of technology grows apace in marketing, it is important to understand how IT and organizational processes impact on the implementation of marketing Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · Abstracts & keywords q Emerald Group Publishing Limited · ISSN 1352-2752
The role of channels and their management in the eBusiness era is becoming increasingly important to customer relationship management. Traditional use of the application portfolio approach has been concerned with providing an appropriate basis for making investment decisions about ITapplications for the firm. This paper argues that there is a gap between the established IS portfolio application theory and the requirements to support management investment decisions about eBusiness applications; Therefore, the paper proposes a channel benefits portfolio (CBP) approach to inform managers’ channel investment decisions concerning business-to-customer channel interface. The suggested approach provides a conceptual framework and means to facilitate the alignment of the firm’s portfolio with their customers’ portfolio. The paper reports exploratory findings regarding customer channel preference and customer channel choice behaviour in the information search and purchasing stages during the customer decisionmaking process on the basis of the CBP. V2C activity on a local level: qualitative cases – Tampere and Silicon Valley Hannu Jungman and Marko Seppa¨ Keywords Venture capital, Entrepreneurs, Finland, United States of America The increased capital intensity of venture capital supply and the increased knowledge intensity of new venture supply have created a knowledge gap and recreated a capital gap between new venture activity and venture capital industry. This development has given rise to an all-new breed of players. In this descriptive, qualitative study, V2C activity is explored in a local context through comparison of cases Tampere (Finland) and Silicon Valley (USA). In Silicon Valley, the dominant group of V2C players is business angels, whereas in Tampere, publicly funded incubators play the most visible role in new venture development. Nevertheless, in both areas, five different categories of V2C players are represented, and, in both, bridge the gaps to a significant extent.
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Abstracts & keywords
Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · 239 – 240
A qualitative sense-making classification of business incubation environments
marketplace through its language, specifically the application of metaphor.
Paul D. Hannon
Enhancing customer service and organizational learning through qualitative research
Keywords Metaphors, Start-ups, Business development
Peter R.J. Trim and Yang-Im Lee
Business incubation is a new and fast growing industry in the UK. The environments within which incubation can take place and their descriptors as used across the industry are many and varied. The language engaged in by policy-makers, professionals and practitioners commonly applies metaphors to convey meaning of loosely defined terms and concepts in a diverse market seeking increased clarity. Metaphors can offer a qualitative approach to sense-making. By articulating ideas through metaphors, individuals can often expand the concepts and expressions available through language. It is asserted that it would be valuable to incubation communities to provide shared meaning to the discourse of incubation such that further confusion is minimised. This paper aims to address this challenge by proposing a classification of incubation environment types based upon a qualitative approach to understand the incubation
Keywords Research, Communication, Culture (sociology), Learning, Marketing, Partnership In order to develop a sustainable competitive advantage in the knowledge based economy, senior managers need to ensure that customer relationship management is placed within a clearly defined organizational culture that embraces organizational learning. Senior managers are required to exhibit a proactive approach to leadership that results in creative solutions being found to solve complex problems. Open communication reinforces the decision-making process and allows mutually based partnership arrangements to develop. This being the case, the network approach to business development can be viewed, as collectivist in orientation and this should allow partnership arrangements to be developed through time.
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Guest editorial
Guest Editors Lynn M. Martin Julie Abbott About the Guest Editors Lynn M. Martin is director of EU Asia projects at the Business School, with key development work under way with India, China, Germany and Spain. She is also director of the innovation management interactive exercise (IMIE), a computer-based tool to aid understanding of the innovation process. In the past she has worked in universities in the UK and Germany, with experience as a senior manager in a large organisation and as an owner-manager in small firms. She has published many papers on small firm development internationally in academic journals and contributed to several books on entrepreneurship and innovation. In addition to supervising doctoral students working in this area she is also course director for the action-research based Doctor in Business Administration Programme. A regular rapporteur and evaluator for the European Union framework programmes, she also contributes to projects and initiatives run by NATO and the Commonwealth in terms of innovation and entrepreneurship. Julie Abbott runs her own marketing consultancy, specialising in producing strategic marketing plans for small to medium sized businesses from their business plans. She lectures widely at various business schools on marketing topics and runs marketing planning workshops for clients. She also does general marketing consultancy for companies that need extra help in understanding their marketplace or how to position themselves for best advantage. Prior to this Julie worked in the IT industry for a number of years, most recently for IBM as marketing manager for a key product set across EMEA (Europe, Middle East, Africa). She mainly worked in technical IT roles both for IBM and other companies. She spent the first five years of her IBM career as an IT consultant before moving into marketing. During her marketing career, she has worked as marketing manager for a variety of IBM’s leading products and has published papers on CRM in leading academic journals as well as contributing to several marketing books. She works closely with many UK business schools to encourage interaction and thought leadership between them and the business world as well as lecturing at postgraduate level on marketing issues.
Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · pp. 241-242 q Emerald Group Publishing Limited · ISSN 1352-2752
Welcome to the Business Innovation in the Knowledge Economy (BIKE) Conference special issue of QMRIJ. This issue contains six qualitative papers with a range of insights and applications into business incubation environments, channel benefits, customer and company voices in e-commerce, IT and organizational processes, a two-country comparison in qualitative case examples and the enhancement of customer service. As such, this issue presents a different scenario to the normal qualitative academic papers by focussing on innovative practices. As background, the BIKE event was one of a series of conferences to explore how new business processes, services and products arise from innovation and knowledge developments and to study and discuss realities of business operations in new technological environments with the benefits of qualitative insights and qualitative inputs to the management of such areas. A particular feature of this annual event is that it brings together academics, practitioners, business people and policymakers; this year it took place thanks to the sponsorship of IBM, the West Midlands IT Association (WMITA) and Stratford-upon-Avon District Council. The logo for WMITA is shown in Figure 1. It has a key significance for the way BIKE has tried to bridge the gap between commerce and academia since WMITA is a group of small and large firms working together as a regional cluster and its presence here also represents an important new university-industry partnership. The involvement of this cluster also indicates the local and regional impacts of BIKE while the more international aspects are shown by the EDECAD involvement. The founding members of BIKE include Julie Abbott, Lynn Martin and Len Tiu Wright. Last July 2003, the BIKE team held a conference at IBM Warwick and Stratford-upon Avon District Council. This formed the UK launch of the EDECAD project that involves India, China, Spain and the UK and is led by Lynn Martin from the Business School at the University of Central England (www.edecad.info). It was partly funded by the EU Asia ITC programme which aims to develop European-Asian links in terms of information technology communications. The logo for this programme is shown here as its involvement indicates the truly international nature of the BIKE event and the potential impacts on a wider economic and social community (www.europa.eu.int/comm/europeaid/projects/ asia-itc) (Figure 2). Over 30 months, EDECAD took an active role in developing new elearning and e-commerce initiatives across the partner countries. Underpinning issues include techno-ethics, the
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Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · 241-242
Figure 1 Logo for WMITA
Figure 2 Logo for EU Asia ITC Programme
societal impacts of new technology and the role of foreign direct investment in this process with a particular focus on SMEs. Supporting the initial stages of this process, participants explored key issues connected with customer relationship marketing, industry and the public sector, knowledge, e-business, small and medium sized enterprises and digital inclusion. Knowledge management and organizational learning formed a central part of the conference and indeed are high on the agendas of many in business today, along with customer service, which must form the central tenet of an organisation if it is to win in the marketplace. Trim and Lee discuss how customer service can be enhanced by a business culture that embraces organizational learning. This can result in proactive leadership and creative solutions being put forward to ever more complex challenges that firms face today when dealing with day-to-day issues such as managing relationships with their customers and suppliers. The papers selected for this issue from the BIKE conference are examples of the focus and high quality of the papers presented over the two days and we believe that they will hold your interest and provide food for thought. The first paper is about customer and company voices in e-commerce. A company’s knowledge base becomes ever more important in this networked world and McLean and Blackie have qualitatively investigated how companies use knowledge management within their e-commerce strategies. Customer expectations are matched against organizational provisions in order to understand knowledge gaps and customer requirements. This underlines how important people and processes still are in business despite the proliferation of information technology in markets and its ubiquitous presence everywhere today. In the second paper, Ranchhod and Gurau tackle the issues between IT, organizational
processes and people from the viewpoint of how this is changing the nature of marketing today. The need for interaction between all three aspects is vital for marketing strategies to be successful in an ever-increasingly competitive business environment. As the Internet is becoming more mature and accepted across most customer segments, and so businesses using this channel are beginning to flourish again, as shown in the third paper. Louvieris et al. argue, in the third paper, that closely aligned company and customer channel portfolios are a strategic imperative for sustainable success in multi-channel environments and so propose a “Channel Benefit Portfolio” approach for successful e-commerce strategies. The growth of e-commerce coupled with governmental encouragement in new business is causing a proliferation of incubation centres and increased use of venture capitalists once again. This intensity of supply is causing gaps in knowledge and capital and has led to a new set of actors – the venture to capitalists (V2C), who move projects from “prospective” to “investable”. Jungman and Seppa in the fourth paper qualitatively researched operating models in two local areas of the US in order to understand activity in this area and to discover if the models developed can be used elsewhere. The wide range of incubation centres has resulted in a whole series of descriptors being used that has given rise to a lot of confusion which is slowing down the development of policy and practice in this area. In the fifth paper, Hannon argues that the incubation market needs a sense-making classification of the different incubation types in order to enhance the meaning of incubation and allow policy development to move forward at the required rate. He proposes a classification system that if accepted would provide a shared meaning to those both within the communities and outside. This issue finishes with paper six by Trim and Lee which consolidates and enhances customer service elements and the context of organizational learning with the qualitative orientation. It can be seen from the papers in this edition of QMRIJ that the business environment is changing as rapidly as ever and it is enlightening to take in research and well articulated academic and practitioner views from within the various focus areas to demonstrate how they are driving or responding quickly to market forces in today’s knowledge economy. In developing this special edition, both Julie Abbott and myself are indebted to the EDECAD Research Assistant Ms Cindy Liu whose own insights on the Chinese experience of Internet implementation, plus hard work and careful support have greatly informed the progress of this edition.
242
Introduction
Customer and company voices in e-commerce: a qualitative analysis Rachel McLean and Nigel M. Blackie
The authors Rachel McLean is a lecturer in Management Information Systems at the Manchester Metropolitan University Business School, Manchester, UK. Nigel M. Blackie is a lecturer in the School of Computing, Science and Engineering at the University of Salford, Salford, UK.
Keywords Knowledge management, Electronic commerce, Shopping, Consumers
Abstract Consumer knowledge is a very important asset for an organisation. Two types of consumer knowledge have been identified, “knowledge about customers” including customer segments, individual customer preferences, potential customers, and “knowledge possessed by customers” including knowledge about product ranges, companies, and the marketplace. e-Commerce offers an ideal medium for the creation and exchange of both types of knowledge. This paper presents the results of an initial phase in a research cycle that looks at e-Commerce through the lens of knowledge management. It examines e-Commerce provision made by organisations for customers across seven facets ranging from transactional to relational facilities. The results of a self-evaluation of companies’ e-commerce propositions are contrasted with customer expectations to determine divergence and alignment. Implications are discussed and conclusions proposed.
Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm
Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · pp. 243–249 q Emerald Group Publishing Limited · ISSN 1352-2752 DOI 10.1108/13522750410557049
In the initial “start up period” of e-commerce, two clear approaches to developing an electronic presence emerged: the Informational approach and the Transactional approach (Holsapple and Singh, 2000). The Informational approach focused on building brand presence, and informing the consumer’s buying decision, while the transactional approach focused on facilitating the retail process – exchange of product or service for financial value (Kalakota and Whinston, 1997). There was a general belief that a transactional approach offered greater competitive advantage. This was reflected by a surge in virtual companies or “dot coms”. Although many of these companies did not survive, business continues to focus on the Internet as a sales channel. Companies utilize the communication capabilities of the Internet for marketing purposes, sending out “personalized” promotional material or in pop up advertisements. Academic literature promotes and supports this use of the Internet in commercial activity (Hoffman and Novak, 2000). For companies the Internet facilitates knowledge gathering. “Consumer knowledge” is the knowledge about consumers collected through the Internet including individual customer preferences, lifestyles and key life events for marketing purposes. They appear almost unaware of a different type of consumer knowledge that is increasingly made explicit and exchanged through the Internet, “knowledge possessed by customers” including knowledge about product ranges, companies, and the marketplace (Rowley, 2002). Research has shown that many consumers are not ready to accommodate online purchasing into current shopping practice. Instead, it is the information and communication capabilities of the Internet that consumers more readily make use of. People currently use the Internet to research products and services, and increasingly fail to complete transactions online. Research by eStats suggests that “over 80 per cent of people using the Internet do so solely to send e-mail or gather news and information. Only 17.8 per cent of people using the Internet list shopping as being a primary motivation” (eMarketer, 2002). Consumers are using the Internet to gather and share knowledge about products and companies. They are using the Internet as a consumer knowledge exchange forum, claiming neutral territory away from the commercial Web as their own (Pastore, 2000; Levine et al., 2000). There has been an increase in the amount of sites such as epinions.com, notacceptable.com and bitchaboutit.com where, significantly, consumers have conversations with
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each other, and share their experiences or stories of interacting with companies and using products. Electronic commerce is still evolving, but it is clear that this new channel offers enormous potential for both consumers and businesses. Kozinets suggests that: . . . a cultural battle is in the making. On the one side are consumers who are just beginning to unite online (and through it, in person) in order to assert social power, to unite and to claim symbols and ways of life that are meaningful to them and the communities they build. On the other are the marketing and other corporate industries who seek to understand these consumers, to address their concerns without “giving away the store” and also to understand how best to take advantage of the many opportunities the new information media (such as the World Wide Web) present as a vast forum for direct sales and advertising (Kozinets, 1999).
Enabling these two sides to interact and align their expectations and aspirations for e-commerce could help to realize the enormous potential of the Internet for customer-to-business relationships. This paper discusses results of research carried out in the Centre For Networking and Telecommunications at the University of Salford. It presents the trends identified in the initial phase of a research cycle that looks at e-commerce through the lens of knowledge management. The aim of this phase of the research was to examine e-commerce provision made by organisations for customers across seven facets ranging from transactional to relational facilities, and to compare and contrast the value placed upon aspects of the provision by customers and companies. The results of this self-evaluation of companies’ e-commerce propositions are contrasted with customer expectations to determine divergence and alignment.
Study design Grounded in the theory that the role of the Internet in commercially related activity is increasingly as a knowledge exchange forum (Giga Information Group, 2001; Holsapple and Singh, 2000; Levine et al., 2000; Rowley, 2002) this research focuses on e-commerce through the lens of knowledge management. From the socially constructed approach to knowledge management (Demerest, 1997; McAdam and McCreedy, 1999), seven facets of e-commerce including facilities that enable both high and low levels of interaction from consumer to consumer, and from consumer to company were identified. They are as follows: (1) communication; (2) sales;
(3) (4) (5) (6) (7)
marketing; links to related sites; company information; online communities; links to consumer reviews.
Companies and consumers were asked to rate the value of each facet via a questionnaire, and follow up interviews with consumers explored the emergent issues to a greater depth.
Research method The data were collected from both companies and customers over a period of a year. In each case the sample was a non-probability, purposive sample. A Positivist approach would dictate that a sample used should be a random probability sample taken objectively and without bias, enabling generalisation from sample to population. In contrast, interpretive researchers employ theoretical or purposive sampling to uncover emerging and transferable theories (EasterbySmith et al., 2002; Lincoln and Guba, 2000). For them it is important to survey relevant groups with “high experience levels of the phenomena under study” (Pettigrew, 1990). For this reason questionnaires were adopted as a preliminary data collection method, and as a means of identifying suitable interview participants with high levels of relevant experience. To ensure consideration of stable usage patterns the sample was made up of well established high street retailers and consumers who were experienced Internet users, having engaged in commercial activity (transaction, product/company research) on the Internet for at least one year. For the companies postal questionnaires were adopted whilst direct postings and snowball sampling (Robson, 1993) were used to contact consumers. A criticism traditionally levelled at postal questionnaires is the generally poor response rate and the reduced depth of information likely to be gathered (Moser and Kalton, 1971). In recent years it has been suggested that business and management researchers particularly are finding it increasingly difficult to achieve an acceptable response rate to questionnaires (Berger, 2000). The response to this has been the increasing adoption of closed questions or Likert scale questionnaires which are quick to complete but may bring only superficial data (Foddy, 1994; Hussey and Hussey, 1997). The response rates were 36 per cent for company questionnaires and 86 per cent for consumer questionnaires. This allowed for the identification of relevant cases within the sample as Likert scales were triangulated (Todd, 1979) with more open ended questions and semi-structured interviews
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Volume 7 · Number 4 · 2004 · 243–249
which allowed the researcher to build a richer picture of the phenomena under study. Through the social interaction of an interview, meaning can be constructed and negotiated between the participant and the researcher. It is argued that the interview is the most powerful means for attaining in-depth understanding of another person’s experience (Woodruffe, 1997).
(4) (5) (6) (7)
links to related sites; company information; online communities; and links to consumer reviews.
Data analysis
From these responses it is possible to build a profile of interest in a particular category for business and customers that demonstrates interest or importance, or indifference. In order to contrast the degree of fit in a category between company and customer expectations the responses were weighted to account for the different number of customer and company responses and the percentage of customer respondents within each scale point subtracted from the corresponding company value. Thus if the responses between customer and company expectation were matched the resulting outcome would approach zero. If however customers placed more emphasis than companies within a scale point this would result in a positive outcome. Conversely a negative resultant would occur if companies placed more emphasis on a scale point relative to customers’ responses. The outcomes of these comparisons do not produce results for quantified relative importance. Thus statements such as category A is twice as important to companies than customers, or category 3 is 50 per cent more important than category 2 should not be derived from the outcomes. This research is not intended to be representative or generalisable. Specific implications can be drawn and viewed as general tendencies rather than generalisable statements (Walsham, 1995). The resultants do however allow a graphical image of congruity between customer and company expectations (Figure 1). There are three intuitive evaluations to be made within a category: (1) A flat, near zero response in all four points of the scale indicates that customer and company expectations are well aligned. (2) A positive gradient slope (sloping from bottom left to top right), indicates that companies are over valuing the importance attached of this facet relative to customer aspirations, and hence potentially over providing. (3) A negative gradient slope (sloping from top left to bottom right), indicates that companies are under valuing the importance of this facet relative to customer aspirations, and hence potentially under providing.
Respondents were asked to rank their opinion using a four point Likert scale on the importance of each of the seven facets in the categories: (1) communication; (2) sales; (3) marketing;
Figure 1 shows the relative importance of each facet to customer versus company. It illustrates that companies and customers were closely aligned in the importance they placed on only one of the seven categories; 5 – information about the company. The remaining categories showed a misalignment
Companies The sample used in the analysis was made up of retailers that appear in British Companies: Best of British Shopping High Street Stores listings (British Companies, 1999). The list comprises one hundred and six companies. Eleven of these were excluded as they were considered to be service industries rather than retail companies (six banks, two travel agencies, two bookmakers, and one mail delivery company). A further six companies were excluded as their primary function was not considered to be retail (two portals to retail companies, one record label, two charities).Two other companies were not registered in the UK, or their Web sites were produced and maintained outside of the UK thereby excluding them from the sample. The final sample comprised of eighty eight UK based retail companies. A postal questionnaire was used to collect data. The questionnaire was addressed to the “E-commerce Manager”, and asked companies to rate the importance, from extremely important to not at all important, of the seven facets of e-commerce. Consumers The sample of consumers was recruited through mail box postings at two universities in the North West of England. Participants were professional staff (lecturers, researchers, professors, information professionals) and students. The questionnaire asked consumers to rate the importance of the same seven features of e-commerce, adapted to take a consumer viewpoint (communicating with companies, making purchases, receiving marketing messages, links to related Web sites, access to information on the company, access to an online community, and links to consumer reviews).
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Volume 7 · Number 4 · 2004 · 243–249
Figure 1 Relative importance of each facet to customer versus company
in the importance attached to them, the greatest divergence being in category 3 – Marketing. However, 4 – Links to related sites, 6 – Online communities, and 7 – Links to consumer reviews also showed substantial differences in the levels of importance placed on them by companies and consumers. The remaining two categories, 1 – Communicating with customers/companies, and 2 – Sales, showed a marginal misalignment. The next section will consider the emergent trend in each category in turn and use qualitative data from follow up interviews with the consumers to create a richer picture of that trend.
Facet one: communicating with companies/customers This facet of e-commerce showed a marginal divergence in the importance attached to it by companies and customers. The general trend is that companies regard the ability to communicate with customers as more important than their customers do. Electronic business-to-customer communication has strong links with marketing and this is reflected in the wider divergence found in facet three: marketing. The fact that consumers assigned little importance to the ability to communicate with companies through a Web site was qualified during interviews carried out with consumers. Many participants noted that companies frequently fail to respond to customer e-mails. At least if you’re hanging on a telephone, even if it’s for an hour you know you’re hanging on a telephone and somebody eventually is going to have to speak to you that day. Whereas e-mail they can leave for a week and you’ve got no idea when they’re going to e-mail you back you know. I mean with some companies you might be checking your
e-mail every hour and still not getting any response so that can be quite frustrating (Interview 12).
Some commented that when they do reply it is with a standard script from the theatre of retail with the illusion of “personalization” through the use of a personal name. This standard script frequently fails to address the customer’s question, and they are forced to fall back on more traditional methods of communication. Participants commented that a personal e-mail rather than a standard reply which didn’t address their particular problem would greatly improve their perception of a company. Some participants attached little importance to this facet of e-commerce as they simply preferred to speak to a company representative than use e-mail to contact them. I must admit I like to deal with someone that I can talk to (Interview 1).
One participant commented that he regarded communication with companies via the Internet as “a one way thing” (Interview 11) where communication is from company to customer preventing rather than facilitating social interacting and exchange.
Facet two: sales The relative importance of this facet to customer versus company was rather surprising. Although only a marginal divergence, the customers surveyed attached greater importance to the ability to make purchases than the surveyed companies did. The companies surveyed were high street stores, and in the qualitative data, many companies commented that online sales made up only a small part of their total sales figures. The importance customers attached to
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Volume 7 · Number 4 · 2004 · 243–249
the ability to make purchases online is qualified in this interview data:
experience, and in some cases prompting the participant to cease dealing with the company responsible. These extracts from the consumer interviews illustrate how strongly the participants felt.
Well the only time I’ve actually used it to buy anything was when I needed to buy some world cup stickers for my nephew and the only means of accessing them was over the internet. That’s really the only time I’ve done any Internet shopping (Interview 9).
I don’t like getting advertising material. I don’t read it because if I want to find out about something then I will find out about it. So it just goes in the bin (Interview 10).
The range of the products that they sell in the online shops is almost unlimited so you can find it and they deliver it to you as well so you don’t even have to go outside (Interview 8).
I hate it. It irritates the hell out of me. I hate being bombarded with junk e-mail. I can’t stand it. It’s the scourge of the Internet. I really think that it needs controlling there’s no control, you know with the Internet it’s unstoppable isn’t it? It’s going to put people off (Interview 6).
The consumers questioned value the ability to purchase online, particularly where there is a product that is unavailable elsewhere. One participant comments that “the range of the products that they sell in the online shops is almost unlimited” and it is this aspect of online sales that is of value to them.
I don’t like having to look at advertising. If you log onto the Internet you’re becoming increasingly bombarded with stuff coming into your computer. You come off the Internet and you realise that there’s three or four windows up of advertising stuff and you weren’t even aware that they had come into your machine and I don’t like that. They do it so that the window is slightly shifted so that you can’t get to the cross. Somebody’s thought all this through and it’s just irritating and they should be shot (Interview 5).
Facet three: marketing Marketing was the facet that showed the most dramatic divergence. Companies attached a great deal of importance to the ability to use the Internet for marketing activities. The ability to gather knowledge about customer preferences, lifestyles, routines and significant life events is a very valuable asset to a retail business, and it is this aspect of e-commerce that companies have focused on. In contrast, it is this aspect of e-commerce that consumers are most wary about. This interview participant expressed his concerns over the fact that companies use the Internet to gather information about customers: I’ve filled in enquiry forms and that sort of thing, where they are basically gathering data on me. . .I just don’t like the idea anyway because all they need to do is put in your postcode and your name and there you go! They’ve got you! And how do they link that up with other databases? You don’t know do you? (Interview 4).
Customers attached little or no importance to the ability to receive marketing messages and promotional information via the Internet. Similarly this area prompted the most vehement responses from the interview participants. Little distinction was made between unsolicited messages and those from companies in which the participant had expressed some interest. Electronic marketing was experienced as a form of organisational power over consumers. Narratives frequently included images of closing down communication channels. Promotions and marketing messages were experienced as an annoyance, adding no value to the consumer
Marketing through the Internet has not developed into the personalized and targeted messages that we were promised. For these consumers, mass messaging from a corporate script addressed to a named person does not add value to their experience of online retail. Significantly the consumers participating in this research assigned very little importance to marketing as a facet of e-commerce.
Facet four: links to related Web site This category relates to the idea of linking commercial Web sites to interest related sites, or other related services, not to competitors’ sites. For example, a DIY store may link to an interior design site with tips on choosing colour schemes, a toy company may provide links to a child development Web site with an independent guide to developing skills through play, or an airline company may link to hotels or car hire. Again this category showed a marked divergence in the relative importance consumers and companies attached, illustrated by a negative gradient slope on Figure 1. Companies considered this facility to be of little importance, where as consumers rated it as very or extremely important. Qualitative data from two interview participants illustrate why customers regard this facet as valuable.
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If there’s links to another site, say it was the manufacturer, you can go and see what else they’ve produced whereas if you’re in a shop you’ve got to
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wait until someone is available or if you’re looking through magazines, that information isn’t necessarily there (Interview 3). I’ve booked flights through Easyjet. . . Then from doing that I’ve then linked to other sites, a hotel site booked hotels and then also booked car parking at the airport so it was all just done sitting at a computer, whereas before you’d have had to go out and be making phone calls so yes, it saves time (Interview 10).
products and services provided by companies. For customers “consumer knowledge” is knowledge possessed by consumers. On the Internet they are building a knowledge sharing culture where stories are told, advice given and opinions shared. If you’ve got a complaint about a company you can put it in a very public space. Customers do actually know that there are particular Web sites out there on which they can put their opinions down (Interview 2).
Customers attach great importance to the ability to access a range of related information and services through one gateway. Their expectations are of a seamless experience. This research suggests that companies are under providing in this category.
Facet five: information about the company This was the only category that showed a flat, near zero response in all four points of the scale, indicating that customer and company expectations are well aligned. Company and consumer responses illustrate that they attach equal importance to information about the company such as company history, staff profiles and contact details. This is borne out both in the literature on issues of trust and e-commerce and in the responses from interview participants in this research project. One participant recounted how he had telephoned a company to check that the details given about a company on their Web site were correct. When I asked them their address, I said well what’s your address you know just a little thing, questions just to sort of like check whether their address is what they say it is on the Web site, just to make sure (Interview 6).
Others commented that a short company history telling how old the company is, how they began trading and other such information made the company appear more “reliable” and “trustworthy” (Interview 1). This research suggests that company and customer expectations are well matched with the actual provision in this category.
. . . you can go onto like a discussion forum where people are talking about it and you can ask specific questions about something, the specifications or any specific requirements it may have before you buy it. . . if you’ve got a lot of knowledgeable users out there it’s handy to chat with them (Interview 8).
Consumers value the potential to communicate with each other that the Internet offers them. This research suggests that companies are currently under providing in this category.
Facet seven: links to consumer reviews This facet has much in common with the previous one. The results here showed vast incongruity. Consumers placed a high value on this facet whilst the companies surveyed placed little or no value on it. It is widely accepted that Amazon have established a successful online retail business, and consumers frequently mention the customer reviews as a strong factor in Amazon’s appeal. Interview participant’s spoke enthusiastically about consumer reviews and stated that they would influence a purchase decision And then for software, buying games software, I regularly go on line just to check particular reviews and also check reader reviews and that will influence whether I buy that particular product (Interview 2). I do take notice of reviews. Even if they’re just written by other consumers, yes I read reviews, I would take notice of those, yes (Interview 9).
Despite this, companies explicitly stated that they regard this facet to be of little or no importance, a major misalignment in company/customer aspirations.
Facet six: online communities Conclusion The analysis of the data on access to online communities showed a negative gradient slope (sloping from top left to bottom right), indicating that companies are under valuing the importance of this facet relative to customer aspirations. Consumers use online communities based around shared interests to exchange knowledge of
Significantly, in contrast with the companies, consumers placed a high value on the facets which facilitate interaction, communication with other consumers and C2C knowledge exchange. Companies placed more value on the marketing facility. Levine et al. state that:
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The same technology that has opened up a new kind of conversation in the marketplace has done the same within the corporation, or has the potential to do so (Levine et al., 2000).
Corporate, scripted marketing messages are not enough to convince the customer of the value of online marketing. They merely enforce the boundaries and power relations between customers and companies. Habermas proposed that “where power is present, communication is systematically distorted”, and further that “power would act as a barrier to the free and unconstrained realization of the human interest in achieving rational truth or enlightenment” (Clegg, 1989). The interview participants of this research do not construct a view of the Internet as opening up communication channels with companies where social interaction may facilitate the construction and exchange of knowledge. Companies must now focus on the communication capabilities of the Internet and use the technology to facilitate conversations across the corporate boundary. They must meet consumers on neutral ground and encourage consumer-to-consumer and consumer-to-business interaction in order to leverage a most valuable resource; the knowledge constructed by and embodied in the customers. In return they must share corporate knowledge with the consumer. Sinkula proposes that for organisations to learn from their customers: Particular attention should be paid to serendipitous, unsolicited, customer information, particularly that which revolves around complaints. Marketing managers must do two things to better listen to customers (Sinkula, 2002).
Firstly he argues they “must process the information better”, and secondly they should “become more open to criticism” (Sinkula, 2002). This research suggests that before they can do this, companies must first learn to have conversations with their customers.
References Berger, A.A. (2000), Media and Communication Research Methods: An Introduction to Qualitative and Quantitative Approaches, Sage, London. British Companies (1999), British companies. High Street Stores, available at: www.britishcompanies.co.uk/highstreet.htm (accessed 25 September 2002). Clegg, S.R. (1989), Frameworks of Power, Sage, London. Demerest, M. (1997), “Understanding knowledge management”, Long Range Planning, Vol. 30 No. 3, pp. 374-84.
Easterby-Smith, M., Thorpe, R. and Lowe, A. (2002), Management Research; An Introduction, 2nd ed., Sage, London. Foddy, W. (1994), Constructing Questions for Interviews and Questionnaires: Theory and Practice in Social Research, Cambridge University Press, Cambridge. Giga Information Group (2001), Planning assumption, 04200100016, available at: www.gigaweb.com/homepage/ (accessed 23 July 2001). Hoffman, D.L. and Novak, T.P. (2000), “How to acquire customers on the Web”, Harvard Business Review, May-June, pp. 178-88. Holsapple, C.W. and Singh, M. (2000), “Electronic commerce: from a definitional taxonomy toward a knowledgemanagement view”, Journal of Organizational Computing and Electronic Commerce, Vol. 10 No. 3, pp. 149-70. Hussey, J. and Hussey, R. (1997), Business Research: A Practical Guide for Undergraduate and Postgraduate Students, Macmillan, Basingstoke. Kalakota, R. and Whinston, A.B. (1997), Electronic Commerce: A Manager’s Guide, Addison-Wesley, Reading, MA. Kozinets, R. (1999), “The field behind the screen: using the method of netnography to research market-orientated virtual communities”, available at: www.kozinets.com (accessed 6 November 2001). Levine, R., Locke, C., Searls, D. and Weinberger, D. (2000), The Cluetrain manifesto. The end of business as usual, London, ft.com. Lincoln, Y.S. and Guba, E.G. (2000), “Paradigmatic controversies, contradictions, and emerging confluences”, in Denzin, N.K. and Lincoln, Y.S. (Eds), Handbook of Qualitative Research, 2nd ed., Sage, London, pp. 163-89. eMarketer (2002), Why do People Use the Internet?, available at: www.emarketer.com/estats/usage_reason_online.html (accessed 11 November 2002). McAdam, R. and McCreedy, S. (1999), “A critical review of knowledge management models”, The Learning Organisation, Vol. 6 No. 3, pp. 91-101. Moser, C.A. and Kalton, G. (1971), Survey Methods in Social Investigation, Heinemann Educational Books, London. Pastore, M. (2000), The Value of Word of Mouth, available at: http//cyberatlas.internet.com/markets/advertising/article/ 0,5941_395371,00.html (accessed on 28 July 2002). Pettigrew, T.F. (1990), How to Think Like a Social Scientist, Longman, London. Robson, C. (1993), Real World Research: A Resource for Social Scientists and Practitioner-Researchers, Blackwell, Oxford. Rowley, J.E. (2002), “Reflections on customer knowledge management in e-business”, Qualitative Market Research: An International Journal, Vol. 5 No. 4, pp. 268-80. Sinkula, J.M. (2002), “Market-based success, organizational routines, and unlearning”, Journal of Business and Industrial Marketing, Vol. 17 No. 4, pp. 253-69. Todd, D.J. (1979), “Mixing qualitative and quantitative methods: triangulation in action”, Administrative Science Quarterly, Vol. 24, pp. 602-11. Walsham, G. (1995), “Interpretive case studies in IS research: nature and method”, European Journal of Information Systems, Vol. 4 No. 2, pp. 74-81. Woodruffe, H.R. (1997), “Eschatology, promise, hope: the Utopian vision of consumer research”, European Journal of Marketing, Vol. 31 Nos 9/10, pp. 667-76.
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Qualitative issues in IT and organizational processes in implementing marketing strategies Ashok Ranchhod and Ca˜lin Gura˜u
The authors Ashok Ranchhod is the Faculty Professor in Marketing at Southampton Business School. He has worked in business and academia., having founded and run a biotechnology company in the eighties. He has published extensively on e-marketing, biotechnology marketing and advertising. Ca˜lin Gura˜u is Lecturer in Marketing in the School of Management, Heriot-Watt University, Edinburgh. He is a Junior Fellow of the World Academy of Art and Science, Minneapolis, USA.
Keywords Marketing, Internet, Marketing strategy, Technology led strategy
Abstract Successful marketing strategies depend very much on an organisation’s ability to implement them. As the role of technology grows apace in marketing, it is important to understand how IT and organizational processes impact on the implementation of marketing strategies. This paper attempts to show how technology is changing the nature of marketing and then shows its interaction with people and processes. It also offers organisations an opportunity to undertake a selfevaluation exercise to determine how well integrated are their implementation policies. In general, the argument outlined indicates that for successful implementation of strategies an organisation has to integrate people, processes and IT.
Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm
Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · pp. 250–256 q Emerald Group Publishing Limited · ISSN 1352-2752 DOI 10.1108/13522750410557058
Introduction Marketing strategy and formulation of this strategy are important aspects of a company’s long-term plans. However, marketing strategy objectives often fail to materialise. Is this because, the strategy was unsound in the first place, or is it because the implementation was in effective, or both? (Sashittal and Tankersley, 1997). Companies tend to place a great deal of time planning strategies and sometimes they fail to consider the full implications of implementing the strategies. Several authors highlight the fact that much emphasis is placed on strategy formulation and little thought is given to implement issues even by marketers. Strategy may or may not drive actual marketing practice (Crittenden and Bonoma, 1988). With the explosion of new forms of communications that have a global reach, it is incumbent on marketers to consider implementation as an important issue in marketing and at the same time consider the relevant speed at which implementation should take place. Technology drivers have become increasingly important over the last ten years as the pace of information exchange increases rapidly. This in many ways has destroyed the luxury of developing strategies over a long period of time. Shorter periods are available for strategy formulation and development. Even shorter periods are available for the implementation of these strategies. Noble and Mokwa (1999), however, define marketing strategy implementation as: . . . the communication, interpretation, adoption and enactment of a marketing strategy or strategic market initiative.
The impact of information technology The implementation of many marketing strategies, depend on the effective utilization of sophisticated Internet technology (Berthon et al., 1996; Hoffman and Novak, 1996; Kitchen, 1999; O’Connor and Galvin, 1997, 1998). The rapid growth of the Internet and Internet marketing suggests that information technology (IT) has an important role to play in the process implementing online marketing communications (Kassaye, 1999). Internet based technology can also facilitate information dissemination, file transformation, information gathering, and searching and browsing activities etc. (Keeler, 1995; O’Connor and Galvin, 1997). Thus, a better utilization of the state-of-the-art IT for business and marketing becomes a fundamental task, which is too important to leave to IT professionals (O’Connor and Galvin, 1998).
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Technological deployment corresponds to the way in which companies plan and manage IT to benefit from its potential and effectiveness in marketing implementation (Croteau and Bergeron, 1991, 1998, and 2001). There are six components of technology deployment. (1) The strategic use of IT refers to the IT applications used to help the organization gain a competitive advantage, reduce competitive disadvantage, or meet other strategic enterprise objectives (Bergeron and Raymond, 1995; Bergeron et al., 1991). (2) The management of IT examines IT related activities such as the usage of current and new technologies, the development of specific IT applications and the degree of IT usage practised by the employees (Bergeron and Raymond, 1995; Das et al., 1991). (3) The role of the information systems (IS)/IT concerns the organizational importance of IT planning, the quality of the IT alignment with organizational structure, the effectiveness of software development, and the management of communication networks (Bergeron and Raymond, 1995). (4) The technological infrastructure addresses the IT architecture and the formalized procedures used to guide and control the firm’s IT resources (Das et al., 1991). (5) The organizational infrastructure refers to the internal functioning of the IT/IS development such as structure, processes, reporting relationships, support groups, and skills (Das et al., 1991; Henderson and Venkatraman, 1999). (6) The administrative infrastructure deals with the managerial policies and actions that influence and guide the work of employees involved with the IT/IS development (Das et al., 1991).
systems of recording. It is useful for routine and tactical activities to improve efficiency (Peattie and Peters, 1998).
Marketing is and will continue to be heavily influenced by IT and marketers who do not adapt to the new technological era will not survive (Bruce et al., 1996, Komenar, 1997). It can benefit organisations in many ways, but it has to be successfully managed. The sensible use of IT allows creative and innovative strategies to cope with the new varied and dynamic marketplace (Schlegelmilch and Sinkovic, 1998). Marketing helps with automation, information and transformation (Remenyi et al., 1995; Zuboff, 1988) (Figure 1).
Automation This argument is used to explain the fact that IT has been primarily used for automating manual
Information This is the next stage of development and translates data into useful information that can be utilised for developing marketing strategies. Information is also the stage where the data obtained through automation are scrutinised and converted into information.
Transformation This stage is reached when organisations embrace IT and start to “think out of the box” (Schlegelmilch and Sinkovic, 1998). This is when companies start to focus on new ideas and concentrate on adaptation and using knowledge to transform themselves into effective market oriented organisations (Brady et al., 1999). IT is now the key driver in most businesses and many companies are conducting business through cyberspace. At the same time, with the growth of the Internet, companies also need to be able to work with and undertake transactions on a global basis. Many companies that implement good systems to deal with value chains on a global basis show good returns on investment.
Information and knowledge creation In addition to this, specific areas of application are also growing. One area is based on systems providing market intelligence on a global basis. As companies become confident of their IT infrastructures on a global basis, they will be increasingly looking to have access to systems that can provide them with business intelligence. Business intelligence gathering is becoming a complex issue for most companies as technology develops further. Increasingly access to information is possible through hard-wired systems as well as wireless protocols. The technology drivers, also create the following possibilities. (1) Salesmen, on the road, can be updated on customer requirements as necessary. This information can be used for enhancing CRM and logistics. (2) As mobile devices become more sophisticated, customers will be able to access inventories of their suppliers. This means that they can place orders and specify delivery times. This can be done via links to an Intranet or the Internet.
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Figure 1 IT strategies
(3) Individuals, apart from talking to others, will also be able to communicate with machines. This is already a reality with consumers being able to buy soft drinks, chocolates and car washes via mobile devices. (4) Consumers will be able to pay for restaurants meals via secure transactions through a mobile device. (5) The “blue-tooth” devices, can enable retailers to market special offers to customers on their mobile devices if they are within a 20 m radius. This will also allow customers to undertake transactions with shops and restaurants. (6) Radio will become an integral part of the mobile device, allowing an individual access to a myriad of radio stations. This also has implications for advertising and branding. (7) The incorporation of ground positioning systems (GPS) into mobile devices (GPS, via satellite), means that individuals will be able to easily locate their positions and also the nearest outlets or services that they need. Current IT systems (Figure 2) are not fluid and dynamic enough to cope with customers who are ubiquitous and can contact companies through mails, mobiles and the Internet. As customers become fluid in the way they contact and interact with companies, companies in turn need to be fluid enough in their approach. Often the IT/marketing link is not good. The marketing function, often does not understand what happens in IT with regards to service provision and prices. There is often a cultural gap between marketing and IT and therefore there
Figure 2 Current systems architecture
is a need to integrate data and for computer experts to work side by side with marketers. There is a need to share experiences. It is important that for good customer relationship management, IT and marketing work together, with IT being able to understand the internal customer needs. A change of philosophy is required, where IT shifts from “building solutions” to defining requirements from the frontend with business and customers in building the best solutions. The one-to-one relationship means that a customer is known to the enterprise and interacts with the enterprise, with the enterprise flexing and changing to meet his/her needs.
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The enterprise can then have a unified view of a single customer across the entire enterprise, linking other functional and geographical units together. As the relationship develops across boundaries, it is clear that the organisation truly becomes a learning organisation with the customer finding that he/she is investing in a continuing relationship with it. At every given opportunity the organisation can “tailor” and refit its behaviour to suit the customer. In the end the way the relationship is maintained, grown and nurtured means that a customer is less likely to spend time in building such a relationship with a competitor. This relationship building needs to be regarded as a business process rather than a technology suite. The technology needs to be able to support and enable this process (Figure 3).
considering how marketing strategies should be implemented. This questionnaire allows organisations to be self-critical in their approach and see the quadrant that they fall into (Figure 4). Once the scores to all the questions have been totalled according to the IT or the organisation context, they can be plotted on the horizontal and the vertical axes. This enables the respondent to position his/her company within the implementation matrix (Figure 5). The implications of the positions within each quadrant are discussed below.
Developing measures for successful implementation In order to develop a basis for understanding a company’s stance with regards to strategy implementation, the following questionnaire was developed. It is generally felt (McKean, 2002), that most companies have poor records when it comes to implementing IT strategies. As the arguments above indicate, IT is now an essential component of marketing. It is therefore important to consider both IT and people issues when
Integrated marketing implementation Companies in this quadrant will have a wellbalanced marketing implementation, based on good IT systems and a dynamic flexible organisation. The people processes and the technology work in unison. The company is likely to have a global IS. Integrated systems tend to offer increased customer service, by increasing convenience, collecting service performance information for management use, and extra services (Furey, 1991). An integrated system can also create barriers to entry in service industries, productivity enhancement and revenue generation (Fitzsimmons and Fitzsimmons, 1997). Effective IT management requires a set of coordinated efforts associated with planning, organizing,
Figure 3 Creating a relationship Web
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Figure 4 Questions to determine organizational and IT factors
controlling, and directing the introduction and use of IT resources within a firm (Boynton et al., 1987; McNurlin and Sprague, 1997).
Fragmented marketing implementation Companies in this quadrant will have excellent organisation capabilities. However, their
technology resources will be poor and not very well integrated. Companies in this quadrant will require extra investment in IT infrastructure. In some firms the lack of clear organizational processes for effective IT management prevent them from using IT strategically (Boynton et al., 1992, 1994). It could be that the firm would benefit from good IT management processes.
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Figure 5 Implementation matrix
Technologically driven marketing implementation
Summary
In this quadrant, companies tend to rely on technology to a greater extent. The people processes tend to be poor and often, mechanistic solutions may be provided leaving individuals within organisations alienated and poorly informed. According to the research carried out (Wilson and McDonald, 2001) it is important that managers can understand and control the IT system rather than accepting technological objectives influenced by the management science of prescribing an optimal solution. Systems are useful in enhancing mutual understanding in a cross-functional planning team and hence in building commitment to marketing plans.
Poor marketing implementation Companies in this quadrant tend to have outdated organizational practices and possess poor technology systems. These companies need organizational change and technology investment. The implementation matrix therefore, provides a useful measure of a company’s ability to implement marketing strategies within an environment, which is increasingly driven by technology. As the role of technology grows and evolves, many companies do not have to be confined to operating within national boundaries. Indeed, many companies are now “Born Global”.
In this paper, a wide range of issues surrounding the effective implementation of marketing have been considered. Implementing marketing strategies successfully lies at the heart of successful company management. However, the process is fraught with challenges as the market place is generally turbulent and ever changing. This places emphasis on developing flexible and responsive organisations. Research also indicates that many organisations do not “follow-through” strategies according to the traditional format and may implement them in an ad hoc manner. Better technology helps to speed up processes. It also helps companies to become global within a short space of time and some companies can be said to be “born-global” from inception. However, it is important for marketing managers to realise that the information provided has to make sense and that the IS actually provide the necessary “nuggets” for implementation purposes. According to Ivan Menezes, Vice President, Group Marketing, Whirlpool Europe (Ronkainen and Menezes, 1996):
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You have to be flexible, the not-invented-here syndrome is not acceptable, you have to be picking up ideas and best practices from different markets and different parts of the business and transferring them rapidly. It does require an entrepreneurial, as opposed to a managerial, structured and disciplined approach. One of the more interesting parts of being in a global or a European marketing role is that there is always so much going on. There is not enough time to go after all the opportunities that are on your plate and you are juggling lots of balls at the same time. It requires constantly
Qualitative issues in IT and organizational processes
Qualitative Market Research: An International Journal
Ashok Ranchhod and Ca˜lin Gura˜u
Volume 7 · Number 4 · 2004 · 250–256
picking and prioritising the big opportunities and going at them and making decisions fast.
When fast decisions need to be made, the role of information becomes highly relevant and important and systems have to be able to offer this facility. As technology becomes more sophisticated and can deliver data and video links at increasing speeds within a mobile environment, marketers need to understand its capability in effective marketing implementation. At the same time the need to understand the impact of globalisation in the marketplace need to be understood and embraced. It appears that it is necessary to integrate the organizational factors with technological factors in order to develop integrated marketing implementation strategies that can be successful in today’s marketplace.
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Further reading Boynton, A. and Zmud, R.W. (1997), “Information planning in the 1990s”, MIS Quarterly, Vol. 11 No. 1, pp. 59-71.
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Introduction
Channel benefits portfolio management in the eBusiness era Panos Louvieris and Harmen Oppewal
The authors Panos Louvieris is based at the School of Management, University of Surrey, Surrey, UK. E-mail: panos.louvieris@ surrey.ac.uk Harmen Oppewal is based at Department of Marketing, Faculty of Business and Economics, Monash University, Monash, Australia. E-mail:
[email protected]
Keywords Consumer behaviour, Electronic commerce, Channel relationships
Abstract The role of channels and their management in the eBusiness era is becoming increasingly important to customer relationship management. Traditional use of the application portfolio approach has been concerned with providing an appropriate basis for making investment decisions about IT applications for the firm. This paper argues that there is a gap between the established IS portfolio application theory and the requirements to support management investment decisions about eBusiness applications; Therefore, the paper proposes a channel benefits portfolio (CBP) approach to inform managers’ channel investment decisions concerning business-to-customer channel interface. The suggested approach provides a conceptual framework and means to facilitate the alignment of the firm’s portfolio with their customers’ portfolio. The paper reports exploratory findings regarding customer channel preference and customer channel choice behaviour in the information search and purchasing stages during the customer decision-making process on the basis of the CBP.
Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister
Realising channel benefits of Internet based eBusiness in the tourism and hospitality industry is widely accepted as an important subject by both academics and industry practitioners. However, a current and major issue in channel benefits management is that there is little research that explicitly addresses the specific methods necessary for measuring success in terms of customer benefits realisation in the new computer mediated eBusiness environments. Moreover, the lack of a portfolio approach to the analysis and management of channel benefits that embraces the customer perspective appears to be an important gap in the existing body of knowledge. This research, therefore, takes a portfolio management approach and proposes a channel benefit portfolio (CBP) as an analytical framework and taxonomy by which channel management investment decisions may be guided. The study aims to explore channel preference; particularly, how channel benefits are evaluated and realised in the information search and purchasing stages of the customer decision-making process. In addition, the study aims to identify the most appropriate channel mix that maximises benefits for the customer. This paper presents findings from exploratory interviews and a small survey into customers’ perceived channel benefits and perceived channel importance in terms of existing and future benefit contribution to channel usage during information search and purchasing. The objectives of the study are as follows. (1) Determine customer preferences for different channels in the information search stage and purchasing stage of the customer decisionmaking process. (2) Determine how customers’ current channel benefits differ from their expected future channel benefits within the context of the CBP. (3) Determine how customers’ perceived channel benefits differ between the information search stage and the purchasing stage within the context of the CBP.
Theoretical background
The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm
This research takes an application portfolio approach to evaluate and realise the channel
Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · pp. 257–264 q Emerald Group Publishing Limited · ISSN 1352-2752 DOI 10.1108/13522750410557067
Panos Louvieris and Harmen Oppewal are the Principal Investigators, and thanks are expressed to Hyung-Soo Jung who assisted in the initial phase of this tourism industry funded research project about (electronic) channel benefits management based at the University of Surrey, UK.
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benefits from the customers’ point of view. The concept of the application portfolio was described by McFarlan and McKenney (1983) and they proposed the strategic grid framework for understanding and appropriately positioning a firm’s IT investment. McFarlan and McKenney (1983) described two aspects of strategic relevance and impact of IT such as the strategic impact of the existing system (current portfolio) and strategic impact of applications development portfolio (future portfolio). McFarlan et al. (1983) also proposed a useful matrix for considering the portfolios as a whole to position the company’s information systems and the matrix shows four alternative sectors for describing the portfolio according to the strategic importance of the existing and future systems. These are strategic, factory, support and turnaround. McFarlan (1984) also developed a matrix concept which considered the contribution of IS/IT to the business now and in the future, based on its industry impact. With reference to Ward (1990), the limitations of the original strategic grid were found by the research of Hirschheim et al. (1988) who found that IS managers thought it unhelpful to aggregate an entire firm’s IT applications into one category. Hence, the derivative portfolio model which classifies IS applications into four groups such as key operational, strategic, high potential and support has been demonstrated to be much more meaningful for management purposes (Ward, 1996). However, there is a gap between the IS portfolio application theory and the current eBusiness application especially in terms of channel benefits. As we move into the eBusiness era, strategic channel design and channel management are important issues in today’s competitive markets where tourism/hospitality organisations are increasingly using eChannels, alongside more traditional channels, for the distribution of their products and services. Clearly, customers have greater channel options (telephone, WAP/mobile, PC, IDTV, brochure, travel store, etc.) for information search and booking. Therefore, a successful eBusiness strategy requires that the role of channels be carefully evaluated when developing an optimum channel mix that is compatible with the preferences and variety of channel choice available to their customers. In order to accomplish the appropriate assessment of the channel benefits, a new framework to evaluate and realise the channel benefits is required. Therefore, this paper proposes the CBP model from the customers’ point of view based on the existing IS application portfolio.
In this model, all channel options are classified into four groups namely key operational, strategic, high potential, and support. Key operational refers to channels that customers currently depend on for successful choice. Strategic refers to channels which are critical to future (and current) customer choice. High potential means the channels which may be important in achieving successful future customer choice. Finally, support refers to those channels which are valuable, but not critical to successful customer choice (Figure 1). The benefits of this CBP management approach are that a company can identify and prioritise the customers’ current/future channel preference and perceived benefits from each channel and create a proper multiple channel strategy aligned to the customers’ channel portfolio. On the basis of the CBP, customer channel preference and customer channel choice behaviour in the information search stage and purchasing stage can be examined.
Channel strategy Marketing channel theory is focused to a relative degree on channels with physical product flows (Bagozzi, 1975; Barabba and Zaltman, 1991; Dwyer et al., 1987; Etgar, 1979; Heide and John, 1988). Traditional channel options evolved primarily around the choice of involving either a wholesaler or dealer, a distributor or an in-house sales force to market and distribute products and services. The advent of information technology, in particular the world wide Web, in the mid 1990s made it possible to move from traditional channel configurations to composite channel arrangements. In traditional channels, all channel
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Figure 1 Customer CBP model
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functions (from demand generation to after-sales service) are usually performed by the chosen configuration. However, in composite electronic channels, these functions can be distributed over several channels (Christiaanse and Zimmerman, 1999). In the new eBusiness environments, the eChannel concept is a plural concept because customers use multiple channels for information search and purchasing (Louvieris and Driver, 2004; Louvieris et al., 2001). The result is a CBP approach which considers a mix of traditional channels and eChannels. This CBP can be used to guide management investment decisions about customer decision support services across customer owned multiple/plural channels to maximise channel benefits. The idea of exploiting the value-adding synergies between channels has been articulated often in the literature concerned with channel investment decisions (Anghern and Meyer, 1997; Venkatraman and Christiaanse, 1996).
Methodology As a first exploration into channel choice behaviour, in-depth qualitative interviews were conducted on with ten university students. The purpose of this preliminary exercise was to obtain an initial identification of channel preferences for the information search and booking stages. In the second stage of the research, a questionnaire regarding the perceived importance of channels was distributed among a class of undergraduate management students. A total of 41 students volunteered to participate and completed the questionnaire, which consisted of questions that asked respondents to rate the current and future importance of each series of channels on a tenpoint scale (1 ¼ not at all important, 10 ¼ very important). For the information search stage 27 channels were presented including relatively new channels such as WAP mobile phone, Interactive digital TV, e-mail, consult with people in the virtual community and so on. For the purchasing stage, the same channel options were presented except those such as consult with people in the virtual community and news/magazine that are not currently offering booking facilities. Though the sample obviously represents a convenience sample, it should be noted that in the context of this study, students are a highly relevant group of respondents. Students represent customers of the future for many eBusiness-based companies and it is relevant to know how this segment evaluates their current and future channel portfolios.
Findings The pilot interviews suggested several differences in the channel preference of respondents between the information search and purchasing stages. Most respondents regarded the Internet as their favourite initial choice of channel. They also regarded the travel shop as their most favoured choice of channel in the purchasing stage because they trusted that a store provides a safer method of payment. Furthermore, it was found that most respondents were not aware or alert of all the channel options available to them. WAP mobile, iDTV, and PDA were not readily perceived as channel alternatives unless prompted by the interviewer. Also, the qualitative interviews highlighted that channel switching behaviour was most intense during the pre-purchase, information search phase of the customer journey. This suggests that a single channel cannot satisfy the range and variety of customers’ channel needs. Therefore, the provision of flexible channel options, online and off-line, that meet customers’ diverse information and purchasing needs appears to be crucial in stopping customers switching to a competitors’ channels. Building on these initial results of the questionnaire, the second research phase included more options for the channel choice of respondents in order to investigate more detailed and complex channel preference. There were marked differences in the importance for specific channels between the information search and purchasing stage. Figures 2 and 3 show the respondents’ mean importance ratings for each channel in the information search and purchasing stages. In the information search stage, respondents regarded talk to friends as the most important channel when searching for a holiday product, closely followed by the Internet and travel shop. However, WAP mobile phone was perceived as the least important channel in the information search stage by respondents. In addition, consult with people in the virtual community was regarded as a less important source of information by the respondents (Figure 2). Figure 3 shows the results of the perceived importance of the current booking channel. Telephone call-overall was regarded as the most important channel for the booking and talk to travel agent, e-mail-overall, PC Internet were also regarded as important channels for booking. However, Teletext and WAP mobile phone were not perceived as the key channel option for booking. A paired sample t-test revealed a number of distinct differences between the importance scores
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Figure 2 Channel preference – information search stage
Figure 3 Channel preference – purchasing stage
of several channels in the current and future. The more detailed channel options are presented in Table AI which shows the respondents’ perceived current and future importance for each channel with mean value in the information search stage. Also, Table AI presents the results of paired sample t-test and it reveals that there were substantial differences in the preference for the specific channel between the current and future timescale. From Table AI, we see that the mean score for importance was significantly different (at the 5 per cent confidence level) in the case of several channels. There was a statistically significant decrease in travel shop channel scores from current to future, p , 0:05 ð p ¼ 0:000). Also there was a significant decrease in other channels such as travel brochure, talk to travel agent, call-overall, call to travel agent
(Call-TA), call to brochure, fax to brochure, postal mail and news and magazine from current scores to future scores. However, with reference to eight relatively new Internet based eChannels, including PC Internet, WAP mobile phone, IDTV, VC, e-mail-overall, e-mail to travel agent, e-mail to brochure, and e-mail to PC Internet, there was a statistically significant increase from current scores to future scores. This result demonstrates that customers’ perceived benefits from the traditional channel in the information search is expected to become less important in the future; however, the customers’ perceived eChannels benefits in the information search stage is expected to become more important in the future. In order to find out whether there is a difference between the current and future in the purchasing stage on the perceived importance of the channels, a paired sample t-test was conducted to compare the perceived importance scores of each channel between the current and future. Table AII shows the respondent’s perceived current and future importance for each channel with mean value in the purchasing stage and the results of the paired sample t-test revealed that there were substantial differences in the preference for the specific channel between the current and future timescale. There was a statistically significant increase in the PC Internet channel scores from current to future, p , 0:05 ð p ¼ 0:000Þ. For other
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channels, such as WAP mobile phone, e-mailoverall, e-mail to travel agent, e-mail to brochure, e-mail to PC Internet and e-mail to teletext, there was also a statistically significant increase from current scores to future scores. On the contrary, there was a distinctive decrease from the current scores to future scores in the traditional channels including travel brochure, talk to travel agent, Call-TA, call to brochure, call to teletext, fax-overall, fax to travel agent and fax to brochure in the purchasing stage. To find out whether there is a difference on the perceived channel preference between the information search and purchasing stages, a paired sample t-test was conducted to compare the perceived importance scores of each channel between the information search and purchasing stages. Table AIII shows the respondents’ preferences for each channel with the mean values for the information search and purchasing stages. It also presents the results of the paired sample t-tests. It appears that there are substantial differences in the preference for the specific channel between the two stages. There is a statistically significant increase in the talk to travel agent channel scores from information search to purchasing, p , 0:05 ðp ¼ 0:034Þ. Likewise, there are statistically significant increases in the call-TA , call to contact number in a brochure (Call-B), call to contact number from the Internet (Call-I) and call to contact number in teletext (Call-TXT) channel scores from information search stage (Call-TA; Call-B; Call-I; Call-TXT) to purchasing stage (Call-TA; Call-B; Call-I; Call-TXT), p , 0:05 ð p ¼ 0:010; p ¼ 0:004; p ¼ 0:021; p ¼ 0:033Þ:. This result indicates that respondents regarded these channels as much more important for purchasing than for seeking holiday product information. Figure 4 shows the current and future customer CBP according to their importance in the information search and purchasing stage. The value of the X and Y axes represent the current and future importance of each channel, respectively, and all the channels are located within the CBP framework i.e. is key operational, strategic, high potential and support. Each channel in the CBP framework is plotted as a diamond symbol for the information search stage and as a circle for the booking stage. From Figure 4, it can be seen that in general, most channels tend to be located in the strategic or support sectors of the CBP model. According to the CBP, e-mail channels based on the Internet such as PC Internet, e-mail-overall, e-mail to a contact number from the Internet, e-mail to travel agent, e-mail to a contact number in a brochure, call to a contact number from the
Figure 4 CBP [information search and purchasing]
Internet were regarded as strategic channels and interestingly talk to friends are very influential in the customer decision-making process in the information search stage. Respondents perceived that these channels are highly important both in the current and future when they find holiday product information. However, another group of eChannels, IDTV, WAP, VC and e-mail to teletext were regarded as high potential and respondents consider that these channels are currently less important, but they may be important in achieving successful future choice. Another group of channels including traditional channels such as call-overall, Call-TA, talk to a travel agent, TV, travel shop, travel brochure and newspaper and magazine were also regarded as strategic, but they were relatively less important in the future importance compared to the group of eChannels. Traditional channels including Fax-overall, Fax to a contact number from Internet, Fax to a contact number in a brochure, Fax to a contact number in the teletext, Teletext-overall, call to a contact number in the teletext and Postal mail were regarded as support channels. These channels are currently valuable and used by the respondents, but they are not critical to successful customer choice. Only one channel, call to a contact number in a brochure, was regarded as key operational in the information search stage.
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In general, the customer channel portfolio in the information search and purchasing stage shows a similar picture of channel distribution. However, a detailed comparison of the channel portfolio between the information search and purchasing stages demonstrates that customers have a different perception about the channels. In other words, there is a gap between the customers’ information search and purchasing portfolios. For example, call to a contact number in a brochure was key operational in the information stage, but in the purchasing stage it was regarded as strategic. Also fax to travel agent and call to a contact number in teletext were considered as support in the information search stage, but they were regarded as key operational in the purchasing stage. Even though customers are currently using or likely to use these aforementioned channels in the information search stage, customers do not intend to use or are not ready to use certain channels in the purchasing stage.
information search and purchasing stages and therefore, from the firm’s point of view, it is critical to identify the customers’ current and future channel preference/benefits during their search and booking stages and provide an optimal channel combination (mix) according to the customer channel preference/ benefits in order to acquire and retain the customers within the company’s channel configuration/portfolio. It is worth noting that the future importance of the customers’ perceived benefits on the Internet based eChannels is expected to increase both in the information search and purchasing stage. Though most of the traditional channels were regarded as less important in the future, however, when traditional channels were linked to the eChannels (e.g. e-mail to travel agent), the future importance of these channel combinations or mixed channels increased. The implication of this result is that it is important for a company to identify the customer benefits and risks of these relatively new eChannels in order to make an appropriate channel investment decisions. Furthermore, there is an opportunity for Internet based eBusiness company to maximise the realisation of the customers’ expected or unrealised channel benefits by providing an optimal channel mix of traditional channels and eChannels to the customers i.e. Business Channel Re-engineering. The distribution of channels within the CBP model shows that most of the channels are located in either the strategic or support quadrant. This result suggests that there are only a few key operational channels as far as customers are concerned, which tends to suggest that customers do not value channels unless they are critical to their decision-making needs and is a subject for further investigation. The management implications of this CBP approach is that Internet based eBusiness in tourism/hospitality companies need to identify the current and future CBP portfolio of their existing and prospective customers to be successful in the multichannel eBusiness environment. It is critical to assess the company’s current channels and identify alternative ones according to the customer’s CBP in order to make appropriate and successful channel investment decisions that maximises channel benefits; thus, making the company much more effective in the management of its customer decision support services across multiple customer channels. This is because in the eBusiness environment, more power accrues to the customer in the company/consumer relationship and customers will be a major
Conclusions The research revealed that customers have a different preference for the channel choice in the information search and purchasing stages. In the information search stage, talk to friends or relatives was regarded as more important than PC Internet and travel shop for the preparation of holiday. This result indicates that private or informal channels have a key role in the customer decision-making process and the customer value for the C2C (customer to customer) or P2P (peer to peer) conversation is becoming increasingly important during the customer buying process. The quantitative findings generally confirm the in-depth qualitative interviews conducted during the preliminary investigation. The implication of this result is that the importance of socio-technical model of channel management may be a key aspect for the success of the Internet-based eBusiness company in the computer mediated eBusiness environment. Therefore, it is necessary for tourism firms to evaluate the customer value for these informal channels such as friends/relatives, online conversational interfaces in order to make an appropriate and successful channel investment decisions that realise or maximise customer channel benefits. However, in the purchasing stage, call related channels, talk to travel agent, e-mail and Internet were regarded as key channels for the booking. These results indicate that customers’ channel benefits are changing according to the
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enabler and driving force and not the firm in terms of channel strategy (Hagel, 1997). Therefore, channel management strategy which consider customers’ CBP as a key aspect of future success for the Internet based eBusiness company in the tourism/hospitality industry. This research also demonstrated how CBP can be used to reveal the channel gap between the information search and purchasing stages when considering critical usage. The fact that customers have a different perception on the critical usage of these channels implies that for the booking stage most eChannels are not sufficiently developed for customer to place their trust in online transactions. The issue of customer trust in eBusiness seems to be a key aspect for the future success of the eCommerece environment. The trust issue was often quoted by respondents during the qualitative interviews as the main factor and reason for the reluctance to conduct transactions online. Furthermore, while the qualitative results of the initial investigation indicated differences in channel usage, the quantitative results were established where these differences significant within the CBP. Hence, a combined quantitative and qualitative approach to channel management should ensure greater reliability in decision-making about channels. In the eBusiness environment which is characterised by multiplicity of eChannels, one can no longer remain focused solely on applications, but must address the key channel investment decisions that underpins eBusiness performance in the eBusiness environments. Future research in the channel benefit evaluation and realisation from the company’s point of view is required in order to establish legitimate and adequate criteria for decisionmaking about strategic channel deployment and investment. Moreover, research into the appreciation of the channel attributes and role in determining customers’ channel choice is required to understand what makes an effective channel benefits management strategy, and will provide further insights for a much more effective CBP analysis. Moreover, CBP analysis will be an important input to segmentation strategy decisions that must take into account the customers’ communication channel portfolios (Louvieris et al., 2003). Finally, the onslaught of new miniaturised communication technologies with greater bandwidth capability (e.g. 3G networks, emerging nanocommunications technologies, etc.) will
mean that channels will become more pervasive. Therefore, the CBP needs to be managed dynamically and updated at regular intervals to ensure continuing alignment of the firm’s portfolio with their customers’ channel portfolios in order to maximise customer relationship capital.
References Anghern, A.A. and Meyer, J.F. (1997), “Developing mature Internet strategies: insights from the banking sector”, Information Systems Management, pp. 37-43. Bagozzi, R. (1975), “Marketing as exchange”, Journal of Marketing, Vol. 39, pp. 32-9. Barabba, V. and Zaltman, G. (1991), Hearing the Voice of the Market: Competitive Advantage Through Creative Use of Market Information, Harvard Business School Press, Boston, MA. Christiaanse, E. and Zimmerman, R. (1999), “Managing electronic channels: the KLM cargo cyberpets case”, Journal of Information Technology, Vol. 14, pp. 123-35. Dwyer, F., Schurr, P. and Oh, S. (1987), “Developing buyer-seller relationships”, Journal of Marketing, pp. 11-27. Etgar, M. (1978), “The effects of forward vertical integration on service performance of a distributive industry”, Journal of Industrial Economics, Vol. 26, pp. 249-55, March. Hagel, J. (1997), Net Gain: Expanding Markets through Virtual Communities, Harvard Business School Press, Boston, MA, p. 17. Heide, J. and John, G. (1988), “The role of dependence balancing in safeguarding transaction-specific assets in conventional channels”, Journal of Marketing, Vol. 52, pp. 20-35. Hirschheim, R., Earl, M., Feeny, D. and Lockett, M. (1988), “An exploitation into the management of the IS function: key issues and an evolving model”, Proceedings of the Joint International Symposium on IS, March. Louvieris, P. and Driver, J. (2004), “Avoiding buyer behavior myopia in hotel eCommerce”, Journal of Hospitality & Leisure Marketing, Vol. 11 No. 1, pp. 65-84. Louvieris, P., Driver, J. and Powell-Perry, J. (2003), “Managing customer behaviour dynamics in the multi-channel environment: enhancing customer relationship capital in the global hotel industry”, Journal of Vacation Marketing, Vol. 9 No. 2, pp. 164-73. Louvieris, P., Jung, H.S. and Pandazis, G. (2001), “Investigating the Web presence of London hotels”, in Sheldon, J., Wober, K.W and Fesenmeier, D.R (Eds), Information and Communications Technologies in Tourism, Springer Computer Science, New York, NY, pp. 327-34. McFarlan, F. (1984), “Information technology changes the way you compete”, Harvard Business Review. McFarlan, F. and McKenney, J. (1983), Corporate Information Systems Management: The Issues Facing Senior Executives, Dow Jones & Irwin, New York, NY. McFarlan, F., McKenney, J. and Pyburn, P. (1983), “The information archipelago-plotting a course”, Harvard Business Review. Venkatraman, N. and Christiaanse, E. (1996), “Expertise exploitation of electronic channels, in best paper”, Proceedings of the Academy of Management Conference, Cincinnati, August.
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Ward, J. (1990), “A portfolio approach to evaluating information systems investments and setting priorities”, Journal of Information Technology, Vol. 5, pp. 222-31. Ward, J. (1996), “Strategic planning for information systems”, in Ward, J. and Griffiths, P. (Eds), 2nd ed., Wiley, Chichester.
Further reading Ward, J. (1987), “Integrating information systems into business strategies”, Long Range Planning, Vol. 20 No. 3, pp. 19-29.
Appendix
Table AI Paired sample t-tests comparing mean scores for the current and future importance of channels in the information search stage Channel PC Internet TS TB WAP TV Teletext IDTV Talk-F Talk-TA VC Call-OA Call-TA Call-B Call-I Call-TXT Fax-OA Fax-TA Fax-B Fax-I Fax-TXT E-mail-OA E-mail-TA E-mail-B E-mail-I E-mail-TXT Postal mail News/Mag
Current Mean SD
7.56 7.34 6.95 2.93 6.25 4.29 4.42 8.00 6.87 3.34 6.76 6.78 5.70 6.63 4.63 4.38 4.65 4.21 4.82 3.39 7.19 6.85 6.21 6.97 4.70 4.68 6.39
1.41 2.11 2.26 1.94 2.26 2.44 2.35 1.89 2.28 2.38 2.27 2.01 2.33 2.15 2.53 2.41 2.60 2.29 2.54 2.07 2.10 2.21 2.28 2.43 2.45 3.11 2.07
Future Mean SD
9.17 6.02 6.07 5.17 6.15 4.36 6.77 8.07 5.70 5.04 5.97 5.41 4.73 6.29 4.09 4.0 4.12 3.82 4.68 3.26 8.58 7.80 6.85 7.90 5.07 3.80 5.56
0.89 2.44 2.46 2.83 2.43 2.51 2.57 1.75 2.24 2.68 2.15 2.14 2.20 2.31 2.11 2.52 2.60 2.20 2.70 1.91 1.97 2.32 2.60 2.36 2.78 2.89 2.32
t
df
Sig. (2-tailed)
2 9.855 3.801 3.163 2 6.465 0.539 22.70 2 7.653 20.723 5.060 2 6.299 2.583 4.787 3.717 1.236 1.89 1.793 1.934 2.389 0.628 0.625 2 5.079 23.854 2 2.549 2 3.702 21.263 5.009 3.148
40 40 40 40 39 40 39 40 40 40 38 40 40 40 40 30 40 40 40 40 30 40 40 40 40 40 40
0.000* 0.000* 0.003* 0.000* 0.593 0.789 0.000* 0.474 0.000* 0.000* 0.014* 0.000* 0.001* 0.224 0.066 0.083 0.060 0.022* 0.534 0.535 0.000* 0.000 0.015* 0.001* 0.214 0.000* 0.003*
Table AII Paired sample t-test comparing mean scores for the current and future importance of channels in the purchasing stage
Channel PC Internet TB WAP Teletext Talk-TA Call-OA Call-TA Call-B Call-I Call-TXT Fax-OA Fax-TA Fax-B Fax-I Fax-TXT E-mail-OA E-mail-TA E-mail-B E-mail-I E-mail-TXT
Current importance Mean SD
6.92 6.78 3.17 3.94 7.53 7.71 7.70 6.58 7.39 5.32 4.89 5.12 4.63 4.53 3.67 7.23 6.82 6.30 7.10 4.77
1.88 2.04 2.16 2.42 1.88 1.70 1.95 1.98 1.65 2.64 2.45 2.80 2.61 2.37 2.26 2.46 2.27 2.25 2.09 2.46
Future importance Mean SD
8.85 5.92 5.04 4.05 6.07 6.56 6.65 5.39 6.95 4.65 4.21 4.43 3.95 4.34 3.37 8.58 8.00 7.46 8.43 5.48
1.79 2.27 3.02 2.46 2.04 2.28 2.30 2.37 2.22 2.62 2.25 2.57 2.30 2.41 2.09 1.81 2.22 2.18 2.02 2.81
t
df
Sig. (2-tailed)
2 10.178 3.438 2 6.077 20.755 5.981 3.614 3.446 4.113 1.371 1.2954 2.865 2.765 3.332 0.805 1.433 2 4.009 2 3.892 2 4.188 2 4.462 2 2.351
40 40 40 38 40 38 40 40 40 39 36 38 40 40 39 33 39 39 39 39
0.000* 0.001* 0.000* 0.455 0.000* 0.001* 0.001* 0.000* 0.178 0.034* 0.007* 0.009* 0.002* 0.426 0.160 0.000* 0.000* 0.000* 0.000* 0.024*
Note: *significance at p , 0.05
Table AIII Paired sample t-test comparing mean score for the importance of channels in the information search and purchasing stage
Channel
Notes: TS: travel shop, TB: travel brochure, Talk-F: talk to friends, Talk-TA: talk to travel agent, VC: consult with people in the virtual community, Call- OA: call overall, Call-TA: call to travel agent, Call-B: call to a contact number in a brochure, Call-I: call to a contact number from the Internet, Call-TXT: call to a contact number in the teletext, Fax-OA: fax overall, Fax-TA: fax to travel agent, Fax-B: fax to a contact number in a brochure, Fax-I: fax to a contact number from the Internet, Fax-TXT: fax to a contact number in the teletext, e-mail-OA: e-mail overall, e-mail-TA: e-mail to travel agent, e-mail-B: e-mail to a contact address in a brochure, e-mail-I: e-mail to a contact address from the Internet, e-mail-TXT: e-mail to a contact address in the teletext, News/Mag: newspaper or magazine. *significance at p , 0.05
PC Internet TS TB WAP TV Teletext IDTV Talk-F Talk-TA VC Call-TA Call-B Call-I Call-TXT Fax-TA Fax-B Fax-I Fax-TXT E-mail-TA E-mail-B E-mail-I E-mail-TXT Postal mail News/Mag
Information search stage Mean SD 7.56 7.34 6.95 2.93 6.25 4.29 4.42 8.00 6.87 3.34 6.78 5.70 6.63 4.63 4.65 4.21 4.82 3.39 6.85 6.21 6.97 4.70 4.68 6.39
1.41 2.11 2.26 1.94 2.26 2.44 2.35 1.89 2.28 2.38 2.01 2.33 2.15 2.53 2.60 2.29 2.54 2.07 2.21 2.28 2.43 2.45 3.11 2.07
Note: *significance at p , 0.05
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Purchasing stage Mean SD 6.92 – 6.78 3.17 – 3.94 – – 7.53 – 7.70 6.58 7.39 5.32 5.12 4.63 4.53 3.67 6.82 6.30 7.10 4.77 – –
1.88 – 2.04 2.16 – 2.42 – – 1.88 – 1.95 1.98 1.65 2.64 2.77 2.61 2.37 2.26 2.27 2.25 2.09 2.46 – –
t
df
Sig. (2-tailed)
1.818 – 0.505 21.056 – 1.634 – – 2 2.198 – 2 2.703 2 3.067 2 2.394 2 2.211 21.667 21.187 1.182 20.980 0.110 20.404 20.551 20.405 – –
40 – 40 40 – 38 – – 40 – 40 40 40 39 39 40 40 39 39 39 39 39 – –
0.077 – 0.617 0.298 – 0.111 – – 0.034* – 0.010* 0.004* 0.021* 0.033* 0.104 0.242 0.244 0.333 0.913 0.688 0.585 0.687 – –
Introduction
V2C activity on a local level: qualitative cases – Tampere and Silicon Valley Hannu Jungman and Marko Seppa¨
The authors Hannu Jungman is based at eBRC, Tampere University of Technology, Finland. He is a project manager at eBRC and researcher at Tampere University of Technology (TUT). He is preparing a doctoral dissertation on new V2C operating models. Marko Seppa¨ is based at eBRC, Tampere University of Technology, Finland. He is director of eBRC, a virtual research centre and joint venture between TUT and University of Tampere (UTA) and one of the six sub-programs of eTampere, a local pilot of eEurope.
Keywords Venture capital, Entrepreneurs, Finland, United States of America
Abstract The increased capital intensity of venture capital supply and the increased knowledge intensity of new venture supply have created a knowledge gap and recreated a capital gap between new venture activity and venture capital industry. This development has given rise to an all-new breed of players. In this descriptive, qualitative study, V2C activity is explored in a local context through comparison of cases Tampere (Finland) and Silicon Valley (USA). In Silicon Valley, the dominant group of V2C players is business angels, whereas in Tampere, publicly funded incubators play the most visible role in new venture development. Nevertheless, in both areas, five different categories of V2C players are represented, and, in both, bridge the gaps to a significant extent.
Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm
Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · pp. 265–273 q Emerald Group Publishing Limited · ISSN 1352-2752 DOI 10.1108/13522750410557076
Since 1995, supply of venture capital financing, the sizes of venture capital funds and, hence, also the minimum investment amounts of a given venture capitalist, have grown substantially, transforming the venture capital process into the venture capital spiral (Seppa¨, 2000). Consequently, after the boom and bust of the Internet hype, since 2000, the interest of venture capital firms has shifted from seed and start-up situations to more mature investment stages, because such investments are considered safer, easier to manage, and markedly more capital than knowledge (hands-on) intensive. At the same time, new ventures have become more knowledge than capital intensive – requiring even more hands-on involvement (Mason and Harrison, 2000; for observations of an earlier such shift refer Bygrave and Timmons, 1992). Thanks to the two phenomena, a knowledge gap has emerged and a capital gap has re-emerged between new venture activity and the venture capital industry. Figure 1 shows an illustration of the dual gap (Rasila et al., 2002, p. 6). To bridge the gaps between venture and capital, an all-new breed of venture to capital or V2C players has emerged based on a number of distinct operating models. The mission of these players is to push “prospective” ventures towards the radar scan of the venture capital industry by turning (refining) them “investable” in the eyes of the venture capitalist, i.e. by building business from venture to capital (Seppa¨ and Na¨si, 2001). V2C activity, aimed at overcoming the capital gap and the knowledge gap, is a concern on the both the local, national, as well as the international level. The benefits of successful V2C activity have been acknowledged, for example, on the European Union level (Aernoudt, 2002). The benefits include an increase in the number of “investable” ventures and jobs, as well as new export income. The services provided by different types of V2C players differ by nature and content. However, in general, V2C players provide, besides financing and other capital contribution, significant managerial support and/or guidance. Such support may or may not include businessman wisdom, growth management insight, technical management skills and/or introductions to contact networks (Rasila et al., 2002). The emerging V2C industry appears to have assumed a part of the classic role of the venture capital industry. Lending the classic discussion on the role of the venture capital financier from Brophy (1986), the role of V2C – for a country or area today – can be put in perspective. To put the role of [V2C] in context, it is useful to think of it as a key part of the economic growth
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Hannu Jungman and Marko Seppa¨
Volume 7 · Number 4 · 2004 · 265–273
Figure 1 The capital and knowledge gaps
also derives on unstructured interviews conducted in Silicon Valley (Appendix 1). The interviews were conducted on convenience basis and focused on the nature of the capital and the knowledge gaps, as well as the status of the venture capital industry, in Silicon Valley. A similar study is underway to understand the nature of V2C activity and the status of the venture capital industry in St Petersburg, Russia. However, the present study is limited to cases Tampere and Silicon Valley only.
Categorisation of V2C players process now facing the United States and other countries as well. The [V2C] process is important in marshalling resources for the attainment of benefits for government, business, and the public at large . . . It is . . . to the point to think of the [V2C] financier as the overseer of the market exchange system, in a sense deciding through financing decisions, on behalf of society at large, which new projects should go forward and which should not. This is an important function in the economic transition now facing many economies. It is unlikely that a country or area can be competitive in commercial exploitation of innovative process, products, and services without a strong local [V2C] community.
Economically, V2C activity clearly plays a significant role in the value chain of the venture capital industry as a pre-screener of new ventures and as provider of knowledge and capital for the most “prospective” ones – the ones with most potential as future investment targets of the venture capital industry. Furthermore, this activity will speed up the growth of new companies and therefore, increase the pace of job creation. Today, in the words lent from Brophy (1986), the V2C players decide, “as the overseers of the market exchange system, on behalf of society at large, which new projects (businesses) should go forward and which should not”. The present study focuses on V2C activity on a local level. More specifically, the study explores V2C activity in Tampere, Finland, and Silicon Valley, USA. First of all, the study aims to identify the key players in two regions and the key differences between them. Second, the study attempts to build early propositions on how to develop V2C activity with a focus on Tampere case. The primary data of the study comprised of public information on the V2C market and interviews of selected individuals, both in Tampere and Silicon Valley. The interviews conducted in Tampere comprised CEOs of all major V2C institutions and were semi-structured by nature. The Tampere study is reported in more detail in Jungman and Seppa¨ (2002). The present study
By definition, V2C players operate to push ventures to capital, help to cross the dual gap. Many V2C players conceptualise entrepreneurs as their main clients. Furthermore, it appears that V2C players are seldom financially interested in what happens to the ventures after they have received venture capital financing, i.e. once transferred from the V2C portfolio to the venture capital industry portfolio. After such transfer it is considered to be the venture capitalist’s task to push the venture from “investable” to “listable”. V2C players can be divided into four categories: (1) business angels; (2) incubators; (3) advisors; and (4) corporate ventures. In addition to these basic categories, venture capitalists themselves may seek to be active in the V2C space, by setting up funds specialised in early stage financing. However, almost without exception, further funds of such players tend to eventually slide towards later stage focus if not premature dissolutions, due to inability to make small enough investments (Seppa¨ and Na¨si, 2001). As in any other new industry, new and emerging operating models have been developed continuously to overcome the shortcomings of the existing ones contributing to a fifth category; (5) Emerging V2C models (Rasila and Okkonen, 2003). In the following sections, a basic overview of each of the five categories of V2C players is provided. Business angels Business angels are, by definition, wealthy individuals putting some of their hard-earned capital, business-experience, and contactnetworks back to the entrepreneurial process. Business angels are profit-driven, market-educated players vested with an extensive value-adding potential. However, they are, by definition, also hobbyists. This is neither their profession nor full
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time job. Even if this is their main job, post-retirement, it does not necessarily fill the hours of their days. Importantly, they are not dependent on any market forces to maintain a long-term in what they are doing; they do not need to serve any particular stakeholder group such as outside investors or even the entrepreneurs. They do not seek organised growth of their business, as do, for example, the players of the formal venture capital industry. In other words, their business reality lacks certain dynamism, for example, the absence of classic stakeholder pressures from financiers and customers. Common to most business angels is that they like to remain anonymous; hence, it may be difficult for entrepreneurs to find such players – let alone the Right One. Anyhow, the number of business angels has grown in the recent years due to the increased number of millionaires produced by the entrepreneurial revolution of the 1990s. On relative terms, business angels serve more as a solution for the V2C space in the USA than in Europe. In the USA, it is estimated that business angels invest about twice as much as the formal venture capital industry in monetary terms (Mason and Harrison, 2000).
By definition, they are also involved for the shortest time with a given venture. On the negative side, a standard image of an advisor relates to quick-and-dirty, get-the-money-and-run type of operation. Advisors are sometimes faced with accusations according to which they do not care what happens in the client firms once they have finished. On the more positive tone, advisors are highly skilled and motivated professionals, who have seen many cases and can derive, advise from experience. Most advisors also work under full market pressure, the requirement of sustainable direct financial profitability. This is neither a hobby for them nor are they around to fulfil (soft) economic-policy-related missions.
Incubators Also business incubators often lack certain dynamism, but from a different angle than business angels. Most incubators are based on a formal process and professional management; this is someone’s main job – not a mere hobby. However, whereas business angels personally participate as owners in underlying ventures, incubator staff seldom has such personal incentive. Many incubators are public sector financed or semi-public players under the public eye with little or no space for making mistakes. In other words, their activity lacks different aspects of dynamism than business angels. According to Aernoudt (2002) a business incubator’s task is to “nurture young firms, help them survive and grow during the start-up period when they are most vulnerable.” In addition to premises, business incubators may also provide services such as hands-on management, access to finance, legal advice, operational know-how and access to new markets. Furthermore, according to Aernoudt (2002), “a business incubator’s main goal is to produce successful firms that will leave the incubator financially viable and free-standing within reasonable delay.” Advisors Compared with business angels and incubators, business advisors are typically the most focused on their own short-term gains and profitability.
Corporate venturing Corporate venturing brings about new business by building on internal entrepreneurship, sometimes referred to as intrapreneurship. In environments and societies that lack entrepreneurial incentive, large corporations are natural platforms for new venture activity. Conversely, in environments boasting with entrepreneurial incentive, corporations have tougher time in keeping new venture activity indoors. Compared with the USA, Europe relies much more on corporate venturing. As a form of “institutionalised parenthood”, corporations have a significantly better track record as a platform for new venture activity than state or government related entities, but there are exceptions also to this rule. It is worthwhile, herein, to make difference between corporate venturing and corporate venture capital: The latter refers to investments made from corporate funds directly in external start-up companies, i.e. it excludes investments made through a fund managed by a third party and the funding of new internal ventures. The former, on the other hand, refers especially to investments in-house (Chesbrough, 2002). Regardless of the fact that there are several significant corporate V2C players both in Tampere and Silicon Valley, as a limitation of the present study, corporate venturing is not discussed, herein, in any further detail. Emerging V2C models The shortcomings – such as the lack of long-term commitment, due to lack of financial interest – of many of the existing V2C models have opened space for new and innovative V2C business models, which seek to integrate the best practises of the existing players. It seems that ownership issues and investment of knowledge (intellectual capital) are the key building elements of the emergent V2C models. It can be argued that the emergent V2C models link the field to the roots of the classic venture capital industry.
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Hannu Jungman and Marko Seppa¨
Volume 7 · Number 4 · 2004 · 265–273
(For a more comprehensive overview on emerging V2C models refer Rasila and Okkonen, 2003.) All the categories of V2C players are represented in both Tampere and Silicon Valley. In the following chapters, an initial overview of V2C activity in the two regions is provided. The classification follows the one introduced above (excluding corporate venturing).
Case Silicon Valley Silicon Valley is known throughout the world as the number one new technology venturing market on the planet. It is also a home for some of the best-known venture capital companies in the USA, and draws people from all over the country to seek and negotiate for venture capital financing. In addition, also the universities in the area are well known for their research and education related to entrepreneurship and venture capital financing. However, based on the interviews conducted for the present study, it is also noticed in Silicon Valley that the needs of entrepreneurs and the services provided by venture capitalists do not always meet. The issue, as presumed, is two-folded: the capital injections available for investment are too large and venture capitalists are unable to provide sufficient hands-on involvement. Because venture capitalists have, consequently, been sometimes forced to return some of their funds back to the investors, due to inability to make small enough, hands-on investments, there is market pressure on the venture capital industry to move towards smaller investments.
Business angels Business angels in the USA invest about twice as much in monetary terms and 20 times more in terms of the number of ventures financed as the formal venture capital industry. According to the Center for Venture Research[1], located at the University of New Hampshire, in total there are ca. 250,000 business angels in the USA who invest annually a total of $20 billion in ca. 30,000 ventures. A typical investment of a business angel is less than $200,000, but can also be as much as $1,000,000. It is typical that business angels co-invest with other business angels (Mason and Harrison, 2000). It is evident that, in the USA, business angels play the most significant role in building business from venture to capital. According to the Capital Connection[2] there are six business angel networks that operate in Silicon Valley (Appendix 2). They all provide capital investments to start-up and/or early stage companies. In addition to mere financial capital,
they also invest mental capital; their time as advisors and board members. Incubators In Silicon Valley, there are nine business incubators (Appendix 3), which are members of the National Business Incubation Association[3]. Most of the incubators are supported by public funds. On an average, each incubator has 16 tenants and the average incubation period is three years. Of the incubators only one appears to be making capital investments (one sponsored by a major corporation). The basic services include office space, furnishing and support services. A majority of the incubators have specialised to serve certain customer groups like international companies expanding to the USA, environmental businesses, art businesses or entrepreneurs from low-income communities. Common to these groups is that they may find it hard to get financing and other resources from other sources. Advisors The entrepreneurial environment and venture capital industry together have created numerous opportunities for various kinds of consultative advisors in Silicon Valley. One special group of these – namely technology analysts – is selected for introduction herein. This special advisor group provides entrepreneurs with technology and market analysis and suggestions for suitable venture capitalists. Such a service will most likely bring entrepreneurs and venture capitalists closer to each other, and make it easier for entrepreneurs to justify their need to raise capital. However, technology analysts do not fully solve the problems related to the knowledge and capital gaps, as they do not provide any managerial advice. Emerging V2C models There is no shortage of emerging V2C operating models in Silicon Valley. Three models have been selected for presentation, herein. The first relates closely to business angel networks and the second to individual business angels. The two models can also be defined as hybrids of the category of advisors. The third model is closer to the category of incubators. CEO Circle consists of chief executive officers with entrepreneurial background. They are hired to companies in order to solve especially the problems caused by the knowledge gap, by sharing their businessman wisdom with the entrepreneurial teams of the start-up companies. Payment is received either in cash or equity. The concept of Virtual CEO is presented by Randy Komisar in his autobiography “Monk and the Riddle” (Komisar, 2001). The book describes
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his personal work as “a business angel without money” possessing skills and networks vital to entrepreneurial ventures. For the time and money he contributes to young ventures he receives a stake in the company. Garage Technology Ventures[4] helps young companies developing new technologies in three ways: (1) they provide small venture capital investments ($100,000-750,000); (2) they help ventures raise bigger investments from venture capitalists, corporate and individual investors; and (3) they work as advisors in mergers and acquisitions.
Business angels In Europe, and this holds also for Finland, the role of business angels is, unfortunately, far less significant than in the USA. The Internet hype of the late 1990s, particularly the successful initial public offerings (IPOs) it enabled, produced several new players in the business angel arena also in Finland. Within Finland, the Tampere region was not among the top scorers of individual IPO related wealth creation of the hype era, however. Hence, in Tampere this category of V2C players is not particularly strong, but of average strength. Nonetheless, notable measures – on the Finnish national scale – to activate business angel activity have been taken precisely in Tampere. In 1997, Finnish Business Angel Association[5] was registered in Tampere. This was the first registered business angel association, and still to date the only one, in Finland. One of the functions of the association is to arrange elevator pitch sessions where entrepreneurs are pre-screened for presentation to participating members. It is to be noted that the association has not been successful, so far, in attracting the attention of Finland’s leading business angels. Even within Tampere, there are unofficial round-table-clubs of business angels that do not actively participate in the operations of the association. In Finland, and this holds also for the Tampere region, business angels typically make investments between e10,000 and 150,000 and their preferred investment time ranges from two to four years.
Of these functions the second is pure V2C activity, while the two others are similar to the functions of venture capitalists.
Case Tampere While the city of Tampere has a good 200,000 inhabitants, over 300,000 people live within a 20 min drive from the city centre, and half a million live within a radius of 100 km. Empowered by two universities (Tampere University of Technology and University of Tampere), other institutions of higher education and research, and a number of knowledge centres and science parks, the Tampere region is rapidly emerging among the most recognised local knowledge areas in Europe. One of the drivers of this development, the eTampere knowledge society development program, is largely geared at putting eEurope – the vision of Europe – into action on a local level. The goal of the eTampere program is no less ambitious than to make Tampere the world’s leading local knowledge society. One mean to achieve this target is creation of new businesses, and acceleration of their growth and development. According to the business development strategy of the city of Tampere, this activity is supported by providing help in set-up activities and in evaluation of business ideas, creating culture that encourages entrepreneurship, securing appropriate finance, helping get required working premises, and promoting networks (Tampereen elinkeinostrategia, 2002). The city of Tampere has been active (as key financier and part owner) in developing several specialised incubators. The mission of these V2C players is to turn “prospective” ventures “investable” in the eyes of venture capitalists, i.e. to help ventures to cross the dual gap. The city of Tampere has also invested in venture capital funds especially targeted to finance early stage companies.
Incubators In Finland, the number of business incubators has grown rapidly since 1995. For example, in the Helsinki region there was only one incubator in 1995 compared to 16 in 2000. Most of the incubators in Finland are located in one of the 16 science parks, and are strongly affiliated with university research (Aernoudt, 2002). There are four players in Tampere that can be labelled as the city’s strategic V2C portfolio. All four have their own sector specific development responsibilities. While they differ in target venture segments, one of their common denominators is the V2C process. They all provide help in developing business plans and in acquiring additional financing, contact networks and office space. All four incubators are briefly introduced below. Finn-Medi Research Ltd[6] is a business development organisation that concentrates on health technologies. In addition to basic incubator services they also provide loans that typically range from e11,000 to 50,000. Tampere Technology Centre Ltd[7] and Tampere University of Technology together constitute an internationally significant
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concentration of ICT based business, research and development activity. Much of the company’s business development services, including Hermia Incubator, have been outsourced for over ten years to entrepreneurial (management-controlled) firms, mainly Hermia Business Development Ltd (of which Tampere Technology Centre Ltd owns 10 per cent). The incubator is specialised in technology based product and business innovations. The V2C player is an exception among the incubators in the Tampere Region, and Finland in general, because it is management-controlled, and public sector based players are only minority owners. Nonetheless, this is a close private-public-relationship. Oy Media Tampere Ltd[8] is minority-held by the City of Tampere, whereas private sector (mainly large) enterprises own the majority. Media Tampere can also make investments in early stage companies and has creatively outsourced incubator services. The incubator Media Club was recently established as an incubator specialised in content production and media business. The incubator is not (yet) a legal entity, but a project fully owned by Tampere Polytechnic. The project was set-up for two years, in 2001. Professia Ltd[9] is the latest entrant to the city of Tampere’s strategic sector-specific V2C portfolio. Professia is owned, in four equal shares, by the city of Tampere, the University of Tampere, Finnvera Ltd (a public funding agency), and Sentio Invest Ltd (a local management-owned venture capital company). Professia manages a business incubator that develops knowledge-intensive advisory and business service companies.
consortium – which resembles the round-table sessions of business angels. In the set-up, Ledi has served as the coordinator that pre-screens target ventures, helps put their presentations together, and is engaged in post-investment activities. The seed consortium provides profit sharing based subordinated loans, ranging from e50,000 to 200,000, to seed, start-up, and growth stage companies. The maturity ranges from two to four (or even to seven), years. The loans are intended to cover the seeking of financing options and, ultimately, the expenses of the due diligence process related to a potential venture capital investment. The consortium (the investing institutions) does not provide any operational help (Laine, 2002).
Advisors There are several advisory firms, in the Tampere Region, that are active in the V2C space. Many of these firms are actually incorporated form of the activity of a given business angel. One advisory firm has been selected as a case example of this category, namely Ledi Oy. Ledi[10] has been one of the most active entrepreneurial companies in the Tampere V2C space. Ledi was established in 1997 and today has a presence at science parks in both Tampere and Helsinki. Ledi is a corporate finance boutique that arranges financing for mainly early-stage enterprises. Ledi has also been offered, and accepted, shares as partial payment for its services. Ledi and/or its individual partners played instrumental roles in establishing the business angel association (introduced above) and in creating a private-public seed-investment partnership involving corporate and government institutions – referred to as Seed
Emerging V2C models eAccelerator[11] is one of the six subprograms of eTampere. It was launched, in 2001, as a sort of an ambitious virtual incubator funded by the city of Tampere. The entity legally responsible for the eAccelerator project is Tampere Technology Centre Ltd. In practise, based on an outsourcing arrangement, the project is managed by Hermia Business Development Ltd, the partner driven company introduced above, making eAccelerator another PPP experiment. In addition to various incubation services the deliverables may include small investments. eAccelerator leans on a network of 15 core experts and an advisory board of 54 persons. The advisory board is designated to help the core personnel in customer service and, at present, they are the primary source of knowledge on legal, managerial and technological matters. The advisory board also plays a central role in evaluating new customer ventures and in making contacts with investors. Contracts with accepted ventures are made case by case. For compensation the management company of eAccelerator takes cash, but more lately has also accepted equity and success fees. Tamseed Ky is seed and start-up venture capital fund managed by Innofinance Ltd[12] in cooperation with Sentio Invest Ltd. The fund was opened in October 2002 and in the first stage it managed to raise 5.6 Me. The fund works in close cooperation with business development entities that are part of the city of Tampere’s V2C portfolio. The aim is to effectively utilise the skills and knowledge of these organisations in developing seed companies. The fund has already made its first investments. Venture Stables[13] is a support model for testing innovations and facilitating for entrepreneurship within the faculty and students of the Tampere University of Technology. Also this V2C operation is managed by
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Hermia Business Development Ltd constituting for yet another PPP experiment in Tampere. The ventures accepted to the stables gain an access to office space, computers and office equipments for one year and an option to one additional year. The contract also covers expert services, patenting costs, etc. up to e7,000. The stable staff can also provide contacts to customers and financiers. If a company succeeds, it is obliged to pay back the money the university has invested in it.
lean heavily on private entities and active ownership. However, the picture is in complete neither in Tampere nor in Silicon Valley. Notably, each of the key players interviewed for this study agrees that further development is still needed in the V2C space, at both ends. These conclusions also reflect upon the differences in entrepreneurial culture between Finland and the USA. In the USA, the general attitude towards entrepreneurship, growth and wealth creation, is by far more encouraging than in Finland. This is manifested by both annual birth-rate of new businesses per capita and the amount of both business angels and angel money put back to the entrepreneurial process.
Summary and discussion Key features and differences of the two V2C arenas A number of similarities and differences mark the players of the regional V2C arenas of Tampere and Silicon Valley. In both regions there are players in all of the five V2C categories. In principle, the markets are dynamic and offer a balanced mix of V2C related services to entrepreneurs facing the dual gap. Overall, the players seem to provide monetary investments in small enough doses, and offer specialised business development services to several different business areas and sectors of economy. It is also evident that the city of Tampere’s portfolio of V2C players, and the incubators they manage, play the most visible role in this V2C arena. Domination of the V2C space by public sector or public sector funded entities is quite a common feature in Europe vs the USA, where business angels play the dominant role. It is worth mentioning that even though the population in Silicon Valley is some eight times larger than that of the Tampere Region, the number of business incubators is only double. In Tampere, business incubators work in close contact with the two universities in the area, whereas in Silicon Valley incubators are established to serve certain special groups of the population, which may find it difficult to start and expand their businesses in other ways. As mentioned above, in Silicon Valley as in the USA in general, business angels play the dominant role in turning entrepreneurial ventures “investable” in the eyes of venture capitalists. In Silicon Valley, an average angel investment is bigger – and obviously also the number of active business angels is larger in both absolute and relative terms – than in Tampere. In Europe, the mechanisms by which V2C resources are provided and distributed differ between countries and regions. In Tampere, several creative PPP schemes are underway as well as all some emerging V2C models. In contrast, the emerging V2C models developed in Silicon Valley
Ideas for further development of V2C services in Tampere region In the words of a Tampere based incubator representative interviewed for this study: “The biggest challenge in the field is to clarify and communicate to each other the needs and objectives of V2C players and venture capitalists and, in the course of the dialogue, develop an operating model that fulfils these needs and, ultimately, makes the growth resource allocation of young ventures more efficient”. Also the other interviewees underscored the importance of dialogue and two-way cooperation between the V2C players and both entrepreneurs and venture capitalists. More efficient and appropriate distribution and use of target venture ownership could be a key to more successful V2C activity. In fact, ownership – not financing – is key to both venture capital and V2C activity (Rasila et al., 2002; Seppa¨, 2000; Seppa¨ and Na¨si, 2001). In return for the time, money and services, and businessman wisdom if any, that they contribute to target ventures, V2C players could receive a minority share in the target company. In Silicon Valley, two emerging V2C models have been identified (CEO Circle and Virtual CEO) that utilise the idea of using equity to buy committed knowledge. By definition, a V2C player’s financial gains should be maximised at the point where a venture capitalist enters the “investable” venture, or – better yet – at the later point where the venture capitalist completes a successful exit (Rasila et al., 2002). In Figure 2, the ideal development of the market valuation of a given venture is shown as a function of time. The picture does not reflect reality in the Tampere region at the present moment, since most of the local V2C players prefer cash to equity and do not exercise active and responsible ownership. At the moment, most of the Tampere based V2C actors have no ownership incentives to pay
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Figure 2 Development of ownership and market valuation through ventures life
attention to the time after receipt of venture capital investment. Likewise, the venture capitalists do not have an incentive to pay attention to the time before their own investment. The ownership structure depicted above could help different parties to better understand each other’s motives and operating logic and enable fruitful long-term relationships. Such an operating model would require much closer cooperation between V2C players and venture capitalists which also brings about new challenges: V2C players may become servants to a given venture capitalist leading to neglect of other stakeholders. Also, misplaced ownership distribution, for example, in favour of faceless institutions rather than entrepreneurial teams responsible for delivering the results, can cause more harm than good to the entrepreneur. Besides ownership, another important issue is the delivery of crucial knowledge to target ventures. We believe that it is not a matter of lack of knowledge – or businessman wisdom – but rather a lack of sufficient vehicle to acquire and deliver that wisdom or competence. As committed competence cannot be bought on the market in the classic meaning of the word, expansion of owner base may be a working solution. The limited-life limited-partnership based fund vehicle of the venture capital industry could serve as a basis in developing a vehicle to do the exchange between knowledge and stake in a company – such as the concept of the Knowledge Fund (Seppa¨, 2002). Whereas a venture capital fund is managed by a venture capitalist, a knowledge fund is managed by a venture knowledgist. Investors of knowledge could be found, besides entrepreneur and adviser communities, for example, inside universities, major corporations, and other institutions. The above discussion is meant to stimulate discussion and lead to further research and development activity in the V2C space. In conclusion, probably the highest yield would come from further work on the development of an operating model that understands and appreciates
the needs of entrepreneurs, V2C players and venture capitalists, but is set to serve the stock market investor (or acquiring corporation) as the ultimate customer. At least as crucial is the valuation of businessman wisdom. Since the city of Tampere and many other key players of the region recognise the importance of a strong local V2C community, Tampere continues to facilitate one of the most potential “testing environments for new V2C laboratories” in Europe and the world. Silicon Valley, for its part, remains as a trendsetter in growth venturing and venture capital financing.
Notes 1 2 3 4 5 6 7 8 9 10 11 12 13
www.unh.edu/cvr/ www.capital-connection.com/networksangels.html www.nbia.org www.garage.com www.ledi.fi/bisnesenkelit/index.html www.finnmedi.fi www.hermiayrityskehitys.fi www.mediaclubi.com www.professia.fi www.ledi.fi www.hermia.fi/eAccelerator www.innofinance.fi www.yritystallit.tut.fi/yritystallit
References Aernoudt, R. (2002), “Incubators: tool for entrepreneurship?”, paper presented at Euram 2002, Stockholm. Brophy, D.J. (1986), “Venture capital research”, in Sexton and Smilor (Eds), The Art and Science of Entrepreneurship, Ballinger Publishing Company, Cambridge, MA. Bygrave, W.D. and Timmons, J.A. (1992), Venture Capital at The Cross-Roads, Harvard Business School Press, Boston, MA. Chesbrough, H.W. (2002), “Making sense of corporate venture capital”, Harvard Business Review, pp. 90-9, March 2002.
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Jungman, H. and Seppa¨, M. (2002), “Local approach to V2C activity”, in Hannula, M., Ja¨rvelin, A-M. and Seppa¨, M. (Eds), paper presented at FeBR 2002, Tampere University of Technology and University of Tampere, Tampere. Komisar, R. (2001), The Monk and The Riddle, Harvard Business School Press, Boston, MA. Laine, P. (2002), Seed Consortium Tampere, Linking money and knowledge Seminar 28.11.2002, Tampere. Mason, C. and Harrison, R. (2000), “Business angels are the answer to entrepreneur’s prayer”, in Birley and Muzyka (Eds), Mastering Entrepreneurship, Prentice-Hall, Englewood Cliffs, NJ, pp. 110-4. Rasila, T. and Okkonen, J. (2003), “Traditional and emerging V2C business models”, in Hannula, M., Ja¨rvelin, A-M. and Seppa¨, M. (Eds), FeBR 2002, Tampere University of Technology and University of Tampere, Tampere. Rasila, T., Seppa¨, M. and Hannula, M. (2002), “V2C or venture-tocapital – new model for crossing the chasm between startup ventures and venture capital”, paper presented at Euram 2002, Stockholm. Seppa¨, M. (2000), “Strategy logic of the venture capitalist”, Doctoral Dissertation, University of Jyva¨skyla¨, Jyva¨skyla¨. Seppa¨, M. (2002), “The concept of the knowledge fund”, Poster presentation at eBRF 2002. eBRF 2002 Book of Abstracts. Seppa¨, M. and Na¨si, J. (2001), “Playing with the goose – pushing entrepreneurs across the capital gap – who, why, and how?”, Research Paper presented at the IntEnt 2001 Conference, South Africa. Published in Conference Proceedings. , Tampereen elinkeinostrategia (The business development strategy of the city of Tampere) 19.8.2002.
.
.
In Silicon Valley: . Dossani, R. and Toyoda, M. Asia/Pacific Research Center, Stanford University; . Guerra, P. Center for Innovation and Entrepreneurship (CIE), Santa Clara University; . Tyebjee, T. Leavey School of Business, Santa Clara University.
Appendix 2. List of Silicon Valley business angel networks . . . . . .
In Tampere . Business angel (anonymous); . Eskola M., FinnMedi Research Ltd; . Jussila, P. and Huhtamella, H., Hermia Business Development Oy; . Jussila, A., Ledi Oy;
Angel Investors; The Angels’ Forum; The Band of Angels; Angel Breakfast Club; Investors Circle; Net Angels.
Appendix 3. List of Silicon Valley business incubators .
Appendix 1. Interviewed professionals
Sulonen, T., Oy Media Tampere Ltd, Media Club; Vakkari, L. Ledi Oy.
. . . . . . . .
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Business United in Investing, Lending and Development; Daly City Business Center; Environmental Business Cluster; International Business Incubator; Panasonic Incubator; Renaissance Business Incubator; San Jose Arts Incubator; Software Business Cluster; US-Japan Business Incubation Center.
Introduction
A qualitative sense-making classification of business incubation environments Paul D. Hannon
The author Paul D. Hannon is a Professor of Incubation and Enterprise at the University of Central England Business School, Brimingham, the UK’s, and probably Europe’s, first professional post in incubation. Here he applies his 30 years of experience in the field of enterprise as an entrepreneur, practitioner, professional and academic working across many aspects of public and private sector environments.
[email protected]
Keywords Metaphors, Start-ups, Business development
Abstract Business incubation is a new and fast growing industry in the UK. The environments within which incubation can take place and their descriptors as used across the industry are many and varied. The language engaged in by policy-makers, professionals and practitioners commonly applies metaphors to convey meaning of loosely defined terms and concepts in a diverse market seeking increased clarity. Metaphors can offer a qualitative approach to sense-making. By articulating ideas through metaphors, individuals can often expand the concepts and expressions available through language. It is asserted that it would be valuable to incubation communities to provide shared meaning to the discourse of incubation such that further confusion is minimised. This paper aims to address this challenge by proposing a classification of incubation environment types based upon a qualitative approach to understand the incubation marketplace through its language, specifically the application of metaphor.
Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · pp. 274–283 q Emerald Group Publishing Limited · ISSN 1352-2752 DOI 10.1108/13522750410557085
It is in the last 10-20 years that phenomenal growth of the incubation sector has been witnessed to the extent that most countries around the globe now boast a growing and thriving incubation industry. NBIA, the US membership association for business incubation, identifies the origins of incubators in New York (www.nbia.org). In the UK it has been suggested that the foundations of incubators emerged out of the growth of managed workspace and enterprise centres in the 1970s and 1980s (Hannon 2004, forthcoming, for a further exploration of the evolution of business incubation). In exploring the definitions of incubators and incubation projects and through examining public and private sector reports and studies it is clear that a common language is emerging. However, this has not necessarily led to a shared meaning of the purpose, nature or process of incubation. Incubators and incubation programmes appear mixed in description of form, function, purpose and outcomes. In reflecting on the diverse range of defining characteristics of incubators and incubation programmes this paper first investigates the origins of the language in common parlance. The use of the terminology applied to such programmes is purposefully chosen. The noun used to describe the phenomenon is borrowed from the natural and life sciences as the range of adjectives used to describe the incubation processes and environments: nurturing; accelerating; safe; protected. These terms have gained a shared meaning temporally and spatially, and have strongly influenced the approaches to incubation policy formation and management application. Indeed, some of the issues raised have been endemic within the enterprise support environment for many decades and are not specifically unique to the world of incubators and incubation. For some readers the origins of the term “incubator” will have meaning and purpose in the context of the challenges of difficult child births where the newly born infant is unlikely to survive without the application of a protective and artificial environment, within which the essential ingredients for life can be monitored and provided through expert care. An incubator may also have meaning and purpose in an horticultural sense where there are attempts to enhance the natural processes of plant reproduction through providing seeds or new cuttings with a controlled environment within which the appropriate nutrients and atmosphere can be provided to simulate idealised conditions for effective and
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speedy growth. In intensive farming methods, such approaches are used to force cropping plants to produce their crops earlier than the processes of a natural environment. Indeed, incubators can have meaning in a farming context in the way that some animals are battery farmed to control and speed up rates of growth and egg production. It may also be that some have experienced the use of incubators in biological research establishments for the use of generating artificial life, developing genetic cultures and other purposes. Whatever the exposure it would be reasonable to expect that a common shared understanding of the term incubator would include notions of protection; nurturing the fragile and weak; accelerating growth; and enhanced survival. Indeed, such understandings are applied equally to those engaged in business incubation. One initial point to emphasise is the way that meanings from such diverse applications with specific purposes have formed a conglomerate meaning of mixed purposes in the context of business incubation.
Why the use of metaphor matters in qualitative research The Collins New English Dictionary defines a metaphor as “a figure of speech that makes an implied comparison between things which are not literally alike” and defines an analogy as “a resemblance in certain essential respects”. These tools are important in qualitative research because their common use in communicating meaning provide illustrative insights into others’ worlds. For instance, the use of metaphor is well established in the organisation theory and change literature both through increased published research and management articles and books from the 1980s, popularised in the late 1980s by Morgan (1986). The metaphor has been widely applied in organizational analysis and has drawn upon diverse images from machines and organisms to jazz bands and even soap bubbles (Palmer and Dunford, 1996 for a review). One use of metaphor is as a tool for making sense of complex and dynamic organizational environments to provide insights into key features and characteristics. From a positive aspect metaphors can be important tools for the “advancement of knowledge and understanding” as in practice, they “entail using a combination of both language and thought to construct a non-literal meaning and apply it to reality in order to shape and enhance our appreciation of that reality” (Grant and Oswick, 1996). Marshak (1993) cited in Dunford and Palmer (1996) states:
. . . underlying, usually unarticulated understandings about a situation are often shaped and revealed metaphorically. Furthermore, because these understandings are critical to how people assess the need for change – and indeed their conception of change itself – paying attention to managing the metaphors of change becomes a critical competency for leaders and change agents.
This supports the underlying purpose of this paper, which is to offer a sense-making framework to support incubation leadership and management. Chia (1996) proposes that the process of “metaphorization” should “force us to re-evaluate, re-conceptualize and reinterpret what is going around us” and hence will be better equipped to deal with the increasingly unpredictable and volatile business world in which they and their organizations must operate. Chia suggests that using metaphors is about “shifting styles of thinking from being (i.e. thinking in terms of ‘states’, ‘entities’, ‘events’, ‘attributes’) to become (i.e. thinking in terms of the primacy of ‘movement’, ‘unfolding’, ‘emergence’, ‘flux’ and ‘transformation’) . . . it is this organismic form of thinking which is more in keeping with a processual reality”. This is a reality in alignment with the fundamental act of incubation. Marshak (1996) describes the use of metaphoric fields that “structure perception and behaviour”. Each field defines reality and Marshak suggests that where there is consistency “with the operative themes of the metaphoric field” (where metaphoric field refers to a system of symbolic meaning) then change “will be readily engaged because they will be coherent and easily understood”. Using different fields would evoke “very different actions and responses . . . depending on which metaphor was shaping perception”. This notion of “fields”, or in the context of this paper “environments” is an underpinning thread throughout. Inns and Jones (1996) reviewing the work of Miles and Huberman (1994) identify how Miles and Huberman explored metaphors as “a qualitative methodological tool, offering the researcher access to participants” interpretations of situations as they are revealed through participants’ use of metaphors’. Furthermore, Inns and Jones also explore metaphor as a means of access to, and expression of, intuitive, embryonic perceptions and understanding. These may be easier to grasp as people attempt to describe their experiences in novel and unconventional ways. The indicative sense-making classification presented in this paper attempts to demonstrate this point. Inns and Jones (op.cit.) suggest that “the world is constituted by our shared language and that we
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can ‘know the world’ through the particular forms of discourse our language creates”. In applying Morgan (1986) work, Inns and Jones continue “metaphors link thought and action and can provoke insights that often allow us to act in ways that we may not have thought possible before”. Although metaphors are used freely in incubation environments there is no critical and qualitative analysis of their application or their meaning. Addressing this gap enables a market classification of incubation environmenttypes that illuminate differences across metaphorical profiles, thus unearthing a more sophisticated qualitative description of incubation landscapes in relation to specified business incubation goals. Bolman and Deal (1991) note that “metaphors are liberating because they offer a sense of choice and new alternatives and ideas” (Palmer and Dunford, 1996). Furthermore, Srivastva and Barrett (1988) argued that “metaphorical language is superior to literal language because it captures expressions . . . and because it can communicate meaning in complex ambiguous situations . . .” (Palmer and Dunford, 1996). Analogies, similes and metaphors are applied in the stories told to communicate thoughts, values and beliefs, and to transfer knowledge and experiences. Entrepreneurs are noted for their use of these tools as part of valuable informal peer learning processes. In business and enterprise support, gardening analogies abound. References to growing strong firms (or plants) from new opportunities (hybrid seeds or seedlings) or new ventures (germinated seeds) are frequently made to explain the processes and policies of incubation. The application of this analogy is so strong that other words from the same context are now applied freely to describe various models in use in the world of business incubation. For example, germinators, hothouses, cold frames, and accelerators can be identified. Table I provides a selected terminology of incubation landscapes in the UK. In attempting to differentiate between the terms it may be useful to identify what are the essential differentiating characteristics between these analogical concepts.
This paper continues by exploring specific selected concepts in common use as the basis for constructing a sense-making framework to inform a more sophisticated characterisation and understanding of the complexity of incubation environments and contexts. These concepts are referred to throughout the paper as environment-types.
Table I Selected descriptors of UK incubation landscapes UK incubation landscapes Cold frames Germinators Hatcheries Hives Innovation centres Enterprise centres
Hot-desks Hubs Graduators Grow-on space Incubators Accelerators
Source: Adapted from UKBI, 2003
Spokes Ideas labs Managed workspaces Venture labs Business centres Fertilizators
An exploration of incubation environment-types First, Table II presents the indicative key characteristics of three commonly used environment-types as applied within their originating horticultural context. The use of this terminology in a different context such as business incubation implies certain meanings and underpinning assumptions about the phenomenon in question. For instance, in a general sense, the term incubator may imply for those in the incubator that they need to be cared for. Experts who make decisions about what needs to be provided by whom, when and for what purpose, carefully monitor the incubatees. If the desired outcome is not being achieved then another course of action is required to bring the incubatee to the desired condition. Additionally, incubatees in the incubator are protected from harmful external influences and the role of the expert monitor is to ensure that there are appropriate filters and controls in place to avoid any unwanted contamination. The incubatee is supported to offer safety and protection whilst in this environment. However, there are some obvious contradictions. Human incubators are generally used for protecting the survival of very weak human life. On the contrary, business incubators highly select their entrants such that only the stronger applicants are invited to become incubatees. The application of such a policy seems at odds with the common shared meaning. In this context incubators would be selecting those firms less likely to survive and need significant support to convert the venture into a healthy business with a strong future. However, the purpose of business incubators seems to provide the opportunity for accelerating the growth and development of the incubatee more so than could be achieved in the external “natural” environment. Such a purpose would appear to have closer fit with that of an “accelerator”, which provides a controlled environment with specific and intensive inputs for growth but not necessarily a protective environment, i.e. some ventures in an accelerator will not survive. The importance of careful application of terminology for the incubation sector is to consider the overall implications for policy and practice of
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Table II Generic indicative characteristics of three environment-types Incubation environment-types Incubator
Generic characteristics
Germinator
Purpose
To provide a protective environment for the germination of new plant life Seeds and new cuttings Nutrients and water Germination compost Climate control
To provide a protective environment for the early growth of new plant life Young seedlings and “taken” cuttings Nutrients and water Growing compost Climate control
Main process
Germination
Growing on
Primary outcome
New seedlings
Young plants
Key Inputs
adopting an incubator “environment-type” that has a distinct purpose and specific set of inputs appropriate for achieving the desired outcomes. Policies and their implementation in practice should be “fit for purpose”. Furthermore, the matching of incubatees with incubation environment-type is likely to ensure a more appropriate fit between needs, demand and supply.
Characterising management capability across incubation environment-types
.
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The above text implies that each incubation environment-type is likely to require specific and different management capabilities with respect to role, style, process tasks and outcomes. Table III provides an outline characterisation across the three incubation environment-types already presented in Table II, but within a business incubation context. These components provide a framework for defining and understanding overall incubation management capabilities. Clarity of role and intervention style match with the overarching policy for each environment-type. For instance, a “hands-in” style is unlikely to be the most appropriate for an “Incubator” environment-type, but will be highly relevant for an “Accelerator” and possibly a “Germinator” environment-type. Undertaking the main process tasks relevant to each environment-type ensures a focus of resource usage and activity in achieving target outputs and outcomes. Mixing process tasks across environment-types is likely to dilute or confuse intended outcomes. It is possible to identify differentiating characteristics for the three incubation environment-types. In reviewing the overall framework presented in Table III certain observations can be posited.
.
Accelerator To provide a controlled environment for rapid growth of plant life to crop maturity Seeds and new cuttings Nutrients and water Enriched compost Disease protection Full climate control Intensive production Early growth Early cropping
There is clarity in the fit across the outcome of each environment-type with the role, style and tasks of management. There is clarity in the differentiation of management capabilities between the three environment-types. There is an indication of incubation intensity variations across environment-types with possibly the “Accelerator” being highest and the “Incubator” being lowest in intensity. There is an indication of scope variation across environment-types in that the “Germinator” is likely to be less selective and engage with a higher volume of entrants. There is an implied identification of degrees of risk across types as “Germinators” are likely to operate further from the market than other types and hence are likely to be engaged in higher-risk activity.
Developing and applying the above framework to the context of business incubation enables both differentiation of management capabilities across environment-types and identification of linkages between environment-types where it is appropriate and beneficial to create a seamless flow from type to type. The paper now considers the usefulness of such a framework to the role of incubation environment-types in supporting generic incubation goals, from three different perspectives.
Mapping environment types against incubation goals Incubation programmes promote a variety of goals. Incubation programmes often have priorities and focus on specific target groups. From Tables II and III, it is now possible to explore the
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Table III Characterising management capabilities against the three incubation environment-types within a business incubation context Management capabilities
Germinator
Overall role
Intervention style Main process tasks
Overall management of facility or programme to ensure regular flow of business ideas, latent entrepreneurs and proposals for new ventures Hands-in and hands-on Finding sources of supply of quality ideas and people Databases of ideas and people Inducting into the germinator Assessing needs and providing required inputs Monitoring and adjusting of inputs to achieve desired outcome, i.e. a viable opportunity and realistic plan
Management outcomes
Understanding and knowledge of the needs of individuals in bringing venture ideas to fruition and testing for viable business opportunities
Outputs
Viable business opportunities and venture proposals
Incubation environment-types Incubator Overall management of facility or programme to ensure seedling growth into healthy young plants
Hands-on Finding sources of supply of strong new or young firms, viable business plans or emerging spin-outs Positioning the business or venture in a relevant incubator Assessing growth needs and providing input requirements Monitoring and adjusting of inputs to achieve desired outcome i.e. survival and growth rates beyond those in general environment Understanding and knowledge of the needs of individuals and teams successfully bringing viable business opportunities to market Sustainable new ventures
potential effects of different environment-types in specific, but common, incubation programme goals, such as: (1) creating new ventures; (2) creating ventures with high-growth potential; and (3) supporting new venture growth. In the context of this paper, creating new ventures refers to those new firms that are established as the result of an incubation programme. Ventures with high-growth potential will be those firms with identified opportunities for achieving growth outputs significantly higher than the mean for the population of all new and small firms. Finally, the “support” category considers the practices applied to new and small ventures to enable those firms to achieve growth outputs that would not have been identified or achieved without support or could be achieved more readily with support. Each category is now discussed and illustrative key points are highlighted and summarised in Table IV. Creating new ventures How do different environment-types affect programme characteristics if the overall purpose is creating new ventures?
Accelerator Overall management of facility or programme to ensure accelerated rates of growth in excess of natural processes and resource inputs Hands-in Finding sources of supply of strong quality proposals with significant potential in targeted growth sectors Locating in specific environments Detailed assessment of competitive global environments and resource needs Dedicated supply of resource inputs Monitoring and adjusting of inputs to achieve desired outcome i.e. superior high-growth rates and IPO Understanding and knowledge of the needs of high growth potential opportunities and their requirements in successfully bringing them to a global market and achieving IPO Exceptional growth rate of new ventures achieving significant returns on investment
Germinators aim to maximise opportunities for creating new ventures through market intelligence and developing strategic awareness. Their skills in attracting people with venture ideas and in motivating them towards venture creation would lead to new venture proposals for viable opportunities being created. Providing a supportive learning environment with easy flexible access is essential. This environment-type is likely to demand high volume usage. The role of the incubator environment-type would be to build the foundations and market opportunities of new ventures through providing local support to selected proposals and helping to validate these in the market thereby developing growth capability in these new ventures. A hands-on approach to build confidence and capability is likely to be necessary. Developing a clear exit strategy will be important. There is unlikely to be a general role for an accelerator environment-type. Their approach is highly selective and probably too intensive for general new venture creation activity as they are only interested in high/fast growth venture opportunities.
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Table IV Examples of indicative defining characteristics of three environment-types against three incubation programme goals Specific programme goals Creating new ventures
Creating ventures with high-growth potential
Supporting new ventures to grow
Germinator
Incubation environment-types Incubator Accelerator
Creative, learning environment Scanning for people with ideas Identifying lots of opportunities Open policy, flexible? High use, high turnover Short-term participation Easy access Fast responses to emerging opportunities Tools for quick assessments Strong networks and contacts Direct access to accelerator
Selective Hands-on approach Validating/testing opportunities Building team capability Strengthening venture foundations and market access Exit strategy Hands-on approach, individually focused Resource intensive Strong selection and exit policies Global expertise Direct access to accelerator
Investment-preparedness focus Low-cost inputs Wide use of networks, peers Easy access to incubator
Local support Building to market commercialisation Strong networks Exit policy
Creating ventures with high-growth potential Another common goal of incubation programmes is the creation of ventures with high-growth potential. Germinators would continue their activity as for goal (1) but now provide additional inputs and processes that facilitate the identification of those ideas or ventures with enhanced growth orientation and characteristics, probably ensuring that close links are initiated with specialist provision at an early stage through either an incubator or accelerator environment-type, but probably the latter, where feasible. Exploiting strong networks and a diverse contacts base is important. The incubator would seek to enhance the venture’s potential for high growth through provision of higher added value services than generally available and possibly in collaboration with an accelerator environment-type. A strong exit policy would be in operation with these ventures. The approach is likely to be resource intensive and require access to a wider base of expertise and knowledge. Goal (2) fulfils the overriding purpose of accelerator environment-types. They aim to take a strong “hands-in” management intervention style with highly selective venture proposals and provide intensive resource inputs to achieve a fast IPO launch with commercially significant potential gains for taking very high risks. Accelerator types may support and collaborate with germinator types in facilitating the identification of embryonic ideas and may work closely alongside Incubator
Probably not the key purpose – could be fatal for many new firms unable to manage fast growth and change
Hands-in approach Low volume, very selective Focus on money, markets and management Direct access to capital markets IPO goal Highly commercial Extensive professional networks Commercial environment Access to global information and opportunities Direct access to wide ranging resources and expertise
types in providing the expertise and resources to maximise the potential of high-growth ventures. However, fast-growth ventures may be less suited to incubator types. Supporting new ventures to grow Supporting new ventures to grow, goal (3) is another common goal of business incubation programmes. In supporting new ventures to grow the role of germinator types would be to create “investmentready” venture proposals, such that they would be appropriate for accessing mainstream support provision. Investments in this context could refer to advice and information, knowledge and learning and support tools as well as access to financial and human resources. Ventures would be directed towards an incubator environment-type. Goal (3) is a key purpose for incubator types. Their local support services and networks would provide clear routes to building growth opportunities and developing ventures able to sustain operations at full market rates. Strong selection and exit policies would ensure appropriate matches between entrants’ capabilities and potential and the resource and experience base and management capability of the incubator environment. Some applications may be referred to germinator or accelerator types as appropriate. Accelerator environment-types can support new ventures to grow where access to commercial and professional expertise and networks are
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appropriate. It is likely that only those ventures at the growth-ready state with strong capability and clear market opportunities will be supported through accelerators. Table IV presents indicative illustrations of the three incubation environment-types against the three specific incubation programme goals explored above. These which define characteristics help to paint a series of pictures, like landscape shots, that inform our understanding of what a particular landscape may look like in the beginning so that we can recognise, describe it, and differentiate one landscape shot from another. Collectively they provide a rich and varied landscape, although we may only be seeing or experiencing any one part of it at a particular time, depending where we are positioned and through which lens we are looking. Overall the framework presented as Table IV proposes nine differentiated incubation programme opportunities. Through selecting different environment-types and/or different incubation programme goals alternative incubation opportunities can be defined. Therefore, in general terms the framework does not suggest that these should be nine isolated and disconnected initiatives. On the contrary, the framework demonstrates the clear potential for synergistic and beneficial linkages across environment-types and between incubation programme goals. It is likely that numerous combinations may co-exist feeding into and off each other. Rather, the framework provides a route map across an incubation landscape for both management and incubatees, and offers greater sophistication and understanding of the potential relationships between incubation programmes and venture ideas. Each opportunity has its challenges and requires that the appropriate management capabilities (Table III) are in place for effective incubation. In summary, the insights presented in this paper aim to provide a rationale for understanding the meaning attached to business incubation and its origins in specific metaphors. In doing so the paper has highlighted the need for a deeper and more sophisticated categorisation of environment-types. In Table III, a typology of business incubation has enabled a characterisation of management capabilities. Further these are considered in the context of three common incubation goals for supporting and enabling growing new ventures and mapped against the three incubation environment-types (Table IV ).
Implications of environment-type classifications for incubation policy and practice This section discusses the implications of the environment-type classifications for incubation policy and practice. The incubation industry and individual incubators and incubation programmes are continually challenged in striving for effectiveness and success within a highly entrepreneurial and dynamic market environment. Concerns of long-term programme sustainability, the building of management capacity and capability, the development of sophisticated modes of evaluation, and the overall integration and coherence of regional incubation systems are current threads within the professional and practitioner incubation communities. But can a qualitative sense-making framework, such as the classification proposed in this paper offer any further illumination and insight to those engaged in setting policy and support practical action? The final section of this paper considers such challenges through the application of the sense-making framework of environment-types as an example of how the application of such tools may provide value. First the germinator environment-type is considered. The germinator environment-type Long-term incubation programme sustainability is a complex phenomenon that is likely to be highly contingent upon both incubation environmenttype and venture characterisation. Some areas of incubation activity can be argued to be higher risk than others. For instance, germinator types are operating at the high-risk end of venture development with low predictability of actual future outcome. Additionally, embryonic ventures are also at risk as access to capital and other resources influence progress and growth potential, and they may not be able to pay commercial rates for expertise and support. Clarifying incubation goal orientation and characterising the incubation environment-type will provide the basis for a more specific choice of impact assessment indicators that are appropriate for the particular context within which the incubation programme is operating. Expectations of impact may then be more appropriately mapped against actual intentions of individual incubation programmes, rather than seeking to apply generalised indicators to all incubation programme initiatives. Such an approach may help to develop a deeper understanding of how orientations and environment-types impact on new and young
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ventures and the localities in which themselves, and the incubation programme co-exist. It may be necessary for regional long-term achievement of wealth creation opportunities that policy makers take a broader and more holistic approach to their funding of incubation programmes. The unpredictability of a “picking winners” approach can mean that investments in incubation could fail to address the fundamental need for attracting and encouraging future “winners”, i.e. the critical role of germinators and (early-stage) incubators. This may also affect sustainability as discussed above. Regional coherence of an integrated incubation system is essential for improving long-term performance and sustainability. Next the incubator environment-type is considered. The incubator environment-type As the number of incubation programmes increases each year across the UK the demand for incubation management and leadership increases. As the pressures from government and other stakeholders increase, and as new entrants demand improved services, then the need for effective, high-quality management and leadership is also high. Additionally, as the UK moves towards the introduction of national benchmarking standards in incubation then the performance of incubation and management will attract closer attention. The management intervention in incubator environment-types is more intensive than germinators and likely to be hands-on in style. Building management capability is crucial. The frameworks presented in this paper are likely to be helpful for incubation governance, management and leadership as they offer increased clarity of role and purpose and enable a focus of effort and resources. Mapping functions against programme goals will also ensure that appropriate performance indicators are applied. It can be suggested that a key factor in achieving incubation success is its embeddedness within regional strategies for encouraging and/or supporting the growth of new ventures with growth potential. Most regions of the UK in alignment with other similar regions across the developed world aim to improve wealth creation in their area. Regional policy makers often see incubation programmes as a mechanism for supporting such aims. A deeper understanding of incubation programme opportunities may aid holistic policy making through the identification of synergies and the co-existence of opportunities within broad based programmes. The three environment-types do not have to be located in separate physical or virtual locations, indeed
there are strong arguments for ensuring close integration. Finally, the accelerator environment-type is considered. The accelerator environment-type Accelerator types may be more likely to achieve high growth outcomes and potential, and may be operating with ventures more able to pay for services. This would suggest that sustainability is more critical for some incubation programmes than others and may therefore be a critical factor in forming policy for funding future incubation programmes. Figure 1 shows this main point. Accelerators, in adopting strong entry and exit policies, are continually reducing the degree of risk to the programme funder. They are less likely to require, or indeed be seeking, public funding, using their access to private venture and angel funds to support client growth opportunities. These incubation programmes of low risk environment-type working with growing ventures may be more able to achieve sustainability than those of a high-risk environment-type working with embryonic stage ventures. Therefore, in deciding how to support incubation across a region it may be useful to consider the way that incubation environmenttypes may contribute to regional wealth creation. It is likely that regional policies will strive to focus on supporting those programmes with the greatest potential for achieving significant outcomes, for example, accelerator types.
A final comment Attaining greater clarity of the complex phenomenon of incubation may ensure that the application of the metaphors and analogies we use in common parlance may gain a shared meaning amongst the growing incubation community of practice. Such shared meanings may lead towards the construction and implementation of focused policies and strategies targeted at specific purposes and ventures. The environment-type and the stage and orientation of the venture are two possible key factors influencing the need for public funding, affecting the degree of sustainability, and contributing towards the general overall success of incubation programmes. A Darwinian viewpoint in common interpretation suggests that the fittest or strongest of the species survives. We should then place many firms in artificial environments where they can grow strong and fit. However, Darwin’s work suggests that it is not the strongest of the species that survives but those best able to respond and
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Figure 1 Mapping likely sustainability success against environment type and venture orientation
adapt to their environment as quick as the environmental changes. Slower adapters are less likely to survive than quicker adapters. This could imply that being in an artificial environment would not expose the species to the same subtle nuances of change that could be experienced by existing in the unprotected and unsupported environment. Those artificial environments able to recreate the changing external environment may be able to develop fast-adapting ventures to survive externally as the environment continues to change. No firm is exactly the same as another. It may be that the creation of environment-types will be appropriate for selected firms only. It will be the matching of the firm and founder with the environment-type that is likely to be critical. The “payback” from incubation programmes should be in increased outputs of better quality in reduced time to market, or healthier, stronger outputs less susceptible to debilitating processes. If either is achieved then the investment has been fruitful. Accelerators and incubators working with high-growth/growth potential ventures are probably the most relevant environment-types for such investments, with accelerators favouring commercial investors. Germinators on the other hand are not ideally placed for achieving the types of investment outcomes described above, and therefore less likely to attract market investments. Germinators and (early-stage) incubators supporting the creation of new ventures and helping new ventures to grow are arguably operating in areas of market failure and are generating ventures to investment-ready state for the market. These approaches are more likely to require subsidy to support their activity.
In summary when the incubation environment is highly diverse, different solutions will be required for different purposes. The selection of the nine opportunities for creating and supporting growing ventures will enable effective choices to be made for matching incubation goals against environment-types and management capabilities. Adopting incubation opportunities within an integrated incubation system may help in maximising incubation impact through developing synergies between environment-types. A final word on the discourse of incubation. Despite its meaning in the context of healthcare, incubators in a business context are the contrary to facilities for supporting the weak and the sick. Similarly, incubators should not be survival schools supporting those that would otherwise not survive. The horticultural analogy enables us to portray a rich and sophisticated landscape of incubation opportunities. We can change the “labels” of the environment-types to better reflect the context in which they are being applied. Other environment-types can be developed and added to the framework as our understanding of incubation grows.
A note on further research There is a continuing need for robust empirical work that explores the use of metaphors within incubation policy rhetoric and practical discourse. Particularly the language of policy-makers, incubator managers and incubatees could be usefully compared and contrasted to determine how “shared” is its use and meaning and to what
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degree this creates barriers or provides opportunities for effective interaction between stakeholder groups. Furthermore, it would be useful to identify the creation and source of the discourse and specifically the apparent dominance of metaphors to understand if this is grown out from an emerging community that is constructing sense-making frameworks in the absence of any other alternative or whether this reflects a sensegiving approach derived from imposed rhetoric. Further, development of the classification of environment-types and their compatibility with a wider range of incubation programme goals would provide deeper insights and understanding as the application of the generic framework across different incubation contexts. The application of the framework as a means for developing more meaningful assessment and evaluation criteria would also be usefully undertaken. The continuing development of the frameworks in this paper, and others, and their analysis in use would contribute to a more sophisticated understanding of the diversity of incubation environments and contexts.
the east midlands region”, Journal of Small Business and Enterprise Development (forthcoming). Inns, D.E. and Jones, P.J. (1996), “Metaphor in organization theory: following in the footsteps of the poet?”, in Grant, D. and Oswick, C. (Eds), Metaphor and Organizations, Sage Publications Ltd, Beverley Hills, CA. Marshak, R.J (1993), “Managing the metaphors of change”, Organizational Dynamics, Vol. 22 No. 1, cited in Grant, D. and Oswick, C. (Eds) (1996) Metaphor and Organizations, Sage Publications Ltd, Beverlay Hills, CA. Marshak, R.J. (1996), “Metaphors in organizational settings: impact and outcomes”, in Grant, D. and Oswick, C. (Eds), Metaphor and Organizations, Sage Publications Ltd, Beverley Hills, CA. Miles, M.A. and Huberman, A.M. (1994), Qualitative Data Analysis: An Expanded Sourcebook, 2nd ed., cited in Grant, D. and Oswick, C. (Eds) (1996) Metaphor and Organizations, Sage Publications Ltd, Sage Publications, Thousand Oaks, CA. Morgan, G. (1986), Images of Organization, Sage Publications, Beverly Hills, CA. Palmer, I. and Dunford, R. (1996), “Conflicting uses of metaphors: reconceptualising their use in the field of organizational change”, Academy of Management Review, Vol. 21 No. 3, pp. 691-717. Srivastva, S. and Barrett, F.J. (1988), “The transforming nature of metaphors in group development: a study in group theory”, Human Relations, Vol. 41, pp. 31-64. UKBI (2003), “Business incubation creating the right environment – the way forward”, a presentation by Peter Harman, Deputy CEO, UKBI.
References Bolman, L.G. and Deal, T.E. (1991), Reframing Organizations: Artistry Choice and Leadership, Jossey-Bass, San Francisco, CA. Chia, R. (1996), “Metaphors and metaphorization in organisational analysis: thinking beyond the thinkable”, in Grant, D. and Oswick, C. (Eds), Metaphor and Organizations, Sage Publications Ltd, Beverley Hills, CA. Dunford, R. and Palmer, I. (1996), “Metaphors in popular management discourse: the case of corporate restructuring”, in Grant, D. and Oswick, C. (Eds), Metaphor and Organizations, Sage Publications Ltd, Beverley Hills, CA. Grant, D. and Oswick, C. (Eds) (1996), Metaphor and Organizations, Sage Publications Ltd, Beverley Hills, CA. Hannon, P.D. (2004), “Incubation policy and practice: building practitioner and professional capability: the case of
Further reading Barrett, F.J. and Cooperrider, D.L. (1990), “Generative metaphor intervention: a new behavioural approach for working with systems divided by conflict and caught in defensive perception”, Journal of Applied Behavioral Science, Vol. 26 No. 2. Lakoff, G. and Johnson, M. (1980), “Metaphors we live by”, University of Chicago Press, Chicago, IL. cited in Grant, D. and Oswick, C. (Eds) (1996) Metaphor and Organizations Sage Publications Ltd, Beverley Hills, CA. Tsoukas, H. (1991), “The missing link: a transformational view of metaphors in organizational science”, Academy of Management Review, Vol. 16 No. 3.
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Introduction
Enhancing customer service and organizational learning through qualitative research Peter R.J. Trim and Yang-Im Lee
The authors Peter R.J. Trim is a Lecturer in Management at Birkbeck College, University of London, London, UK. He teaches a number of marketing courses at undergraduate and postgraduate level, and is currently undertaking research into corporate intelligence and national security. Yang-Im Lee is a Lecturer in the School of Business and Management at Brunel University, Uxbridge, UK. She is a marketing specialist and is at present researching various aspects of marketing strategy and international management.
The body of marketing knowledge has over the past two decades been extended and refined, and as a consequence there does appear an occasion to merge the body of marketing knowledge and strategic management knowledge. It is also evident that as companies enter new markets abroad and form strategic alliances with previous competitors, that new bodies of marketing related knowledge will emerge. However, what is of interest is that the subject of marketing is being transformed and is to some degree being linked closely with human resource management for example. This is to be understood in the sense that the service economy is important and as a consequence a distinct body of knowledge has originated relating to services marketing. Also to emerge is the concept of relationship marketing and this is to be placed within a cultural context. For example, relationships are developed though time and issues such as trust and loyalty emerge that are rooted in organizational culture. Organizational culture contains the cultural traits and values to be found in national culture, and is shaped and reshaped by a set of factors including history, religion and technology for example.
Keywords Research, Communication, Culture (sociology), Learning, Marketing, Partnership
Qualitative research
Abstract In order to develop a sustainable competitive advantage in the knowledge based economy, senior managers need to ensure that customer relationship management is placed within a clearly defined organizational culture that embraces organizational learning. Senior managers are required to exhibit a proactive approach to leadership that results in creative solutions being found to solve complex problems. Open communication reinforces the decision-making process and allows mutually based partnership arrangements to develop. This being the case, the network approach to business development can be viewed, as collectivist in orientation and this should allow partnership arrangements to be developed through time.
Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm
Qualitative Market Research: An International Journal Volume 7 · Number 4 · 2004 · pp. 284–292 q Emerald Group Publishing Limited · ISSN 1352-2752 DOI 10.1108/13522750410557094
In order to understand the complexities of the issues confronting management academics and business practitioners, it is necessary to undertake qualitative research that allows insights to be drawn from various, but related bodies of management knowledge. This further underpins the fact that the strategic marketing concept has validity, and also suggests that marketing academics and practitioners, and human resource management academics and practitioners, have a number of interests in common. For example, a service oriented company relies extensively upon its employees to market the products and services available, and consumers and potential consumers pay attention to the value for money concept and the quality of the after sales service provided. Therefore, the quality of marketing staff and their support staff are key factors in determining the type and amount of business that will be secured. It is not surprising to learn, therefore, that to achieve a specific marketing objective(s), staff need to be adequately trained and motivated, and the necessary leadership and reward systems need to be in place. Owing to the fact that organizations undergo rapid forms of transformation from time to time (expansion followed by contraction), it is relevant to suggest that research that provides
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insights into how staff feel (“the feel good factor”); how they view their own performance and the performance of their peers; and how they view their superior from the stance of leadership and motivation, are all worthy of study. Data can be collected from attitudinal surveys, however, a crucial point to note is that if a manager accepts that organizations undergo periods of transformation, it would be more relevant to suggest that the employees themselves are involved in the research process, as it is the staff who are going to be responsible for making the necessary sacrifices and changes vis-a`-vis working practices for example. If senior management is determined to reward and retain staff, it is vital that in-house qualitative research is undertaken, that is viewed as ongoing and relevant. Research that is viewed as inclusive will sit comfortably within the organization’s culture, because it will produce factual evidence, and any anomalies can be thought through and turned into research objectives and questions, which then form the next phase of the research. In-house research is useful with respect to making matters public (feelings, emotions, programmes and policies, for example), and it also has the advantage of immersing the employees in the research process, and making them more aware of the need for change. This paper will make clear how action research, which is a valid and increasingly deployed form of qualitative research, can be used by staff employed by an organization to study and influence the process of change that is taking place, within the organization (Easterby-Smith et al., 2003, pp. 10-11 and 43-44). Action research can be used to reform an organization’s structure, as it provides a platform for senior managers to devise and implement new programmes and policies. Action research has one key advantage. The research/ evaluation is “controlled by the people in the program or community. It is something they undertake as a formal, reflective process for their own development and empowerment” (Patton, 1990, p. 129).
a specific view of how goals and objectives are to be established and realized. For example, Bae and Chung (1997) have made some useful observations regarding the motivation level of workers in South Korea, and it is clear that South Korean workers are loyal to the organization they work for. The advantage of staff being committed to the organization has been recognized by Fincham and Rhodes (1999, pp. 417-418), and it also provides further advantages in the sense that the necessary style of leadership can be forthcoming that produces a relationship marketing focus. In other words, a shared organizational culture has the benefit of allowing staff within the organization to learn from each other and this occurs through collaboration (Porter et al., 2000). Collaboration may be planned or indeed forced upon an organization. However, once when partnership arrangements are entered into they need to be directed and managed so that a win-win outcome results. Hofstede (1997) and Schein (1992) have adopted a holistic view to culture and this allows marketers to think more deeply about the cultural setting in which goods are traded and partnership arrangements are managed. One of the powerful aspects to emerge relating to a culture is of course the influence of religion. If one compares Japan and South Korea, it is clear that over the centuries, Buddhism and Confucianism have been adopted, but adopted at different points in time and as a consequence, the mindsets of the people from Japan and South Korea are different. There are a number of other factors to consider when studying how a national cultural value system has emerged and given rise to cultural traits that influence the decision-making process. An important point to note however, is that countries such as South Korea are now undergoing a process of transformation and this will result in new hybrid management models being produced. One can therefore suggest, that countries such as South Korea will have more than one type of organizational model in being (Lee, 2001, p. 271). As a consequence, South Korean companies will adapt in various ways to the challenges they face. There are various ways in which action research can be used to provide insights into the past, present and future aspects of organizational culture. Therefore, it is essential that senior managers find ways to utilize the knowledge and experience of existing staff, and to harness this knowledge and experience in a meaningful way. This assumes a degree of urgency when one understands that organizations compete in what can be classified as a knowledge management era, where the speed at which information is exchanged represents a key success factor. Politis (2003, p. 56)
Collectivist organizational culture Oakland (1993) has indicated that the concept of improvement is to be thought as a continuous process. This suggests that the drive towards quality needs to be placed within a specific organizational context, and a collectivist cultural setting appears to be the main integrating factor as it considers how everybody can benefit and share in the rewards gained. One is not suggesting that individualism is to be perceived as unacceptable or harmful, but that senior management need to have
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has put this perspective: “Transferring knowledge from one person to another requires that tacit knowledge be converted into explicit knowledge through sharing experience, dialogue discussions, know how ‘exteriorization’ and teaching”. Action research can be used to explain how communities (staff in various departments and partner organizations for example), relate to their community (or tribe) and the wider community (the industry within which the organization competes). Therefore, research undertaken to study and highlight the impact of cultural traits, and which at the same time is aimed at influencing change, should be viewed as relevant and necessary. The fact that Schensul and Schensul (1992), p. 166 have indicated that this type of research can be conducted over a period of time, suggests that a whole range of issues can be studied and explored to provide deep insights into how organizational culture evolves; who is instrumental in developing or changing an organization’s culture; and how organizational culture can complement or hinder marketing strategy implementation for example.
possible to turn the knowledge into a competitive advantage and this will as a consequence allow those in the organization to learn (Appelbaum and Gallagher, 2000, p. 46). This means human resource management specialists need to identify the skill gaps of the employees and devise training and management development programmes to eradicate the skill gaps. Alternatively, a thorough audit can be undertaken and if necessary, expert labour can be hired. Appelbaum and Gallagher (2000), p. 49) have indicated that training “must be designed to help close the gaps between an organization’s current reality and its future transformation”. Therefore, it is not surprising to note that staff in the human resource management function need a high profile within the organization because human resource management specialists are required to ensure that the organization has the required skill base. This is a powerful argument for suggesting that human resource management specialists should be involved in work which is of a competitive intelligence nature and also, human resource management specialists should be seconded to various departments/functions/strategic business units in order to monitor and appraise staff on a continual basis. It is clear from the research undertaken that managers considered it necessary to create an environment of development and learning (McKenna, 1999, p. 776). This being the case, it should be relatively straightforward for training and development to be viewed as an investment as opposed to a cost. Whatever be the view, it is clear that there are a number of advantages associated with a learning organization. For example, Appelbaum and Reichart (1997, p. 234) have stated: “Learning organizations are skilled at systematic problem solving, and each is accompanied by a distinctive mind-set, tool kit, and pattern of behaviour”. This suggests that a learning organization can embrace new challenges and is better able to confront the various threats that materialize in the environment. Staff in a learning organization appear to be proactive and managers appear to be concerned about the welfare of the employees. This being the case, managers and their subordinates should be viewed favourably by the shareholders owing to the fact that as well as yielding a return on the investment made, and enhancing the value of the company, there is also a commitment to incremental growth and survival in the long term. The findings from action research can assist senior management to develop a holistic approach to organizational learning. It can also trigger further research into areas that were previously thought to be outside the scope of the research
Organizational learning De Weerd-Nederhof et al. (2002, pp. 320-321) have indicated that the word learning encompasses individual, group and organizational learning. It is important to place learning in a multidimensional context because marketing managers do need to identify which management training and development programmes are appropriate for their staff. A customer oriented culture will provide a platform for relevant training programmes (Rubin, 1995) that are viewed as relevant and necessary, which result in organizational learning objectives being set and achieved. Becoming a learning organization should prove beneficial in the sense that Hitt (1996, p. 16) has indicated that there are two interrelated reasons why organizations become learning organizations: survival and excellence. In a customer driven era it would seem logical that an organization is driven by the concept of excellence owing to the fact that senior managers are being continually asked to search for new ways to improve the performance of the organization to meet specific objectives (increasing market share and providing higher returns to shareholders, for example). It is becoming increasingly important to realize that this is a day and age characterized by ideas and knowledge, and staffs are known to work more independently than earlier (Appelbaum and Gallagher, 2000, pp. 43-44). By harnessing and using the knowledge within an organization, it is
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objective, and this may result in the original research questions being rephrased or redefined. This should not be viewed as a weakness, but should be viewed as useful and appropriate. Biott (1996, p. 171) has even indicated that: “As projects unfold, questions are often reformulated and new ones emerge. Interests are reshaped, foci shift, and observations or findings are frequently combined with self-revelation including practitioners’ sense of the emerging force of their own newly established identities as researchers”. This suggests that action research has a fundamental role to play in areas of staff development and training, as it can be used to integrate separate staff development courses into an overall staff development programme. It can also be used to highlight the skill deficiencies of marketing staff who are employed by partner organizations in the marketing channel. This is a crucial point owing to the fact that external marketing staff may have the responsibility for after sales service provision, which includes providing training to staff employed by the end-user.
has highlighted the fact that managers face significant problems while dealing with crosscultural management issues and relationships, and that the time put into both building and developing cross-cultural and global relationships can be described as enormous. According to Geissler (2001, p. 489), integrated marketing communications can assist marketers in managing relationships. The objective is to view the communications effort from the eyes of the consumer, and this will ensure that there is “a clear and consistent message, and maximum communications impact” (Geissler, 2001, p. 489). Owing to the importance associated with the process of communication, it is necessary to place communication within a specific context. Communication can be thought as internal (in-house conferences and newsletters, for example), and as external (a custom designed promotion strategy). Action research can and does provide an opportunity for evaluation and is useful with respect to appraising promotional messages and strategies. It can also be used to study the link between an organization’s identity and how the leader’s/senior management team’s vision is operationalized. Action research can be undertaken to establish if there is a match between the views put forward by senior management and the views put forward by junior management, for example. The research findings can identify the gaps that exist, and action can be taken to close the gaps and ensure that everybody that occupies a management position is on the same wavelength. Action research can also be used to establish if the formal communication channels that are in being are appropriate and work in the way that they should.
Open communication Communication is an important, but under recognized aspect of management. One would think that the better-educated workers are, the more they will see the need to co-operate and share information. This is not necessarily the case in an organizational culture driven by individual self-esteem and underpinned by the concept of individualism. Open communication can and does result in teamwork and the achievement of goals, however, too much transparency can result in jealousies and embitterment, and inevitably lead to conflict. Conflict may be the result of individuals competing, but it may transpire as a result of groups competing (within a department/function/ strategic business unit or between staff at different locations or between staff in a joint venture/ strategic alliance) for specific rewards. Appelbaum and Gallagher (2000, p. 50) are correct in suggesting that communication is a critical factor with respect to the successful implementation of change within an organization. Appelbaum and Gallagher (2000, p. 51) have also referred to a key point made by Senge, who is attributed with the saying that a learning organization encourages and embraces dialogue. What is evident is that it is essential for managers to invest sufficient time in developing and cultivating relationships with staff within the organization that they work for and with staff in actual and potential partner organizations. Research undertaken by McKenna (1999, p. 775)
Proactive leadership Schein (1992) has made various links between organizational culture and leadership. One of the key points to emerge from the literature is that the value system of top management can be transferred to those lower down the hierarchy and as a consequence staff throughout the organization can improve the image of the organization by transforming their energies into certain outputs. Bearing this in mind, organizational performance can be improved through ensuring that the guiding beliefs of senior managers override the daily beliefs of subordinate staff (Davis, 1984). This being the case, it should be possible for new leadership styles to emerge that lead to change being appropriately managed. It also means that current thinking relating to leadership style as explained by Kakabadse (2000) needs to be viewed positively by all the employees of the organization as
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transformational leadership is a necessary form of empowerment that leads to new initiatives being put forward which ensure that existing challenges are dealt with in a positive and speedy manner. Indeed, one of the advantages of transformational leadership, for example, is that about changing the status quo (Hughes et al., 1999, p. 291) and does to a certain degree require that managers and their subordinates are on the same wavelength. Hence, an organization’s value system can be defined and can manifest in a specific corporate communication process, that underscores the value of a specific leadership style. According to Patton (1990, p. 157), action research can be used to focus on a specific problem within a programme/organization/community. Owing to the fact that research can be undertaken of a confidential nature, it is true to say that the research findings are not always made available to a wider public. Aspects of the research outcome can and do appear in the form of summaries and recommendations, which are then circulated to appropriate people for further discussion and debate (Patton, 1990, p. 158). In the case of an organization appointing a new leader, it can be argued that there are reasons for appointing an internal candidate (to maintain continuity) or an external candidate (to improve the image of the organization and raise the level of confidence of the shareholders). Action research can be used to establish if it is appropriate to appoint an external leader, and if so, who should be appointed.
Marketing covers a broad range of issues. Bearing this in mind it can be suggested that action research can be used to study whether the product development process needs to be changed; how pricing policies (and especially Internet pricing, for example) can be devised and implemented; and how distribution channels can be reconfigured. The issue of market entry may surface and need attention. Regarding restructuring distribution, it is possible to suggest that research may need to be undertaken that involves and incorporates the view of staff at several partner organizations. Thus, collaborative research may be the most appropriate way in which to obtain relevant data and information, and may witness the global marketing group or global brand group establishing the parameters of the research.
The network approach to business development Krapfel et al. (1991) have indicated that when appraising suppliers, it is necessary to think in terms of substitutability, indispensability and common interests. A key factor in determining whether a supplier organization will be given renewed/increased business is whether their staff can meet quality objectives, price objectives and delivery objectives. This means that the level of customer service provided by the supplier organization needs to conform to the level of customer service provided by the manufacturer (Geyskens et al., 1999). Achrol and Kotler (1999, p. 151) have indicated that marketing can be viewed from the stance of a network integrator and this in turn suggests that marketing managers will be involved in strategic decision-making, for example. It also suggests that marketers will become more involved in the formulation and implementation of partnership arrangements, and will participate more fully in strategic alliances.
Strategic marketing focus The strategic marketing concept as outlined by Aaker (1992) is becoming increasingly relevant and marketing managers have to think much more carefully about market entry decisions. In the years ahead, marketing managers will need to spend time devising new forms of market intelligence, both systems and processes, to consider the actions of organizations involved in strategic alliances, as these forms of organizational configuration have changed the dynamics of the market place. A strategic marketing approach will provide a basis for relationship marketing and this should facilitate the customer relationship management process. The strategic marketing approach can also be used by marketing managers to identify synergistic business activities (Doyle, 1994) that result in fitness (Porter, 1996) being achieved. Pulendran et al. (2003, p. 492) have indicated that “the impact of marketing planning quality on business performance is indirect rather than direct”. This raises all sorts of questions ranging from who within the organization is involved in the marketing planning process to issues such as the degree of formalization that exists in the planning process. In some organizations it is possible that in-house economists provide data and conceptual inputs and in specific industries that are susceptible to fluctuating market conditions and/or huge investments in technology, for example, it is possible that marketing planning is based on or incorporates some form of scenario analysis. Should scenario analysis or some other forward planning device(s) be used, it is possible that marketers work alongside economists and mathematicians, and that the organization sponsors some aspect of a particular university business school’s programme offering or a line of research or recruits a specific type of student.
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What one has to remember is that what is deemed formal in one cultural setting may be perceived as informal in another, or the degree of formality may be different. With respect to the latter, it is clear that Japan and South Korea represent collectivist cultures, however, Japanese people consider that disagreement should not result in open conflict even if change is necessary whereas people in South Korea believe that a disagreement can result in conflict if change is necessary. This may be an over simplification, but the key point to note is that cultural traits found in a nation’s value system are evident within organizations (they manifest in the decision-making process). Hence, it is possible to predict what might happen in a situation where the values of one cultural group collide with the cultural values of another cultural group. This is an important fact to remember when studying international partnership arrangements. To fully understand what is happening requires that marketing staff have a reasonably detailed knowledge of the country from where the other cultural group originate, and furthermore, have a sound appreciation of how flexible the cultural value system is of the people that the organization is doing business with. Action research is appropriate for studying complex issues. It can also be said that action research can be used to bring about reflection within an organization. In other words, although senior managers are keen to solve marketing problems and move on to the next set of problems, it is essential that there is a period of reflection that allows those that have been involved in the decision-making process (and their subordinates), to think through more deeply the consequences of their actions. Patton (1990, p. 158) is right to point out however, that “Research can be a highly political activity that generates opposing opinions and strong emotions”. Often people in positions of power are reluctant to authorize change as it can be viewed as an erosion of their own power base within the organization. A commitment to action research can change this misconception and bring about what Biott (1996, pp. 171-2) calls an “emergence of a new researcher identity”. If people at the apex of the organization are committed to ensure that more transparency results in more effective decision-making, then action research can be used to implement a research culture within the organization that has the additional benefit of encouraging the employees to think more critically about how decisions are made and implemented. This would place the strategic marketing concept within its rightful context, as the concept itself does incorporate reflection.
It is useful, however, to pause and consider what a researcher involved in qualitative research is trying to achieve. For example, Gummesson (2000, p. 116) has indicated that action research is both demanding and far-reaching. This would suggest that those embarking upon action research should anticipate future problems well before they materialize and think of ways to deal with the problems before they become insurmountable. One can cite many potential problems, however, the key point to note is that the researcher may need to formulate a contingency plan in advance of the research being undertaken and also may need to lobby a number of senior managers in advance that the necessary political support is forthcoming. Action research in organizations does expose a number of issues and problems, and it is inevitable that some members of staff will feel that they are at risk. Staff who are exposed may behave in a manner that cannot be anticipated, and that is why it is crucial that those involved in the research project think through carefully the possible consequences in advance of the research commencing.
Customer service policy Cook (1992) has provided some useful insights into the concept of customer service and Rowley (2000) has indicated that satisfied customers experience an increasing level of expectation once their immediate satisfaction level has been satisfied. Christopher et al. (1991) and Payne and Frow (1999, p. 799) have indicated that it is cheaper for an organization to retain the customers that it has than for marketers to gain new customers. Rubin (1995, p. 25) has indicated that there is a link to customer retention and profitability, and Parasuraman (1997) has made the link between an organization providing a high level of customer service and being able to achieve a sustainable competitive advantage. It is important to keep in mind that customers are inherently different (Weitz et al., 1995) and their differences can be gauged and monitored by facilitating technology such as the Internet. The Internet is considered valuable with respect to gaining feedback from customers (Rich, 2000), however, Trim and Tanudjaja (2001, p. 91) are correct to point out that marketers need to study how the Internet can be used to develop marketing relationships. The concepts of trust and loyalty also come to attention and Nooteboom et al. (1997, pp. 311-15) have made a useful contribution to the body of knowledge by stating that the dimensions of trust need to be known in order that the role which trust plays is fully
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understood. Therefore, it is clear that marketers need to think in terms of mutuality if brand loyalty is to be achieved; and this can be achieved through accurate market segmentation (Trim and Lee, 1999, p. 65). There is no doubt that in the years ahead, marketers will need to undertake research that provides a better understanding of how customers think and what motivates them. Various qualitative research methods can be used including focus groups, in-depth personal interviews and small group interviews, for example. Action research can be used to devise customer focused support programmes, which result in customer expectations being met. Case studies highlighting the best practice of customer service can be used as in-house training vehicles, and current and future areas of research activity can be identified.
However, trust-based relationships need to be based on an accurate form of market segmentation (Christopher et al., 1994, pp. 6 and 30-1; Gronroos, 1994, pp. 10-13). It also means that internal relationships (between managers and subordinate staff) also need to be managed appropriately (Piercy, 1995, pp. 26-7). One way in which paradigm shifts can be fully understood and appreciated is through a research culture. A research culture can and does get staff to question events, outcomes and broadens the decision-making capability of the organization. Marketing strategists, and marketing planning and intelligence personnel, can be made responsible for implementing a culture change within the marketing function. This will bring to the surface what is referred to as self and social identities (Biott, 1996, pp. 173-5), and will result in a commitment to practitioner-oriented research. Biott (1996, p. 177) has made a useful contribution to the body of knowledge by suggesting that: “Insider practitioner research, like many other aspects of social interaction in workplaces, is often shaped by caution, strategic common sense, compromise, reciprocity and unspoken truces. This is as much about establishing and maintaining favourable relationships, as it is about reducing risk and protecting self-interest”. One logical lesson to be deduced from this quotation would appear to be that those involved in the action research process need to think carefully about continued access as it would seem that if access is denied at any point, the research outcome may be less effective than anticipated. Should this be the case, it might be that the organization is less inclined to favour a research culture and as a consequence the status quo is maintained. What the researcher has to understand is that the term access covers a number of factors and the consequences associated with power and authority need to be understood (Hammersley and Atkinson, 1996, p. 64). When canvassing support for an action research project, a researcher needs to demonstrate that they know what benefits will be derived from the research and what assistance they will need from personnel within the organization.
Relationship marketing In order to have a customer service policy in place, it is necessary to have a customer-oriented culture that underpins the concept of relationship marketing (Lewis and Gabrielsen, 1998, p. 66). This being the case, it should be possible for marketing managers to formulate and implement a customer driven marketing oriented strategy (Doyle, 1994; Porter, 1996). When auditing the marketing strategy process, it is realistic to suggest that marketers need to have a firm understanding of how their colleagues view the customer development and retention process. For example, Gummesson (1999, p. 9) has suggested that relationship building, and in particular the development of long term relationships, need to be viewed from a win-win perspective. This suggests that the relationship marketing concept represents a paradigm shift in marketing as indeed Gronroos (1996) has suggested. As a result of this paradigm shift, both marketing practitioners and marketing academics need to think in terms of new ways to develop and test new marketing theories and approaches. A number of issues emerge which need attention. For example, it can be suggested that we are living in an image-oriented era, and because of this, both individuals and organizations are concerned about the way in which they are viewed and perceived. Wei (2002) has highlighted why it is necessary to differentiate between image and identity, and has linked psychology to image enhancement and perception. Market-driven companies are implementing customer-focused strategies and this is to provide higher levels of customer satisfaction (Achrol and Kotler, 1999, p. 147). In order to be effective, a long term relationship needs to be based on mutual trust.
Security management The link between security management and marketing has not been fully explored in the literature. Trim (2002, pp. 262-3) has indicated that security will hold the attention of staff at the apex of the organization for years to come. As well as issues of fraud and industrial espionage, the work of computer hackers will need attention. Indeed, senior management will need to ensure
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that there is a formal security policy operating within the company and that key staff have links with staff employed by relevant trade associations (Trim, 2002, p. 264). In order that the necessary security barriers are in place, senior management will be required to put in place a framework that guarantees that the corporate intelligence activity within an organization is underpinned by a commitment to security and intelligence work (Trim, 2001). Security is an area of activity that can be more thoroughly researched. At present, too few individuals within an organization are charged with determining security policy and implementing security systems. There is an opportunity in most types of organization to undertake securityoriented research that involves staff within the organization working with staff from computer security technology companies. Various action research projects can be devised and implemented in the area of security, and this is expected to become a common practice. For example, security action research projects would meet the criteria laid down by Easterby-Smith et al. (2003, p. 10) because they would have “a direct and immediate impact”. It would also ensure that those involved in action research projects learn from the research process (Easterby-Smith et al., 2003, p. 10). Ultimately, security-oriented action research should result in security being viewed as a core activity and given representation at board level.
In order to meet the objectives set, the various marketing managers will need to be effective communicators, exhibit a proactive leadership style and be committed to achieving excellence. Should this be the case, it is possible that a learning organization culture will be developed and this will ensure that long lasting partnership arrangements are formulated. In order to be successful, long term partnership arrangements need to be based on trust, and need to be continually reinforced through constant communication. There is no doubt however, that the years ahead will be reasonably unpredictable, and marketing intelligence and planning will assume a higher profile within companies. This means that issues such as security and intelligence work will need to be viewed differently than they are at present, and that security management will become a core activity. Qualitative research and in particular, action research, is expected to provide business practitioners, with a means for establishing a research culture within an organization. A number of action research projects can be devised that are aimed at improving the performance of individuals and the organization itself. By ensuring that a research culture materializes, it should be easier for senior management to transform the organization into a learning organization. Once a learning organization culture has been established, various initiatives can be introduced to ensure that managers adopt a proactive approach to problem solving. This in turn should result in greater transparency and a highly motivated workforce.
Conclusion The strategic marketing concept is both relevant and useful as it integrates a number of related and semi-related bodies of knowledge into a logical way of analysing and interpreting the actions of companies, customers and governments. The strategic marketing concept also allows marketing mangers to establish how the business environment is changing and allows various mechanisms to be put in place to monitor developments as and when they occur. In order to remain competitive, a company will be required to develop a sustainable competitive advantage that it can maintain through time. This means that senior management will need to ensure that the company invests in the latest technology and furthermore, various marketing managers are required to identify how their subordinates can develop their skill base through time. Marketing managers will increasingly need to work more closely with specialists in the human resource management function to put in place staff development programmes. This should ensure that staff have the relevant skills that they need to undertake a growing range of complex assignments.
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Literati Club
Awards for Excellence Annelies Verdurme and
Jacques Viaene Ghent University, Ghent, Belgium are the recipients of the Journal’s Outstanding Paper Award for Excellence for their paper
‘‘Exploring and modelling consumer attitudes towards genetically modified food’’ which appeared in Qualitative Market Research: An International Journal, Vol. 6 No. 2, 2003 Jacques Viaene is Professor of Agricultural Economics at the Department ‘‘Agricultural Marketing’’ at the Faculty of Agricultural and Applied Biological Sciences, University of Ghent. Teaching and conducting research on Agricultural Marketing, Price Analysis, Agricultural Economics and Agricultural Extension. He has been project leader of many research projects and studies about agro-marketing in Belgium, EU and East and Central European Countries. Annelies Verdurme in 1999 graduated as Bio-engineer (masters) in cell and gene biotechnology at Ghent University. During the next four years she was involved in her doctoral research at the department of agricultural economics about, Consumer attitudes towards genetically modified food and the development of a segmented communication. All together seven papers were published on this topic and she obtained her doctorate in February 2003. Since then she is marketing manager at Nielsen company.
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