Field Guide to Case Study Research in Business-To-Business Marketing and Purchasing 9781784410797, 9781784410803

Citation preview

FIELD GUIDE TO CASE STUDY RESEARCH IN BUSINESS-TOBUSINESS MARKETING AND PURCHASING

ADVANCES IN BUSINESS MARKETING & PURCHASING Series Editor: Arch G. Woodside Recent Volumes: Volume 7:

Advances in Business Marketing and Purchasing

Volume 8:

Training Exercises for Improving Sensemaking Skills

Volume 9:

Getting Better at Sensemaking

Volume 10: Designing Winning Products Volume 11: Essays by Distinguished Marketing Scholars of the Society for Marketing Advances Volume 12: Evaluating Marketing Actions and Outcomes Volume 13: Managing Product Innovation Volume 14: Creating and Managing Superior Customer Value Volume 15: Business-to-Business Brand Management: Theory, Research and Executive Case Study Exercises Volume 16: Organizational Culture, Business-to-Business Relationships, and Interfirm Networks Volume 17: Interfirm Networks: Theory, Strategy and Behavior Volume 18: Business-to-Business Marketing Management: Strategies, Cases, and Solutions Volume 19: Reflections and Advances in Honor of Dan Nimer Volume 20: Deep Knowledge of B2B Relationships within and across Borders

ADVANCES IN BUSINESS MARKETING & PURCHASING VOLUME 21

FIELD GUIDE TO CASE STUDY RESEARCH IN BUSINESS-TO-BUSINESS MARKETING AND PURCHASING EDITED BY

ARCH G. WOODSIDE Department of Marketing, Carroll School of Management, Boston College, MA, USA

HUGH M. PATTINSON School of Business, University of Western Sydney, Sydney, Australia

ROGER MARSHALL Marketing Department, Auckland University of Technology, Auckland, New Zealand

United Kingdom North America India Malaysia China

Japan

Emerald Group Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2014 Copyright r 2014 Emerald Group Publishing Limited Reprints and permission service Contact: [email protected] No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-78441-080-3 ISSN: 1069-0964 (Series)

ISOQAR certified Management System, awarded to Emerald for adherence to Environmental standard ISO 14001:2004. Certificate Number 1985 ISO 14001

CONTENTS LIST OF CONTRIBUTORS

vii

PREFACE

ix

DEAL-MAKING NEGOTIATIONS BY GOVERNMENTS AND MAJOR PRODUCT SUPPLIERS: A CASE STUDY OF THE U.S. DEPARTMENT OF DEFENSE AND AIRBUS VERSUS BOEING Michael Kleinaltenkamp, Ronny Behrens and Stefanie Reh

1

THE PARABLE OF A LITTLE RESEARCH: MAKING MONEY FROM AN INTERNET TRADING PORTAL Roger Marshall and Poh Tze Peng

13

BUILDING RELATIONSHIPS FOR SURVIVAL: COPING MEDIA INDUSTRY DYNAMICS Thomas Mejtoft

39

BARRIERS TO INNOVATION DIFFUSION IN INDUSTRIAL NETWORKS: A SYSTEMATIC COMBINING APPROACH Juho-Petteri Huhtala, Pekka Mattila, Antti Sihvonen and Henrikki Tikkanen USING DISCOURSE ANALYSIS IN CASE STUDY RESEARCH IN BUSINESS-TO-BUSINESS CONTEXTS Nick Ellis and Michel Rod

v

61

77

vi

CONTENTS

ETHNOGRAPHIC RESEARCH IN SERVICE MARKETING: THEORY, METHODS, AND PRACTICE Catharina von Koskull

101

A PRIMER TO THE GENERAL THEORY OF BEHAVIORAL STRATEGIES IN BUSINESS-TOBUSINESS MARKETING Arch G. Woodside

147

B2B INTERACTIONS AT TRADE FAIRS AND RELATIONSHIP QUALITY: A CONCEPTUAL APPROACH Maria Sarmento, Cla´udia Simo˜es and Minoo Farhangmehr

167

IMPLEMENTING STRATEGIC CHANGES TO GENERATE SUSTAINABLE COMPETITIVE ADVANTAGE Rube´n Llop and In˜aki Garcı´a-Arrizabalaga

191

MAKING SENSE OF MARKETING DECISION SYSTEMS THROUGH PICTORIAL REPRESENTATION: DECISION SYSTEM ANALYSIS Roger Marshall, David Bibby and WoonBong Na

211

NEW B2B METHODS, TECHNIQUES AND TECHNOLOGIES FOR CAPTURING INSIGHTS OF MAJOR ACCOUNT MANAGERS: DEVELOPING B2B COMMUNITIES FOR ENERGY SUPPLY Suresh C. Sood and Hugh M. Pattinson

227

FACTORS DRIVING MANUFACTURING FLEXIBILITY: THE TAIWANESE CASE Wen-Hsiang Lai and Roger Marshall

255

USING CASE-BASED RESEARCH FOR AGENT-BASED MODELLING Sharon Purchase, Sara Denize and Doina Olaru

271

LIST OF CONTRIBUTORS Ronny Behrens

Marketing Department, Freie Universita¨t Berlin, Berlin, Germany

David Bibby

Marketing Department, Auckland University of Technology, Auckland, New Zealand

Sara Denize

School of Business, University of Western Sydney, Sydney, Australia

Nick Ellis

Durham University Business School, Durham, UK

Minoo Farhangmehr

School of Economics and Management, Minho University, Braga, Portugal

In˜aki Garcı´aArrizabalaga

Deusto Business School, University of Deusto, San Sebastia´n, Spain

Juho-Petteri Huhtala

Aalto University School of Business, Helsinki, Finland

Michael Kleinaltenkamp

Marketing Department, Freie Universita¨t Berlin, Berlin, Germany

Wen-Hsiang Lai

College of Business, Feng Chia University, Taichung, Taiwan

Rube´n Llop

EADA Business School, Barcelona, Spain

Roger Marshall

Marketing Department, Auckland University of Technology, Auckland, New Zealand

Pekka Mattila

Aalto University School of Business, Helsinki, Finland

vii

viii

LIST OF CONTRIBUTORS

Thomas Mejtoft

Department of Applied Physics and Electronics, Umea˚ University, Umea˚, Sweden

WoonBong Na

College of Business Administration, KyungHee University, Seoul, South Korea

Doina Olaru

UWA Business School, Perth, Australia

Hugh M. Pattinson

School of Business, University of Western Sydney, Sydney, Australia

Poh Tze Peng

Exporters.sg, Singapore

Sharon Purchase

UWA Business School, Perth, Australia

Stefanie Reh

Marketing Department, Freie Universita¨t Berlin, Berlin, Germany

Michel Rod

Sprott School of Business, Carleton University, Ottawa, Canada

Maria Sarmento

School of Economics and Management, Minho University, Braga, Portugal

Antti Sihvonen

Aalto University School of Business, Helsinki, Finland

Cla´udia Simo˜es

Open University Business School, Open University, Milton Keynes, UK

Suresh C. Sood

Advanced Analytics Institute, University of Technology, Sydney, Australia

Henrikki Tikkanen

Aalto University School of Business, Helsinki, Finland; Stockholm University School of Business, Stockholm, Sweden

Catharina von Koskull

Department of Marketing, CERS Centre for Relationship Marketing and Service Management, Hanken School of Economics, Helsinki, Finland

Arch G. Woodside

Department of Marketing, Carroll School of Management, Boston College, MA, USA

PREFACE THE ARGUMENT FOR CASE STUDY RESEARCH Case studies have so many advantages for writers, readers, researchers, and educators; it is such a shame that most academic assessment systems give them so scant credit. For writers, there is an enormous freedom. No ironclad rules exist about form when writing a case study, no limits to topics or frames, often even the loosest of length restrictions. A glance at the table of contents of this volume of business-to-business case studies illustrates this freedom. The case study author can choose to write in a formal manner, very similar to an academic research paper or in a casual, story-like manner. Arch G. Woodside, in his chapter about developing a general theory of behavioral pricing, chooses a formal, research-paper style. In stark contrast, Roger Marshall and Poh Tze Peng write their case study, about the development of a business-to-business online trading exchange, almost as a novelette; a simple story narrated simply. Length is typically restricted by academic journals, and it is hard to find a journal home for any paper under 5,000 or over 8,000 words. Yet Michael Kleinaltenkamp, Ronny Behrens, and Stefanie Reh in their chapter communicate a very powerful message about the political hooks that decision makers need to recognize when a foreign company competes with a domestic business they require only 3,500 succinct words. On the other hand, the virtues of a “thick description” are widely extolled for ethnographic studies, but how can such a comprehensive, meticulous study be contained within 10,000, or even 12,000 words? Catharina von Koskull uses over 16,000 words in her fascinating study of the uses made of customers’ information when a bank sets up a new online interface. This book carries a theme, of course, it is all about businesses trading, relating and competing with other business; but within that frame what a scope there is for topics! Even within this modest collection topics span Internet trading, business-to-government marketing, banking decisions, trade fair interactions, behavioral pricing, and manufacturing flexibility. A similar story is told of the methods embraced; indeed, there seems no limit to method. It is a common misperception that case study research is ix

x

PREFACE

qualitative. That this need not be the case is illustrated in their chapter by Sharon Purchase, Sara Denize, and Doina Olaru, who argue the case for case studies as a platform for agent-based modeling, through Suresh C. Sood and Hugh M. Pattinson’s suggestions in their chapter about casebased netnography and behavioral informatics, to Wen-Hsiang Lai and Roger Marshall’s use of quantitative survey and fuzzy logic data within his case study. For the reader, there are also great benefits to case studies. It is well documented that business people relate far more strongly to “vivid” information than to statistical (Kosslyn, Ganis, & Thompson, 2003). Vivid, in this information processing context, implies that the reader has sufficient existing memory nodes that the new information triggers a strong mental image. Thus, a typical businessperson confronted with a decision is far more likely to listen to anecdotal evidence from a fellow-businessperson speaking on the golf course than to statistical decision support information in the office. Many managers simply do not relate to “dry” statistics; do not have the mental imagery to translate the numbers into a decision, but they do strongly identify with a story told about a decision situation even slightly similar to theirs. Case studies have an advantage over conventional research reports that many of those reading a case study can form mental representations within their cognitive system, connecting the situation in the case to their own, and helping them to reach insights into their particular decision circumstance. Thus, for instance, Thomas Mejtoft in their chapter discusses survival in the printing industry. Any businessperson whose business is threatened by technological advances will immediately respond to the very vivid imagery triggered in their mind. Similarly, in their chapter Juho-Petteri Huhtala, Pekka Mattila, Antti Sihvonen, and Henrikki Tikkanen discuss another situation where survivalist competitive actions impede innovation flows through and industry. A drier report of a research project that carries the same message as these will simply not engage the reader the same way what businessperson has not encountered self-serving competitive behavior that disadvantages the whole marketplace and all those within it? Finally, other than advantages for the author and the reader, good case studies are both environmentally valid and academically rigorous. The trade-off is with generalizability, which is sacrificed by setting research into a particular situation; but that same placement shows clearly the applicability of the theory or idea in the circumstance described. So,

xi

Preface

Kleinaltenkamp, Behrens, and Reh describe a situation where existing business relations and their binding effects influence subsequent behavior. In their case study, in spite of a superior product offering by a new potential supplier, the incumbent wins the contract. This outcome is clearly not a generalizable truth, yet undeniably this occurred within the particular relationship described in the case study and the cause and effect within the situation are very clearly defined. Woodside and Wilson (2003) explain how case studies can achieve a deep understanding of processes. Processes can be as (apparently) straightforward as a contract negotiation (chapter titled “The Parable of a Little Research: Making Money from an Internet Trading Portal”), online management of a major account (chapter titled “New B2B Methods, Techniques, and Technologies for Capturing Insights of Major Account Managers: Developing B2B Communities for Energy Supply”), photovoltaic innovation (chapter titled “Factors Driving Manufacturing Flexibility: The Taiwanese Case”) or survival in a technology-threatened industrial sector (chapter titled “Building Relationships for Survival: Copying Media Industry Dynamics”); case studies such as these can reach below the surface occurrences to identify the motivations of the players that determine the sequence of events. Academic rigor in case study research is often attained by using multiple sources of information, multiple methods, to offer triangulation focused upon a single outcome, or process (Woodside, 2010). This is clearly discernable in most the methods used in the cases in this volume. Examples from this case collection include decision system analysis, ethnography, and netnography, which all draw on multiple data sources including third party and participant observation, questionnaire responses, interviews, and document analysis. Other studies reported here use multiple analysis techniques, including comparative qualitative analysis, statistical analysis and geometric representation, all within the same study.

THE CASE STUDIES IN THIS BOOK There are 13 cases presented here. Each is quite different from the others, having unique mixtures of topics, methods, and purpose. This creates a good illustration of the richness of case study research, but makes it hard to cluster the chapters meaningfully. Nevertheless, an attempt is made.

xii

PREFACE

Short-Form Storytelling The first four chapters contain a case study that simply tells a short story. Chapter titled “Deal-Making Negotiations by Governments and Major Product Suppliers: A Case Study of the U.S. Department of Defense and Airbus versus Boeing,” the first case study, is the shortest in the book and the only case using entirely secondary data. Kleinaltenkamp, Behrens, and Reh discuss the situation of Boeing and Airbus vying for a major contract with the US Government. The twists and turns of this case are quite fascinating, and the message that emerges from the analysis speaks of the negotiation power of the incumbent business partner. All the data is sourced from public records but assembled to tell short, pithy, and insightful story. Chapter “The Parable of a Little Research: Making Money from an Internet Trading Portal” is yet more simplistic. The story, set in Singapore, that Marshall and Poh tell is how some very simple, typical, marketing research enabled a few inexperienced young men to turn a hobby Internet portal into a paying business-to-business trading company. The story is narrated in an informal, casual style, yet holds a fundamental truth. The marketing research conducted was typical of off-line endeavors, yet served very well within an Internet setting. Underlying whatever research is conducted there is an imperative to understand how relationships can be established and value added to them over time this is the very essence of business-to-business marketing. The third story-telling case study, by Thomas Mejtoft, explains about how both vertical and horizontal relationships have cushioned the impact of new media on the printing industry in Sweden. This is a story of business survival, which again hinges on value both tangible and intangible in business relationships. Huhtala and his colleagues, in Finland, are interested in a related phenomenon. They first began to investigate the flow of innovation through the advertising industry, but swiftly found themselves investigating barriers to diffusion. Using a variety of interview techniques, and iteratively referring to theory in a combining technique, they were able to identify the players in the industry network and also identify the blockages to innovation diffusion. Through constant reiteration and cross-referencing, the reasons for the disruption to the flow of ideas are identified as competitive, survival behaviors.

xiii

Preface

Longer Stories Chapter “Using Discourse Analysis in Case Study Research in Business-toBusiness Contexts” employs a more formal method, discourse analysis, to tell a longer story. This research is set in India and uses in-depth interviews to draw out beliefs, attitudes, intentions, and experiences from a very large sample of managers in that country, in order to explore the identity processes in Indian industrial networks. The analysis suggests what these social constructions mean for the management of buyer seller relationships, and goes some way toward addressing the dominant Western perspective prevalent in most studies of business relationships. The analysis also shows how discourse analysis can provide a rich analytical perspective on business-tobusiness relationships. Chapter “Ethnographic Research in Service Marketing: Theory, Methods, and Practice” is, by far, the longest in the book. Ethnography requires a thick description, and von Koskull provides such a description within the context of a bank designing and building a new Internet interface. The fieldwork took over one year and generated a plethora of rich data. The author first describes ethnographic methods and data collection modes, then moves on to describe the fieldwork findings. Finally, von Koskull discusses validity, reliability, and generality of the method and her particular case, and the coping tactics she used to manage this very long study.

Cases Concerned with Theory Development Woodside, in his chapter, uses inductive research to support theory. He first explicates the theory of behavioral pricing and then briefly describes a number of cases that support the theory. The methods for gathering data in the empirical studies are rich indeed; spanning a wide range from statistical hypothesis testing, through true field experiments to think-aloud methods. Woodside is able to conclude that behavioral pricing theory is distinct from context-free microeconomics, market-driven, and competitor-only price setting. This enriches and develops general theory to illustrate ways the managerial practice of pricing can be improved. The eighth case study concerns theory development. Maria Sarmento, Cla´udia Simo˜es, and Minoo Farhangmehr gathered insights from practi-

xiv

PREFACE

tioners and exhibitors through direct observation, informal contacts, and interviews at business-to-business trade fairs in Portugal during one year of fieldwork. They conclude that a relationship marketing focus is critical to trade-fair participation, and are able to offer valuable insights to all parties to optimize the trade fair experience. It has long been understood that trade fairs are among the most powerful communication persuasion vehicles in the business-to-business kitbag, but this is the first study, as far as the authors are aware, that places relationship development and management at the heart of the trade fair. The last of the theory-focused case studies is written by Spanish authors, Rube´n Llop and In˜aki Garcı´ a-Arrizabalaga, and is particularly contentious. These authors write as consultants, and draw from a large number of recovery, turn-around, and start-ups that they have personally managed this is, in a sense, participant observation. Their thesis is that when companies are faced with a crisis then they normally ignore competitive advantage and simply struggle to survive. These academics, however, believe that crisis provides a real opportunity to strategically seize the competitive high ground. Fifteen specific business cases are examined and a model developed from the analysis to support this theory.

Research Explaining the Use of Case Study Methods The four remaining cases all focus upon method rather than theory. All are set in a case study frame, but show how different research methods can be used to advantage in different situations. These methods embrace decision system analysis, agent-based modeling, fuzzy set qualitative comparative analysis, and netnography. First, in their chapter, Roger Marshall, David Bibby, and WoonBong Na revisit a decision system analysis (DSA) performed three decades ago, to update knowledge of advertising agency group decision-making systems. These researchers find that the industry has changed dramatically, and the whole process of campaign decision-making is now compressed and far more networked, as against the more linear form espoused earlier. New players are identified, but one of the most interesting findings is that the companies themselves are using a form of DSA to improve their performance. The methods of DSA are discussed and compared to alternative techniques. Sood and Pattinson in their chapter present a cutting edge exposition of netnography, explaining the multiple methods that are typically bought to

Preface

xv

bear to capture insights of online behavior. In this instance, their online case study vehicle is the sales activity required to create and manage online communities for major accounts of energy suppliers in Australia. The authors offer insights into how such a marketing network can be integrated into existing structures and give a broad guide to the complex business of optimizing the big data opportunities that assist in the management of the network. Chapter “New B2B Methods, Techniques, and Technologies for Capturing Insights of Major Account Managers: Developing B2B Communities for Energy Supply” is a narrated story about how a Taiwanese academic, working as a consultant to the Government, conducted a wide-ranging study in order to help manufacturers attain more flexibility. The study followed typical consulting procedures, where a large sample of senior managers of manufacturing concerns served as an expert panel to advise the academic. What is unique in this case is that after gaining the groups’ acceptance of a hierarchical set of theoretical flexibility factors, these were rearranged as pictorial representations of fuzzy logicderived plane surfaces, which were finally represented to the business managers as a set of ordered propositions designed to identify the key factors contributing to flexibility. There is empirical value in the case, but the research method is an interesting, layman-friendly, slant on a rigorous research method. In the final chapter, Purchase, Denize, and Oluru address a gap in the methodology literature by including case data within agent-based model building processes. B2B marketing researchers are offered a guide to the processes and principles of using case-based data to build simulation models. Do read and enjoy any, or all, of these case studies. If your imagination is caught by some method, topic or situation that is particularly vivid to you, then it is quite possible that you will see a solution to a problem of your own, be inspired to write your own case study, use a research method never tried before, or find a way in which your knowledge domain could be enhanced. Arch G. Woodside Hugh M. Pattinson Roger Marshall Editors

xvi

PREFACE

REFERENCES Kosslyn, S. M. L., Ganis, G., & Thompson, W. L. (2003). Mental imagery: Against the nihilistic hypothesis. Trends in Cognitive Sciences, 7, 109 111. Woodside, A. G. (2010). Case study research: Theory, methods, practice. Bingley, UK: Emerald Group Publishing Ltd. Woodside, A. G., & Wilson, E. J. (2003). Case study research methods for theory building. Journal of Business & Industrial Marketing, 18(6 7), 493 508.

DEAL-MAKING NEGOTIATIONS BY GOVERNMENTS AND MAJOR PRODUCT SUPPLIERS: A CASE STUDY OF THE U.S. DEPARTMENT OF DEFENSE AND AIRBUS VERSUS BOEING Michael Kleinaltenkamp, Ronny Behrens and Stefanie Reh ABSTRACT This short case study deals with the analysis of the airborne refueling tanker contract placed by the U.S. Department of Defense to the U.S. group Boeing. The data used in this case is all drawn from secondary sources, and the story told chronologically. Initially, the scene is set with a discussion of the types of relationship, planned and de facto, that emerge when companies do business with each other, and an analysis of the situations when different emphasis is placed upon specific benefits and costs of the relationship. Discussion continues around the concept that

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 1 11 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021011

1

2

MICHAEL KLEINALTENKAMP ET AL.

relationship benefits are perceived as more important for the continuation of a relationship than relationship costs when relationship value, direct switching costs, and sunk costs exist, the search for a new partner is reduced. The question of why Boeing was favored by the U.S Department of Defense over competing Airbus Industries stands in the center of this analysis. The analysis explains how existing business relations and their binding effects, as well as resulting advantages and disadvantages, influence subsequent behavior. Keywords: Airborne; Airbus industries; bidding; Boeing; U.S. Department of Defense

THEORY Business relationships are subsequent results of transactions between two companies, a supplier and a customer. These transactions do not occur randomly. In other words, there are good reasons for both of them to connect with each other and therefore an endogenous connection between the two companies exists (Kleinaltenkamp & Ehret, 2006). There are two ways these relationships can arise. Planned relationships are the result of a conscious decision for making business with the partner; for example, because companies have made specific investments when dealing with each other for the first time. In subsequent transactions each company is locked in and forced to deal with the other company for a certain time in order to prevent losses resulting from the lock-in. However, the second form of relationship, unplanned or de facto, is established during a longer period of time. They gradually increase because of good prior experience in dealing with each other. Expectations turn into experiences and, as a result, the companies rely on each other. Thus, unplanned relationships often result in commitment and customer loyalty. “People stay in relationships for two major reasons: because they want to and because they have to” (Johnson, 1982, p. 52). This is also true for business relationships. In the case of a voluntary binding (“want to”) the buying company stays because it is interested in continuing the relationship because of economic reasons. Whereas, in the case of an involuntary binding (“have to”) the customer stays in the relationship because the company sees itself forced to continue the relationship. Voluntary binding

3

A Case Study of the U.S. DoD and Airbus vs. Boeing

effects result from a relationship value that is perceived by the buying party. This relationship value has a positive connotation explaining why the transaction partner does not want to get out of the relationship. Involuntary bindings are based on switching costs; that is, costs which occur with a switch of provider. Typically three types of switching costs are distinguished (Jackson, 1985; Klemperer, 1987): sunk costs, opportunity costs, and direct switching costs. Sunk costs or committed costs arise when specific investments are made whose value would get lost if the business relationship is terminated. When a business relationship ends, opportunity costs arise because of the relationship’s value. Direct switching costs are connected with the change of a business partner, the ending of the former relationship (take-down costs), the search for better alternatives (search costs), and the establishment of new relationships (setup costs). Voluntary bindings are mainly based on the relationship value. Six value dimensions have been identified (Ulaga & Eggert, 2006), which differ in three relationship benefits and three relationship costs according to the core offering, sourcing process, and customer operations (Table 1). In empirical studies it has been shown that relationship benefits are perceived as more important for the continuing of a relationship than relationship costs (Geiger et al., 2012; Ulaga & Eggert, 2006). There are also important relations between the different dimensions of bindings and their consequences; relationship value reduces the probability of changing the business partner. In addition, direct switching costs and sunk costs downsize this probability. On the contrary, relationship value and direct switching costs increase the willingness to intensify the collaboration. Additionally, these three binding dimensions enhance the tolerance in the relationship. When relationship value, direct switching costs and sunk costs

Table 1.

Dimensions of the Relationship Value. Benefits

Core offering Sourcing process Customer operations

Product quality Delivery performance Service support Personal interaction Supplier know-how Time-to-market

Source: Ulaga and Eggert (2006, p. 122).

Costs Direct costs Acquisition costs Operation costs

4

MICHAEL KLEINALTENKAMP ET AL.

exist, the search for alternatives and additional partners is minimized. Only sunk costs increase the search for additional partners, because the enterprises do not want to be locked in (Geiger et al., 2012). Following these binding effects a distinction is made between in-suppliers and out-suppliers. In-suppliers already are in a business relationship; outsuppliers have to acquire a relationship first. Thus, in-suppliers usually are in a better position than out-suppliers. Their aims are to increase the quasi rents and to secure the client binding for repetitive purchases. Out-suppliers’ goals are to replace the current in-supplier and to make a change attractive for the client. They have to establish a business relationship by building up confidence in individual transactions.

THE COMPETING COMPANIES: AIRBUS AND BOEING First, we introduce the main competitors for the airborne refueling contract, Boeing and Airbus. The U.S. company, Boeing, is the biggest manufacturer of civil and military aircrafts and helicopters worldwide. It employs 165,000 employees and had a turnover of 63.4 billion USD in 2010. Boeing already produced and supplied the first series of tankers for the U.S. Department of Defense (DoD) in the 1950s, and is therefore to be seen as the in-supplier having an advantage in knowledge when cooperating with the DoD. The U.S. Government subsidizes even research and development. They introduced the KC-46A to take part in the competition, which is a redevelopment based on the smaller and older commercial airliner Boeing 767. But except for in Japan and Italy, Boeing lost against Airbus in every other foreign countries’ request for proposals (N.U., 2010, March 3; N.U., 2011, February 24). Boeing and Airbus Industries, the European subsidiary of the European Aeronautic Defense and Space Company (EADS), form the dominant duopoly in the large-capacity aircraft market. With its 52,500 employees and a sales volume of 30.4 billion USD, Airbus is also one of the largest aircraft manufacturers worldwide. But it was not yet represented on the lucrative U.S. market, and had never cooperated with the DoD. For this reasons it has to be seen as the out-supplier. To that effect, the cooperation with the U.S. aerospace and defense company Northrop Grumman offered better chances to Airbus to win the competition by granting access to knowledge about the targeted market. Introducing the KC-45, a modified version of the Airbus A330, an already

A Case Study of the U.S. DoD and Airbus vs. Boeing

5

approved aircraft, Airbus was hoping to win the competition to lower its dependence on the euro area (N.U., 2011, February 24).

HISTORICAL BACKGROUND One of the most important binding effects is the relationship value. But in order to be able to examine it, it is necessary to analyze the past events up to the crucial tender. In November 1953, the Strategic Air Command (SAC) predecessor of the United States Strategic Command and at that time responsible for the ability to reach and attack every possible enemy target around the globe recommended buying 200 tanker airplanes for the budgetary year 1954. Six competitors, namely Consolidated Vultee Aircraft Corporation, Douglas, Fairchild, Martin, Lockheed, and Boeing took part in the tender procedure on May 5, 1954. But Boeing had a significant advantage at that time. They started investing money into research about a novel jet propulsion system in the early 1940s, and decided to spend 16 million USD at their own risk for the development of a new strategic bomber. The result of their efforts was the Boeing 367-80, also known as the Dash 80, which had its rollout on the May 14, 1954. Furthermore, they started autonomous studies with the flying broom, a rigid, controllable telescopic boom, which is able to transfer 2,300 liters of fuel per minute, instead of the 950 l/m the old standard hose was capable of, in 1948. Since the competitors’ models only existed on the drawing board, their chances of winning were comparatively small. On August 3, 1954, the SAC declared that they were in need of an interim solution until all competitors are ready. They ordered 29 tanker airplanes from Boeing, worth overall 150 million USD. Two weeks later, another order was placed: a further 88 tanker airplanes for another 240 million USD. Moreover, the Dash 80 finally got its own military designation: KC-135A (N.U., 2004, September 15). Finally, in February 1955, the winner of the tender was announced: Lockheed won and was contracted to build a prototype of their tanker model. But again, the order with Boeing was increased. So indirectly, Boeing won, because Lockheed’s prototype was all the United States Air Force (USAF) ordered from them. This paradox ending has triggered criticism and upset, which led to an investigation by the U.S. congress in February 1956. In the resulting report undue assistance was

6

MICHAEL KLEINALTENKAMP ET AL.

revealed as, for example, the USAF left workshops to Boeing and delivered military engines for commercial use to Boeing. However, that did not change the outstanding order, because only the KC-135A was available on short notice. During the following time, Boeing was charged with 10 orders for a total of 732 refueling tankers of the A-series (490 of them were still in use in 2008) and follow-up orders for tanker airplanes, which have been modified for special tasks, and for maintenance and repairs (N.U., 2005). A high level of satisfaction on both sides enabled a long cooperation, which also indicates a high relationship value.

2003 In May 2003, the USAF decided to lease 100 KC-767 tankers in order to replace the 136 oldest KC-135s, additionally having an option to buy the aircraft when the contract expired. This plan was criticized heavily for being too expensive, which resulted in an amendment to the leasing contract, now to purchase 80 and to lease 20 tankers. Nevertheless, buying one KC-767 would have cost 150 million USD, leasing it would make each plane 110 million USD more expensive. So by comparison, the new leasing contract would have caused 11 billion USD additional expenses for the DoD. The Republican politician John McCain, chairman of the economic committee at that time, voiced public criticism and suspected a deal that favored Boeing and put the taxpayers at a disadvantage. As a result, the project was stopped by the Pentagon in December 2003 and further investigations were undertaken because suspicions of corruption began to rise. In the course of the investigation Darleen Druyun, former Principal Deputy Undersecretary of the Air Force for Acquisition, and Boeing executives pleaded guilty and admitted expanding the price of the contract and passing over information about Airbus’ tanker A330 to Boeing, to benefit her future employer. Her partners in crime, also being responsible for her appointment at Boeing (annual income 250,000 USD + 50,000 USD bonus per year), were Michael Sears, CFO of Boeing by this time, and the former CEO of Boeing, Philip M. Condit, who later resigned. Druyun had to pay a fine of 5,000 USD and was sentenced to nine months in prison and 150 hours of community service. The contract with Boeing was revoked and Boeing had to pay a 615 million USD fine (Merle, 2004).

A Case Study of the U.S. DoD and Airbus vs. Boeing

7

2008 Meanwhile, in 2005, EADS won the Northrop Grumman Corporation as cooperation partner to take part in the competition. On January 30, 2007, the USAF issued a new request for proposals. The main requirements at that time were: a range and a fuel offload at least as great as the KC-135, the ability to absorb fuel inflight, and to fuel several aircrafts at a time, using the probe and drogue system. In addition, a new rating system was introduced: the integrated fleet air refueling assessment (IFARA) tool. Now, operative activities were rated by using realistic wartime scenarios. The IFARA-score and the price were intended to form the basis for the final decision. On February 29 the DoD announced that the joint venture between NRG and EADS had won the competition. The competitive price (12.5 billion USD against Boeing’s 15.4 billion USD for the first 68 aircraft), the higher IFARA-score (could accomplish missions with about 24 planes fewer), and the more rapid availability for delivery were the determining factors for the decision (N.U., 2011, December 29). But Boeing protested the evaluation process in March 2008 at the Government Accountability Office (GAO) in Washington. The GAO upheld the protest, criticizing seven points explicitly, and recommended the USAF to issue a new request for proposals.

THE SITUATION SINCE 2010 The latest call for tenders (CFT) was published on February 24, 2010, and its content was completely different from the former ones and thus could be seen as a totally new call. The CFT was exactly tailored for Boeing. They had smaller, less powerful tanker aircraft. All together there were three competing companies for this CFT: Boeing, EADS with Northrup Grumman, and the U.S. Aerospace with the Ukrainian aircraft manufacturer Antonow. Northrup Grumman soon quit because of the competitive conditions, which obviously favored Boeing. EADS now has to take part without Northrup Grumman. Although the conditions for EADS changed for the worse, both Boeing and EADS submit their offers in the time line (July 9, 2010). During this time Boeing had overall political binding effects. Members of Congress made intensive lobbying efforts. Boeing would add 50,000 new jobs in over 40 states. Another important move was that Boeing revised its

8

MICHAEL KLEINALTENKAMP ET AL.

model and now advertised with the argument that the production could be guaranteed any time at a suitable level for the Air Force. This can be seen as an obvious attempt to compensate the technical superiority of EADS (N.U., 2011, February 24). EADS wanted to build 48,000 new jobs as well as a completely new factory in Alabama, contributing to their objective to settle in North America as well. The fact that they still took part in the CFT, even though Northrup Grumman had left, established EADS in the U.S. defense market. EADS also made lobbying efforts and EADS’s tanker aircraft had won all the international CFTs of the previous few years (N.U., 2011, February 24).

ANALYSIS There are several reasons for awarding the order to Boeing; protectionism, patriotism, and lobby are only a few of them. But there are other important relational bindings that have to be checked in detail to understand their effects. It was already mentioned that voluntary bindings and involuntary bindings existed, which influenced the relationship between the USAF and the two main tenderers, Boeing and Airbus. Boeing was picked and so Boeing is considered to have had more intensive bindings to the USAF than Airbus. The core offering is an important aspect of voluntary binding. The CFT was exactly tailored for Boeing, so Airbus did not have any chance for offering a better core product. The quality of the core offering can be divided into product quality and delivery performance. In this regard Airbus’ quality was better, when one considers that all the other foreign countries had ordered aircraft from them they had more occasions to reengineer the planes. In contrast, the delivery performance from Boeing was already tested in the last orders. The fact that Airbus did not have a factory in the United States at that time was an important aspect for choosing Boeing with respect to the core offering. But also involuntary bindings suggest that Boeing had the better core offering because the sunk costs and the direct switching costs would have been too high when choosing the out-supplier. Another aspect exerting pressure on the USAF to pick Boeing was the better performance in the sourcing process, which refers to the service support and personal interaction and acquisition costs in detail. The in-supplier already had key account managers for Boeing working together for several years. A better service support could be divined for future because the interfaces already existed. Also, the costs related to the sourcing process for establishing new contact persons and interfaces spoke against Airbus. The last fact refers to

A Case Study of the U.S. DoD and Airbus vs. Boeing

9

the dimension of customer operations. Boeing performed better in both voluntary and involuntary bindings: they have better supplier know-how because of its status as an in-supplier, especially concerning implicit knowledge acquired through practice. The time-to-market had no significant advantage for any of the companies. But the operation costs were important as a factor for finally picking Boeing, because they had the cheaper tankers and so the involuntary binding effect was quite high. Summarizing the value dimensions, Boeing was simply the better choice for the USAF. Another time the in-supplier won.

DISCUSSION The tanker contract placed by the U.S. DoD is a very unique case, which gives us some insight into the difficulties of out-suppliers, who want to participate in foreign markets. According to the theory, Boeing deserved to win the request for proposal in 2010. But the theoretic model of relationship value does not cover other factors, which also had significant influence on the final decision. Apart from the long-lasting and satisfying relation between Boeing and the USAF, lobbyism and protectionism, as governmental actions to restrain international trade with the intent of protecting local businesses from foreign competitors, seem to be the main drivers of the decision process and blurred the essential objectivity of the tender. The Aircraft industry has served as a textbook example of an industry where governments use trade policy to alter the strategic interaction between the domestic firm and its foreign rival with the goal of shifting market share and profits from a foreign to a domestic firm. (Pavcnik, 2002, p. 738)

The following section discusses the paper by Pavcnik (2002) dealing with “Trade disputes in the commercial aircraft industry,” in the light of a recent situation in the defense section. The cause of the paper was the launch of the superjumbo A-380 in the United States and the conflicts between the U.S. Government and the EU involved. The financial support for Airbus by the EU can be seen as the main conflicting issue. The U.S. Government had doubts if it was legal and especially Boeing was concerned about the resulting consequences when Airbus entered the U.S. market with that superjumbo. To what extent the entry of Airbus would harm Boeing’s market performance, and in what way it would change the competition in the commercial aircraft market, were essential questions.

10

MICHAEL KLEINALTENKAMP ET AL.

Since 1974, when Airbus launched the A-300, the company was successful in undermining the dominating monopolist position of Boeing in the big U.S. market. Nowadays, when talking about aircraft industry, it is always the duopoly between Boeing and Airbus. Airbus has therefore grown since the earlier years. “International trade plays a central role in the industry” (Pavcnik, 2002, p. 735). Another important fact of the aircraft industry is that the market is limited, so companies cannot gain profits by selling large volumes. That is a reason why the business rivalry is quite high both in the commercial and in the national defense aircraft market. Pavcnik shows that a national producer enjoys a clear advantage in the home market. We can apply this reasoning to the case study; the U.S. DoD has finally chosen Boeing the home supplier for producing the new tankers. “All aircraft producers rely heavily on export sales” (Pavcnik, 2002, p. 737). This quote also characterizes the situation in the last seven years, from 2003 to 2011, concerning the competition for selling their aircraft to the U.S. DoD: each company wanted to win the tender for proposal, because they and their governments had invested a large amount of money in research and development for producing an excellent tanker for the USAF. Taking that perspective, it is unsurprising that the USAF has given the award to Boeing, because they had already invested in their home producer and thus it would have caused them a huge amount of sunk costs if they had switched to Airbus. Choosing Boeing was simply the natural way. But it is also important to mention that these are presumptions in some sense, because public information about the precise value of the subsidies does not exist. There is also no clear evidence to show in what way government supports influence the strategic orientation, interaction, and profit. Unfortunately, there is not much research on the influence of protectionism on industrial relations yet. In retrospect, one can see that both relationship value and governmental actions formed the final decision of the USAF. Since there is no fitting model for B2B and B2G transactions, which includes all decisive factors, there is still need for research to build a comprehensive theory.

REFERENCES Geiger, I., Lefaix-Durand, A., Saab, S., Kleinaltenkamp, M., Baxter, R., & Yeonhee, L. (2012). The bonding effects of relationship value and switching costs in industrial buyer-seller relationships: An investigation into role differences. Industrial Marketing Management, 41, 82 93.

A Case Study of the U.S. DoD and Airbus vs. Boeing

11

Jackson, B. (1985). Winning and keeping industrial customers. Lexington, MA: Lexington Books. Johnson, M. P. (1982). Social and cognitive features of the dissolution of commitment to relationships. In S. Duck (Ed.), Personal relationships (pp. 51 73). London: Academic Press. Kleinaltenkamp, M., & Ehret, M. (2006). The value added by specific investments. A framework for managing relationships in the context of value networks. Journal of Business and Industrial Marketing, 21(2), 65 71. Klemperer, P. (1987). Markets with consumer switching costs. The Quarterly Journal of Economics, 102(2), 375 394. Merle, R. (2004). Long fall for Pentagon Star Druyun doled out favors by the millions. Retrieved from http://www.washingtonpost.com/wp-dyn/articles/A48241-2004Nov13. html. Accessed on May 11, 2014. N.U. (2004, September 15). KC-135 Stratotanker. Official Website of the U.S. Air force. Retrieved from http://www.af.mil/AboutUs/FactSheets/Display/tabid/224/Article/104524/ kc-135-stratotanker.aspx. Accessed on May 11, 2014. N.U. (2005). Boeing delivers final re-engined KC-135. Boeing Frontiers, 4(3). Retrieved from http://www.boeing.com/news/frontiers/archive/2005/july/qt_ab1.html. Accessed on May 11, 2014. N.U. (2010, March 3). Frankfurter Allgemeine. Retrieved from http://www.faz.net/aktuell/ wirtschaft/unternehmen/tankflugzeuge-fuer-die-air-force-airbus-verliert-35-milliardenauftrag-1956402.html. Accessed on May 11, 2014. N.U. (2011, February 24). Spiegel online. Retrieved from http://www.spiegel.de/wirtschaft/ unternehmen/0,1518,747610,00.html. Accessed on May 11, 2014. Pavcnik, N. (2002, December 17). Trade disputes in the commercial aircraft industry. The World Economy, 85, 733 751. Ulaga, W., & Eggert, A. (2006, January). Relationship value and relationship quality: Broadening the nomological network of business-to-business relationships. Journal of Marketing, 70, 311 327.

THE PARABLE OF A LITTLE RESEARCH: MAKING MONEY FROM AN INTERNET TRADING PORTAL Roger Marshall and Poh Tze Peng ABSTRACT This simple case study tells the story of three young men who started an online business-to-business trading portal for fun, and to help fund them through university. They seized the opportunity of a major assignment to ask a new lecturer, the narrator, to guide them into profitability. Reluctantly, the young men were coerced into a literature survey, which proved surprisingly helpful to them. A simple research project followed, using mixed methods (survey, expert opinion, key account interviews). Based on the survey results and some simple frameworks from the literature, the young men not only completed their exercise, but also went on to turn their hobby into a sustainable business. The business still exists today, based on the simple study conducted some 12 years ago. Keywords: Internet trading; relationship building; online research

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 13 37 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021001

13

14

ROGER MARSHALL AND POH TZE PENG

SETTING THE SCENE I am going to tell a story; a tale rather like a parable in that it is simple and has a very strong teaching point. The story is unlike a parable, though, in two ways. First, it is absolutely true; this is not a fabricated story designed to get a point across, I will just relate the events that took place exactly as they happened. Second, this is not a moral or religious lesson, but a business-to-business research lesson. The milieu is the start-up and development of an online trading portal, and the business thrives today. I will introduce the characters in my story as I go along, but first let me set the scene and introduce myself, as both the narrator and a minor player in this small drama. At the time the story takes place (at the turn of the century) I was a middle-aged man but a new academic. I was an expatriate in Singapore, teaching at a large high-quality university there. I had not been in the country long, and had only been an academic for a few years. I had a shiny new doctorate, a middle/senior management business background, and just a little consulting experience; but was quite nervous about supervising and even conducting academic research without the comfort of my own supervisor’s support. The university had (and still has) a final year project (FYP) as part of its undergraduate degree program. Groups of three or four students work together on a project under a lecturer’s supervision; each lecturer is expected to run three to five such groups each year. At the beginning of each year small hunting packs of students scour the university corridors seeking a supervisor preferably someone who has a ready-made project or a strong reputation for successful completions. Needless to say that, as a foreigner and an unknown quantity, with a very short research record to boot, I was rarely sought out. Nevertheless, one day in 2000 such a group knocked on my door and sought my help.

THE MAIN CHARACTERS AND THEIR EARLY STORY Poh Tze Peng, Koh Tat Koon, and Kelvin Sum were typical Singapore Business School undergraduates of the better sort. Enterprising, polite, hardworking, and bright, they sat in front of me in my office beaming with confidence. Tze Peng was the ringleader, and explained that the three of them had been friends since their first year of study, and had embarked upon a hobby project together. Tze Peng was the marketing man, while

The Parable of a Little Research

15

Kelvin specialized in financial analysis and Tat Koon was studying for an honours degree in applied economics. Tze Peng explained the situation to me. Inspired by the growth of the Internet and the potential for yet more growth, when the lads were firstyear students they decided to set up a business Internet exchange with the idea of linking international businesses keen to trade. They thought, quite sensibly, that with their combination of skills and knowledge they should be able to set up an exchange and might even be able to make some money from it to fund their studies. It seemed to the young men that using the Internet to connect businesses is not only cheap but also widely accessible, thus transactional and marketing costs would be reduced for participating companies. They further reasoned that because the Internet is able to provide information exchange globally at no more cost than locally, businesses operating internationally would stand to gain the most from using the Internet. Being the entrepreneurial young folk they are, they acted upon this idea and set up Exporters.com.sg, based in Singapore, as an online business exchange for global traders, exporters, importers, wholesalers, and distributors. Exporters.com.sg (hereafter Exporters) currently (in 2000) provided paid services such as online product catalogues, web design, and banner advertising. Other, free, services include information on industry news and currency exchange rates, sales leads notification, discussion forums, and a member directory. The Internet domain name “Exporters.com.sg” was chosen (and was registered) as it communicates the portal’s purpose in the most straightforward way it is, simply, an online exchange for exporting and importing trading businesses. The exchange accepted submissions by Singapore businesses from 1998 and, in March 1999, in response to demand the exchange started to admit overseas businesses as well. The exchange was surprisingly popular; the Exporters team estimated that they had a little over 3,000 clients, but had thus far only managed to recoup their costs through a little pop-up advertising. All three entrepreneurial students realized that their business was at that critical stage where so many ventures fold poised on the one hand for growth but requiring an extra commitment and some strategic direction to realize that growth. On the other hand, failure to capitalize on the clear potential quickly would see some other entrepreneurs moving in to fill an obvious void, thus leading to the speedy extinction of the exchange. The proposal made to me was quite straightforward. The students had selected me to supervise because I had a business background, and the

16

ROGER MARSHALL AND POH TZE PENG

challenge is to help them make the exchange profitable. All three had been in my marketing management class, had listened to the lectures about value exchange and relationships, about customers’ needs, and marketing research, now they wanted me to lead them into profitability as their FYP. Quelling a momentary panic that I now had to demonstrate that my lecture materials actually work and also get up to speed quickly to hide my total lack of knowledge about the Internet, I accepted the brief and we became a team. I sent the three students away and sat and thought about this situation.

THE RESEARCH APPROACH I knew nothing about Internet marketing which, to be fair, was then in its infancy anyway. However, I reasoned that marketing research serves the same purpose on- and off-line; maybe it is performed just the same as long as allowance is made for the medium. In any case, as this was to be a university project, with at least some academic aspects to it, I may as well simply lead these students through a classical market research routine to find out what value can be added that would make the exchange site so useful to users that the Exporters team could start charging a usage fee. It also seemed common sense to find out what the literature has to offer, first with respect briefly to the Internet background then, in a little more detail, what is known about the nature of online exchange portals. With the general approach settled in my mind, I sent an email to the boys and asked them to start with a literature survey. I asked them to start with a brief discussion of the Internet trading environment and potential, but mainly to find what any existing research had to say on the topic of trading portals. They were a little nonplussed at the idea that a good starting point is to seek help from the literature, having anticipated that I would suggest some brilliant strategy or sophisticated research technique, but agreed to go ahead.

GUIDANCE FROM THE LITERATURE General Internet Scene The literature of the time was very thin, but some interesting facts and ideas did emerge from the survey, nevertheless. Most sources were consulting

The Parable of a Little Research

17

company reports rather than academic papers, but this was early days for online trading. The young men discovered that the Internet grew from an experiment in the 1960s to link researchers with remote computer centers of the U.S. Department of Defense to enable sharing of hardware and software resources by many users. By 1993, Mosaic, which a year later became Netscape, offered a web browser that allowed personal computer users to browse easily from one file on the web to another. The commercial value of the Internet began to be widely noticed after these browsers became commonly available. There are three distinct general classes of electronic commerce uses: business-to-business (B2B), business-to-consumer (B2C), and within business (Kalakota & Whinston, 1997). Note that at the time of the research the value of consumer-to-consumer online business was not recognized. B2B commerce was thought to be the fastest growing segment of all (Klein & Quelch, 1997). Comparative forecasted estimates for B2B ecommerce revenue by 2003 differ dramatically depending on the source, but the Gartner Group (reported in Lennstrand, Frey, & Johansen, 2001) states it to range from $US1,255 billion to $US9,907 billion; but all analysts agreed that the potential was enormous.

The Emergence of Online Exchanges To take advantage of the huge revenue potential trumpeted by the many analysts, many B2B online exchanges were announced and launched at this time. An online exchange is defined by a Goldman Sachs report as “web sites where buyers and sellers come together to communicate, exchange ideas, advertise, bid in auction, conduct transactions, and coordinate inventory and fulfillment (Simms, 2000, p. 12).” Synonyms for such a site include “infomediary,” “metamediary,” “electronic market,” “e-market,” “Internet market,” “I-market,” “vertical hub,” “e-hub,” “butterfly market,” “vortex business,” “digital exchange,” and “online exchange.” To avoid confusion, the students chose the term “online exchange” for their purpose. By August 2000, there were 1,501 online exchanges, with 85% of this number based in United States; Deloitte predicted the number to rise to 4,240 by 2003 (Business Wire, 2000). It is not difficult to see why the number of online exchanges was predicted to grow so rapidly. The benefits of these online exchanges are numerous (Klein & Quelch, 1997). For buyers, online exchanges provide market-driven prices, assortment, convenience and rapid procurement and savings on information search and transaction costs.

18

ROGER MARSHALL AND POH TZE PENG

For sellers, online exchanges provide an additional channel for their products with no (immediate) disruption of existing distribution arrangement, a means of uploading surplus inventory or obsolete equipment efficiently, and of comparing their own prices to those of other vendors in real-time and on a market-by-market basis. Such sites also offer the option of price discrimination by market segment, reduced credit risk and low collection costs (particularly if the online exchange assumes those functions as part of its service offering), lower marketing cost per unit sold than on units sold through traditional sales organization, and opportunity to test prices without risk, particularly if vendors’ offerings are anonymous. Although online exchanges have numerous benefits for both sellers and buyers, the extent of their participation is affected by two factors (Ruppersberger & Solodar, 2001): technological sophistication of buyers and sellers and product/service complexity. The higher the degree of technological sophistication and less complex the products/services, the more likely sellers and buyers will migrate rapidly to an online exchange. According to the information the three lads found, there are basically three models of online exchanges, as Table 1 shows. One factor that determines the format used is the size of businesses in the industry (Ruppersberger & Solodar, 2001). When the size is large, consortia-led or private/proprietary exchanges tend to be used. On the other hand, when business size is small, these businesses tend to participate in third-party exchange. One segment of businesses that lends itself to B2B is the small and medium enterprises, a strong potential segment of third-party exchanges. As Exporters is such a third-party exchange, the Exporters team determined to further investigate this type of exchange. They found that there are four evolving levels of functionality thirdparty exchanges provide (AMR, 2000). The first is informational, and the bulk of B2B start-ups are in this category. The information takes the form Table 1. The Three Primary Business Models for Online Exchanges. Exchange Models Third-party

Consortia-led Private/Proprietary

Description Exchange is owned and operated by a third-party that is not considered to be a trading partner, often a B2B start-up Exchange ownership is shared between industry leaders and a technology partner Exchange is owned and operated by a single large firm

Examples Ventro

GM/Daimler-Chrysler/ Ford, Covisint Wal-Mart’s RetailLink

The Parable of a Little Research

19

of industry directories, product databases and catalogs, discussion forums and billboards, and professional development. Facilitation is the ability to match a buyer’s specific need with a supplier’s specific offering. The transaction is completed off-line, via traditional channels. The transactional level requires a higher level of commitment from the participants, as trading partners can consummate the transaction online. Finally, integration functionality allows a third-party exchange to fit into a larger supply chain. The levels of functionality offered by an online exchange does not evolve quickly, it takes some time to develop from being an online exchange that offers search, selection, and aggregation of purchasing power to providing collaboration and supply chain management services. In addition, online exchanges grow in various phases (Hagel & Armstrong, 1997). In the early stage of an online exchange it is probable that traffic will be very slow and the site will have to rely on other activities to ensure liquidity. Participants check the online exchange rarely, and treat it as a secondary marketplace. As membership grows, participants will check online exchanges during each of their purchases against other primary channels, and conduct transactions where their needs are best met. Eventually, some online exchanges will have the opportunity to become an exclusive destination for participants, who they will use it to conduct all or most of their transactions. Each industry, however, has its own unique characteristics, inefficiencies, and market conditions, and hence some industries are more suited to support an online exchange. Six industry characteristics are proposed by Klein and Quelch (1997): inefficiencies in traditional distribution channels, market fragmentation, minimum scale barriers, commodity-type products, short life-cycle products, and involvement of trade associations. It is thus suggested that the top five industries to conduct B2B commerce online are likely to be computer/telco equipment, food and beverage, motor vehicles and parts, industrial equipment and supplies, and construction and real estate. The Gartner Group (2000) claims that there are eight revenue categories, ways to make money online from an exchange site. These are transaction fees, referral fees, direct sales, subscriptions, value-added services, industry data analysis, advertising, and tenancy rental. One key success factor of online exchanges is the ability to generate a high velocity of transactions, which then creates liquidity in the online exchange (Hagel & Armstrong, 1997). This means that the exchange is able to aggregate a large number of sellers and buyers. A good way to create liquidity is to combine commerce, content, and community. “Commerce” is

20

ROGER MARSHALL AND POH TZE PENG

the online exchange’s ability to generate transactions. “Content” is the sellers’ database that contains descriptions of catalogue items and “community” refers to a network of people who share an interest. In addition, the key assets that drive growth of a virtual community are gaining a critical mass of members, providing usage profiles, advertising/vendors, transaction profiles and, lastly, expediting transactions. After their initial reluctance to “waste time” searching the literature, the Exporters group found much of the knowledge acquired quite interesting and potentially very useful.

RESEARCH STRATEGY Research Questions At this point the Exporters team felt that they were gaining some understanding of what we had discussed in lectures, the idea of adding value to an online exchange in order to secure a long-term mutually profitable relationship. On the other hand, although the literature survey had revealed some insights about possible strategic approaches, they were no nearer knowing exactly what services their customers, and potential customers, really seek. Thus, the researchers determined two key research issues for this project. First, what type of services are valued by members? Second, what are the points of pain currently experienced in export and import activities? The young men felt that from insights drawn from answers to these questions a strategy could be developed to lead Exporters to further profitable growth.

Research Method I suggested a very straightforward mixed research method, as neither the students nor their raw supervisor were very practiced researchers. First, as all the 3,000 customers Exporters had so far dealt with were online, an online survey would give a general picture of client value perceptions. Second, to flesh out the survey data some personal interviews with selected members might reveal more in-depth information about their trading activities and preferences. Third, as none of the research team felt totally confident of their academic knowledge of online trading, interviews with

21

The Parable of a Little Research

selected academic experts in various disciplines would provide a more expert opinion on how to successfully grow Exporters. Finally, before launching any strategy, a competitor analysis might reveal gaps in the market, where clients registered a need that no competitor yet fulfills.

Survey Research The researchers selected the framework used by AMR Research (2000), discussed above, as the basis for the data collection. This involves four evolving levels of functionality: informational, facilitation, transactional, and integration. There were 3,200 trading members from Asia, America, Europe, and Africa at the time this research was carried out. Table 2 contains a summary list of members by industry.

Table 2.

Trading Members of Exporters.com.sg by Industry, as a Percentage of Total.

Industry Building and construction Chemicals Computers Electrical Electronics Fashion Food and beverages Trade services Hobbies and recreation Home furnishings Jewelry Medical Metals Minerals Office supplies Optical Packaging Paper and wood Plastics and rubber Printing and publishing Safety and security Textiles Transportation

% of Total 3.93 6.75 7.33 3.28 8.10 8.68 13.38 4.83 5.80 6.40 1.60 3.53 4.28 1.98 1.38 0.70 1.78 1.60 1.75 1.08 0.98 7.25 3.68

22

ROGER MARSHALL AND POH TZE PENG

A pilot test was conducted with 30 selected members, and minor changes in wording made based on feedback from participants. Fig. 1 is a blackand-white computer screenshot of the simple online survey. Interviewing Selected Exporters Members Tze Peng, Tat Koon, and Kelvin each conducted two personal, unstructured interviews with members who subscribed to the online services package, the product catalogue, and banner advertising. Each researcher explored two main areas of concern in each interview. First, the points of pain encountered by each member’s trade activities and, second, the type of services they would like Exporters.com.sg to offer. Interviewing Selected Academics The last interviews were conducted with four academics in the students’ university, whose expertise lies in information technology, international

Fig. 1.

Computer Screenshot of the Online Survey.

23

The Parable of a Little Research

business, and finance all of which areas were felt to be important. In each open interview the three Exporters researchers sought the opinions of these experts about what strategies Exporters should adopt and what are the key issues to be addressed, from their respective disciplinary perspective.

Competitor Analysis To better understand the competition, the research team selected 10 competing online exchanges. This is a convenience sample, but all were at least selected based on the criteria that they must cover multiple industries, with a global membership base, and be profit-seeking organizations. The researchers then examined the types of products and services offered by each exchange, to assess how well they were positioned relative to Exporters in the light of the required services demanded by Exporters’ membership sample.

RESULTS Survey A total of 440 companies responded to the email request to visit the survey site and complete the short questionnaire, which represents 13.75% of the total membership. The distribution of respondents by industry is shown in Fig. 2. Of the 440 respondents, 84.32% are companies with fewer than 90 employees; companies with between 90 and 400 make up 14.55% and the remaining 1.14% represents companies with more than 400 employees. These responses reinforce the young entrepreneurs’ perception that their target market is primarily small and medium enterprises, and that their strategies should reflect this fact. Next, the Exporters analysts noted responses to the checklist of 33 services to find those most needed. The overall top 10 most wanted services include industry news, events and trade shows, market analysis and reports, product catalogues, request for quotations, online negotiation, email lists, search engine registration, online trade exhibitions, and online purchasing. Of these 10 services, 7 of them are classified as information, 2 to the facilitation function, and the remaining 1 to the transaction function. None at all relate to the integration function.

24

ROGER MARSHALL AND POH TZE PENG

Chemicals Electrical Fashion Trade services Home furnishings Medical Minerals Packaging Plastics & rubber Safety & security Transportation 0

Fig. 2.

10

20

30

40

50

60

70

Sample Composition, Online Survey.

This indicates that the current needs and wants of members are pointing toward the direction of the information function. This also means that members generally do not have the intention, knowledge, or experience to maximize the benefits they could obtain from using the integration function. It also implies that Exporters need to know how to shift these needs toward the integration function in order to maximize members’ benefits. The Exporters team was shocked to find that they currently did not offer 6 of the top 10 most wanted features: events and trade shows, market analysis and reports, online negotiation, search engine registration, online trade exhibitions, and online purchasing. Even worse, they were offering services that were not featured in the top 10, including currency exchange, banner advertising, discussion forums, and website design. A reassessment was clearly called for. Next, the young men analyzed the desirability of each of the top 10 services to the companies represented in the survey. Industries most desiring the top 10 services were calculated, and were found to be the chemicals, computers, electronics, fashion, food and beverage, home furnishing and textiles industry. Note that (from Table 2), these seven industries made up 57.89% of the current membership. These, then, become the industries for Exporters’ focus (Table 3).

10 Most Wanted Services by Industry.

Services Overall

Chemicals

Computers

Electronics

Fashion

Food and beverage

Home furnishing

Textiles

X X X

X X X

X X

X

X X

X X X

X X

X X

X

X

X X

X

X

X X X X

X

X X

X X X X

X X X X

X X X

X

X

X

X X X

X X X

X

X X

X

X

X

X

X

X

X

X X

X X

X X X

X X

X X X

X X X X

X

25

Industry news Events and trade shows Market analysis and reports Multiple languages support Currency exchange Product catalogue Online auction Request for quotations Online negotiation Collaborative planning Customer service Customer analysis Banner advertising Discussion forums Email lists Chat rooms Sponsorship Website design Search engine registration Online trade exhibitions Online purchasing Order status Shipping Goods inspection Production planning Credit check

Top 10 Most Wanted Services

The Parable of a Little Research

Table 3.

Services

26

Table 3. (Continued ) Top 10 Most Wanted Services Overall

Chemicals

Computers

Electronics

Fashion

Food and beverage

Home furnishing

Payment processing Payment guarantee Financing/Loans Escrow services Insurance HR recruitment HR training

a

X X X

9

7

7

8

9

Count of how many of overall top 10 most wanted services matched each industry’s 10 most wanted services.

8

7

ROGER MARSHALL AND POH TZE PENG

No. of services matcheda

Textiles

The Parable of a Little Research

27

The next analysis concerned the top 10 most wanted services and the 7 industries; Table 1 contains this analysis. Clearly, focusing on the top 10 most wanted services, Exporters would be able to cover most of the 7 industries’ needs. However, as shown in the table, each industry has its unique needs. The results also show that all require seven of the services, with six industries also wanting online trade exhibitions and online purchasing. The cost effectiveness of developing each service is increased when the service is well received by an increasing number of industries. An analysis of required services between companies with or without websites, and between export, import, or both reveals no differences. Besides the checklist of services, respondents were also asked for any services wanted but not included on the checklist; 45.65% wanted Exporters to provide more product categories, and another 15.22% wanted name-lists with contact information of their potential business partners.

Interviews with Selected Members The researchers explored two main areas of concern in each of six interviews with leading users, namely the points of pain encountered during each interviewee’s trade activities and a confirmatory discussion of the type of online services they would like Exporters to offer.

Problems, Points of Pain The first and most commonly raised problem in exporting is the process of obtaining trade documentation. One interviewee cited an example of how time-consuming it is to obtain a Certificate of Origin, as he had to make several personal trips to trade offices to obtain them. In addition, as each country has different sets of trade regulation and procedures, exporting goods can be a daunting task. This presents an opportunity for Exporters. Another problem is the intense price competition faced by interviewees who export products. In the global market, most buyers consider price as the first factor to consider before engaging into any further negotiation. Thus, the need for cost control and reduction is extremely important and Exporters can help by providing services integration function to achieve this. One interviewee, who dealt in contract manufacturing, raised the problem of coordinating production and delivery of goods. The interviewee felt that production usually could not meet the delivery schedule

28

ROGER MARSHALL AND POH TZE PENG

expectations and this often results in customer complaints and order cancellations. In the case of interviewees who deal in resale of goods, the main problem encountered is the lack of suppliers’ inventory status information. This informational gap often leads to loss of sales, as these interviewees were unable to confirm the availability of goods to buyers. This presents another opportunity for Exporters to develop services to facilitate of such information flow and communication. Another issue raised was the collection of payment. Interviewees felt that the procedures involved are complex. In cases of new buyers, interviewees usually required buyers to use a Letter of Credit for the sale. When asked about the idea of an online payment solution, many felt that the Internet is not safe yet and would probably be too expensive. This issue may become possible to address over time. Lastly, communication with buyers can sometimes be difficult. With the increasing usage of Internet, many companies are using electronic mail to replace phone calls. However, some interviewees felt that it is difficult to ascertain the intention of buyers. For example, one interviewee received an “Okay” reply from a customer. This interviewee did not know if the customer was confirming the order or simply giving a friendly reply to express appreciation. Thus, business communication needs to be improved.

Confirmation of Required Services The most commonly cited service was product catalogues. All interviewees generally felt that product catalogue is an important marketing tool to inform potential customers of their offerings. In addition, they felt that a comprehensive and up-to-date catalogue of their products can help to replace the practice of sending customers product pictures through mail or electronic mail a task they considered tedious and time-consuming. A proposed solution was to create product catalogue in electronic format for customers to download from Exporters. Another service suggested by members is one that enables online negotiation with buyers and sellers. Such a platform is desired as it provides low cost of interactions, enables formation of contract terms, and documentation for future references. This was a little odd, as it is in direct contrast to the survey findings. From the above findings, the three young entrepreneurs came to understand that, at the time of the research, although interviewees encounter many problems in international trade, they do not think that Exporters, or

29

The Parable of a Little Research

rather the Internet, can be used to offer effective online solutions. Most interviewees viewed the Internet as another marketing tools and not a new way to do business. It could be difficult to offer more advanced online solutions such as online payment solution and collaborative production planning, as the customers do not yet seem ready for it. Thus, to generate short-term revenue, Exporters can only offer services at the informational level, such as product catalogues, buyers and sellers lists, and so on. The positive side of this state of customer unreadiness is that Exporters does have some time to develop the integration infrastructure in anticipation of members’ needs for such services in the future.

Competitor Analysis The Exporter group’s last marketing research task was to consider 10 major competitors to compare their services offered against the 33 services

Table 4. Competitor Offerings. Functional Services Informational Industry news Events and trade shows Market analysis and reports Multiple languages support Currency exchange Product catalog Banner advertising Discussion forums Email lists Chat rooms Sponsorship Website design Search engine registration Online trade exhibitions Facilitation Online auction Request for quotations Online negotiation

Competitors Offering 6 4 1 6 0 8 5 4 2 2 0 2 1 1

0 10 1

Functional Services

Competitors Offering

Transactional Online purchasing Credit check Payment processing Payment guarantee Financing/Loans Escrow services Insurance

2 0 0 0 0 0 0

Integration Collaborative planning Customer service Customer analysis Order status Shipping Goods inspection Production planning HR recruitment HR training

0 0 1 1 0 0 0 0 0

30

ROGER MARSHALL AND POH TZE PENG

Table 5.

Scores of Competing Exchanges Based on Overall Top 10 Most Wanted Services.

Competing Exchanges

Score

Busytrade.com Alibaba.com Global Sources TradeArea.com

0.61 0.59 0.57 0.57

Exporters.com.sg AllProducts Online Tradeeasy TradeOffer.com Tpage.com EC Plaza Eceurope.com

0.51 0.40 0.40 0.39 0.38 0.30 0.16

that are broken down from the four levels of functionality. This may offer insights for opportunities for Exporters to get a first-mover advantage. The analysis, shown in Table 4, shows that of the 33 services, the average number of services provided per site is only 6.5. Furthermore, only 17 of them are provided by any of the 10 competing exchanges. Exporters’ competitors are competing at very much the same level, providing mainly only the information function (Table 5). The Exporters analysts conducted further analysis by applying weights to the 10 most wanted services in accordance to their desirability. These 10 services are then compared to services provided by competitors how well the competitors provide those 10 services. A score was calculated for each site with the highest being only 0.61 to a possible 1. Exporters ranks fifth with a score of 0.51. None of the exchanges are well positioned in terms of providing the 10 most wanted services.

STRATEGIC AND OPERATIONAL CONSEQUENCES To be successful, Exporters needs to be more than just an exchange that aggregates information. Similar to the financial services industry, businessto-business markets are characterized by information-based transactions, large and liquid exchanges, and intense competition (Wise & Morrison, 2000). Mere aggregation of information cannot be the primary source of

31

The Parable of a Little Research

value, as the financial services industry had shown. Online exchanges need to provide value-added services to sustain competitiveness. Thus, to develop a competitive advantage, the young entrepreneurs need to build a strong brand name that communicates a vision; to be an exchange that provides a total solution for international trade. The lads were filled with enthusiasm for growing the portal to the status of a metamediary (Sawhney, 1998). Metamediaries are neutral third parties that create clusters of cognitively related activities that users would engage in to satisfy a distinct set of needs. Export and import activities require information collection from a variety of fragmented sources, often consist of numerous complementary products and services such as shipping and payment and are characterized by unpleasant experience. All these characteristics suggest that Exporters, if transformed to a metamediary, would be able to provide value to members. This means that Exporters have to identify activities that members would engage in to fulfill their business needs, assemble the products and services that satisfy these needs into a seamless, integrated bundle. To transform Exporters into a metamediary, the lads decided to make use of three strategic pillars, as shown in Fig. 3, Commerce, Content, and Community (Hagel & Armstrong, 1997; Anonymous, 2000). First, the site has to supply rich informational content to support members. This information can include sellers’ product catalogues, buyers’ request for quotations, industry news, and other items on the “top 10” list. Second, an electronic commerce platform must be created to enable online transactions to take place. This does not only include payments facilities between sellers and buyers, but also a comprehensive set of online solutions that integrate

Metamediary

Content

Community

Commerce

Industry focus

Content development

Integration platform

Fig. 3.

The Strategic Framework.

32

ROGER MARSHALL AND POH TZE PENG

members’ businesses into Exporters’. Examples are shipping services, production planning, customer relationship management, and collaborative planning. These two strategic pillars are not sufficient. For instance, providing a rich set of product catalogues (content) does not guarantee that sale transactions (commerce) will take place. Content does not necessarily translate to commerce. Thus, there is a need for a third pillar to bridge this gap: building a business community within the Exporters’ website. A strong community means there are strong ties among members where they developed sharing of information and other trading activities. This will be akin to business clubs where members interact among themselves not only for business dealings, but also social needs. When business relationships (community) exist, conducting transactions (commerce) will naturally take place. Tactics To support the three strategic pillars round-table discussions took place, which resulted in the development of a number of tactical strategies. These strategies were derived from literature review, survey results, interviews, and competitor analysis and all came together in discussion. The tactics are then grouped collectively under industry focus, content development, and integration platform. Together with the three strategic pillars, these three groups of tactical strategies will form the basic framework for Exporters to work toward its goal. Industry Focus The first decision taken was to concentrate on the specific industries recognized as having the greatest potential. As discussed in the survey analysis, the Exporters group chose seven industries, chemical, computers, electronics, fashion, food and beverage, home furnishing, and textiles industry. Moreover, small and medium enterprises within these industries seem to constitute a large percentage of Exporters’ member base, so will provide an even closer focus. As it was discovered in the analysis that each industry has its own unique needs and wants, the Exporters men decided to customize the services provided for each of the seven industries. Taking the computer industry as an example, they determined to provide industry news, product catalogue, requests for quotations, email list, and currency exchange. In

The Parable of a Little Research

33

addition, the entrepreneurs decided to also provide events, trade shows and online purchasing, order status, and shipping for this industry. In order to stay abreast of changing needs as the industry, the technology, and the customers develop, a series of in-depth surveys will be carried out with the objectives of finding out what specific aspects of services and what support industries are related to the seven chosen industries. Examples of these specific aspects include how services are to be offered, at what price, and features. After finding which are the support industries important to the relevant industries, Exporters will be able to supply news, information, or even build links between them to help provide members with rich content and better facilitate transactions. These two tactical moves will then help to refine the customization of services, as mentioned earlier, within each of the seven industries.

Content Development The objective is to build up rich informational content within Exporters’ website. First, the students decided to carry out an extensive informationcollection exercise on their current members’ profile. This information will include members’ buying requirements, financial ability, business structure, purchase patterns, information needs, and so on. By having this information, Exporters will be able to understand members better and can better personalize services. This will inevitably strengthen the relationship with members and hence increase their loyalty to Exporters. The team was impressed by the uses of the data gleaned from the survey and the relative ease with which it was collected, and are thus encouraged to continue with this activity. A related tactical move is the implementation of a continuous feedback system, which the young men will be able to constantly monitor and so improve services to the members. A major idea is to implement a member rating system, where each member gives ratings to other members that they have business dealings with. This would first, provide unbiased opinions with a large sample size and, second, provide an inexpensive way to identify reliable and trustworthy partners. Another strategy is to improve the verification system on member’s information. Currently, Exporters admits all applications as long as full particulars are provided and business interest in line with Exporters. This, however, does not guarantee that all information provided by each application is accurate. To instill trust and credibility, Exporters needs to improve

34

ROGER MARSHALL AND POH TZE PENG

this system. There are some ways, such as partnering with credit-checking companies worldwide and request applications to be accompanied with documentations to verify clients’ businesses. The survey showed that 45.65% of those respondents wanted an increase in the number of product categories in our website. Taking their request seriously, Exporters will increase the number of product categories as the first tactical move and continue to expand according to members’ needs. The survey further pointed up three more critical information functions, product catalogues, request for quotation, and electronic mailing lists. A first action item will be to customize product catalogues for each industry, as each has different informational needs. In addition, the lists will be made downloadable (using a PDF format) to save suppliers time in distributing product information to potential customers. Providing a comprehensive and customized product catalogue service has another important advantage. The researchers felt that a product catalogue could be an important strategic tool to introduce members to provide other integration services such as online purchasing, payment processing, and goods inspection. Once members start to use the customized product catalogue services the Company can then recommend other integration services to bring more value for their businesses. Second, to differentiate the request for quotation service, the Team believes, from their own experiences, that a key factor is to increase the success rate of matching the right sellers and buyers. Many competing exchanges provide numerous sales leads with basic information about buyers’ product requests. Exporters.com.sg can do a better job than that by also providing more extensive information such as the prospective buyer’s purchase history, business background, purchase preference, and credit reports. All this information would be valuable to sellers, as it enables sellers to make a much more informed decision as to whether they could satisfy buyers requests or not a risk reduction tactic. Third, for the electronic mailing list services, the Exporters researchers proposed an automatic matching service for members. Members will be automatically notified when there is a potential supplier or buyer that matches their business needs. This provides a highly customized list of contacts at members’ convenience. Note that all the above are possible because Exporters is compiling a comprehensive database of each and every member. Finally, Exporters decided to provide information about events, trade shows and market analysis and reports, as members indicated a need for these two services, and they are both offered by leading competitors. In

35

The Parable of a Little Research

addition, however, we will offer search engines registration, online trade exhibitions, and online purchasing as these three items featured on the top most wanted across all seven key industries. Integration Platform The research shows quite clearly that Exporters’ members are generally not yet not ready to integrate their business online and into Exporters. This gives the Company time to prepare the platform for integration facilities. Within the next year or two the students were determined to source, evaluate, and partner with international financial institutions, software vendors, and logistics companies. They are the key players in regard to integration, as they can facilitate transactions and distribution between the members involved in trading. These partners will provide support for financial, logistics, and informational flow in members’ business transactions. Revenue Model As pointed out by several authors, there are many ways for an online exchange to generate revenue. Currently, many online exchanges derive most of their revenue through advertising and charging transaction fees based on transaction sales volume. Although advertising is a traditionally proven revenue model, and transaction fees are a relatively popular way to generate profits, the Exporters’ team believes them unsustainable in the long run. With the explosion of information on the Internet, the use of untargeted advertisements has led to declining advertising effectiveness. Knowing that small and medium enterprises generally earn narrow margins, charging a transaction fees based on sales volume is also often not feasible. In order to capture value in a more purposeful way, Exporters decided, after much discussion, to position themselves as an agent for their members (Hagel & Singer, 1999). With the online information explosion and knowledge about members’ information and preference (which will have to kept current), Exporters will be able to provide a much more targeted service than before. Exporter’s role as an agent can be illustrated as follows. The extensive information database will enable Exporters to offer targeted services such as proactively searching for suitable suppliers and buyers, filtering unwanted advertisements, initiating purchase reminders, providing recommendations, managing members information, and purchase history.

36

ROGER MARSHALL AND POH TZE PENG

The revenue plan consists of three components. First, a basic subscription fee from each member, this acts as agent fees for Exporters. The fee will be set at an affordable rate to enable small and medium sized companies to participate. Second, Exporters will charge a different fixed fee for each value-added service, such as product catalogues, online purchasing, market report and analysis, credit checking, and escrow services. Third, referral fees will become a new revenue stream when connecting outside service providers with members. These outside service providers are financial institutions, logistics service providers, and software vendors. This revenue model should provide a diversified and sustainable means of generating revenue and capturing value from the services provided to members.

WHAT HAPPENED? The three students completed and submitted their Final Year Project, received an “A” grade for it, and were very happy. But these are serious young men and they commenced immediately to put their project recommendations into practice. Kelvin and Tat Koon both are senior executives in Singapore companies, but Tze Peng started working fulltime on Exporters. More than 10 years later, much of what was determined in those university meetings was put into practice, and today Exporters.sg is a thriving business, with well over 30,000 satisfied client members. Tze Peng is moving strongly to establish an integration platform and the business is bringing in a steady profit.

LESSONS FROM THE EXPERIENCE I started this story by likening it to a parable. Like a parable, the story itself is simple, four lads turning a hobby into a profitable business with the help of a new academic. The research is simple; standard, common sense, mixed methods. The lessons are also simple, but powerful for all that. First, is that a little theory goes a long way. These lads are smart, but could not make their hobby pay. Only when they overcame their reluctance and gave in to their supervisor’s insistence did they go the literature of the time and sort out some basic frameworks. These frameworks guided them to structure their thoughts, their research and, ultimately, their successful business model.

The Parable of a Little Research

37

Second, is that even simple research helps to clear the mists and turn chance into some sort of surety. Without understanding exactly how different their customers’ industries are, without learning about the key services required in each, the young company was blind any profits they might make would be through luck and not planning. It is interesting for me, as an observer and narrator, to note how the thought patterns and ideas these young men had so long ago are now surfacing in the literature. The eagerness to build database relationships with clients is a good example. They became almost fixated on serving the needs of their clients. Cocreation had not been coined as a term or even a thought when these boys were strategizing. Their actions and tactics, though, are almost a copybook example of moving from a transactional to a cocreative, relational mode of business. No wonder the business thrived.

REFERENCES Anonymous. (2000). B-to-B e-commerce growth, B2B trade magazine (Vol. 85, No. 11, p. 22). Chicago, IL: Crain Communications. Business Editors/Technology Writers. (2000, September 11). The end of B2B doom and gloom – A profitable rebirth begins. Business Wire. Retrieved from http://ezproxy.aut.ac.nz/login? url=http://search.proquest.com/docview/445875707?accountid=8440 Hagel, J., & Armstrong, A. G. (1997). Net gain: Expanding markets through virtual communities. Boston: Harvard Business School Press. Hagel, J., & Singer, M. (1999). Net worth. Boston: Harvard Business School Press. Kalakota, R., & Whinston, A. B. (1997). Electronic commerce: A manager’s guide. Reading, MA: Addison-Wesley. Klein, L. R., & Quelch, J. A. (1997). Business-to-business market making on the Internet. International Marketing Review, 14(5), 345 361. Lennstrand, B., Frey, M., & Johansen, M. (2001). Analyzing B2B eMarkets – The impact of product and industry characteristics on value creation and business strategies. ITS Asia-Indian Ocean regional conference, ITS, Perth, Western Australia. Richardson, B. (2000, April). Evaluating the independent trading exchanges. AMR Research, Inc. Industry Report. Ruppersberger, G., & Solodar, J. (2001). Wholesale distribution. New Equipment Digest, 66(5), 52. Simms, M. (2000). Goldman revises financial services stake in burgeoning B2B market. Wall Street & Technology, 18(2), 12. Sawhney, M. (1998). Leveraged high-variety strategies: From portfolio thinking to platform thinking. Journal of the Academy of Marketing Science, 26(1), 54 61. Wise, R. W., & Morrison, D. (2000). Beyond the exchange: The future of B2B. Harvard Business Review, 78(6, November-December), 86 96.

BUILDING RELATIONSHIPS FOR SURVIVAL: COPING MEDIA INDUSTRY DYNAMICS Thomas Mejtoft ABSTRACT For several hundreds of years printing has been the only effective channel for spreading mass communication. During the 1900s several new media channels have been invented and, with the addition of the Internet, this has both changed the way media is consumed and has increased the competition between different channels. This qualitative case study of 37 firms reports on how relationships are used in the printing industry to relieve some of the impact of the competitive forces from new, and easily accessible, media as a means for marketing and, furthermore, on the impact on the printing industry as an industry. The results from the case study show that there are both internal and external effects of forming relationships and those vertical, as well as horizontal, relationships are of great importance to create a sustainable competitive situation for the printing industry. Relationships are used to increase both the strategic flexibility of the firm and the flexibility of the print media channel. Furthermore, the study illustrates that the printing industry, and print as

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 39 59 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021000

39

40

THOMAS MEJTOFT

a medium of communication, is drifting gradually away from the actual customer due to the new paradigm of value creation. Keywords: Relationships; vertical integration; competitive strategy; media industry; case study

INTRODUCTION AND THEORETICAL FRAMEWORK There have always been channels for spreading information, but from the dawn of Man and for a long time since, most messages were spread personto-person. In these early times mass communication was not an option. Thus, it is no coincidence that in an ancient tale, a Chinese rice merchant used what is today referred to as relationship marketing to focus on customer value and the offer, instead of the transaction (Gro¨nroos, 1996). Other ways of spreading messages have been by writing them down. In many cultures around the world, rock carvings have been important to document events and thoughts between generations. This can be seen on Norsemen’s rune stones from the Viking Age in the north of Europe, the petroglyphs at the Easter Island, or ancient paintings at Uluru in Australia. However, rune stones are immovable and, today, regarded as vital pieces of history. More flexible and essential sources of information were documentation in books, or on paper, which were written and copied by hand, mostly by monks. Even though these were not unique copies, the editions of these works were, or course, very limited. Ever since the invention of printing by Johann Gutenberg in the 15th century (yet, versions of movable types was used around 400 years earlier by Bi Sheng in China during the Song Dynasty), printed material has been a very important channel for spreading different messages to a broader public (Kipphan, 2001; Romano, Lee, Rodrigues, & Sankarshanan, 1999). Due to its ability to mass-produce information material, printing was (more or less) the only way of spreading mass communication until broadcast media, like radio and TV, were introduced in the early 1900s. Consequently, just as printed material has been important, printing firms have been powerful actors in the media value system. During the 1900s many media channels were invented and introduced with radio, television, and Internet being the most prominent. Ahonen (2008) mentions print, recordings, cinema, radio, television, Internet, and mobile phones as the seven mass media channels. The differences between them should be noted as the first five, that is, the old media of print,

Coping Media Industry Dynamics

41

recordings, cinema, radio, and TV, are all types of broadcast media that originally were analogue and have a linear and “controlled” flow. Accordingly, there is a distinction in how we denote what is done with these media and things (Mussell, 2012). We read, listen to, and watch the old media, such as print, radio, and TV, but we use new media, like the Internet and mobile phones. When introducing new technologies, innovators make a deliberate connection to the old and to a familiar use of things. The need for customers to understand that the innovation is a substitute rather than a complement to the old products is one strategic reason for doing so: “when Amazon first introduced the electronic book reader, the Kindle, in 2007, they deliberately evoked the language of print especially books in order to stress the continuities between their product and existing cultures of reading” (Mussell, 2012, p. 15). The new digital channels that started to emerge with email in the late 1960s further differ from the “old ones” listed above by being created directly for digital systems. Since the World Wide Web (www) was invented, or rather created, in the early 1990s these new media and channels have had an incredible growth and are today easily accessible by almost anyone. The late addition of social media is also worth mentioning, due to its ability to focus the common power of the Internet and “marketing managers should recognize the power and critical nature of the discussions being carried on by consumers using social media” (Mangold & Faulds, 2009, p. 360). The use and access to the Internet and, consequently, to social media is very widespread in the western world and as of 2012, 90% of Sweden’s population (75% on average in the OECD countries) has access to the Internet in their homes (Nordicom-Sverige, 2013; Schwab, 2012). “Social media” is a term and concept coined in the post-era of Web 2.0 (Berners-Lee, 1999; O’Reilly, 2005; O’Reilly & Battelle, 2009) and represents media intended for some kind of social interaction, either virtual or physical. Simplified, due to technical limitations, websites in the 1990s allowed mostly one-way communication or a back and forth oneway communication. This could be information posted on a firm’s website and the possibility for visitors to send email or post questions on the website and, after a while, get answers. But following the burst of the dot-com bubble around year 2000, the long-term development of new Web 2.0 technologies led to the possibility of sharing and linking content as well as communication, collaboration, and integrating user generated content (e.g., Blackshaw & Nazzaro, 2006; OECD, 2007; Prahalad & Ramaswamy, 2000) in real-time. This outcome was all in line with the

42

THOMAS MEJTOFT

original thoughts by the inventor of the World Wide Web, Tim BernersLee (1999, p. 169), on the future development of the web as “a much more powerful means of collaboration between people.” Although defined in many different ways, social media are activities that combine media technology and user generated content with different kinds of social interaction in accessible and easily modified ways. According to Kaplan and Haenlein (2010, p. 61), “Social media is a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user generated content.” Today social networks sites (Boyd & Ellison, 2006) such as Facebook, YouTube, and Twitter are central parts of people’s lives. Founded in 2004, Facebook has had an incredible growth and reached over 1.1 billion monthly active users as of March 2013 (Facebook, 2013). How the value of different media is assessed is of course subjective and, obviously, gradually changes between generations. If we follow how the ideas of value creation has changed over time, it is possible to realize that the input of labor (e.g., Marx, 1930 [1867]) and value added in the industry (e.g., Drucker, 1973; Fine, 2001) were important when discussing manufacturing systems along with the value chain (e.g., Buaron, 1981; Gluck, 1980; Porter, 1985). Nevertheless, the value chain also introduced the awareness that not all phases in the value creation process can, or have to be, performed by a single firm or organization and, hence, introduced thoughts on cooperation and different kind of relationships as important paths to success (e.g., Hagedoorn, 1995; Hergert & Morris, 1988; Mariti & Smiley, 1983). Thus, behind every decision regarding value adding activities in the value chain, managers have to decide whether an activity should be purchased on the open market, performed by a partner in a cooperation or performed internally within a firm through vertical or horizontal integration (e.g., Adelman, 1949, 1955; Child, Faulkner, & Tallman, 2005; Faulkner, 1995; Gulati, 2007; Harrigan, 1983b; Perry, 1989; Williamson, 1975, 1985). As the competitive environment gets more cluttered, it seems as if “in many product groups where firms once competed in isolation, they now compete as allies in business communities” (Fombrun, 1993, p. 186). One of the more common reasons to cooperate is to gain access to and, sometimes, control over complementary resources to the resources already under a firm’s control (e.g., Faulkner, 1995; Gulati, Nohria, & Zaheer, 2000; Jarillo, 1988; Todeva & Knoke, 2005). This is done to create or preserve competitive advantages against the surrounding world and “expand the periphery of their value proposition to customers”

Coping Media Industry Dynamics

43

(Gulati, 2007, p. 196). The difference between a cooperation and a market transaction is the “high degree of (perceived) opportunity for joint value creation between the two organizations” (Jarillo, 1988, p. 38) and this joint value creation is important for a successful relationship. Consequently, when considering the framework of creation and delivery of perceived value, focus has shifted from production and objects (cf. Drucker, 1973; Fine, 2001) to services and other more intangible concepts. This was touched upon by Kotler (1972, p. 48) in the 1970s as “the core concept of marketing is the transaction […] the things-of-values need not be limited to goods, services, and money; they include other resources such as time, energy, and feelings.” The “servitization” of many industries in the 1980s led to ideas of value not only being created within a firm’s boundaries and typical strategic networks, but also including the customer or consumer in a complex value constellation (Shostack, 1977; Vandermerwe & Rada, 1988). According to Normann and Ramı´ rez (1993, p. 69), the goal is to “mobilize customers to create their own value from the company’s various offerings.” Cocreation (e.g., Howe, 2006; Normann & Ramı´ rez, 1993; Payne, Storbacka, & Frow, 2008; Prahalad & Ramaswamy, 2000, 2004a, 2004b; Ramaswamy, 2008) received a great deal of interest in the early 2000s, based on the introductory ideas of Web 2.0 (as mentioned above), with a foundation in the development of the Internet from a presentation platform to a creative production environment. In recent years, the design of services and the Service Dominant Logic of marketing have gained much attention and suggest that services are the fundamental basis of any exchange (e.g., Vargo & Lusch, 2004, 2008). Vargo and Lusch (2004, pp. 10 11) propose that “the customer is always a coproducer” and then value could be defined as “an interactive relativistic preference experience” (Holbrook, 1994, p. 27). The short discussion above further emphasizes the difference between print and new media, such as today’s social media. Professional print is still mainly controlled by the printing industry as a production process (even though digital printing technology has made it available for almost everyone to use and produce), while social media is a collaborative media where all parts of the value creation process can be part of the creation of the final product in real-time. The aim of this case study is to discuss how relationships are used in the printing industry to relieve the impact of competitive forces from new media that faces old media, in this case print, as an information carrier and, further, the impact on the printing industry as an industry.

44

THOMAS MEJTOFT

THE STRUCTURE OF THE PRINTING AND GRAPHICS ARTS INDUSTRY The graphic arts industry is a very old and, in some ways, traditional industry. During the first part of the 20th century the need for the graphic arts industry and printing firms increased since they became important for delivering mass communication to accompany all mass-produced products that were a result of the industrialization (Rossell, 1959). However, as described above, the number of channels for spreading both mass and customized communication has increased dramatically during the latter half of the 1900s, and printed material mostly competes within the same budget as, for example, television and online marketing (Kotler, Wong, Saunders, & Armstrong, 2005). The printing industry has, historically, been a fragmented industry with many privately owned small and medium sized firms (SMEs). Due to over-capacity and strong internal industry competition, there have been continuous price reductions (Birkenshaw, 2004; Gilboa, 2002; Intergraf, 2007; Kipphan, 2001; Mejtoft & Vistro¨m, 2007; Smyth, 2006). This has also led to constant changes of the industry structure with mergers, both between firms within the printing industry and with other media firms, and bankruptcies. Nevertheless, the fragmentation in the industry is still relatively high. This has created a situation where ordinary print is regarded as a commodity product. That is a product that is, in the eyes of the customer, more or less interchangeable with competitors’ products of the same type and sold primarily on basis of price. The commoditization of print and publishing has further been accelerated by the desktop publishing trend, personal computers, and home and office printers with high print quality since it is possible to create simple digital and print media today without professional help. However, in some segments print is still important and valuable as information carrier or production method. Two examples are packaging printing, where primary packages are getting more important for displaying the product and carrying important information about the product (e.g., Calver, 2004; Meyers & Lubliner, 1998), and printed electronics, where the production method is expected to reduce the production costs for simple electronics and displays (e.g., Kantola et al., 2009). According to studies by Pira International (Smyth, 2006), more than 90% of the European printing firms employ less than 15 people and operate mainly in a local market. In Australia the situation is similar to Europe,

45

Coping Media Industry Dynamics

with 85% of firms in the graphic arts industry having less than 20 employees and only 2.5% employing over 100 people (IBSA, 2010). The fragmentation and market of the Swedish commercial printing industry is very similar to these conditions (Mejtoft, 2008).

METHOD The results in this study are based on a case study approach. Even though there are some different opinions on what a case study really is, a general starting point of a definition is a contemporary study of a complex unit in its real-life context (e.g., Gillham, 2000; Merrian, 1988; Stake, 2005; Yin, 1994). Hence, a case study is most often performed to understand complex social phenomena and, according to Yin (1994, p. 9), case studies have a distinct advantage over other research methodologies when “a ‘how’ or ‘why’ question is being asked about a contemporary set of events over which the investigator has little or no control.” Consequently, the nature of the research question, the amount of control, and the desired end product are important to consider when choosing research design (Merrian, 1988). Case studies have several advantages since “theory developed from case study research is likely to have important strengths like novelty, testability, and empirical validity, which arise from the intimate linkage with empirical evidence” (Eisenhardt, 1989, p. 548) and “advantages of fine-grained studies can include meticulous attentions to detail, relevance to business practice, and access to multiple viewpoints. Case studies, if they are done well, capture the complexities of corporate strategy, competition, and uncontrollable environmental factors surrounding strategy formulation” (Harrigan, 1983a, p. 399). This research is based on several interconnected studies, to capture the depth and complexity of the use of integration and relationships, which is an example of “a unit of human activity embedded in the real world; which can only be studied or understood in context; which exists in the here and now; that emerges in with its context so that precise boundaries are difficult to draw” (Gillham, 2000, p. 1). Accuracy is important in case studies. To provide accurate data, interviews with most respondents have been performed during different occasions (Woodside, 2010). The results of this qualitative case study are based on six different interview series carried out in Sweden between 2007 and 2012. Parts of the results have been reported in Mejtoft and Nordin (2008, 2009a, 2009b), Mejtoft and Packmohr (2009),

46

THOMAS MEJTOFT

and Mejtoft (2010). In total, 37 different firms in the media industry have been part of the study. Thirty-five of the firms were printing firms (i.e., a firm with their core business within printing), all chosen as representative of the industry. To analyze the results from the printing firms in contrast to the general media industry, interviews with two media and advertising agencies were performed. To keep the balance between structure and exploration, all interviews were performed using an interview form based on open-ended questions structured around the research questions defined for this case study (e.g., Fontana & Frey, 2005; Robson, 2002). The interviews were carried out either at the respondent’s firm or by telephone without any time constraints. The printing firms’ respondents have all been top management (mainly managing directors or founders), due to their influence over the firms’ long-term strategic paths (e.g., Beal & Yasai-Ardekani, 2000; Collis & Montgomery, 2005; Harrigan, 1985; Porter, 1996; Schein, 1983), of which cooperation is a part. The findings from the interviews were analyzed by using pattern matching technique (Campbell, 1975; Yin, 1994), where the firms initially were analyzed separately and then matching patterns between firms were identified and reported. A common criticism of case study research is that a single case in a case study does not provide a good basis to form generalized conclusions. However, in case studies, whether it is single or multiple case studies, Stake (2005, p. 460) states “the purpose of a case report is not to represent the world, but to represent the case.” This suggests that “case studies, like experiments, are generalizable to theoretical propositions and not to populations or universes” (Yin, 1994, p. 10). The use of Sweden as a base for this case study on technology related issues is motivated by the work of the World Economic Forum and the Global Information Technology Report, which in May 2012 marked Sweden as the leader in the Networked Readiness Index (NRI). According to Dutta, Bilbao-Osorio, and Geiger (2012, pp. 9, 17), “Sweden’s performance is remarkable in every aspect. The country leads four of the 10 pillars of the NRI, namely infrastructure and digital content, individual usage, business usage, and economic impacts.” Hence, the adoption of new technologies and new communication channels in Sweden are fast and widespread among the public. Researchers do not claim that their case studies are representative (Stake, 2005; Yin, 1994), thus the results from this study should not be considered to have specific relevance in other environments. Nevertheless, the results provide a good overview and illustration of the studied phenomenon within the graphics arts industry.

Coping Media Industry Dynamics

47

RESULTS AND DISCUSSION The results and the analysis from the case study aims toward providing an illustration of how firms, traditionally focusing on old media, use relationships to face the impact from new media technologies and the competition from firms focusing on these new channels. As discussed earlier, depending on the strategic importance of the activity, integration, market transactions, or cooperation are suitable ways of handling new services needed for providing the value necessary to a firm’s customers.

Vertical Integration, Relationships, and the Graphics Arts Industry When focusing the discussion on the print and graphic arts industry, it is important to analyze the structure of the industry and how firms are organized to meet current and future market demands. The results from the case study show that within the value chain for print media, vertical integration is both of high importance and a widely used strategy in the commercial industry. This is most noticeable in the number of steps in the value chain that firms have chosen to integrate. Most firms have integrated some creative services, prepress, finishing, and distribution in addition to their print business. Even though the overall reason for integration is clearly stated by the respondents as the possibility to increase revenues and profits by providing a broader selection of services, a strategic reason for backwards vertical integration is the need to ensure appropriate input to the printing business unit and, consequently, working closer to the customers. One reason is that integration on mature markets may give firms “an improved ability to forecast cost or demand changes” (Harrigan, 1983b, p. 3). In a similar manner forward integration is a strategy chosen to guarantee fast handling and make the firm less dependent on external partners, both in terms of finishing and distribution and, thus, decrease the total delivery times. The results also show that the internal transfer between different steps in the value chain is not total, neither for backward nor forward integration. Accordingly, jobs are both received and delivered to different external partners. The respondents clearly state that cooperation is important both for vertical and horizontal activities. This type of behavior of partial vertical backward integration is denoted concurrent sourcing by Parmigiani (2007, p. 285) and exists when firms “are making and buying the same good, in contrast to considering a broader unit of analysis and/or one with more

48

THOMAS MEJTOFT

heterogeneity.” Harrigan (1983b, p. 18) describes a similar phenomenon using term “taper integration” and Porter (1980, p. 125) with “partial integration.” However, these do describe both backward and forward partial integration. The results concerning vertical cooperation illustrate two different ways in which printing firms can increase their resource flexibility and get what the firm perceives as value, by being part of a cooperation (cf. Faulkner, 1995; Gulati et al., 2000; Jarillo, 1988). The intention to enhance customer satisfaction and offer full service solutions encouraged the case firms to engage in different kinds of cooperation, to have the ability to retain contact with their customers no matter what kind of services are needed within the print value chain. The case firms mention two common reasons for engaging in cooperation to extended capacity of resources already under the firm’s control and to get access to complementary resources. To add resources that extended capacity and render possible temporary increases in production is a way to better meet market fluctuations; to complement the line of production and services with complementary resources makes it possible to offer full service solutions to customers. The main reason for engaging in vertical cooperation is to gain access to different kinds of resources. Hence, a combination of integration and cooperation in the vertical value chain is a common way of balancing the need for providing all services in the value chain, as well as not risking over-building capacity in case of structural changes in the industry or negative changes in the state of the market. The results from the case study show that all firms in the study had more or less developed relationships with other firms, both within the industry and with firms that cannot be classified as printing firms. The relationships were mostly nonstructured relationships based on a high level of trust and commitment (cf. Morgan & Hunt, 1994) with, most often, a lack of contracts and other formal documents that state the nature and level of the cooperation. This is, according to the respondents, a result of the higher initial cost and bureaucratization of formal contracts and, since most firms are smaller, the presence of trust and commitment between firms was deemed more important. One of the respondents expresses these as “I help you and you help me”-relationships or “gentlemen’s agreements.” According to the respondents, this absence of formal agreements is a fast and effective way of starting new relationships needed for the production, even though the use of this type of arrangement has been discouraged (Gerlach, 1990). Furthermore, relationships are, in general, set up with local or regional partners. The local and regional connection is mainly a result of most

Coping Media Industry Dynamics

49

printing firms being SMEs, mainly acting in a market with local and regional customers (Mejtoft & Vistro¨m, 2008). In addition to their network of relationships, eight of the case firms were also part of organized alliances. These relationships include a more structured cooperation, and have a central organization as they are built on franchise or similar types of structures (Blair & Kaserman, 1982; Inaba, 1980; Norton, 1988; Rubin, 1978). Even though He and Balmer (2006, p. 242) suggest that “with careful nurturing on the part of marketers, alliance brands have the potential to develop into a valuable strategic resource,” the printing firms’ individual brands are usually strong in the local market. Previous research has shown that most printing firms that are part of an organized alliance combine their own local brand with the organization/franchise brand (Mejtoft & Nordin, 2007), and are therefore not a sole franchisee. The results indicate that relationships are important for firms in the printing industry. One major reason is the shift in power from printing firms being a central and necessary part of the value chain of media and marketing to become a subcontractor and producer that is easily bypassed using other media channels. Even though backwards vertical integration is undertaken, as mentioned above, due to the need to get closer to the customer, the respondents state that advertising agencies and partners are very important for getting the appropriate input to the printing units and getting a sufficient volume. The respondents at the media agencies clearly indicate that even though print is important, “many customers try to avoid print due to the high cost of production and distribution compared to other channels, such as the Internet.” Consequently, the respondents are unanimous that the largest shift in media channels is from print to digital channels. The results and analysis of the data from the case study show indications of how different relationships become increasingly valuable for firms with old marketing communication technology to survive in an increasingly digitalized society, most often as a complement to broadcast or digital campaigns. Summarized, the results indicate that there are both internal and external effects of the relationships and vertical, as well as horizontal relationships are of great importance to create a sustainable situation for the printing industry.

Effects of Vertical and Horizontal Relationships The need for acting as a full service firm, and provide end products and services within print media is strong among printing firms, regardless of size.

50

THOMAS MEJTOFT

Cooperating with different firms to increase the capacity of resources is important to enhance the firm’s flexibility and become less dependent on one technology and, thus, less affected by business cycles. According to the respondents this is one of the main reasons for starting relationships, to be able to create this vertical organization. Vertical relationships within the value chain are needed to deliver a complete product to the end customers as well as enabling a closer relationship with the customer and, therefore, be less affected by the general price pressure in the printing industry. The relationships needed are both backward and forward in the value system. The respondents emphasize cooperating forward with finishing and delivery firms to decrease the lead-time of the total production. The digitalization of media channels has resulted in an increased speed of communication, as most information can be distributed over the Internet. This has had a vast impact on print, which has a slow delivery speed compared to all-digital channels, and resulted in a need for providing shorter lead-times within the print value chain. According to the respondents, creating vertical relationships backwards in the value chain to get closer to the customers (and somehow to the actual consumers) is one of the main advantages that the printing firm is trying to achieve when cooperating. Even though print brokers are a major customer segment to printing firms and are vital for their survival as a producer, creating relationships and working close to other customers, such as advertising agencies and direct customers are important to form a tighter bond to the end users. Creating tight bonds not only increases customer loyalty, but also increases the possibility for end user contact, since printing firms are more likely to have long-term perspectives on the service provider customer relationship and, therefore, create suitable services for these customers. Not only is print declining and experiencing increasing competition from other media, but today there are also several more steps (and firms) that work closer to customers and end users, such as media agencies. Consequently, as the content has become digital, the printing industry has become one step too far away from the customer, and even farther away from the consumer of the end products. This affects not only how a printing firm can work with its customers, but also the profitability of the industry. The supplier position in the value system is also supported by the widespread use of cost-based pricing in the printing industry (Hulte´n, Vistro¨m, & Mejtoft, 2009). The respondents in this case study also advocate this, as they believe that the price pressure on print makes it necessary to work with cost-based pricing to avoid negative margins. Furthermore,

Coping Media Industry Dynamics

51

the respondents indicate that creating tight relationships with customers is one way of avoiding the fierce price competition in the industry. In addition to having vertical relationships to increase the efficiency of the production chain, the need for horizontal relationships was also stressed by the respondents. These relationships were mainly to access more output channels and services that was not a natural part of their production. One thing that was mentioned by several of the respondents was cooperation regarding IT competence (which is, if not a strategic business unit, very important for many firms within the industry). Even though most respondents called attention to the need for basic and commonly used IT services to be integrated within the firm’s boundaries, most firms had created tight relationships with external, mostly small and local, IT firms. These relationships are crucial due to the high degree of digitalization in the industry, which has led to a need for creating different kinds of solution that are not only based on print but also solely Internet-based solutions of, for example, distribution of digital material. These kinds of relationships also boost the integration of print into digital channels, which has, according to some of the respondents, been a major success factor for several years. Even though larger firms have more resources to create customized solutions that make the workflow from digital input to printed output smooth and integrate digital channels and print, these things are also important for smaller firms to stay competitive. Consequently, different kinds of IT services have become increasingly important to control, to be able to both create (for the user) simple online services and to simplify the general internal production workflow.

Long-Term Effect of Digital Channels and the Democratization of Channels A clear tendency can be noticed of how the power in the media industry has shifted over time. Just as for the general view of how value is created, value in the media industry is no longer as distinctly created in production (cf. Normann & Ramı´ rez, 1993; Shostack, 1977; Vandermerwe & Rada, 1988). Before the 1900s, printing firms were, more or less, the owners of the content and were influential in how marketing messages were spread. However, as the number of media channels has increased during the last century, the value of the content has increased, but the value of controlling an individual channel has decreased. This was confirmed by the media agency respondents, since “the thing that matters the most is the content”

52

THOMAS MEJTOFT

and is far more important than the actual channel that is used for delivery. Even though the actual message has, of course, always been important, the ability to easily and cheaply spread the message has not always been a commodity product. Furthermore, simplicity in the use of different channels is also important. This is another major reason for printing firms to create strong relationships with other partners in the print value chain. At the end of the day, trying to avoid becoming a supplier of cheap print and “just put some dirt on paper” is one of the reasons to cooperate with other firms to create an integrated media firm, according to one of the respondents. As discussed in the introduction, the control of different channels is noteworthy. Most channels used for mass media are controlled by a specific industry; radio, TV, and partly print are such channels controlled by the broadcast industry and the printing industry. Social media differ from this, due to its openness. Even though webpages on social networks such as Facebook can be controlled and moderated by the firm publishing the page or group, social media channels are obviously much harder to control due to the high reliance on word-of-mouth. One example of a more democratic channel is the hashtag (#) on Twitter. The hashtag is a Twitter convention that has spread to other channels and is distinguished in the tweet by adding “#” to a text string. Hashtags are therefore a way to label topics that make all others’ posts visible for anyone searching for a specific hashtag. Each hashtag can be regarded as a channel (Messina, 2007) and no government, firm, or individual can control these, they are free for anyone to use and post information as they will. This situation became apparent with the political changes in Egypt during 2011, when Twitter was one of few free channels, and was used to spread messages by the critics of the regime (Papacharissi & de Fatima Oliveira, 2012). The inability to control intentional campaigns on social media has been shown many times lately. When Australian airline Qantas launched a campaign, after a dispute with the trade union, in the fall of 2011, the hashtag proposed by Qantas unintentionally ended up with nonfavorable tweets (Taylor, 2011). Similar hashtag hijacking happened to McDonalds in the United States (Curry, 2012) and Starbucks in the United Kingdom (Morse, 2012) during 2012. The importance of control in social media and the ability, and the need to respond and delete comments and post have been widely discussed during the last few years (e.g., Ghaemi, 2011; McDermott, 2012). The media agency respondents indicate that the main reason not to recommend social media campaigns is the lack of control in the campaign and the commitment needed by the client for the result of a campaign to be successful. Even though an advertisement agency can

Coping Media Industry Dynamics

53

initiate and carry through a social media campaign, the long-term risk and responsibility is still in the hands of the brand owner. Even though the study here focuses on print, which is under pressure by digitally distributed media and social media as both a complement and a substitute (Brandenburger & Nalebuff, 1996; Porter, 1979), the situation is similar for the other traditionally controlled media channels. Internet-based digital media and social media have made it possible for almost anyone to broadcast on both radio (e.g., podcasts) and TV (e.g., YouTube). Consequently, the media industry has been democratized both in means of production (e.g., desktop publishing and webcams) and distribution (e.g., Twitter). The way value is created and perceived is also a major reason that old, and controlled, media channels are declining in value, while new channels, that support cocreated material and word-of-mouth ideas become increasingly important in information spreading and marketing. Even though we live lives that are largely analogue, our communication has been increasingly digitalized. All this communication and information spread through digital channels has led to a high level of noise in these channels. This is one of the reasons why print campaigns are mentioned, by the media agency respondents, as potentially successful, because of the “exclusivity that print might give when almost all other campaigns are digital” and the “ability to control the content” in comparison to, for example, social media.

CONCLUDING REMARKS By using a qualitative case study approach for this research, it is possible to gain in-depth knowledge into both the reasons why and the effects that the graphic arts and printing industry experience because of the continuous introduction of new, and easily accessible, media. The results from this case study show that for an old industry, such as the printing industry, to adapt to the new media landscape, not only vertical integration is necessary but also both vertical and horizontal relationships are favored for securing long-term survival. It is, however, important to notice that the integration is by no means total in all stages. The strategy used is taper integration, where vertical integration is combined with relationships, in order to increase the strategic flexibility of the firm. From the results and the discussion above, it is clear

54

THOMAS MEJTOFT

that many of the relationships that printing firms develop are used to increase the flexibility not only of the firm, but also the flexibility of print as a media channel and, hence, make it a more attractive channel in competition with new digital channels. Another reason is to increase the possibility of regaining some of the power over the content and, consequently, increase the profits in the industry. Even though printing firms historically have been powerful in the media production and distribution value chain, new media have switched the power away from these firms. It is also suggested that the printing industry has gradually drifted further and further away from the actual paying customer and from the end user of their products. This has led to the printing industry being a supplier of cheap production in the media value network, which is a situation that the industry is trying to avoid by cooperating and integrating to get closer to their customers.

ACKNOWLEDGMENTS Thanks to my former colleagues A˚sa Nordin at the Mid Sweden University, Sven Packmohr at Malmo¨ University, and Magnus Vistro¨m at SCA Forest Products, for their continuous support and participation in my research for many years. Many thanks to my friend Andre´ Odeblom for checking my grammar and spelling. Furthermore, my sincere thanks to Grafiska Fo¨retagens Stipendiestiftelse for providing funds when I presented parts of this research at the ANZMAC Conference in Adelaide 2012 and, last but not least, the Kempe Foundations, for funding the digital printing research in O¨rnsko¨ldsvik.

REFERENCES Adelman, M. A. (1949). Integration and antitrust policy. Harvard Law Review, 63(1), 27 77. Adelman, M. A. (1955). Concept and statistical measurement of vertical integration. In G. J. Stigler (Ed.), Business concentration and price policy: A conference of the universities National Bureau Committee for Economic Research (pp. 281 330). Princeton, NJ: Princeton University Press. Ahonen, T. T. (2008). Mobile as 7th of the mass media: Cellphone, cameraphone, iPhone, smartphone. London: Futuretext. Beal, R. M., & Yasai-Ardekani, M. (2000). Performance implications of aligning CEO functional experiences with competitive strategies. Journal of Management, 26(4), 733 762.

Coping Media Industry Dynamics

55

Berners-Lee, T. (1999). Weaving the web: The past, present and future of the World Wide Web by its inventor. London: Texere. Birkenshaw, J. (2004, April). The future of print on paper. Prepress and print technology, Pira International. Retrieved from http://pira.atalink.co.uk/pulp-and-paper/163.html. Accessed on January 26, 2005. Blackshaw, P., & Nazzaro, M. (2006). Consumer-generated media (CGM) 101: Word-of-mouth in the age of the web-fortified consumer (2nd ed.). Retrieved from http://www.nielsenonline.com/downloads/us/buzz/nbzm_wp_CGM101.pdf. Accessed on March 13, 2011. Blair, R. D., & Kaserman, D. L. (1982). Optimal franchising. Southern Economic Journal, 49(2), 494 505. Boyd, D. M., & Ellison, N. B. (2007). Social network sites: Definition, history, and scholarship. Journal of Computer-Mediated Communication, 13(1), 210 230. Brandenburger, A. M., & Nalebuff, B. J. (1996). Co-opetition. New York, NY: Currency Doubleday. Buaron, R. (1981). New-game strategies. The McKinsey Quarterly, 1, 24 40. Calver, G. (2004). What is packaging design? Mies, Switzerland: Rotovision. Campbell, D. T. (1975). “Degrees of freedom” and the case study. Comparative Political Studies, 8(2), 178 193. Child, J., Faulkner, D., & Tallman, S. (2005). Cooperative strategy, managing alliances, network and joint ventures (2nd ed.). Oxford, UK: Oxford University Press. Collis, D. J., & Montgomery, C. A. (2005). Corporate strategy: A resource-based approach (2nd ed.). Boston, MA: McGraw-Hill. Curry, C. (2012). McDialysis? I’m loving it!: McDonald’s twitter promo fail. ABC News, January 24. Retrieved from http://abcnews.go.com/blogs/headlines/2012/01/mcdialysisim-loving-it-mcdonalds-twitter-promo-fail/. Accessed on June 15, 2012. Drucker, P. F. (1973). Management: Tasks, responsibilities, practices. New York, NY: Harper & Row Publishers. Dutta, S., Bilbao-Osorio, B., & Geiger, T. (2012). The networked readiness Index 2012: Benchmarking ICT progress and impacts for the next decade. In S. Dutta & B. BilbaoOsorio (Eds.), The global information technology report 2012: Living in a hyperconnected world (pp. 3 34). Geneva: World Economic Forum. Eisenhardt, K. M. (1989). Building theories from case study research. The Academy of Management Review, 14(4), 532 550. Facebook Inc. (2013). Newsroom: Key facts. Retrieved from http://newsroom.fb.com/KeyFacts. Accessed on June 7, 2012. Faulkner, D. (1995). International strategic alliances: Co-operating to compete. London: McGraw-Hill. Fine, B. (2001). The continuing imperative of value theory. Capital & Class, 25(75), 41 52. Fombrun, C. J. (1993). Envisioning strategic change. In P. Shrivastava, A. Huff, & J. Dutton (Eds.), Advances in strategic management (Vol. 9, pp. 157–188). Greenwich, CT: JAI Press. Fontana, A., & Frey, J. H. (2005). The interview: From neutral stance to political involvement. In N. K. Denzin & Y. S. Lincoln (Eds.), The Sage handbook of qualitative research (3rd ed., pp. 695 727). Thousand Oaks, CA: Sage. Gerlach, M. (1990). Trust is not enough: Cooperation and conflict in Kikkiman’s American development. Journal of Japanese Studies, 16(2), 389 425. Ghaemi, N. (2011). Deleting the blog bully [blog post]. Retrieved from http://www.psychologytoday.com/blog/mood-swings/201106/deleting-the-blog-bully. Accessed on December 22, 2012.

56

THOMAS MEJTOFT

Gilboa, R. (2002). The production digital printing market: Opportunities and trends. Proceedings from IS&T’s NIP18 (pp. 134 138). San Diego, CA. Gillham, B. (2000). Case study research methods. London: Continuum. Gluck, F. W. (1980). Strategic choice and resource allocation. McKinsey Quarterly, 1, 22 33. Gro¨nroos, C. (1996). Relationship marketing: Strategic and tactical implications. Management Decision, 34(3), 5 14. Gulati, R. (2007). Managing network resources: Alliances, affiliations and other relational assets. Oxford, UK: Oxford University Press. Gulati, R., Nohria, N., & Zaheer, A. (2000). Strategic networks. Strategic Management Journal, 21(3), 203 215. Hagedoorn, J. (1995). A note on international market leaders and networks of strategic technology partnering. Strategic Management Journal, 16(3), 241 250. Harrigan, K. R. (1983a). Research methodologies for contingency approaches to business strategy. The Academy of Management Review, 8(3), 398 405. Harrigan, K. R. (1983b). Vertical integration, outsourcing, and corporate strategy. Washington, DC: BeardBooks. Harrigan, K. R. (1985). Vertical integration and corporate strategy. Academy of Management Journal, 28(2), 397 425. He, H.-W., & Balmer, J. M. T. (2006). Alliance brands: Building corporate brands though strategic alliances? Brand Management, 13(4/5), 242 256. Hergert, M., & Morris, D. (1988). Trends in international collaborative agreements. In F. J. Contractor & P. Lorange (Eds.), Cooperative strategies in international business (pp. 99 109). Lexington, MA: Lexington Books. Holbrook, M. B. (1994). The nature of customer value. In R. T. Rust & R. L. Oliver (Eds.), Service quality: New directions in theory and practice (pp. 21 71). Thousand Oaks, CA: Sage. Howe, J. (2006). The rise of crowdsourcing. Wired Magazine, Issue 14, June 6. Hulte´n, P., Vistro¨m, M., & Mejtoft, T. (2009). New printing technology and pricing. Industrial Marketing Management, 38(3), 253 262. IBSA. (2010). Environment scan 2010: Printing and graphic arts industry. Innovation & Business Skills Australia. Inaba, F. S. (1980). Franchising: Monopoly by contract. Southern Economic Journal, 47(1), 65 72. Intergraf. (2007). Competitiveness of the European graphic industry. European Commission: Enterprise and Industry Directorate-General. Jarillo, J. C. (1988). On strategic networks. Strategic Management Journal, 9(1), 31 41. Kantola, V., Kulovesi, J., Lahti, L., Lin, R., Zavodchikova, M., & Coatane´a, E. (2009). Printed electronics, now and future. In Y. Neuvo & S. Ylo¨nen (Eds.), Bit bang: Rays to the future (pp. 63 102). Helsinki, Finland: Helsinki University of Technology. Kaplan, A. M., & Haenlein, M. (2010). Users of the world, unite! The challenges and opportunities of social media. Business Horizons, 53(1), 59 68. Kipphan, H. (2001). Handbook of print media: Technologies and production methods. Berlin: Springer. Kotler, P. (1972). A generic concept of marketing. Journal of Marketing, 36(2), 46 54. Kotler, P., Wong, V., Saunders, J., & Armstrong, G. (2005). Principles of marketing (4th European ed.). Upper Saddle River, NJ: Pearson Education Limited. Mangold, W. G., & Faulds, D. J. (2009). Social media: The new hybrid element of the promotion mix. Business Horizon, 52(4), 357 365.

Coping Media Industry Dynamics

57

Mariti, P., & Smiley, R. H. (1983). Co-operative agreements and the organization of industry. Journal of Industrial Economics, 31(4), 437 451. Marx, K. (1930). Capital (Vol. 1, E. Paul & C. Paul, Trans.). London, UK: J. M. Dent & Sons Ltd. (Original work published 1867). McDermott, I. E. (2012). Trolls, cyberbullies, and other offenders. Searcher, 20(10), 7 11. Mejtoft, T. (2008). Institutional arrangements and competitive posture: Effects of company structures in the commercial printing industry. Doctoral dissertation. Royal Institute of Technology, Stockholm, Sweden. Mejtoft, T. (2010). Moving closer to the customers: Effects of vertical integration in the Swedish commercial printing industry. Journal of Strategic Marketing, 18(7), 599 611. Mejtoft, T., & Nordin, A˚. (2007). Strategic alliances in the digital printing industry. Taga 2007 Proceedings (pp. 38 62). Pittsburgh, PA. Mejtoft, T., & Nordin, A˚. (2008). Cooperation and competition: The case of the Swedish commercial printing industry. In D. Spanjaard, S. Denize, & N. Sharam (Eds.), Australian and New Zealand Marketing Academy conference 2008. Sydney, Australia: Promaco Conventions Pty. Mejtoft, T., & Nordin, A˚. (2009a). Cooperation and resource flexibility as competitive strategy: The case of the printing industry. In A. Albarran, P. Faustino, & R. Santos (Eds.), The media as a driver of the information society: Economics, management, policies and technologies. Lisbon: MediaXXI. Mejtoft, T., & Nordin, A˚. (2009b). Print as a channel for relationship marketing: A study of the Swedish printing industry. In D. Tojib (Ed.), Australian and New Zealand Marketing Academy conference 2009. Melbourne, Australia: Australian & New Zealand Marketing Academy. Mejtoft, T., & Packmohr, S. (2009). Transaction costs and their influence on institutional arrangements in the Swedish printing industry. In A. Albarran, P. Faustino, & R. Santos (Eds.), The media as a driver of the information society: Economics, management, policies and technologies. Lisbon: MediaXXI. Mejtoft, T., & Vistro¨m, M. (2007). Positioning in the printing industry: Differentiation in terms of price, lead time, print quality and flexibility. In N. Enlund & M. Lovrecˇek (Eds.), Advances in printing and media technology (Vol. 34, pp. 327 336). Zagreb: Acta Graphica Publishers. Mejtoft, T., & Vistro¨m, M. (2008). Delivery times and closeness to geographic market: A comparison between digital and conventional printing houses. In N. Enlund & M. Lovrecˇek (Eds.), Advances in printing and media technology (Vol. 35, pp. 45 54). Darmstadt: International Association of Research Organizations for the Information, Media and Graphic Industries. Merrian, S. B. (1988). Case study research in education: A qualitative approach. San Francisco, CA: Jossey-Bass Publishers. Messina, C. (2007). Groups for Twitter; or a proposal for Twitter tag channels [blog post]. Retrieved from http://factoryjoe.com/blog/2007/08/25/. Accessed on October 23, 2007. Meyers, H. M., & Lubliner, M. J. (1998). The marketer’s guide to successful package design. Lincolnwood, IL: NCT Business Books. Morgan, R. M., & Hunt, S. D. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58(3), 20 38.

58

THOMAS MEJTOFT

Morse, F. (2012). Starbucks PR fail at natural history museum after #spreadthecheer tweets hijacked. The Huffington Post, December 17. Retrieved from http://www.huffing tonpost.co.uk/2012/12/17/starbucks-pr-rage-natural-history-museum_n_2314892.html. Accessed on April 13, 2013. Mussell, J. (2012). The nineteenth-century press in the digital age. Basingstoke: Palgrave Macmillan. Nordicom-Sverige. (2013, February). Mediebarometer 2012: En fo¨rsta o¨versikt. Go¨teborgs universitet. Normann, R., & Ramı´ rez, R. (1993). From value chain to value constellation: Designing interactive strategy. Harvard Business Review, 71(4), 65 77. Norton, S. W. (1988). An empirical look at franchising as an organizational form. The Journal of Business, 61(2), 197 218. OECD. (2007). Participative web: User-created content. Retrieved from http://www.oecd.org/ dataoecd/57/14/38393115.pdf. Accessed on October 5, 2010. O’Reilly, T. (2005). What is Web 2.0. Retrieved from http://oreilly.com/web2/. Accessed on April 2, 2011. O’Reilly, T., & Battelle, J. (2009). Web squared: Web 2.0 five years on. Web 2.0 Summit. Retrieved from http://www.web2summit.com/web2009/public/schedule/detail/10194. Accessed on August 4, 2010. Papacharissi, Z., & de Fatima Oliveira, M. (2012). Affective news and networked publics: The rhythms of news storytelling on #Egypt. Journal of Communication, 62(2), 266 282. Parmigiani, A. (2007). Why do firms both make and buy? An investigation of concurrent sourcing. Strategic Management Journal, 28(3), 285 311. Payne, F. A., Storbacka, K., & Frow, P. (2008). Managing the co-creation of value. Journal of the Academy of Marketing Science, 36(1), 83 96. Perry, M. K. (1989). Vertical integration: Determinants and effects. In R. Schmalensee & R. D. Willig (Eds.), Handbook of industrial organization (Vol. 1, pp. 183 255). Amsterdam: North-Holland. Porter, M. E. (1979). How competitive forces shape strategy. Harvard Business Review, 57(2), 137 145. Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York, NY: Free Press. Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York, NY: Free Press. Porter, M. E. (1996). What is strategy? Harvard Business Review, 74(6), 61 79. Prahalad, C. K., & Ramaswamy, V. (2000). Co-opting customer competence. Harvard Business Review, 78(1), 79 87. Prahalad, C. K., & Ramaswamy, V. (2004a). Co-creating unique value with customers. Strategy & Leadership, 32(3), 4 9. Prahalad, C. K., & Ramaswamy, V. (2004b). The future of competition: Co-creating unique value with customers. Boston, MA: Harvard Business School Press. Ramaswamy, V. (2008). Co-creating value through customers’ experiences: The Nike case. Strategy & Leadership, 36(5), 9 14. Robson, C. (2002). Real world research (2nd ed.). Oxford: Blackwell Publishing. Romano, F. J., Lee, B., Rodrigues, A., & Sankarshanan (1999). Professional prepress, printing, and publishing. Upper Saddle River, NJ: Prentice-Hall.

Coping Media Industry Dynamics

59

Rossell, R. (1959). An amazing and dramatic story of progress. In C. L. Helbert (Ed.), Printing progress: A mid-century report (pp. 1 15). Cincinnati, OH: International Association of Printing House Craftsmen, Inc. Rubin, P. H. (1978). The theory of the firm and the structure of the franchise contract. Journal of Law and Economics, 21(1), 223 233. Schein, E. H. (1983). The role of the founder in creating organizational culture. Organizational Dynamics, 12(1), 13 28. Schwab, K. (Ed.). (2012). The global competitiveness report 2012 2013: Full data edition. Geneva: World Economic Forum. Shostack, G. L. (1977). Breaking free from product marketing. Journal of Marketing, 41(2), 73 80. Smyth, S. (2006). The future of European printing to 2011. Leatherhead: Pira International. Stake, R. E. (2005). Qualitative case studies. In N. K. Denzin & Y. S. Lincoln (Eds.), The Sage handbook of qualitative research (3rd ed., pp. 695 727). Thousand Oaks, CA: Sage. Taylor, B. (2011). Epic fail for Qantas twitter competition. Reuters. Retrieved from http:// www.reuters.com/article/2011/11/22/us-qantas-idUSTRE7AL0HB20111122. Accessed on April 8, 2012. Todeva, E., & Knoke, D. (2005). Strategic alliances and models of collaboration. Management Decision, 43(1), 123 148. Vandermerwe, S., & Rada, J. (1988). Servitization of business: Adding value by adding services. European Management Journal, 6(4), 314 324. Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68(1), 1 17. Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: Continuing the evolution. Journal of the Academy of Marketing Science, 36(1), 1 10. Williamson, O. E. (1975). Markets and hierarchies: Analysis and antitrust implications. New York, NY: Free Press. Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York, NY: Free Press. Woodside, A. G. (2010). Case study research: Theory, methods and practice. Bingley, UK: Emerald Group Publishing Limited. Yin, R. K. (1994). Case study research: Design and methods (2nd ed.). Thousand Oaks, CA: Sage.

BARRIERS TO INNOVATION DIFFUSION IN INDUSTRIAL NETWORKS: A SYSTEMATIC COMBINING APPROACH Juho-Petteri Huhtala, Pekka Mattila, Antti Sihvonen and Henrikki Tikkanen ABSTRACT Over the past 50 years, a substantial interest has been put to research on how innovation spreads within social networks over time (see Rogers, 1962, 2010). Our initial aim was to examine innovation diffusion in industrial networks. We operationalized the research through a case study of an advertising network by using systematic combining as the approach (Dubois & Gadde, 2002, 2014). From the initial focus of innovation diffusion, the rematching of data and theory led us to focus on the barriers of innovation diffusion. By doing so, we found out that multilevel strategizing appears to be an important phenomenon in understanding dynamics of innovation diffusion within industrial networks. Specifically, strategizing occurs in two levels: (1) the groups within the network compete for position, and (2) actors within a group compete for position by trying to differentiate themselves from other group actors. A strategic

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 61 76 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021002

61

62

JUHO-PETTERI HUHTALA ET AL.

mismatch between the two levels leads the network to become decelerated or even static in diffusing new innovations (Abrahamsen, Henneberg, & Naude`, 2012). Uncovering these findings would not have been possible without the use of systematic combining and the constant matching between theoretical and empirical domains. Keywords: Systematic combining; industrial networks; innovation diffusion; advertising

INTRODUCTION Business network studies focus on examining how various economic activities occur within a networked structure (Kogut, 2000; Powell, 1990; Tortoriello & Krackhardt, 2010). An especially rich and growing body of network research focuses on understanding network dynamics and exploring how network structures, relations between actors, and resource constellations change over time. The network structure is seen as a continually evolving interplay between various actors of the net (Gulati, Nohria, & Zaheer, 2000), where the role of a single actor also undergoes dynamic change. These changes, both in the network structure and in the role of the actors, have emerged through the changes in the substance and function of the network (Ha˚kansson & Snehota, 1995). Recently, network and innovation scholars have focused on understanding the network dynamics that drives the diffusion of innovation within networks (Ceci & Iubatti, 2012; Kogut, 2000). Innovation diffusion is the process through which innovation spreads within a specific social system over a period of time (Peres, Muller, & Mahajan, 2010; Rogers, 1962, 2010). Previous studies that focus on innovation diffusion within business networks have identified various structural factors that increase the likelihood of adaptation and innovation diffusion within networks, such as high levels of centralization, small numbers of actors, and the multidimensionality of networks (Ceci & Iubatti, 2012; Cooke, 2001; Valente, 1995). However, as extant research focuses on demonstrating innovation diffusion through computerized simulations (e.g., Abrahamson & Rosenkopf, 1993; Choi, Sang-Hoon, & Lee, 2010), industrial innovation diffusion research lacks real-life examples of how innovations diffuse. Studies that examine innovation diffusion in a real-life setting have mainly focused on innovation diffusion in strategic entrepreneurial nets aimed at improving the effectiveness of innovation performance (e.g., Cooke, 2001). The

Barriers to Innovation Diffusion in Industrial Networks

63

application of these findings to other types of network settings is somewhat problematic, as the network type can have a substantial effect on the manner in which innovations diffuse (Midgley, Morrison, & Roberts, 1992). Thus, more understanding of innovation diffusion in different real-life network settings is needed. The study was originally designed to provide a framework of the innovation diffusion process in an existing business network setting. As we found that innovations were not diffusing within the network we studied, the focus shifted from framing the industrial innovation diffusion process into extending our understanding of possible barriers to innovation diffusion within the net. Specifically, we became interested in uncovering both individual actor-level and group-level factors (Wilke & Ritter, 2006) that decelerate the innovation diffusion in this context, especially strategizing (Gadde, Huemer, & Ha˚kansson, 2003). We operationalize the research as a case study (see, e.g., Eisenhardt, 1989; Yin, 2003) based on 6 interviews of industry experts and 16 interviews with participants of different actor groups. Our research design follows the systematic combining approach, which is based on abductive logic and continuous iteration between the theory and the empirical data (Dubois & Gadde, 2002). As systematic combining is a novel approach for innovation diffusion research, we explain in the methodology section how systematic combining is applied into our research. The study here focuses on advertising networks in Finland between 2010 and 2012. During the three-year period, possibilities to advertise in tablet devices were emerging. This situation provides a rich setting to study innovation diffusion at the intersection of traditional print advertising and rapidly expanding digital advertising.

THEORETICAL BACKGROUND According to the view of the Industrial Marketing and Purchasing (IMP) research group, markets are complex networks of dependent exchange relationships (Axelsson, 1992; Dyer & Singh, 1998; Halinen, Salmi, & Havila, 1999). According to Mo¨ller and Svahn (2003) networks are value systems that seek to offer end customers “whole products” through knowledge transfer and joint value creation between the actors. Specifically, three types of value systems can be identified, stable and well-defined value systems, established value systems, and emerging value systems.

64

JUHO-PETTERI HUHTALA ET AL.

In network-related studies, focus has especially been on network interactions between multiple actors (Ha˚kansson & Snehota, 1995). Understanding the spatial and interlinked relationships between actors within a business network is seen a key requirement for understanding any type of a network (Henneberg, Naude´, & Mouzas, 2010). The basic assumption in the industrial network approach is that analyzing these relationships requires examination of actors, resources, and activities within the focal network (Ha˚kansson & Snehota, 1995). Additionally, Wilke and Ritter (2006) have suggested a distinction between structural and actor-level analysis of network interactions. The structural level analysis consists of examination of network relationships between multiple actors within the focal network. On the other hand, in the actor level of analysis, the organizations in the focal network are examined (Wilke & Ritter, 2006). During recent years, research has investigated innovation diffusion within the industrial network context (Ceci & Iubatti, 2012; Kogut, 2000). According to innovation diffusion theory, innovation diffusion is the process of the penetration of new products and services into social networks, which is driven by social influences (Peres et al., 2010; Rogers, 2010). These social influences may include social interdependencies of all kinds within the network (Goldenberg, Libai, & Muller, 2010), such as various groups of actors within an industrial network. With regards to innovation diffusion process, current network and innovation diffusion studies have already demonstrated how innovation diffuses within simulated environments (Abrahamson & Rosenkopf, 1993; Choi et al., 2010). For instance, Choi et al. (2010) find that different cliques between groups of actors within the net have crucial roles in defining how innovations diffuse. Although innovation diffusion has been researched extensively through computerized modeling, we believe that this field of study has much more to offer in terms of describing the innovation diffusion in both real-life and industrial network contexts. Our study builds on both industrial networks theory and innovation diffusion theory. As we are interested in how innovations are diffusing in reallife settings where networks are changing, we apply the actors, resources, and activities (ARA) model (Ha˚kansson, 1987; Ha˚kansson & Snehota, 1995) to unravel the structures and between-actor relationships in the industrial diffusion process. In order to understand multiple perspectives of possible barriers of innovation diffusion, we explore both firm level and group-level activities within the network (Wilke & Ritter, 2006). In doing

Barriers to Innovation Diffusion in Industrial Networks

65

so, we focus on strategizing behavior (Gadde et al., 2003) to cover simultaneous strategizing in these two levels.

METHOD In order to examine innovation diffusion within existing business network and the dynamics of the participating actors, the resources ties, and the activity links related to innovation diffusion, we selected a case study method. A case study approach (e.g., Stake, 1995; Yin, 2003) is considered to be appropriate for two main reasons. First, according to Yin (2003) a case study approach is a useful method for exploring complex phenomena within its context. Second, it is the recommended method for understanding dynamics of complex network systems with unclear boundaries (Halinen & To¨rnroos, 2005). Within the case study framing we utilize a systematic combining approach (Dubois & Gadde, 2002, 2014). According to Dubois and Gadde (2002, p. 556) systematic combining is defined as “a non-linear, pathdependent process of combining efforts with the ultimate objective of matching theory and reality.” When the systematic combining approach is utilized, theory and empirical data are continuously adapted to fit with each other through the processes of traveling back and forth between theoretical realm, empirical realm, and case analysis. As theory, empirical work, and analysis are evolving simultaneously, systematic combining is exceptionally useful for theory development (Dubois & Gadde, 2002). The stages through which this research process evolves can be identified in retrospect (Dubois & Gadde, 2002). Fig. 1 shows how the study combines both empirical fieldwork and existing conceptual insights to broaden our understanding of innovation diffusion in industrial networks. The process is highly iterative as we move back and forth from theory to empirics numerous times. Fig. 1 also indicates how our understanding of the phenomenon progresses. In Step 1, our aim was to frame innovation diffusion process. First we conducted six interviews with industry experts to gain a deeper understanding of an advertising network within the context of industrial networks. In this step, we followed the long interview approach advocated by McCracken (1988). Therefore, we first focused on grand tour questions, followed by specific questions of the categories that the interviewees had

66

JUHO-PETTERI HUHTALA ET AL. EMPIRICAL REALM

THEORETICAL REALM

RESEARCH FOCUS

Innovation diffusion theory (e.g. Rogers, 1962), industry networks theory (e.g. Axelsson, 1992)

Initial idea: Innovation diffusion

Interviews with innovation facilitators (media houses) and innovation adaptors (advertisers)

Fig. 1.

Innovation diffusion theory, industry networks theory, ARA-model (Håkansson and Snehota, 1995)

Strategizing in industrial networks (Gadde et al., 2003), value networks (Möller and Svahn, 2003)

Ideation and reorientation

Interviews with innovation facilitators (media houses) and innovation adaptors (advertisers)

Analysis

Expert interviews

Reorientation of focus: Barriers to innovation diffusion

Reorientation of focus: Multilevel strategizing as barrier to innovation diffusion

The Systematic Combining Research Process.

identified. This enables us to get an overview of how Finnish advertising industry functions. After gaining an overview of how the advertising industry functions according to experts, we returned to the theoretical realm and applied the ARA-model (Ha˚kansson, 1987; Ha˚kansson & Snehota, 1995) to analyze the network. This enabled us to distinguish the kinds of actors, the activities they conduct, and what kind of activity bonds there could be. We then consulted industry experts to validate our identification of different actors within the network. The next step in our research process was to conduct seven semistructured interviews with the different actors in the network. These actors are three innovation facilitators (media houses) and four innovation adaptors (advertisers). At this point, we faced a dilemma: Innovations were not diffusing among actor groups in the advertising network. As neither innovation facilitators nor innovation adopters appeared complacent about the diffusion of the innovation on their side, we turned our attention toward innovation intermediaries that function between the facilitators and adapters and their role in decelerating the diffusion of

Barriers to Innovation Diffusion in Industrial Networks

67

innovations. Therefore, our focus was shifted from framing innovation diffusion process to examining barriers to innovation diffusion, by exploring conflicts between and within actor groups. Thus, our research was redirected from studying the process of innovation diffusion into explaining the deeper reasons behind the lack of innovation diffusion. In the final step, we conducted nine semi-structured interviews with various actor groups within the network, focusing on innovation intermediaries (media, advertising, and digital agencies) that were previously identified. By iterating the research data and theoretical realm, we were able to distinguish how different actors and groups of actors decelerate the adoption of innovations. This enabled us to first, produce a description of the phenomenon from which we then started building the explanation (Pentland, 1999). All the interviews were tape recorded and transcribed later. Table 1 depicts the persons interviewed in each stage, their position, the group they belong to, and their advertising network experience.

FINDINGS Based on our empirical research, we define various groups of actors and their activities in the network. The advertising network consists of five broad groups of actors: (1) media houses that offer media space, (2) media agencies that sell communications planning and media space, (3) advertising agencies that produce advertisements, (4) new digital agencies that provide specialist services related to new digital media content, and (5) advertisers that purchase advertisements and ad space. On the activity level, intermediary actor groups have overlapping activities as media agencies, advertising agencies, and digital agencies partake in the planning and execution of advertising campaigns. Fig. 2 illustrates how these actor groups are interlinked with each other in the advertising network structure. Before the digitalization of media industry, advertising network consisted of only four actor groups, namely media houses, media agencies, advertising agencies, and advertisers. The value creation in this network was created through joint efforts of all actor groups, where advertising agencies were the leading actors. Following the categorization of Mo¨ller and Svahn (2003), this represents a stable and well-defined value system, where value activities, actors, technologies, and procedure are specified and well known.

68

JUHO-PETTERI HUHTALA ET AL.

Table 1. Informant No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Interviewees, Their Position and Background. Position

Group

Advertising Network Experience

CEO CEO Partner Partner CEO CEO CEO Planning Director Team Manager Brand Marketing Manager Area Manager Online-Dialog Director Marketing Manager Head of Digital Advertising Account and Sales Manager Creative Director Producer CEO Creative Strategist Account Executive Digital Director CEO

Industry expert Industry expert Industry expert Industry expert Industry expert Industry expert Media house Media house Media house Advertiser Advertiser Advertiser Advertiser Digital agency Digital agency Digital agency Digital agency Advertising agency Advertising agency Media agency Media agency Media agency

Unknowna Unknowna Unknowna Unknowna Unknowna Unknowna 7 years 2 years 7 years 7 years 1 year Less than a year 8 years Less than a year Less than a year Less than a year 1 year 5 years 2 years 4 years 1 year 2.5 years

a

Experience of industry experts is unknown as questions related to advertising network experience were not included in early stages of our research.

INNOVATION FACILITATORS

INNOVATION INTERMEDIARIES

INNOVATION ADAPTORS

2) Media agencies

1) Media houses

3) Advertising agencies

5) Advertisers

4) New digital agencies = High activity intensity = Low activity intensity

Fig. 2.

Illustration of the Finnish Advertising Network.

Barriers to Innovation Diffusion in Industrial Networks

69

The new digital agencies emerged during 2000s when neither the advertising agencies nor media agencies had the ability to produce digital advertisements. As such this did not pose direct challenges to the positions of the conventional actors in the existing network structure, as the digital agencies initially assumed a subcontractor position and they were unable to gain resources and conduct activities that would have threatened the positions of the advertising agencies. As one of our interviewees stated on the past roles of different actors: The 1980s was a goldmine for the advertising agencies and still in the 1990s TV [advertising] was like a money-printing machine. (Creative Director, informant no. 16)

As the marketplace of digital marketing grew at the beginning of the new millennium, the network positions of digital agencies became reconfigured into a more central role in the Finnish advertising network. These developments have effectively separated advertising and digital agencies into distinct network actors. This dynamic is largely due to major cuts in firms’ advertising budgets as a result of the economic downturn and due to the introduction of new technologies. These two actor categories thus emerged into distinct groups of network actors that compete with each other for customers and contracts. However, this competitive setup with regards to activities of different actors is not very clear for different actor groups in the network. Due to these changes in technology, value-creating activities, and actors, the network is incrementally developing, representing an established value system (Mo¨ller & Svahn, 2003). These changes are well exemplified by the following quote from one of the interviewees: … We used to have clear roles that the advertising agency does the visual … and media agency makes the choice on media channels … and now when the digital agencies have entered the field, the digital has kind of stirred the soup … (Planning Director, informant no. 8)

With regards to innovation diffusion, media houses have taken the primary role of developing and facilitating new advertising innovations within the network. This is largely due to the falling subscription rates that need to be mitigated through new forms of generating cash flow. On the other hand, all of the interviewed managers from the advertiser group say that they are willing to launch pilots with new advertisement techniques, such as tablet advertising, if these become available. Despite the fact that there are both active innovation facilitator group and potential innovation adaptor group within the established value

70

JUHO-PETTERI HUHTALA ET AL.

system, advertising innovations are not spreading in this system. This situation appears to stem from conflicts between the three intermediary groups, namely digital, media, and advertising agencies. Actors within these groups are not able to share resource ties and activity links together mainly because of group-level cliques and individual-level positioning. First, two groups of network actors, media and advertising agencies, try to defend their groups’ existence. The majority of interviewed media and advertising agencies highlight the importance of both the quality of the creative idea and the use of traditional advertising measures, which were central value-creating activities in the previous stable value system. Creativity has been the core activity of advertising agencies, while the core activity of media agencies has been measurement. This juxtaposition is exemplified well by the following two quotes, first from a media agency and second from an advertising agency: We have to get the measurement right [in digital context]. It has to have the right KPIs [key performance indicators] and we have to measure them. (CEO, informant no. 22) This is very simple equation. Effectiveness of the advertisement [idea of the advertisement] times the number of contacts equal the effectiveness of the advertising campaign. If you have a bloody good idea and you reach 50.000 people with it, it is better than having a decent idea and reach 2.500.000 people. (CEO, informant no. 18)

On the other hand, digital agencies emphasize the new features of digital channels, such as personalization and the inaccuracy of traditional measurement. This differs substantially from the perspective of both advertising agencies and media agencies. The new way of how value is created in the existing value system is illustrated by a digital agency representative: These kinds of digital mediums that identify the users are increasing, where you can automate the measurement that gives the log [of user data] out which is way more accurate … Idea of brand and its functionality can be conveyed more clearly through interactivity and rich content [in digital media] than through a single picture or text [in traditional media]. (Creative Director, informant no. 16)

The intermediary groups therefore blatantly compete with each other by emphasizing their strengths and playing down the role of the other groups. This creates an “us against them” strategizing at the group level. In doing so, advertising agencies and media agencies draw from the old stable and well-defined value system, whereas digital agencies draw from the established value system under incremental change. This mismatch appears to explain why these groups compete against each other and, on the group level, hinder the diffusion of innovations.

Barriers to Innovation Diffusion in Industrial Networks

71

Second, the firms in the intermediary groups compete within the group for positions and network influence. Within the group, individual actors’ strategizing takes the form of, for instance, positioning themselves by being a frontrunner or a different kind of agency. This was highlighted by a media agency representative, who noted the following: [Usually] media agencies thinking starts from a budget that has been decided to be allocated to a certain [bought] media. [Our] engagement thinking starts from the point that companies exist for their customers and the smartest marketing is to first identify and utilize company’s own channels and then think what role does bought media have. (CEO, informant no. 22)

These networked groups pose similar intra-group activity readiness by emphasizing specific and distinct aspects of advertising that comply with their core activities. Together, the dynamics of these strategizing activities within and between these groups creates a suboptimal situation for innovation diffusion. As one media house manager said: In Finland 82% of all media advertisement is conducted via media agencies. We have conducted 5 years of digital advertising through our 11 magazine brands. So guess how many digital advertisements we have sold via media agencies? One. (CEO, informant no. 7)

Multilevel strategizing is an important phenomenon in understanding networks where there are numerous actors in several distinct competing groups that have overlapping roles when the value system shifts from being stable into being an incrementally changing one. These groups within the network compete for position. Simultaneously, actors within a group compete for position by trying to differentiate theirselves from other group actors.

DISCUSSION This research provides an example of how multilevel strategizing conflicts lead a network to decelerated or even static position in diffusing innovations. Thus, it extends the sparse empirical knowledge of the factors that may decelerate innovation diffusion in industrial networks. According to Abrahamsen, Henneberg, and Naude` (2012) firms aim to change the network in a desired direction by altering how the role of the focal firms is interpreted. Our study highlights that firms have a dual role in trying to alter how they are identified. More specifically, firms strive to belong to a group, but simultaneously try to position themselves within the groups as being different.

72

JUHO-PETTERI HUHTALA ET AL.

Interestingly, search for a dominant position in the network becomes a dual phase process. First, the groups within the network compete for position. Second, actors within a group compete for position by trying to differentiate themselves from other group actors. Due to the existing network structure and functions, actors from different competing groups have problems in generating activity links and mutual understanding that would benefit both of the actors in their own category (Munksgaard, Clarke, Storvagn, & Erichsen, 2012). This results in strategic mismatch between the groups, which leads the network to become decelerated or even static in diffusing new innovations (Abrahamsen et al., 2012). When looking at the network from a value system perspective (Mo¨ller & Svahn, 2003), change from a stable and well-defined value system into an incrementally changing value system can create conflicts between actors. Furthermore, when new actors provide alternative ways of creating value in the new value system, the propensity for conflicts is accelerated. This may partly explain why innovations are not fully adopted even though every actor group in the network acknowledges them. Methodologically, this research also provides suggestions. The processes of abduction are oftentimes hidden within journal articles, as has been noted by Dubois and Gadde (2014). However, in the present study the process helped in discovering a new perspective into the phenomenon and therefore followed the original suggestion of Dubois and Gadde (2002) in using the method. We strongly suggest that these kinds of processes should be made transparent as they give depth, complexity, and credence to business reality. Simultaneously this requires researchers using systematic combining to outline how the method was used and how the movement between empirical and theoretical domains was made to reach conclusions. Making this process explicit when reporting the study, in our opinion, gives the study its methodological rigor. Systematic combining as an approach provides tools for understanding deep and complex structures and does not shy away from unanticipated empirical findings (Dubois & Gadde, 2002). These kinds of unanticipated findings are easily left outside the scope of multiple case studies that strive for analytical generalization (Eisenhardt, 1989). However, in the present study the emergence of unanticipated findings was what led toward studying multilevel strategizing. Therefore, the needed breadth of data to produce analytical generalization can very well hide the new and interesting findings that might emerge from the data if a closer look was taken. In this case study, the depth of the inquiry enabled us to reorient the study to a new direction. Therefore, these kinds of unique phenomena also warrant further research and can open up new avenues for theoretical development.

Barriers to Innovation Diffusion in Industrial Networks

73

CONCLUSION Based on our study, it appears that strategizing occurs on two levels, namely individual actor level and actor group level, and may decelerate innovation diffusion within industrial networks. More specifically, actor groups try to defend their existence when new actors and ways to create value emerge. This can hinder the diffusion of innovations in a network; despite different actor groups having the knowledge of how new value could be created. Furthermore, actors within the actor groups may compete with each other and therefore hinder the diffusion of innovations. In addition to the theoretical contributions discussed so far, this study contributes to the discussion on using systematic combining as an approach. This point is further explicated in the subsequent “Lessons Learned” section. Managerially, our research brings three main implications. First, one should understand the group one operates in and the direction that value system is heading toward. This enables assessment of whether participation in a certain group enables value creation when the value system changes. Second, one should reassess who are emerging or potential competitors, and form ties to actors in the main competing group to draw synergistic benefits. This brings competitors into your own group and secures your own role in the value system. Third, firms should constantly reassess how the focal company creates value, what is the role of other network actors in value creation, and how the actors overall contribute to the value creation of the network now and in the future. Collectively this knowledge could be applied to positioning oneself in relation to emerging industry standards, or to building relations that ensure value creation over time. This research has limitations. First, to better understand network dynamics, longitudinal studies are needed to fully understand how such groups emerge and evolve. Second, our research focuses on incrementally changing value system and thus testing these findings in other types of systems, such as emerging value systems with radical changes (Mo¨ller & Svahn, 2003), would bring new insight into how actors and actor groups strategize, and how innovations diffuse.

LESSONS LEARNED We encourage business-to-business (B2B) researchers to use systematic combining as an approach when the motive is to understand deeper

74

JUHO-PETTERI HUHTALA ET AL.

structures that underlie B2B phenomena. Rather than having an initial framework or testable hypotheses, as suggested by positivistically oriented case study methods (Eisenhardt, 1989; Yin, 2003), an initial idea of the studied phenomena and context is required. In this study innovation diffusion was the initial phenomenon and advertising networks the context. If the initial idea does not provide empirical or theoretical findings, the researcher has two options. First, the researcher may alter the study by changing the initial idea and consider the phenomena from a purely different perspective. Second, the researcher may look for unanticipated findings that question the original idea, and reorient the study accordingly. Either way, this requires the matching of empirical and theoretical domains. In our study, the unanticipated findings led us to approximate toward a new research problem that was better at uncovering the deeper structures in the network. The level and unit of analysis should be loosely defined when entering the field. This helps the researcher to find the case from the context. In our study, the initial focus shifted from studying the facilitation and adaptation of innovation into studying the strategizing of intermediary actors and its role in innovation diffusion. Reporting the process of systematic combing should be made transparent and explicit. Showing the path through which the systematic combining process led to the final research objective and outcome, can help the reader to understand why such an approach was used and how the systematic combining process was executed. In our study, we report this process as a figure depicting the temporal ordering of stages in the methodology section and provided descriptions of each of the stages.

ACKNOWLEDGMENT This work has been funded by the Finnish Funding Agency for Technology and Innovation (Tekes) and a Next Media research project.

REFERENCES Abrahamsen, M. H., Henneberg, S. C., & Naude`, P. (2012). Using actors’ perceptions of network roles and positions to understand network dynamics. Industrial Marketing Management, 41(2), 259 269.

Barriers to Innovation Diffusion in Industrial Networks

75

Abrahamson, E., & Rosenkopf, L. (1993). Institutional and competitive bandwagons: Using mathematical modeling as a tool to explore innovation diffusion. Academy of Management Review, 18(3), 487 517. Axelsson, B. (1992). Corporate strategy models and networks—diverging perspectives. In B. Axelsson & G. Easton (Eds.), Industrial networks: A new view of reality (pp. 184 204). London: Routledge. Ceci, F., & Iubatti, D. (2012). Personal relationships and innovation diffusion in SME networks: A content analysis approach. Research Policy, 41(3), 565 579. Choi, H., Sang-Hoon, K., & Lee, K. (2010). Role of network structure and network effects in diffusion of innovations. Industrial Marketing Management, 39(1), 170 177. Cooke, P. (2001). Regional innovation systems, clusters, and the knowledge economy. Industrial and Corporate Change, 10(4), 945 974. Dubois, A., & Gadde, L.-E. (2002). Systematic combining: An abductive approach to case research. Journal of Business Research, 55(7), 553 560. Dubois, A., & Gadde, L.-E. (2014). “Systematic combining”—A decade later. Journal of Business Research, 67(6), 1277 1284. Dyer, J., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660 679. Eisenhardt, K. M. (1989). Building theories from case study research. Academy of Management Review, 14(4), 532 550. Gadde, L. E., Huemer, L., & Ha˚kansson, H. (2003). Strategizing in industrial networks. Industrial Marketing Management, 32(5), 357 364. Goldenberg, J., Libai, B., & Muller, E. (2010). The chilling effects of network externalities. International Journal of Research in Marketing, 27(1), 4 15. Gulati, R., Nohria, N., & Zaheer, A. (2000). Strategic networks. Strategic Management Journal, 21(3), 203 215. Ha˚kansson, H. (1987). Industrial technological development: A network approach. London: Croom Helm. Ha˚kansson, H., & Snehota, I. (1995). Developing relationships in business networks. Boston, MA: International Thomson Press. Halinen, A., Salmi, A., & Havila, V. (1999). From dyadic change to changing business networks. An analytical framework. Journal of Management Studies, 36(6), 779 794. Halinen, A., & To¨rnroos, J.-A˚. (2005). Using case methods in the study of contemporary business networks. Journal of Business Research, 58(9), 1285 1297. Henneberg, S. C., Naude´, P., & Mouzas, S. (2010). Sense-making and management in business networks Some observations, considerations, and a research agenda. Industrial Marketing Management, 39(3), 355 360. Kogut, B. (2000). The network as knowledge: Generative rules and the emergence of structure. Strategic Management Journal, 21(3), 405 425. McCracken, G. (1988). The long interview. London: Sage. Midgley, D. F., Morrison, P. D., & Roberts, J. H. (1992). The effect of network structure in industrial diffusion processes. Research Policy, 21(6), 533 552. Mo¨ller, K., & Svahn, S. (2003). Managing strategic nets. A capability perspective. Marketing Theory, 3(2), 209 234. Munksgaard, K. B., Clarke, A. H., Storvagn, P., & Erichsen, P. G. (2012). Product development with multiple partners: Strategies and conflicts in networks. Industrial Marketing Management, 41(3), 438 447.

76

JUHO-PETTERI HUHTALA ET AL.

Pentland, B. (1999). Building process theory with narrative: From description to explanation. Academy of Management Review, 24(4), 711 724. Peres, R., Muller, E., & Mahajan, V. (2010). Innovation diffusion and new product growth models: A critical review and research directions. International Journal of Research in Marketing, 27(2), 91 106. Powell, W. W. (1990). Neither market nor hierarchy: Network forms of organization. In B. Staw & L. L. Cummings (Eds.), Research in organizational behavior. Greenwich, CT: JAI. Rogers, E. M. (1962). Diffusion of innovations (1st ed.). New York, NY: The Free Press. Rogers, E. M. (2010). Diffusion of innovations (4th ed.). New York, NY: The Free Press. Stake, R. E. (1995). The art of case study research. Thousand Oaks, CA: Sage. Tortoriello, M., & Krackhardt, D. (2010). Activating cross-boundary knowledge: The role of Simmelian ties in the generation of innovations. Academy of Management Journal, 53(1), 167 181. Valente, T. W. (1995). Network models of the diffusion of innovations. Cresskill, NJ: Hampton Press. Wilke, R., & Ritter, T. (2006). Levels of analysis in business-to-business marketing. Journal of Business to Business Marketing, 13(3), 39 64. Yin, R. K. (2003). Case study research: Design and methods. London: Sage.

USING DISCOURSE ANALYSIS IN CASE STUDY RESEARCH IN BUSINESS-TO-BUSINESS CONTEXTS Nick Ellis and Michel Rod ABSTRACT The basic thesis espoused in this chapter is that a discourse analytic approach, that explores managers’ stories, is equally valid as a more typical case study approach that seeks confirmatory data. Depth interviews with industrial network participants are conducted and described; interviews where managers are encouraged to talk of their lived experiences, beliefs, attitudes, and intentions. Specifically, this case study presents a qualitative exploration of identity processes in industrial networks, in particular social constructions of Indian modernity. The analysis suggests what these constructions mean for the management of buyer seller relationships (cf. Bagozzi, 1995). The study also reflects calls for more empirical research to be undertaken to improve understanding of contemporary marketing practices, especially in large emerging market economies such as India and Brazil (Dadzie, Johnston, & Pels, 2008). Discursive data were collected in the form of transcripts

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 77 99 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021003

77

78

NICK ELLIS AND MICHEL ROD

from semi-structured interviews with a variety of managerial participants involved in trade between New Zealand (NZ) and India. All the participants are Indian, with interviews taking place in 2006 in Delhi, Mumbai, Bangalore, and Chennai. Interviews were conducted in English; with 23 individuals representing organizations operating in the lumber, wool, horticulture, dairy, engineering, IT, tourism, and education industries, they lasted between 45 and 90 minutes, and were recorded on audio and video media. The study goes some way toward addressing the dominant Western perspective prevalent in most studies of business relationships, and shows how discourse analysis can provide a rich analytical perspective on business-to-business relationships. Keywords: Discourse analysis; industrial networks; Indian business

INTRODUCTION This contribution to this field guide represents an attempt to understand how business-to-business (B2B) managers make emic sense of their worlds in a way that complements researchers’ etic sense-making. The method’s foundation is depth interviews with industrial network participants; interviews that encourage managers to talk of their lived experiences, beliefs, attitudes, and intentions. In this way the method seeks to move beyond the predominant logic in B2B research or Level I data that is typically based on positivist testing of survey results, but may also arise from subjective personal introspection (Woodside, Pattinson, & Miller, 2005). For some commentators, the mental models involved in Level I sense-making can be subject to personal prejudice and bias (Woodside, 2003). Such perceived limitations begin to be addressed in Level II research, where a participant’s emic view is subject to commentary and judgment by the researcher, perhaps by drawing on other interviews or documentary sources to confirm, deny, or elaborate on the participant’s report. This is the level of research that typifies most B2B case studies (Woodside et al., 2005). The validity of this perspective has limitations in conducting research into B2B decision-making processes, especially in term of achieving a more hermeneutic interpretation of sense-making at a further level, that is, Level III (or even IV see Woodside et al., 2005). However, this chapter takes a somewhat different view of Level I and II sense-making in case research; one that considers other possibilities open to the marketing scholar.

Using Discourse Analysis in Case Study Research in B2B Contexts

79

DISCOURSE ANALYSIS IN BUSINESS CASE STUDY RESEARCH Instead of necessarily seeking confirmatory data within a case study, we show in this report how it can be an equally legitimate research enterprise to explore managers’ stories by taking a discourse analytic approach. In doing so, what some scholars may view as undesirable bias and subjectivity in managers’ interview accounts become objects of study in their own right as the researcher focuses on how managers appear to make sense of their world(s). In particular, discourse analysis (DA) facilitates researcher interpretations of how managers achieve the social construction of their identities and those of other network participants, including other individual actors and firms. In the same way that the collection of thick descriptions (Geertz, 1973) of B2B relationships enables researchers to achieve deep understanding of managers’ decisions, for instance via the verbal protocols generated by the think aloud method (e.g., Woodside & Wilson, 2000), DA helps to unpack managerial sense-making by conducting inductive studies of managers and the accounts they provide in legitimating their working practices (cf. Mintzberg, 1979). DA assists in making explicit the usually implicit thought processes of participants, thus improving researchers’ grasp of the nuances of sensemaking in organizations (Weick, Sutcliffe, & Obstfeld, 2005) and business networks (Henneberg, Naude´, & Mouzas, 2010). DA’s potential contribution to case study scholarship can be appreciated if one looks at Woodside’s (2010) box metaphor of case study research premised on the postulate of disproportionate achievement and a property space perspective with regards to research objectives and methods. Given the current substantiation for utilizing DA and the objectives DA seeks to realize, the argument is that DA’s use in case studies provides high levels of accuracy and significant coverage/detail if one employs a number of embedded cases within an overall case study approach. Trade-offs are not reconciled since generality is not an intended aim. In DA’s approach to textual data, the method is rather different to content analysis which, while offering some insights to the B2B case researcher regarding patterns of occurrence in spoken or written texts (e.g., Pettigrew, 1975), is ultimately an approach that can be said to go by the numbers. As such, content analysis is an insufficient method to explore the meaningmaking that takes place in B2B contexts. The use of DA, on the other hand, allows us to embrace recent calls for B2B scholarship not to view science as merely “synonymous with quantification” (Malhotra & Uslay,

80

NICK ELLIS AND MICHEL ROD

2009, p. 29). A discursive perspective brings to the B2B context approaches that draw from across the organizational and broader social science spectrum (cf. Spekman, 2004). This broadening of approaches to case study research is important as there is a tendency for B2B researchers to seek permanent, structural explanations of social phenomena which imply some sort of final interpretation, rather than seeing themselves as “scientists spinning stories about meanings that may be useful but are always wrong” (De Cock & Sharp, 2007, p. 249). Accepting that the search for the (single) truth is always in vain, the chapter argues for more post-structuralist and social constructionist perspectives of reality, knowledge, and language to be adopted within B2B research. These perspectives challenge conventional marketing theory, which tends to take an essentialist view of social reality (Alvesson & Willmott, 2002) and, instead, refuse to take meanings for granted (Musson, Cohen, & Tietze, 2007). Drawing upon these epistemological underpinnings, the chapter advocates a discourse analytic approach to the study of business markets. The exploration of discourses represents an important analytical move for industrial network scholarship since discourses “(re)produce knowledge, culture, identities, subjectivities and power relationship in social settings … [while] specific social actors are very much constrained and even disciplined by the available discursive resource and practices …” (Vaara & Tienari, 2004, p. 343). A focus on specific legitimating and naturalizing practices in normative language use is thus a key element of the discursive approach as outlined in this contribution. So what can DA bring to B2B research? If one accepts that discourse “acts as a powerful ordering force in organizations” (Alvesson & Karreman, 2000, p. 1127), then DA has much to offer. Managerial discourse helps to construct the reality (or world) into which the speaker acts. Indeed, for Phillips, Lawrence, and Hardy (2004, p. 640), “the discursive realm acts as the background against which current actions occur enabling some actions and constraining others.” A further question then arises: how should one explore this important discursive realm? DA embraces a multitude of approaches, a detailed explanation of which is beyond the scope of this report. For a useful overview of organizational DA, see Iedema (2003, pp. 28 56) who notes that this methodological approach “relies on and grounds its arguments in empirically derived data to make its claims.” Taking this empirical perspective, the version of DA being advocated is based upon a number of trends in the linguistic turn (Oswick et al., 2007), including speech act theory (Austin, 1962),

Using Discourse Analysis in Case Study Research in B2B Contexts

81

discursive social psychology (Potter & Wetherell, 1987), critical DA (Fairclough, 1992), social linguistics (Halliday, 1973), and elements of conversation analysis (Sacks, Schlegoff, & Jefferson, 1974). The chapter suggests that B2B scholars take on board the most pragmatically useful elements of these versions of DA, enabling “a simultaneous focus on the function of talk and the devices of construction” (Coupland, 2001, p. 1107). Within parts of the marketing academy it is increasingly accepted that such a discursive approach can facilitate greater understanding. For instance, Fischer and Bristor (1994) offer a fledgling example of DA in the marketing literature, conducting a post-structuralist analysis of the rhetoric of marketing relationships, albeit purely in terms of B2C relationship marketing. Taking a similar stance, and this time explicitly exploring the “discourse” of B2C relationships, are Fitchett and McDonagh (2000, p. 211) who assert, “Relationship marketing exists primarily at the level of discourse. That is, relationship marketing provides a set of ideas and concepts which we can choose to apply when seeking to represent … a particular issue or phenomena in marketing.” Critical DA has also been used to study the nature of political marketing discourse in particular, to illustrate the network of identities and power relations that this discourse reproduces (Moufahim, Humphreys, Mitussis, & Fitchett, 2007). Moving beyond considerations of consumer markets, Elliott (1996) posits DA as a potentially powerful research approach to examine the interests enmeshed in B2B marketing management, recognizing that, “the discourses of managers may be replete with interpretive repertoires which function to legitimate their activity and sustain their organizational power base, and exploration of these discursive fields may provide insight into the areas of strategy, TQM, technology licensing, joint ventures and global marketing” (1996, p. 67). He argues that studies of what managers actually do may be enhanced by insights from DA in a variety of areas such as new product development, advertising agency relationships, and sales-force management. Taking Elliott’s work forward by engaging with marketing practice is the focus of a number of studies in the context of advertising agencies. Hackley (2001), for example, attempts to identify some of the interpretive repertoires used by advertising professionals involved in client relations. A DA approach is also used by Haytko (2004) to explore subjective personal meanings expressed in interviews with managers involved in agency client relationships. She explores conceptualizations of both interfirm and interpersonal relationships by combining DA with a phenomenological focus on the perspectives of the participants. Studies are beginning to bring a discursive element to the exploration of supply chains and other interfirm exchange relationships. For instance, in a

82

NICK ELLIS AND MICHEL ROD

study of considerable depth, Faria and Wensley (2002) argue that the representations of social systems characterized by supply chain and network studies are usually taken by researchers to be mutually exclusive rather than available to be mobilized skillfully by actors. They show that, in fact, managers reproduce in their narratives the difficulty of balancing two criteria posed for intermediaries: those of economic growth and of social integration. Hopkinson (2003, p. 1945) draws upon DA to address the question of how the narratives of managers in a distribution network construct the organization in different ways. In doing so, she questions the correspondence between these participants’ and theorists’ constructions of organizing. In an earlier piece Hopkinson (2001) also employs a social constructionist approach, taking language as central to the construction of particular realities, in order to examine front-line managerial sense-making with reference to influence in marketing channels. Ellis, Higgins, and Jack (2005) deploy interview and documentary evidence to analyze market(ing) discourses within the agri-food sector. They question the assumption that the market for animal feeds is an objective and self-producing social fact. Their study shows how the discursive production of supply chain positions plays a part in structuring the world of agri-food interorganizational relationships and establishes some of the apparent facts about the world(s) into which marketing managers act. In looking at how marketing is seen and practiced by SME managers and enterprise and development agency practitioners, Copley (2010) illustrates that a discourse analytic lens reveals many differences in the perceived nature of SME marketing and the inappropriateness of marketing models and frameworks developed through the study of marketing practiced by large corporations. Finally, through an examination of a purchasing code of practice produced by a UK manufacturer and a series of managerial interviews, Ellis and Higgins (2006) explore how codes may (or may not) assist in shaping the identity and positioning of stakeholders within the supply chain. They argue that a more subtle understanding of social constructions of managerial identities and the other within the language of supply chain ethics may facilitate moves toward strategies of fairer trade. One is thus beginning to see in the literature a reflexive approach to language that goes beyond the predominantly realist underpinnings of most B2B marketing theory. This is not to say, however, that talk is all that there is. Exercise is cautioned over what Fairclough (2005, p. 916) has described as “the adoption of postmodern and extreme social constructivist positions” and the need is acknowledged to promote a more contextualized agenda for DA that also takes heed of social and material elements of interaction (Oswick et al.,

Using Discourse Analysis in Case Study Research in B2B Contexts

83

2007). So the discontinuities between paradigmatic differences are not viewed as leading automatically to incommensurability intolerance (cf. Burrell & Morgan, 1979). The chapter recognizes a need for B2B research to remain at least partly embedded in a material view of industrial market understanding. With this caution in mind, DA can expose the nonrational and subjective ways with which participants imagine their networks (Ellis, Lowe, & Purchase, 2006). DA can make explicit the connections among everyday discourse, sense-making practices, and larger social structures, such as markets or networks. As noted above, such an approach unpacks talk in a rather different way to the literal manner in which a conventional qualitative method like content analysis would determine categories from a manager’s account. Just how a B2B researcher might conduct DA is shown below, in turning to the case design and actual discursive methodology in more detail.

THE CASE OF INDIAN BUSINESS NETWORKS The case study reported in this contribution is drawn from a qualitative exploration of identity processes in industrial networks, in particular social constructions of Indian modernity. The analysis suggests what these constructions may mean for the management of buyer seller relationships (cf. Bagozzi, 1995). The study also reflects calls for more empirical research to be undertaken to improve understanding of contemporary marketing practices, especially in large emerging market economies such as India and Brazil (Dadzie, Johnston, & Pels, 2008). The main findings of the case study have been presented elsewhere (Ellis, Rod, Beal, & Lindsay, 2012); thus, while alluding to these findings, the discussion which follows seeks to highlight particular aspects of the DA methodology, including the justification of the use of DA by B2B researchers, and to acknowledge some lessons learned from undertaking such a study. In terms of B2B case research, conceptually and methodologically, this approach is located within the ideographic studies of certain industrial network scholars. The significance of processes of social construction in relationship management is acknowledged by some inductively orientated researchers, chiefly those representing the IMP (Industrial Marketing and Purchasing) Group (e.g., Axelsson & Easton, 1992; Johanson & Mattsson, 1994). IMP perspectives on identity are important for the study of B2B

84

NICK ELLIS AND MICHEL ROD

interactions. According to Gadde and Ha˚kansson (2001, p. 103), identity “sets the conditions for which actors are perceived valuable counterparts. Identity also impacts both on the interpretation of the behavior of others and the principles for the company’s own behavior.” The chapter adopts the notion of “identities in networks” (Huemer, Ha˚kansson, & Prenkert, 2009, p. 56) in the reported study, as the focus is on the nature of the identity work being carried out by a variety of actors representing different organizations and the meanings drawn upon by these actors in their discursive positioning of both their selves and of network others. As Ellis and Ybema (2010, p. 279) point out, managers in interorganizational relationships “discursively mark self/other boundaries that varyingly position themselves, and their colleagues, competitors, customers and suppliers.” By looking closely at managers’ language use in legitimizing their positions, the chapter adds to the understanding of processes of identity construction in industrial networks. By undertaking the study in a context that is under-explored in B2B research, that is, India, a further layer of complexity is added to the notion of identities in networks resulting from engagement with the tensions between the discourses that characterize what might be seen as Western and traditional cultures, discourses that are likely to be important parts of the “identity process” (Huemer et al., 2009, p. 68). In line with a crucial IMP raison d’eˆtre, the goal is to “try and understand the patterns of meanings and the beliefs which guide managers in their interactions with others in the increasingly complex network in which they operate” (Turnbull, Ford, & Cunningham, 1996, p. 59). A discursive approach should enable B2B researchers to consider such meanings via what Easton and Araujo (1993, pp. 69 70) describe as the language that “describes the ways in which actors in networks describe their own views of networks.” In doing so, the chapter shares Guillet de Monthoux’s (1975, p. 35) desire to “illustrate, in their own words, how industrial marketing managers perceive the job of marketing.” Using a discourse analytical approach, however, enables more than illustration of managers’ claims; the method facilitates a rather more nuanced analysis of the discursive work being done in managerial texts.

A DISCURSIVE METHODOLOGY Adopting the methodological approach to business networks outlined by Ellis and Hopkinson (2010), the concept of the interpretive repertoire is

Using Discourse Analysis in Case Study Research in B2B Contexts

85

used to facilitate the study of discursive agency and constraint on the part of network participants. Repertoires are recurrently used systems of terms viewed as building blocks that speakers are thought to use strategically in explaining, justifying, and excusing (Potter & Wetherell, 1987). They effectively function as scripts (cf. Welch & Wilkinson, 2002) that can facilitate and/or restrict actors’ sense-making and identity construction. Repertoires can be identified through the examination of certain words, metaphors, figures of speech, and grammar. They enable evaluative micro discursive constructions about the behaviors of the self and others. The approach to DA taken in this study reflects Austin’s (1992) maxim that words do things, in that it considers issues of practice and discourse simultaneously. From a sense-making perspective, such reflection entails acknowledging that practice is cultural, and understood locally at the time of action (Chouliaraki & Fairclough, 1999). One way of understanding practice is in relation to the marketing values and principles that are put into action via linguistic practices. Indeed, Svensson (2003, p. 21) argues that “marketing work should first and foremost be understood as language use, or more specifically as discourse,” where discourse is seen as language use as a social practice, or form of action. In exploring such practices, DA focuses upon how language works to produce and reproduce social structures, relations, and identities. Each industrial network actor or individual person can be thought of as belonging to many different groups with shared values or Discourses, with a capital “D” (Gee, 1996). Speakers draw upon interpretive repertoires to position themselves within certain Discourses, such as the Free Market or the New Economy (De Cock, Fitchett, & Volkmann, 2005). These groups indicate particular ways of “behaving, thinking, speaking and valuing that are accepted as instances of particular roles by specific groups of people” (Woodilla, 1998, p. 4). The conceptualization of Discourse is one that views people’s talk as discourse (with a small “d”), or language in use. For Gee (1996, p. viii), Discourses are ways of being “people like us,” and discourse is thus always value-laden. Alvesson and Karreman (2000) use a similar terminology, for these authors Discourses infiltrate discourses (or texts), making certain actions and outcomes appear inevitable and legitimate. In conducting DA, attention shifts constantly between the particularity of the text of the conversation and the Discourse that informs it. DA is a combination of “articulating precisely how participants produce and understand their unfolding interaction according to their own use of language, and the nature of language use

86

NICK ELLIS AND MICHEL ROD

in terms of Discourse membership. The actual use of language is vital to articulating different underlying values” (Woodilla, 1998, p. 41). Discursive data was collected in the form of transcripts from semistructured interviews with a variety of managerial participants involved in trade between New Zealand (NZ) and India which was undertaken as a part of a wider NZ-based study of cross-cultural trading relationships. Although the sample was convenience-based, snowballing out from trading partners in NZ, gaining access in this way allowed for interaction with representatives from a wide range of Indian industries and regions. All the participants were Indian, with interviews taking place in 2006 in Delhi, Mumbai, Bangalore, and Chennai. Interviews were conducted in English; with 23 individuals representing organizations operating in the lumber, wool, horticulture, dairy, engineering, IT, tourism, and education industries, they lasted between 45 and 90 minutes, and were recorded on audio and video media. Managers were asked open questions concerning their roles and the organizations they represented. These included the initial scene-setting: “Tell us about the sector(s) in which your organization operates,” and went on to address issues such as “What products or services does your organization provide,” and “What role(s) do you perform” as well as, “How would you describe the relationships between your organization and its customers/suppliers?” To manage the interview data, the preliminary phase of analysis involved a content analytic approach where B2B-related topics such as “markets” or “partnerships” were identified in accounts, and their pattern of occurrence throughout the corpus of transcripts noted. The next task was to identify interpretive repertoires that were employed within the relevant portions of the interviews. The aim was to develop an understanding of how repertoires were used by identifying the various discursive forms of any one repertoire and exploring who used such forms, when, and with reference to what. These steps were facilitated by NVivo software, which allowed for a high degree of transparency and levels of agreement as each researcher in turn coded the data. Consistent coding of text to repertoire nodes was guided by a protocol based in part on the management literature, but also on the emic responses of managers (cf. Ellis & Hopkinson, 2010). Attempts to ensure that analytical claims could be depended on came about because they were derived from accountable procedures that were systematic. They were credible because they were logical and based on evidence. Demonstrating this in DA involves showing how the interpretations of individual segments of talk, as well as overall claims, are grounded in the data (Wood & Kroger, 2000).

Using Discourse Analysis in Case Study Research in B2B Contexts

87

SOME INDICATIVE FINDINGS AND ANALYSIS Here this chapter confines itself to highlighting only a selection of the repertoires that emerged during the study, in order to illustrate the use of DA in case research. A detailed analysis of managers’ discursive practices from this study can be found elsewhere (Ellis et al., 2012). Several sets of linguistic resources appear to be of significance to Indian managers. This study’s discursive approach suggests that particular aspects of this talk can be organized into six interpretive repertoires (summarized in Table 1). Although the labels for each repertoire are the researchers’ own, the analysis was driven by the discourse of the participants in moving from in vivo talk, through first-order themes (child repertoires), and on to second-order themes (parent repertoires), which became increasingly induced by the researchers in order to offer suggestions regarding the functioning of each over-arching repertoire (cf. Nag, Corley, & Gioia, 2007 p. 828). The fourth column of Table 1 is a reminder that in DA it is not just the identification of linguistic tools that is important; what speakers do with language is also crucial. Thus, as each repertoire is discussed in turn, the chapter highlights identity-constructing practices within managers’ descriptions of B2B relationships. The repertoires emerged from patterns of talk wherein similar phrases and terms were drawn upon across the sample. Having said this, although the aim is been to identify repeated usages of language, the relative frequency of occurrence of each repertoire is not necessarily the most significant issue in DA; rather, it is the strategic use of language by speakers that matters more. So, while identification of repertoires was guided by noting reoccurring expressions and terms, the interpretive themes that emerge from the analysis are used as the guiding framework for discussion, instead of letting pure frequency dictate the order in which findings were presented. In order to convey a holistic view of the data the analysis does, nevertheless, give an indication of whether a repertoire was more or less frequent in occurrence; via descriptors such as common, moderately common, and so on (see Ellis et al., 2012). Five illustrative analyses from the main study are now presented.

Repertoire (i)

Questioning Globalization

Although the questioning globalization repertoire was common, being used by more than half the sample, the negative variant is less common than

88

Table 1. Summary of Interpretive Repertoires. First-Order Theme (“Child” Repertoire)

Second-Order Theme (“Parent” Repertoire)

“… it’s about filling the structural holes …” (Participant 11) “… business principles are pretty much the same all across the world” (P13) “Globalization has tended to find a … lower level all the time. I don’t believe in that …” (P2) “… now we are interacting with the world things are changing” (P1)

Networks

1. Networks

a. Accepting globalization b. Questioning globalization

2. Globalization

Past and present management practices “The Delhi distributor is totally different from a. Local nuances a Chennai distributor” (P14) “… each company has a board, supported by a full team of professional managers” (P20)

b. Professionalism

“… but small firms: small entrepreneurs, … their business affairs could be quite different” (P23) “We are not so far behind China” (P12)

c. Big versus small

d. India versus China

2. Globalization

3. Past and present management practices 4. Indian Management systems 4. Indian Management systems 4. Indian Management systems 4. Indian Management systems

Discursive Construction

Constructs a national identity for India, portrays organizations as network nodes Evokes a universal sense of business values and practices, and thus identities Asserts a distinct national identity for India and for some types of organization Constructs a changing national identity, but one that not all organizations share Suggests that business practices are not consistent across all Indian firms Associates “professional” management with modern business practices Again, suggests that business practices are not consistent across all Indian firms Positions China as wanting when compared to India as a place to do business

NICK ELLIS AND MICHEL ROD

Exemplar Segment of Talk (“In Vivo”)

a. Nature of exchange

5. Relationship management

b. Commitment

“We know how the market works more than any fruit trader …” (P7) “Well basically, I’m a chartered accountant and then MBA finance …” (P23)

e. Expert partner

5. Relationship management 5. Relationship management 5. Relationship management 5. Relationship management 6. Managerial expertise

Source: Ellis et al. (2012).

c. Trust d. Mutuality

Managerial expertise

Evokes existence of both economic and social exchange in interorganizational relationships Suggests a long-term outlook to relationships is desired by Indian firms Attributes the quality of trustworthiness to nations, organizations, and individuals Reinforces claims of Indian firms to be seeking mutual benefits Positions firms as possessing valuable key capabilities or knowledge Constructs the managerial self as an expert individual

Using Discourse Analysis in Case Study Research in B2B Contexts

“If you try and help them in a friendly way, … I am sure you can get better business” (P4) “Indian customers basically look for long-term supplies” (P1) “You can also come across some kind of flyby-night kind of people” (P23) “And it’s a marriage between equals” (P13)

89

90

NICK ELLIS AND MICHEL ROD

positive views of globalization. The repertoire is of great interest nevertheless, as it is used to assert a national identity for India (and thus Indian network actors), as in the case of this manager who offers an account of his attempts to use a local quality scheme with his clients. It appears that these customers only accept a “British” certificatory system as “international”, leaving an Indian alternative, frustratingly, as less credible: P: Many of these (customer) countries are already part of the British kingdom so these people want only the ISO certificate. We have our own certificate in India, but they want the (other) certificate, so I have to go and get that. R: This is international? P: They consider it international. (P10

Repertoire (ii)

General Manager

Engineering firm)

Past and Present Management Practices

The past and present practices repertoire is moderately common, and found in the talk of about half the speakers. The repertoire’s use tends to construct a changing national identity for India, and thereby Indian firms and managers. This participant uses the contrast between past and present to attribute changes in corruption levels to the modern corporate sector. An “outside” world is evoked where business is apparently “done” in a certain way, a way that has been communicated to the “current” Indian generation via education and the media: R: What about issues like corruption, does that frighten New Zealand companies off? I mean, India has a reputation for corruption. P: No, no. Corruption now is going down because (…) the current generation is more exposed to what is happening outside because of their education overseas and also because of the development of satellite and cable television here. So they know the concerns of the other side of the world and how business is done there. (P21 CEO IT systems firm)

Repertoire (iii)

Professionalism

This professionalism repertoire tends to associate “professional” management with “modern” business practices, which are then contrasted with traditional “family” management styles. Yet, even though this participant is quick to affirm the researcher’s intervention, he is not so proud of his

Using Discourse Analysis in Case Study Research in B2B Contexts

91

“systems” that his family do not continue to exert what appears to be a considerable amount of traditional influence throughout each company they own and paternally administer (or “guide”): P: Family business versus the modern kinds of business management has been very well woven in India by many, and we certainly take pride in being one of them. R: Professions. P: Professions, yes. Forty years back my father put in place professional management systems including corporate governance, which has been used in the business world today. (…) Of course our family owns the majority of shares and each company has an independent board, supported by a full team of professional managers. Right from CEOs down the line, we guide. (P20 Advisor Trade foundation)

Repertoire (iv)

India versus China

The India versus China repertoire reveals a powerful instance of discursive othering on a national level as China is regularly compared to India and found wanting. The repertoire is all the more resonant since it occurred unprompted on several occasions in managers’ accounts as they constructed national identities. This manager draws on a vivid transportation metaphor to cast China as culturally inferior in a way that suggests (unspecified) problems ahead for businesses operating in that country: Doing business in India is like driving along an old, dug up, detoured, speed-bumped road, but one which, if you persevered, would ultimately get you to your destination. Much patience is required but it is a country with progressive policies (…). This is unlike China, for example, which is like a super highway that allows people to get on and go fast, but with no certainty that there won’t be total blocks ahead at some point. (P13 Director Software firm)

Repertoire (v)

Nature of Exchange

Several managers drew on the nature of exchange repertoire to highlight the existence of both social and economic exchange within interorganizational relationships. These elements of exchange could arguably be said to correspond to traditional and modern views of business practice respectively. For example, the speaker below portrays Indian markets as “working on sentiment,” and lists several socially orientated behaviors by managers that can lead to “better” (economic) business:

92

NICK ELLIS AND MICHEL ROD Relationship plays a very important part because Indian markets are, you know, they work more on sentiment. If you have closer relationships with your clients, try and help them in a friendly way, have a cup of coffee with him, I am sure you can get better business. (P4 CEO Wool importer)

DISCUSSION THE CONTRIBUTION OF DISCOURSE ANALYSIS This chapter’s discursively based scrutiny of mangers’ talk has revealed an overlapping range of relationship-related interpretive repertoires. The use of these repertoires helps to construct Indian marketing managers as accomplished practitioners, able to accommodate a number of complementary, and sometimes competing, Discourses of management in (and about) B2B interactions. One theme that emerges in the sensemaking practices of the participants is that of a constant negotiation of identity. A benefit of a discursive approach is that multilevel identity construction can be shown to be an ongoing element of managers’ talk, such as the individual (e.g., “I”), organizational (“we”), national (“Indian companies”), and network other (“them”) positioning that was evident in interview transcripts. The analysis allowed us to determine three notional levels (cf. Wilke & Ritter, 2006) of identity construction in managers’ accounts: national, organizational, and individual. These identities range from macro to micro level of social actor. The different levels are interrelated, thereby allowing speakers to construct themselves while using an interpretive repertoire that, at first glance, may appear to be functioning at a higher level. Thus organizational (company) identities are nested within the nationally constructed identity of India as a country, and individual (managerial) identities are nested within both organizational and national identities. By evoking different levels of identity in the same segment of talk, managers are able to position themselves, and their firms, as practitioners and organizations with particular attributes, even without explicit reference to their own (nested) roles. Repertoires seem to be deployed by participants to maintain, defend, and potentially exploit particular subject positions or identities in the power imbalances that underpin global supply chain relationships. Rather like a script for relationship management, Indian marketers’ repertoire use reflects the agency afforded by drawing upon different Discourses and also,

Using Discourse Analysis in Case Study Research in B2B Contexts

93

at the same time, the constraints that some of these Discourses can bring. Thus participants are found on one hand using their linguistic toolkits to mold identities on their own terms, while on the other appearing to be unable to perceive B2B marketing in terms other than those suggested by the various knowledge systems circulating in the Indian business context. Findings tend to echo the tension between traditional and modern management values coexisting in India; for instance when participants utilize the past and present practices repertoire. Although the study has focused mainly on cases of Indian managers’ discursive constructions of business relationships, what may be the most interesting aspect is what can be concluded about the potential effects of language in (and on) generic B2B marketing practices; this mean the dexterity with which individual managers discursively position themselves, their firms, and their country by drawing upon a wide range of interpretive repertoires in accounts of relationship management. Using DA some of the inherent tensions in discursive constructions of managerial selves and trading partners as well as other network members are revealed: constructions which, as previously argued, help us to understand more about managerial sense-making, and which have the potential to impact on decision making and ultimately, marketing actions.

LESSONS LEARNED This case study does not really go as far as the authors would like to redress the dominant Western perspective prevalent in most studies of business relationships. The methodological constraints faced in gaining access to the talk of Indian managers has meant that compromises have necessarily been made, such as over the predominantly male gender of participants (all but one were men), and indeed, their relatively elite status. Another possible problem is the inability of nonnative speakers to follow all the discourse under scrutiny. This may not apply to this particular data set, however, since it is generated from an educational and trading context where communication takes place predominantly in the English language. Thus, although there were cultural differences, researcher/ participant interactions were unaffected by a lack of linguistic comprehension. However, it is acknowledged that the wider international nature of the ongoing cross-cultural research project of which this study forms a

94

NICK ELLIS AND MICHEL ROD

part means that such issues will need to be considered more carefully in future case studies. One important aspect of a DA-based approach is that researchers must be as transparent as possible about any co-construction of meaning in the texts under analysis, which means that where a participant’s talk appears to have been directly triggered by the way in which the researcher has framed their question, it is appropriate to acknowledge this in the analysis. Note, for example, the conversational turn-taking that occurs in three of the segments of talk used to illustrate the exemplar interpretive repertoires in this report. Participants draw on the researcher’s input in their talk by co-constructing meaning around their interlocutor’s assumptions about “corruption” and what is “international” in examples (i) and (ii), and the leading use of the word “professions” by the researcher in example (iii) above. Given the nuanced nature of DA the depth, semi-structured interview is a perfectly legitimate data-gathering method in a case study, especially when it is likely that some of the issues discussed about potentially confidential contexts like business relationships may not have been addressed without the specific probing of the interviewer. Nevertheless, there is a tension here since a less structured approach to interviewing may have avoided pressurizing participants into a preconceived response pattern in which the expression of Indian cultural values was seen as inadmissible in response to researchers’ inquiries. This could have given managers greater freedom to explain in their own way the contextual factors that they viewed as influencing organizational practices. Finally, on reflection, it is recognized that, on replaying the interview recordings, it appeared that sometimes the Western voice of the researcher was heard a little too much in relation to the voices of participants. This resulted in the occasional verbal exchange that revealed much about the nuances of language and the interview process, as well as the cultural assumptions that case researchers can sometimes be guilty of making. This report concludes with four examples, to provide food for thought to fellow discursively minded B2B scholars who plan to conduct depth interviews in cross-cultural contexts. Lesson One beware of leading the participant, especially with an evaluative projection about a network actor or a market. Consider in your analysis what world-view your interlocutor’s response may be trying to discursively evoke, and why. For example, note now this manager responds by using the vocabulary of the researcher but, by shifting from the

Using Discourse Analysis in Case Study Research in B2B Contexts

95

particular “they” to the wider “anybody,” makes a broader point about business’ perceptions of India: P: Our partner’s problem is, since they haven’t visited India, you know they don’t really understand the Indian market. R: Do you think they’re frightened of the Indian market? P: I don’t think that anybody needs to be frightened of the Indian market. (P3 Director Timber importer)

Lesson Two avoid laboring a culturally sensitive point, particularly when the interviewee responds by attempting to minimize the significance of the topic. Furthermore, ponder in your analysis why this discursive struggle is taking place for instance, is the speaker trying to construct a particular identity? For example, note how this manager claims to be personally ignorant of the issue of superstition, as well as making some wider assertions about the Indian business community, thereby positioning both himself as above such things and India as a progressive trading nation: R: What in general should New Zealand be aware of in terms of things like astrology, superstitions? P: I’m not an expert on that but in general (…) people are not superstitious that much, especially people who are involved in big business in India, people are not superstitious. R: I mean, is there an unlucky number for instance in India? P: I am sure that there is but I am not aware of it. R: And what about Indian customs generally? I mean for instance in East Asia white is often the color of death. What happens in India? P: There are much smaller issues like that that New Zealanders have to be aware of, but nothing that’s very serious or drastic you know. (P15 Manager Tourism authority)

Lesson Three take care not to let your attempts to show local knowledge, however laudable in terms of building empathy, over-ride the discursive self-positioning of your participants. If you do so, then note the significance of their verbal response. For example, see here how the manager is keen to assert his expert, university-trained identity by pointedly correcting the researcher: P: I graduated in textile engineering. I am a textile engineer as from Baroda, which is in the Western part of India. R: Yes, famous for gems.

96

NICK ELLIS AND MICHEL ROD P: Sorry? R: Isn’t it famous for gems, Baroda? P: Baroda is famous for its university actually. (P4

CEO

Wool importer)

Lesson Four having cautioned against too much researcher input into conversations, researchers are also advised to be prepared to intervene where necessary in order to illuminate an aspect of local language use that may be confusing. Such interventions may expose some fascinating elements of local attitudes to managing relationships. For example, by probing a little deeper, the researcher encourages this participant to reveal the difference between formal and informal aspects of the term “collaboration” as used in their story about a business relationship that initially was portrayed as not working: P: You know, the collaboration ended but still the relation is going on (…) The collaboration and joint venture doesn’t work for longer. R: But sorry, I don’t quite understand that. You’re saying the collaboration doesn’t last? P: You see, the joint venture and collaboration is short lived, that’s what I’m saying. But what is long lived is the understanding, the relationship and continuously complementing each other’s business (…) So that collaboration is the understanding and I think signing the collaboration agreement has no meaning. (P10 General Manager Engineering firm)

Researchers should bear in mind these sorts of lessons when seeking to illuminate any of the levels of understanding and research suggested in the hermeneutical framework posited by Woodside et al. (2005) and/or the box metaphor of (multiple) case study research embracing disproportionate achievement (Woodside, 2010). Within these frameworks this chapter argues that the unpacking of managers’ subjective stories can form an important part of the case study process and theory development. In this regard, a discourse analytic approach is a useful addition to the B2B researcher’s armory in the never-ending struggle to makes scholarly sense of how managers in turn make sense of their socially constructed world(s).

ACKNOWLEDGMENT We acknowledge the comments and suggestions made by James Fitchett and Nick Ashill in helping to maximize the contribution that this manuscript makes.

Using Discourse Analysis in Case Study Research in B2B Contexts

97

REFERENCES Alvesson, M., & Karreman, D. (2000). Taking the linguistic turn in organizational research: Challenges, responses, consequences. Journal of Applied Behavioural Sciences, 36, 136 158. Alvesson, M., & Willmott, H. (2002). Identity regulation as organizational control: Producing the appropriate individual. Journal of Management Studies, 39(5), 619 644. Austin, J. (1962). How to do things with words. Oxford: Oxford University Press. Axelsson, B., & Easton, G. (1992). Industrial networks: A new view of reality. London: Routledge. Bagozzi, R. P. (1995). Reflections on relationship marketing in consumer markets. Journal of the Academy of Marketing Science, 23(4), 272 277. Burrell, G., & Morgan, G. (1979). Sociological paradigms and organizational analysis. Oxford: Heinemann. Chouliaraki, L., & Fairclough, N. (1999). Discourse in late modernity: Rethinking critical discourse analysis. Edinburgh: Edinburgh University Press. Copley, P. (2010). Through a discourse analytic lens less darkly: Illuminating how SME principals and support agency practitioners see marketing in SMEs. The Marketing Review, 10(4), 353 368. Coupland, C. (2001). Accounting for change: A discourse analysis of graduate trainees’ talk of adjustment. Journal of Management Studies, 38(8), 1103 1119. Dadzie, K. Q., Johnston, W. J., & Pels, J. (2008). Business-to-business marketing practices in West Africa, Argentina and the United Sates. Journal of Business & Industrial Marketing, 23(2), 115 123. De Cock, C., Fitchett, J., & Volkmann, C. (2005). Constructing the new economy: A discursive perspective. British Journal of Management, 16, 37 49. De Cock, C., & Sharp, R. J. (2007). Process theory and research: Exploring the dialectic tension. Scandinavian Journal of Management, 23, 233 250. Easton, G., & Araujo, L. (1993). Language, metaphors and networks. In D. Sharma (Ed.), Industrial networks Advances in international marketing. Greenwich, CT: JAI Press. Elliott, R. (1996). Discourse analysis: Exploring action, function and conflict in social texts. Marketing Intelligence & Planning, 14(6), 65 68. Ellis, N., & Higgins, M. (2006). Recatechizing codes of practice in supply chain relationships: Discourse, identity and otherness. Journal of Strategic Marketing, 14, 327 350. Ellis, N., Higgins, M., & Jack, G. (2005). (De)constructing the market for animal feeds: A discursive study. Journal of Marketing Management, 21, 117 146. Ellis, N., & Hopkinson, G. (2010). The construction of managerial knowledge in business networks: Managers’ theories about communication. Industrial Marketing Management, 39, 413 424. Ellis, N., Lowe, S., & Purchase, S. (2006). Towards a re-interpretation of industrial networks: A discursive view of culture. The IMP Journal, 1(2), 29 59. Ellis, N., Rod, M., Beal, T., & Lindsay, V. (2012). Constructing identities in Indian networks: Discourses of marketing management in inter-organizational relationships. Industrial Marketing Management, 41, 402 412. Ellis, N., & Ybema, S. (2010). Marketing identities: Shifting circles of identification in interorganizational relationships. Organization Studies, 31, 279 305. Fairclough, N. (1992). Discourse and social change. Cambridge: Polity Press.

98

NICK ELLIS AND MICHEL ROD

Fairclough, N. (2005). Discourse analysis in organizational studies: The case for critical realism. Organization Studies, 26(6), 915 939. Faria, A., & Wensley, R. (2002). In search of ‘inter-firm management’ in supply chains: Recognising contradictions of language and power by listening. Journal of Business Research, 55, 603 610. Fischer, E., & Bristor, J. (1994). A feminist poststructuralist analysis of the rhetoric of marketing relationships. International Journal of Research in Marketing, 11, 317 331. Fitchett, J., & McDonagh, P. (2000). A citizen’s critique of relationship marketing in risk society. Journal of Strategic Marketing, 8(2), 209 222. Gadde, L-E., & Ha˚kansson, H. (2001). Supply network strategies. Chichester: Wiley. Gee, J. P. (1996). Social linguistics & literacies: Ideology in discourses. London: Falmer Press. Geertz, C. (1973). The interpretation of cultures. New York, NY: Basic Books. Guillet de Monthoux, P. B. L. (1975). Organizational mating and industrial marketing conservatism Some reasons why industrial marketing managers resist marketing theory. Industrial Marketing Management, 4(1), 25 36. Hackley, C. (2001). Looking at me, looking at you. Qualitative Market Research An International Journal, 4(1), 42 51. Halliday, M. A. K. (1973). Explorations in the functions of language. London: Edward Arnold. Haytko, D. L. (2004). Firm-to-firm and interpersonal relationships: Perspectives from advertising agency account managers. Journal of the Academy of Marketing Science, 32(3), 312 328. Henneberg, S., Naude´, P., & Mouzas, S. (2010). Sense-making and management in business networks Some observations, considerations and a research agenda. Industrial Marketing Management, 39(3), 355 360. Hopkinson, G. (2001). Influence in marketing channels: A sense-making investigation. Psychology & Marketing, 18(5), 423 444. Hopkinson, G. C. (2003). Stories from the front-line: How they construct the organization. Journal of Management Studies, 40(8), 1943 1969. Huemer, L., Ha˚kansson, H., & Prenkert, F. (2009). The becoming of Cermaq: The interplay between network influences and firm level control ambitions. The IMP Journal, 3(3), 53 75. Iedema, R. (2003). Discourses of post-bureaucratic organization. Amsterdam: John Benjamins. Johanson, J., & Mattsson, L.-G. (1994). The markets-as-networks tradition in Sweden. In G. Laurent, G. Lilien, & B. Pras (Eds.), Research traditions in marketing. London: Kluwer Academic Publishers. Malhotra, N. K., & Uslay, C. (2009). Commentary: Relative presence of business-to-business research in the marketing literature: The demand-oriented path forward. Journal of Business-to-Business Marketing, 16(1 2), 23 30. Mintzberg, H. (1979). An emerging strategy of ‘direct’ research. Administrative Science Quarterly, 24(5), 582 590. Moufahim, M., Humphreys, M., Mitussis, D., & Fitchett, J. (2007). Interpreting discourse: A critical discourse analysis of the marketing of an extreme right party. Journal of Marketing Management, 23(5 6), 537 558. Musson, G., Cohen, L., & Tietze, S. (2007). Pedagogy and the ‘linguistic turn’: Developing understanding through semiotics. Management Learning, 38(1), 45 60. Nag, R., Corley, K. G., & Gioia, D. A. (2007). The intersection of organizational identity, knowledge, and practice: Attempting strategic change via knowledge grafting. Academy of Management Journal, 50(4), 821 847.

Using Discourse Analysis in Case Study Research in B2B Contexts

99

Oswick, C., Keenoy, T., Beverungen, A., Ellis, N., Sabelis, I., & Ybema, S. (2007). Discourse, practice, policy and organizing: Some opening comments. International Journal of Sociology & Social Policy, 27(11 12), 429 432. Pettigrew, A. M. (1975). The industrial purchasing decision as a political process. European Journal of Marketing, 9(1), 4 19. Phillips, N., Lawrence, T. B., & Hardy, C. (2004). Discourse and institutions. Academy of Management Review, 29(4), 635 652. Potter, J., & Wetherell, M. (1987). Discourse and social psychology: Beyond attitudes and behaviour. London: Sage. Sacks, H., Schlegoff, E., & Jefferson, G. (1974). A simplest systematics for the organization of turn-taking in conversations. Language, 50(4), 696 735. Spekman, R. E. (2004). A commentary on business marketing: A twenty-year review and an invitation for continued dialogue. In D. A. Reid & R. E. Plank (Eds.), Fundamentals of business marketing research. New York, NY: Best Business Books. Svensson, P. (2003). Setting the marketing scene: Reality production in everyday marketing work. Lund: Lund Business Press. Turnbull, P., Ford, D., & Cunningham, M. (1996). Interaction, relationships and networks in business markets: An evolving perspective. Journal of Business & Industrial Marketing, 11(3 4), 44 62. Vaara, E., & Tienari, J. (2004). Critical discourse analysis as a methodology for international business studies. In R. Marschan-Piekkari & C. Welch (Eds.), Handbook of qualitative research for international business. Cheltenham: Edward Elgar. Weick, K. E., Sutcliffe, K. M., & Obstfeld, D. (2005). Organizing and the process of sensemaking. Organization Science, 16(4), 409 421. Welch, C., & Wilkinson, I. F. (2002). Idea logics and network theory in business marketing. Journal of Business to Business Marketing, 8(3), 27 48. Wilke, R., & Ritter, T. (2006). Levels of analysis in business-to-business marketing. Journal of Business to Business Marketing, 13(3), 39 64. Wood, L. A., & Kroger, R. O. (2000). Doing discourse analysis: methods for studying action in talk and text. London: Sage. Woodilla, J. (1998). Workplace conversations: The text of organising. In D. Grant, T. Keenoy, & C. Oswick (Eds.), Discourse and organisation. London: Sage. Woodside, A. G. (2003). Middle-range theory construction of the dynamics of organizational marketing-buying behaviour. Journal of Business & Industrial Marketing, 18(4 5), 309 335. Woodside, A. G. (2010). Bridging the chasm between survey and case study research: Research methods for achieving generalization, accuracy and complexity. Industrial Marketing Management, 39(1), 64 75. Woodside, A. G., Pattinson, H. M., & Miller, K. E. (2005). Advancing hermeneutic research for interpreting interfirm new product development. Journal of Business & Industrial Marketing, 20(7), 364 379. Woodside, A. G., & Wilson, E. J. (2000). Constructing thick descriptions of marketers’ and buyers’ decision processes in business-to-business relationships. Journal of Business & Industrial Marketing, 15(5), 354 369.

ETHNOGRAPHIC RESEARCH IN SERVICE MARKETING: THEORY, METHODS, AND PRACTICE Catharina von Koskull ABSTRACT This chapter focuses on the ethnographic research approach that I employed in a service marketing study. The first part briefly describes ethnography’s key characteristics, that is, emergent research logic, prolonged fieldwork, and multiple modes of data collection, where the main method is observation. The second part discusses the data collection methods: participant observation, informal discussion, interview, and document analysis. This section describes in detail how these techniques were used in practice and highlights the key challenges I faced, especially related to the observations, and how I managed these challenges. The third part describes the case, field setting, informants, and field relationships. The development project that I studied concerned a bank’s website and project members from the bank and different consultant agencies represent the study’s informants. The fieldwork lasted for about one year and covered the entire development process from the initial stages to the launch, and some time after. The chapter ends with a thorough discussion about the research criteria of validity, reliability, and generality, and the

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 101 145 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021004

101

102

CATHARINA VON KOSKULL

coping tactics that I used in this study to enhance these. Prolonged fieldwork, multiple modes of data collection, reflexivity, and specification of the research are among those important tactics that this last section discusses in detail. Keywords: Ethnography; service marketing; banking; multiple methods; longitudinal

THE ETHNOGRAPHIC APPROACH “Ethnography” refers both to a particular research method and to its eventual outcome: a written product. In a broad sense, ethnography as a research approach is based on an emergent logic that includes fieldwork that uses a variety of research techniques (primarily observation) over an extended period of time. The approach emphasizes descriptive detail as a result (e.g., Aull-Davies, 2005). Ethnography has its roots within anthropological research of exotic societies. Influential pioneers such as Malinowski, Boas, and Mead developed an approach that involves going to the source and becoming immersed in the world of others (Mariampolski, 2006; Schwartzman, 1993). By the 1980s, the use of the ethnographic approach increased in marketing research, and in particular, in research on consumer behavior (see, e.g., Arnould & Wallendorf, 1994; Wallendorf & Arnould, 1991). In service marketing and management, the ethnographic approach is not well established. Nonetheless, studies have been conducted in service marketing and management with a focus on the customer (cf. Arnould, Price, & Tierney, 1998; Harris & Baron, 2004; Swan & Bowers, 1998), and to a lesser extent with a focus on service managers (cf. Wagar, 2007). In mainstream new service development (NSD) and new product development (NPD) research, the most frequently used methodologies and methods are first, retrospective, deductive and explanatory, empirically based with survey as the main data collection method (see, e.g., reviews of approaches used in the central stream on success/failure factors in NPD and NSD marketing research by Brown & Eisenhardt, 1995; de Jong & Vermeulen, 2003; Henard & Szymanski, 2001; Montoya-Weiss & Calantone, 1994). Second, normative and prescriptive, conceptual with illustrative empirical examples (see, e.g., the approaches used in marketing studies on radical vs. incremental innovations and the role of a customer focus in each type of innovation by Hamel & Prahalad, 1990, 1994; Thomke & von Hippel, 2002; Ulwick, 2002). Thus, the ethnographic

Ethnographic Research in Service Marketing

103

method has not been frequently employed in marketing research on NSD/ NPD. Indeed, as Workman (1993) argues: Whereas much effort has been directed toward developing normative procedures to help product development, there has been little empirical research on what actually goes on in marketing and where new product development activities take place … Much of the research on marketing activities has used surveys to measure the tasks and responsibilities of product managers. (Workman, 1993, p. 406)

Hence, inductive field research is lacking in marketing-related development studies. In management studies on product development and innovation, more ethnographies and field research can be found (see, e.g., Barley, 1990; van de Ven & Poole, 1990), particularly in studies on decision making (see, e.g., the classical works by Cyert, Simon, & Trow, 1956; Howard, Hulbert, & Farley, 1975; Hulbert, Farley, & Howard, 1972; Mintzberg, Raisinghani, & The´oret, 1976; Woodside & Samuel, 1981). The ethnographic approach generates descriptive detailed contextual real-time data, including the seemingly insignificant, the mundane and the taken-for-granted, which is needed to gain in-depth understanding of customer information in service development. Additionally, the ethnographic methodology is emergent and exploratory. “Exploratory” is often used in a condescending sense as a label for “pre-research,” pilot studies, or research in a new field. However, as Mintzberg (1979, p. 584) puts it: “No matter what the state of the field, whether it is new or mature, all of its interesting research explores.” Hence, when ethnography is used the problem is not defined in a precise manner a priori entering the field (e.g., Hammersley & Atkinson, 1983; Jorgensen, 1989; Lofland, 1995; Pettigrew, 1990). How well the problem is defined differs between ethnographers (e.g., Aull-Davies, 2005). When I started the field study of the service development project, the focus was on how the customer is taken into account by developers when they develop a service. From early observations made in the field in conjunction with insights gained from a review of prior research, I learned that there existed a gap between practice and theory and I therefore decided to focus on identifying different types of use of customer information in service development. Hence, the purpose of the study was to identify and describe different types of customer information use in a service development project. The ethnographic approach is open-ended and flexible, and allows the researcher to focus on interesting and novel issues as they emerge during the process (e.g., Aull-Davies, 2005; Ball & Ormerod, 2000; Lofland, 1995;

104

CATHARINA VON KOSKULL

Wolcott, 1994). In this way, ethnography facilitates the researcher’s learning process (Forsythe, 1999; Hammersley & Atkinson, 1983; Schwartzman, 1993) and places a premium on the production of new propositions and knowledge (Lofland, 1995). Based on emergent findings in the field, I realized that aspects related to customer information acquisition, such as the source of the information, the temporal aspect, and means of the acquisition were different than those found in prior research and that a contribution could be made if these were further investigated. Thus, based on the emergent findings, I formulated and further explored in the field the following research questions: From what source is customer information acquired? When is it acquired and how? Ethnography requires the researcher to study up-close both what people say and what people do in the natural, “everyday” setting. Ethnography involves experiential participation by the researcher in field contexts. Ethnography includes several methods of data collection such as observation, interview/discussion, and the inspection of documents. However, observation in real-time, or in situ, is the main method of ethnography (Arnould & Wallendorf, 1994; Aull-Davies, 2005; Lofland, 1995; Stewart, 1998). Before conducting the ethnographic study, I performed another study at the case company, the bank, where I interviewed branch office managers and asked them to describe, in retrospect, customer information acquisition and use in service development at the bank. Although the respondents had either participated in a development project at the bank or otherwise had knowledge about it, to describe in retrospect was too difficult. For example, although the managers assured me that the customer was taken into account, I did not receive any concrete or detailed examples of use of customer information in service development at the bank. Thus, I realized that a direct access to data that allows me to “see for myself” in real-time, and not to solely rely on the memory of informants, is the key to capture the use of customer information.

METHODS FOR DATA COLLECTION ON THE DEVELOPMENT PROJECT’S USE OF CUSTOMER INFORMATION I collected the empirical material through a combination of three methods: participant observation, interviews/informal discussions, and documents.

Ethnographic Research in Service Marketing

105

For about 13 months, between the 16th of February 2005 and 21st of March 2006, I went back and forth into the field several times a week and studied the development process of a website in its natural cultural setting, that is, in a development project at a bank, while the process unfolded from the early stages of the development process to the launch of the developed service, and some time after. Through observations of development meetings, interviews, and informal discussions with development project members and by analyzing documents, I investigated customer information use in the development, from what source(s) it came, and how and when it was acquired. To keep track of the collected information, I created a logbook (see later). In the following text, I discuss the methods that I employed in the study.

Participant Observation Participant observation is the key method within ethnography. Goffman (1989 in Lofland, 1995) describes the method as follows: Getting data … by subjecting yourself, your own body and your own personality, and your own social situation to the set of contingencies that play upon a set of individuals … You’re artificially forcing yourself to be tuned into something that you then pick up as a witness-not as an interviewer, not as a listener, but as a witness to how they react to what gets done [by], to and around them … (pp. 44 45)

Observation captures real time, which means that I investigated customer information use and acquisition while it evolved. In this way observation is less dependent on what people say they do, have done, or will do, as the observer can hear and see this for him/herself (Einarsson & HammarChiriac, 2002). Observation offers obvious advantages over surveys or secondary sources. For example, surveys tend not to capture the emotions among the process informants (Woodside, 2010), which is necessary in order to understand the complexity that underlies the use and nonuse of customer information in service development. Although questionnaires appear to deliver valid and reliable quantified information, there may be a world of difference between what people actually do and what they respond in a questionnaire about their doings (Silverman, 1998). Consequently, observation may capture interesting discrepancies between sayings and actual doings (Schwartzman, 1993; Stewart, 1998). Indeed, in my study, I captured several situations where the development managers’ sayings about what they intended to do differed substantially from what they eventually did. Hence,

106

CATHARINA VON KOSKULL

if I had employed a snapshot survey study where the managers had stated their intentions, I would have reached insufficient and inaccurate results “removed from real-life thinking and actions” (Woodside, 2010, p. 72). When the researcher observes, he or she takes a “short cut” to the issue of interest, that is, the researcher does not have to go through the tricky path of implicit assumptions and expectations held by the informant on “the answer that the researcher is after” (Stewart, 1998). Hence, to have direct access to the issue of interest is one of the key strengths with observation. The researcher who observes, and reflects on what is being observed, may capture behavior that is taken-for-granted by the informants, and thus would never surface in an interview. As Patton (2002) argues: Because all social systems involve routines, participants in those settings may take them so much for granted that they cease to be aware of important nuances that are apparent only to an observer who has not become fully immersed in those routines. (p. 263)

Thus, observation captures both the emic (insider) and the etic (outsider) perspective (Stewart, 1998; Woodside, Pattinson, & Miller, 2005). This means that the researcher does not have to rely on only the informant’s interpretation of the issue of interest, but can complement it with his or her own interpretation, which represents the etic perspective. The researcher’s personal experience, which derives from participant observation, is an extremely valuable source of information (Jorgensen, 1989). Thus, the researcher usually writes down the etic perspective in the form of reflective notes that he uses in the emergent analysis. In this way observation differs from other methods since both the insider’s and the outsider’s views constitute the collected data that are used for analysis. The observer investigates the problem in its “natural” setting. Consequently, in this study I conducted the investigation of customer information in the context in which it naturally appeared. To observe customer information use in the field generated an understanding of the “bigger picture.” In addition, the up-close immersion in context increases the likelihood of revelatory incidents that naturally occur in real-time. These incidents stimulate real-time insights that launch systematic analysis of additional data (e.g., Arnould & Wallendorf, 1994). Observing the development meetings generated hints on circumstances that triggered the use/nonuse of customer information in the development. This means that to merely observe the developers’ reasoning, negotiating, and decision making on developmental issues, the question of why was occasionally answered. The researcher’s role may be conceptualized on a continuum from a complete outsider to a complete insider (Einarsson & Hammar-Chiriac, 2002;

Ethnographic Research in Service Marketing

107

Hammersley & Atkinson, 1983; Jorgensen, 1989; May, 1997). Participant role involvement determines what the researcher is able to hear, see, smell, touch, taste, or feel (Jorgensen, 1989). Four roles are frequently identified: the complete observer, the participant-as-observer (more observer than participant), the observer-asparticipant (more a participant than observer), or the complete participant (Einarsson & Hammar-Chiriac, 2002; Hammersley & Atkinson, 1983; Jorgensen, 1989; May, 1997). The complete observer refers to a situation when the persons observed are not aware of the researcher’s intentions. The observer is either not visible or he is anonymous to the social setting that is under examination. The more distanced the observer is, the greater the potential is for misunderstandings and inaccurate observation. The complete participant is similar to the complete observer in that those that are observed do not know the intentions of the researcher. However, here the researcher has become a member of a group or an organization or is already a member that decides to conduct a study of the social setting he/she belongs to. This role is the ideal to which the researcher should aim. However, this strategy is limited by, for example, the difficulties of taking field notes without being disclosed, or, as pinpointed by Hammersley and Atkinson (1983, pp. 94 95), “some potentially fruitful lines of inquiry may be rendered practically impossible, in so far as the complete participant has to act in accordance with existing role expectations.” The most likely roles are those in between the extremes. Thus, the ethnographer is either a participant-as-observer (more an observer than participant) or an observer-as-participant (more a participant than observer). I made clear from the very beginning that my role in the project would be that of a passive observer. Thus, I adopted the role of being a participantas-observer. I revealed my identity as a researcher to all project members, but I never went into details about my project. Instead, I explained it to the observed in nonspecific terms such as “to investigate service development and the role of the customer.” Additionally, to be as unobtrusive as possible, I strove to rather say too little than too much about my research and myself, but enough to gain the informants’ confidence and minimize potential suspicions and misconceptions. I only revealed my research and purpose of “being there” when asked, a situation that did not happen very often. For example, it took about seven months before some project members even asked about my project, and as they seemed content with my answer of “the role of customer information in service development,” I did not explain it any further.

108

CATHARINA VON KOSKULL

My ambition was to be a “fly on the wall” and I was even named and referred to as “the fly” in a humorous sense. The nickname actually served as a reminder of my role as a passive observer to everyone involved in the project. In line with the ethnographer’s concern about presenting data and analyses that are true (Lofland, 1995) or accurate (Woodside, 2010), I wanted the development process and activities to be conducted in the same way as they would have been if I had not observed it. Thus, at all times I strove to behave in such a way that the activities that I observed would not significantly differ from those that occurred in my absence (Bogdan & Taylor, 1975). To conduct participant observation entails to choose what and when to observe. All in all, I observed 54 development meetings/workshops where the developers reasoned, negotiated, made decisions on the development, performed development activities, reviewed completed action points, and divined new ones. I aimed to observe every meeting that took place during the development process, and this aim was largely met. In total, I missed fewer than 10 meetings (out of 63) over a period of about one year. The reasons why I did not attend these meetings were either sickness or that the key informant had forgotten to inform me about a meeting, which only happened in the beginning of the process before my role as an observer became established. I received the agendas and meeting minutes for every meeting, including the ones that I had not participated in. In this way I kept up with what went on and, subsequently, increased the coverage of potential data on customer information use that might have transpired while I was off the field. As a field investigator I was concerned with how to cover possible instances of customer information acquisition and use that took place in the field while I was off it. As mentioned above, one way to increase the coverage was to investigate the agendas and, meeting minutes of meetings I did not attend. Another way was the agreement made with two of the core developers, whom I called at agreed times once a week to learn about the development activities that had been performed since my last call. After some time these telephone calls proved to be unnecessary because my observations of meetings together with e-mails and other collected documents provided much the same information. Hence, the phone calls only confirmed what I already knew and were ended. It also became clear that most decisions that were made about development activities were made formally during the development meetings, or, if not, were still revealed in discussions among the developers during these meetings. I also observed two out of three user tests with an early prototype of the developed website.

Ethnographic Research in Service Marketing

109

In addition, I observed interactions between developers and other organizational members during, for example, lunch breaks. I conducted three different kinds of observation: face-to-face observation, telephone observation, and a mix of face-to-face and telephone observation. I describe these next. Face-to-Face Observation (FTFO) I observed, face-to-face, 10 development meetings among the core team of developers. These meetings took place in a specific room at the bank’s headquarters or at the other involved businesses’ premise, and varied in length from one and a half hours to full-day workshops. I also observed two out of three user tests with customers, which one of the developers at the headquarters performed. These lasted 15 and 30 minutes, respectively. I audio-recorded all observations of meetings and the user tests. I also observed face-to-face informal interactions and communication between developers and other bank personnel. For example, on one occasion one of the developers briefly exchanged some words with the call center manager about customer information issues in the lunch queue. During the observations, I made field notes of reflections, and wrote down questions to be clarified later in interviews or in informal discussions. During all observations, I strove to interfere as little as possible. Thus, I did not ask any questions during the observed meetings. In the beginning of the field study, the developers would occasionally look my way as if searching for my opinion on the matter they discussed. On these occasions I did not respond verbally, but instead I would write something in my logbook and through body language, behave as a researcher, to remind them about my role. Eventually, my role became established in the group and the developers learned that there was no point in turning to me. They also appeared to get familiar with the situation of having a researcher hanging about (e.g., Hammersley & Atkinson, 1983) as they paid less attention to me and appeared comfortable with the situation. As ethnographers in other studies have observed, there was a gradual adjustment by the insiders to the observations (see, e.g., Hammersley, 1998; Miles & Huberman, 1994; Stewart, 1998). Telephone Observation (TO) Most often, that is on 32 out of 54 observations, I observed the development meetings by participating over the telephone. These meetings were

110

CATHARINA VON KOSKULL

held at the headquarters. The project leader called me and connected me to a small speaker situated on the table of the meeting room, and thus I listened to the meetings from my office at the university. The fact that I observed the majority of meetings by telephone facilitated unobtrusive observation. The developers were either not aware of my participation or forgot about it. In the beginning of the field study, the key informant would start the meetings by saying (in a humorous manner) things like: “Ok, we have the fly participating on line so good morning to you too.” As development meetings and weeks went by, the key informant less frequently mentioned my presence, and seemingly assumed that the rest of the project team already knew that I participated. However, at the end of several meetings, when I said: “Thank you and good bye,” it became evident that one or more in the group had not been aware of my presence, or had forgotten about it. Finally, the facts that the organization of the bank is geographically dispersed, and that those studied frequently rely on audio and video conferences to communicate with one another, facilitated unobtrusiveness. In short, they were familiar with the small electronic device situated on the table of the meeting room and subsequently seemed to pay no attention to it. I audio-recorded all telephone observations.

Face-to-Face and Telephone Observation (FTFO/TO) I observed 12 meetings that were a mixture of face-to-face and telephone meetings. These observations took place at the key informant’s office. The key informant communicated and participated in meetings via audio conferences with developers physically located at the headquarters, other branches, and other businesses (consultants). The observations were audio-recorded. One advantage with this kind of observation was that I often could, immediately after the meeting, clarify those issues that I had not understood. In retrospect, I would never have captured the different types of use or the insights on customer information acquisition, if I had not been in the field to observe and register these activities as they transpired. To observe the development meetings made it possible to capture the “on-going thinking, deciding, actions and outcomes of processes” (Woodside, 2010, p. 72) that occurred in the development. For instance, if I had asked them from where they acquire information about customers that they consider and, at times, use as a basis for the development, would they have told me that “Every once in a while during the development process we put ourselves in

Ethnographic Research in Service Marketing

111

the shoes of the customer and try to imagine what the customer would prefer and then we develop accordingly, or maybe not.” Observation, however, creates the possibility to capture this tacit and introspective dimension of the development project members’ decision making (cf. Langley, Mintzberg, Pitcher, Posada, & Saint-Macary, 1995). Additionally, if I had asked the developers from where and when they acquire the used/not used information would they have told me that “We do not acquire information, we use information that already exists inside our organization and, occasionally, we consider to use information that is known to us without it being acquired in a conventional way, such as rumors about us and our services that flourish in the market?” Most likely not, because this type of managerial behavior contrasts the notion of the effective manager that rationally (albeit bounded) acquires information and uses it to make decisions (cf. Feldman & March, 1981; Mintzberg, 1972). In addition, when I observed the developers’ discussions it became clear that in their minds, customer information primarily equaled data contained in customer databases, or information from traditional market surveys or focus group interviews, rather than, for example, information informally acquired from the call center. Hence, observation facilitates the researcher to overcome the limitations and boundaries set by language. My study on customer information use identified six types of use: immediate use, almost postponed use, postponed use, almost use, potential use, and immediate nonuse. In addition to the customer as a source of customer information, the developers used themselves to imagine possible customer reactions to different development outcomes. In regards to the temporality of acquisition, information that already existed, that is, had been acquired prior to the start of the development process, was used, as well as information that was acquired during the focal development process was postponed with the intention to be used the next time the same service will be developed. Finally, I found that customer information informally acquired from, for example, frontline personnel was used more frequently than information acquired formally through market research methods. These findings contrast prior NPD/NSD marketing research.

Informal Discussion and Interview An interview by an ethnographer, whose main research strategy is participant observation, is often unstructured and very close to a naturally

112

CATHARINA VON KOSKULL

occurring conversation (e.g., Aull-Davies, 2005; Jorgensen, 1989) or informal discussion (Workman, 1993). The essence of the informal discussion is that the ethnographer does not decide beforehand the questions to ask but, rather, may have a repertoire of topics to select from when the moment seems appropriate (Aull-Davies, 2005; Elliott & Jankel-Elliott, 2003; Hammersley & Atkinson, 1983; Jorgensen, 1989). The informal discussion is free-flowing, and allows the informant to control it. However, even in informal discussions, ethnographers have in mind topics they wish to explore and questions they would like to pose; thus they tend to direct the discussion with the research in mind, without imposing much structure on the interaction. Good ethnographic conversationalists do not violate the rules for introducing or taking up a topic, and they conform to similar rules for taking turns and recognize the implicit right of other people to join the conversation. The discussion is also informal because it is not planned, but rather seen as happening spontaneously. Thus, it may take place in a wide variety of contexts, such as during talks before observations of meetings, and after or during breaks in meetings (e.g., Aull-Davies, 2005; Jorgensen, 1989). In addition to informal discussions, interviews are useful especially as they allow the researcher to systematically ask the same questions to different insiders. When the ethnographer performs an interview, she or he employs a list of predetermined questions (Jorgensen, 1989). Normally, the researcher has to make some special arrangements to conduct the interview and it is characterized by being “formally bracketed and set off in time and space as something different from usual social interaction” (Aull-Davies, 2005, p. 95). Due to the longitudinal aspect of ethnography, the ethnographic interview and informal discussion usually take place between individuals who share more than the interview/discussion encounter. This means that the ethnographer has established an ongoing relationship with the informant(s), thus points made in the interaction are usually with reference to both a shared history and with an awareness of a future connection. As Woodside (2010, p. 72) argues, “re-interviewing the same person on different days and often in different contexts/locations is valuable because of the opportunity to clarify information collected from the first interview and, equally important, because a second interview creates a sense of ‘us’ between the informants and interviewer.” In this way the ethnographic interview and discussion differ from more traditional interviews and surveys. The longer-term relationship between the ethnographer and the informant increases the validity of the data (Stewart, 1998).

Ethnographic Research in Service Marketing

113

In my study, I used both interviews and informal discussions to generate a gradual understanding of customer information use and acquisition in the service development project. Participant observation was the main method, but to make sure that I captured as much of the phenomenon as possible I conducted interviews, usually with the aim to clarify issues that I had written down during observations, or to check whether my interpretation as an outsider was correct. Although there is no such thing as a correct interpretation, the ethnographer aims to “gather the best possible evidence, knowing that rarely is any set of evidence perfect or even exhaustive of the meanings people apply to the circumstances of their daily lives” (Jorgensen, 1989, p. 55). Thus, I strove to make sure that I understood the meaning of the insider’s language that I observed in meetings, since this understanding formed the basis of my interpretation and analysis. Several ethnographers emphasize the importance of learning the language of the people that are studied (e.g., Aull-Davies, 2005; Bogdan & Taylor, 1975). In addition, to clarify issues and to double-check my interpretations, I conducted interviews to gain an understanding of insider documents such as development planning documents and policies, but also technical documents in an to me unknown technical language. I conducted the majority of the interviews with the main key informant face-to-face at his office. As previously mentioned, in the beginning of the investigation I also conducted recurrent telephone interviews with two other informants. Eventually, however, these proved unnecessary, because the data generated in these interviews were also captured in observations and documents. All interviews were audio-recorded. In addition to the interviews, I also had numerous recurrent informal discussions with the development team members. These discussions typically resulted from talking before or after observed meetings or during breaks, and lasted from 15 minutes to about 1 hour. The discussions provided the opportunity to ask questions beyond the activities I observed, such as historical, political, organizational, structural, and development process issues. Thus, these discussions provided much background and contextual information, which contributed indirectly to my understanding of the research problem. In addition, these informal discussions served as an “arena” to exchange information of a more personal character, which seemed important in order to establish and maintain field relationships based on trust and cooperation (e.g., Jorgensen, 1989). In cases where the informal discussion provided data specific for the research problem, I made

114

CATHARINA VON KOSKULL

field notes of this as soon as possible during the same day. Thus, I did not audio-record the informal discussion, as this would have been too obtrusive. In both the informal discussions and the scheduled interviews, I avoided asking questions directly related to customer information. The reason for this was that if I would have asked questions such as “are you going to ask the customer’s opinion on that?” or “why do you, or do you not, turn to the information you already have acquired on the customer’s perception and base the development on that?,” I might have influenced the developers’ behavior. Rather, I wanted the development process activities to be conducted in the same way as they would have if I had not studied them. Additionally, I avoided “why” questions and questions that asked informants to explain what they mean. These kinds of questions convey an evaluative judgment and may put informants on the defensive or make them feel pressured. Instead, as an ethnographer I strove to at all times ask “what,” “when,” “where,” and “how” questions that are more likely to generate descriptive information (Spradley, 1980).

Documents In the course of participant observation, the ethnographer usually encounters a wide array of documents. Organizations are routinely, often extensively, involved in the production and consumption of written materials. However, documents are not restricted to written materials. Digital resources such as websites, electronic bulletin boards, and e-mails are also ways in which documentary realities are produced by organizations. Hence, documents are produced for both internal and external consumption. The field investigator should pay careful attention to the inspection of the documents themselves and also to how and for what purposes they are produced, circulated, read, and stored. Documents can serve as distinctive data in their own right or can be used to support or validate other findings (Atkinson & Coffey, 1997; Hammersley & Atkinson, 1983; Jorgensen, 1989; Workman, 1992). In my study, I collected and inspected a vast number of documents. I scrutinized documents specific to the studied development process such as project plans (e.g., project organization and responsibilities, timetables), development plans (e.g., a pre-study, templates, and site maps for the structure), meeting agendas and minutes, copies of presentations made at meetings, and technical specifications. I also inspected general documents such

Ethnographic Research in Service Marketing

115

as policies at the bank. In addition, I investigated documents produced by a market research firm and market communication firms. In addition to written materials, I received a large number of e-mails (about 300) from the developers. The e-mails were of three kinds: (1) I was put on the distribution list together with the development team members. Some messages were just a few lines long and simply announced the time and date of the next meeting, and others contained attachments with dozens of pages of the type of written documents already mentioned above. Before and after every meeting, the project leader sent the agenda and meeting minutes to everyone on the list. All mails were downloaded, saved, printed out, and filed. (2) As I was on the distribution list, I automatically received mail. In addition, I also corresponded directly with informants by e-mail. Informants forwarded e-mails to me they thought I might be interested in. These usually contained communication between two or more of the developers, or between developers and other members of the bank. In some cases, the forwarded e-mail contained several e-mails that represented back and forth correspondence that had taken place between developers about the new service. In addition to the unsolicited mails, I also requested mails of correspondence that I learned from observation that had taken place. (3) Finally, I also used e-mails to schedule interviews and observations with informants, or to ask specific questions to clarify, for example, technical terms. The documents were insightful and supported my gradual understanding of customer information use. For example, an insider document labeled “the pre-study” included results from two focus group interviews conducted with the bank’s customers early in the development process. The results of the focus group interviews were seldom discussed in observed meetings, and as I had the acquired customer information documented, I could compare and analyze how much of it was actually used. Other important documents were meeting agendas and minutes that I inspected to catch up on meetings I had not been able to observe. When I compared data in the documents and data collected in the observations, I identified discrepancies as well as convergences between the written and the actual “sayings and doings.” Early on during the field study, I realized the advantages of using several methods. For example, to continuously read documents increased the understanding of the observed development discussions and, conversely, the observations improved the comprehension of the documents.

116

CATHARINA VON KOSKULL

The Logbook In order to keep track of the empirical material, I created a logbook. Like a calendar, the logbook can be best described as a running, chronological record of the fieldwork. Unlike the calendar, however, it is a more substantive record of all the interactions and experiences I had in the field (cf. van Maanen, 1988). This means that interactions where no data collection took place were also recorded, such as telephone calls from the key informant about delays, cancellations, or changes of meeting time. During and immediately after an encounter with the informants, I systematically made notes in my logbook (the two systems for making notes are described below). Later, during the more focused analysis, I found these notes invaluable because they directed me to document(s) or recorded audio tape(s) with information central to the research questions. Thus, the logbook functioned as a directory to other sources of data that were further investigated and analyzed. In addition, I also found the logbook a valuable source of data in its own right. Not only did it contain my field notes and my reflective notes, but the logbook also illustrated the evolution of the entire development process. This facilitated the identification of when the use and acquisition of customer information took place in the development process. As field interactions and the collection of empirical material increased, the number of pages grew and by the end of the field study, the logbook constitutes a document of 143 pages. I used two different systems to organize and record the field interactions in the logbook. For observations and interviews, I recorded the type of interaction, that is, whether it was face-to-face, telephone or a combination of face-to-face and telephone, the place of interaction, the date, the time the interaction started and ended, and the names of the participants involved in the interview or the observation. Additionally, I always made some notes of the main purpose and results of the encounter. If the customer had been discussed or only mentioned, I also made notes about this. Later, these notes helped me to recall the encounter’s substance. In addition to the interaction’s summary, I referred to documents that had been central to the interaction and to audiotapes with a full record of the interview or observation. Finally, some encounters generated reflections that I also wrote down. Table 1 depicts the system for how I organized observations, interviews, and documents in the logbook. I downloaded, printed out, and filed e-mails and SMSs, and additionally, I copied them into the logbook as I received them. I also copied and pasted meeting agendas and minutes in the logbook. Initially, I translated

117

Ethnographic Research in Service Marketing

Table 1. Interaction Type Place Date Time Participants Purpose

Result

Reflective notes

The System for Organizing Observations, Interviews, and Documents. Description For example: Face-to-face, telephone, face-to-face/telephone For example: The bank’s headquarters, restaurant, the key informant’s office, meeting room at branch office x, consultant’s premises Any between February 16, 2005 and March 21, 2006 During business hours From one to several informants and I For example: to produce the project plan, to develop content, structure, functionality, weekly review meeting, to get updated on last week’s development, to clarify issues that were discussed in observed meetings Summary of main results of interaction, including whether the customer was discussed. Reference to documents central to the interaction: insiders’ doc. title/date Reference to audio recording: purpose of interaction/date Occasionally the interaction generated reflective notes

the material produced by the informants from Swedish to English. However, as the development process went by and the interactions with the field intensified, I found it too time consuming to translate (between 16th of February and the end of May 2005, I interacted with the field on average 1.6 days per week and 1 4 times per day of interaction. From June 2005 to the launch of the new service in March 2006, I interacted with the field on average 3 days per week and between 1 and 7 times per day. The period between September 2005 and January 2006 was the most intense. During this period the interactions were more or less on a daily basis, that is 4 5 days per week and often several times per day). I also found it very difficult in some cases to translate the language without the loss of some of its nuances and character. To avoid the loss of some levels of meaning and in line with ethnography, I decided to keep the material in its original language (e.g., Aull-Davies, 2005). Table 2 illustrates the system of how I organized e-mails and SMS. As mentioned, I collected the empirical material during about one year. I stored it chronologically by time of collection and by the end of the field study the empirical material consisted of more than 1,000 documentary pages (e-mails included) produced by the bank and informants, the logbook of 143 pages with recorded field interactions together with field notes and reflective notes, and 82 audiotapes (with recordings that span from 15 minutes to 2 hours per tape) of recorded observations and interviews.

118

CATHARINA VON KOSKULL

Table 2.

The System for Organizing E-Mails and SMS.

Interaction

Description

Type Date Information

e-mail or SMS Any between February 16, 2005 and March 21, 2006 Name of sender, receiver(s) copy of the e-mail, agenda, and meeting minutes in full length On some occasions an e-mail or SMS generated reflective notes

Reflective notes

In regards to the amount of empirical material, I found the logbook invaluable when I started the more focused analysis after I left the field.

THE CASE, FIELD SETTING The selection of a case relates with the problem under investigation and the aim of the study. This means that the researcher should continually keep in mind the requirements of the research and seek out an appropriate case in light of the research problem and the aim of the investigation (Aull-Davies, 2005; Hamel, Dufour, & Fortin, 1993). The purpose of the current study is to identify and describe different types of customer information use in service development. The approach is to go for the depth, not breadth, and to understand, not predict. In ethnography, access is of main concern and usually constitutes the main selection criterion of case and setting (e.g., Hammersley & Atkinson, 1983; Patton, 2002; Schwartzman, 1993). In my study, the entire development process of a website constituted the case and context for the investigation of customer information use and acquisition. This choice was based on the possibility to gain access to the closed setting of a development project, which can be considered relatively difficult (Jorgensen, 1989). Although many aspects of a company may be open to almost anyone, certainly not all of the activities that go on there are open to the participant observer as an outsider. The embedded notion of secrecy and “magic” in service and product development makes the information about any activity that goes on in these processes sensitive; thus, to gain access to such a setting was a privilege. The choice of informants was a rather straightforward task. Because the development process was organized and performed by a group of people, that is, the development project, the project members represented the informants.

Ethnographic Research in Service Marketing

119

The development process took place in a bank setting that, consequently, represented the field setting. In the following sections, I present the circumstances that generated the choice of the case, field setting, and informants, and these are followed by a description of the case and the informants.

Selection of a Case and Field Setting The following circumstances led to the decision to conduct the study on a bank’s development process of a website. Due to stipulations made by the foundation, which at that time financially supported me, the study needed to be conducted within the financial service industry. A large number of studies in NPD and in NSD have been conducted in the financial service industry (e.g., Stevens & Dimitriadis, 2005). However, there is a lack of ethnographies in service development conducted in this industry (and in others). The choice to focus on the bank as a field setting was further motivated by access. During the fall of 2004, I conducted negotiations with the bank about the possibility to gain full access to a development process. I made clear that I needed to conduct participant observations of development meetings, make recurrent interviews with developers, and collect documents. In short, I needed full access. The fact that I had already performed a study at the bank and had gained some rapport was to my advantage in the negotiations. As the context for my investigation of customer information concerned a strategically important process such as NSD, confidentiality and people’s anonymity were an issue. Thus, I was expected to not reveal names or other details that would reveal the case, the field setting, or the informants. During the winter of 2004, it was decided that I would be granted full access to a development project that concerned the bank’s website that started in February 2005. In addition to access as the key selection criterion, several other issues motivated this choice. First, a website can be viewed as a self-service technology that allows the customer to serve him/herself (Bitner, 2001). This means that in order to receive the information on the bank’s website, the customer has to participate in the service delivery by interacting with a technological interface. The result of this technology-based encounter, such as customer perceived value, is thus largely dependent on the customer’s understanding of how to interact with the website in order to gain the wanted information (Bitner, Faranda, Hubbert, & Zeithaml, 1997; Meuter, Ostrom, Roundtree, & Bitner, 2000).

120

CATHARINA VON KOSKULL

Thus, to use customer information, particularly when a service where the level of customer participation is high is developed, could be viewed as being of paramount importance to the company. Taken together, the participant role of the customer in the service delivery makes the development process of a website as the context for the study an interesting case. Second, the bank stated that the development process would only take about 6 months; thus, it seemed to be a time-effective project that suited well with the planned timetable for my dissertation (however, eventually the development took about 12 months). Third, the project was just about to start, which granted me the opportunity to conduct the investigation of customer information from the very beginning of the development process throughout the entire process to the launch of a new service. In this way the investigation covered the whole process, which increased the probability to capture all data on customer information use and acquisition. To investigate the whole development process also provided me with the opportunity to identify when use and acquisition emerged in the process. Later, it was revealed that although the development project was new, the development process had already started once before, about one year earlier and after about half a year it had been put on hold. Nevertheless, the development process was in the very early stages when my field study began, so I decided to continue the investigation. I retrospectively investigated the “missing” initial part of the development process, the bank’s so-called “pre-study,” by inspecting its documentation and by interviewing the person that had been responsible for it. A final issue that motivated the choice of the development project was the ongoing discussion of the evolution of an information society and digital economy. In regards to this general discussion, the development of a website as the case and context for the investigation of customer information seemed timely and relevant.

The Bargain In order to gain entry to an organization as an outsider and to get access to material for a longer time period, in my case for little more than one year, it is common practice in ethnographic studies that the researcher gives something in return. I conducted an internal survey among the frontline personnel at the bank’s branch offices. To link the development project with the rest of the organization and to make sure that the eventual result

Ethnographic Research in Service Marketing

121

of the development would be supported by as many people as possible in the bank, the director of business development thought that it would be a good idea that an outsider, such as myself, could find out how managers at the different branches wanted the website to be developed. At first, I was a bit concerned about the effect my investigation might have on the neutrality of the findings. Soon, however, I realized that this would not be a problem. On the contrary, the survey provided an excellent opportunity to investigate up-close the path of the customer information, that is, how it was acquired and how it was used in the development. The questions that I posed to the managers were formulated by the project leader and sent by e-mail in advance to the branch offices. Thus, my role was to call the branch offices and collect the answers on two questions: 1. What are the three biggest weaknesses with today’s website? 2. If you could wish for three services/functions that could exist on the website in the future, which ones would it be? (Insider document: E-mail, June 29, 2005). I reported the answers to the developers in the form of a written document. I did not analyze them, but simply wrote down the answers branch office by branch office. It can be mentioned that from my point of view, the survey became a small test. First, some of the survey results contained customer information that branch offices had acquired and wanted the developers to use. Second, after I had e-mailed the survey results to the developers, I observed up-close in development meetings how the developers reacted to the customer information that the frontline personnel wanted them to use. The customer information that had been acquired over time by branch offices, and that was formally provided to the developers through the survey, was included in the data that I analyzed.

DESCRIPTION OF THE CASE: THE DEVELOPMENT PROCESS OF A WEBSITE The development process that I studied started in February 2004 and ended two years later with the launch of the new website. The studied development process represented the third in chronological order since the bank first was established on the Internet. Thus, the development can be viewed

122

CATHARINA VON KOSKULL

as incremental in nature. The initiative to develop the website came from the marketing department: The open website with all its content has grown and become disproportionate in comparison to the structure, which is, independently, perceived as difficult to navigate by the visitor. To publish on, and withdraw content from, the web is too time consuming. (Insider document: “The pre study,” 2004, p. 11)

Initially the aim with the development was stated as: “to increase the flow of new customers acquired via the website” (Insider document: “The pre study,” 2004, p. 8). Later, the aim was stated as: To strengthen the bank’s relationship through improved communication with its three segments: customers, potential customers and, media and investors. Improved communication means that we consider the needs of each segment to a greater extent. In addition, it means new graphic design, new navigation and a functionally improved publishing tool. (Insider document: “The project plan v.3,” 2005, pp. 1 2)

Hence, instead of targeting potential customers as in the initial aim, the primary target of the new website was changed to existing customers: This is a strategic change. However, acknowledging the facts it is easy to understand this new aim, i.e., looking at the old website’s visitor statistics, we can conclude that it is not economically viable to primarily target potential customers. Besides, we are convinced that by turning to our existent customers we will acquire new customers as well. Let us clarify with an example: Imagine it’s Friday night and you’re walking past a house. Inside there is a party going on, you can tell by the laughter, music and the sound of ice cubes in glasses of cocktails coming through the open window. How do you react? Most likely you would become curious and would want to be invited. Advertising agencies have used this principle since the beginning of time. Humans become curious of things that are not actually meant for them. This “party-in-thehouse” phenomenon can be applied to the new website. Of course, the new website will contain high quality pages for potential customers who would like to know more about the bank. The point is that when these visit our website for the first time we will communicate to them as if they already were our customers. (Insider document: “Definitions of the website project,” 2005, pp. 3 4)

However, despite the changed and formally stated aim in the document, in the observed meetings, no distinction was made between existent and potential customers. On the contrary, based on the observed discussions among the developers, it seemed as if the aim with the development still was to increase the number of new customers acquired via the website. The studied development project developed three aspects of the website: the actual content, that is, what information to include and how it should be expressed and exposed; the structure, that is, under what heading and on what hierarchical level to put the content; and the functionality, that is,

123

Ethnographic Research in Service Marketing

Table 3. Description of the Case and Data Collection Methods. Time Period

Main Development Activity

February 2004 June 2004 June 2004 January 2005 February 2005 May 2005 June 2005 February 2006

Bank’s pre-study Development “put on hold” Development of the technical platform Development of the structure and content

Data Collection Methods

Field study (February 2005 March 2006): • Participant observation • Interview, informal discussion • Inspection of documents (e.g., the results of the bank’s pre-study in 2004)

underlying technology that cannot be seen by the visitor but still influences what is seen, for example, the navigation logic, interactivity of content, cookies, etc. The development process started in February 2004, and two years later, the new website was launched. My field study started in February 2005 and ended some time after the launch in March 2006. Table 3 presents the main activities of the development process, together with the data collection methods.

THE BANK’S PRE-STUDY The development process started with a “pre-study,” which was led by Ms. Marketing Manager, who also participated in the core development team. The purpose of the pre-study was to generate suggestions and map out different alternatives for the development of the new website. The prestudy resulted in an extensive document of 60 pages and 16 attachments with ideas and suggestions that concerned content and functionality of the new website. As part of the pre-study, an external market research firm conducted two focus group interviews to acquire customer information. The purpose of the interviews was: To clarify the bank’s customers and other banks’ customers perception of the current website and how one could develop. To clarify what information visitors search and what information the website should contain … Central questions include: What comes to one’s mind when surfing on the bank’s website?

124

CATHARINA VON KOSKULL

What is good and bad on it? Why does one visit the bank’s website What information does one search for? How does the bank’s website position itself: what does it inform and convey about the bank? (Insider document: “The pre study,” 2004, p. 38)

Interestingly, in an observed meeting about one and a half years later, some of the developers expressed their views on these focus groups. According to one developer, not much usable customer information was ever acquired, and according to another one, the reason for this lied in the focus group technique used (TO, June 30, 2005, see Appendix B). Hence, the customer information that was formally acquired in this way was rarely used in the development.

The Development Put on Hold The development work was planned to start as soon as the pre-study ended (June 2004), but was “put on hold” until February 2005. There were primarily two reasons for the delay. First, the summer holidays started in June and it was perceived as a bad idea to start the development project before all potential project members were back at work. Second, after the summer holidays another development project with a higher priority had to be completed and the development of the website could not start because of lack of resources.

Development of the Technical Platform Between February and May 2005 the website’s underlying technical platform was much discussed. For example, there was a long evaluation and negotiation process between competing suppliers of publishing tools and the bank, as well as, between competing suppliers of application servers and the bank. In these processes, the bank’s IT function with programmers and Mr. Director of Business Development played a key role (cf. Pettigrew, 1975). In addition, the estimated amount of hours to develop “the back-end” solution was decided upon, revised, and decided upon again. People at the bank’s IT function together with suppliers and consultants revised and implemented the technical platform based on the requirements made by the core development project and Mr. Director of Business Development.

Ethnographic Research in Service Marketing

125

Development of the Structure and Content The development of the structure and content started with a kickoff in June at one of the cooperating consultant’s premises. As expressed by one developer at the kickoff, the website was in need of a “face lift” and old content should be “recycled” (FTFO/TO, May 13, 2005, see Appendix B). In order to link the development work of the new website with the views of the rest of the organization, I conducted an internal survey among managers at the branch offices (see the section “The Bargain”). With the aid of the survey, I, indirectly, acquired customer information from personnel who interact with customers on a daily basis. For example, the majority of branch offices stated that something really had to be done to the loan calculator on the old website because customers had complained a lot about its functionality. During the development of the website’s structure and content, one of the development project members conducted a small usability test and acquired customer information directly. The purpose with the test was to identify if there were any “big mistakes” made in the development of the navigation. The usability tests did not indicate any such mistakes and the development continued as planned. In February 2006, in other words, in the same month as the launch of the new website, the developers acquired customer information through a small e-mail survey sent to noncustomers. The survey was initiated in order to get some views on the final development from people who were not as familiar with the old website as managers at the bank. It was believed that the information from this group would be different and potentially more insightful, as the noncustomers would not have the old website as a frame of reference when they evaluated the new one. In sum, excluding the period when the development was put on hold, the development of the website took one and a half year. In regards to customer information acquisition and use, these activities were most frequent during the development of the website’s content and structure during the last nine months of the process. The content and its structure are visible to the customer visiting the website. This was, most likely, the reason why customer information was acquired and used most frequently during this period.

SELECTION AND DESCRIPTION OF INFORMANTS The selection of informants is as critical for the ethnographic researcher as it is for any researcher in any study. In spite of the importance of

126

CATHARINA VON KOSKULL

informants, their selection process is not a one-way procedure. The selection depends on factors such as their accessibility and willingness to assist in the research as well as their knowledge and insight. Thus, ethnographers are often as much selected by their informants as the reverse (Aull-Davies, 2005). According to Stewart (1998), the purpose of sampling in ethnography is to achieve strategic coverage of “the system,” in my case the use and acquisition of customer information in the chosen development process. Thus, a good ethnography is expected to sample the entire distribution, and not just the central tendencies of the topic studied. “What good ethnographic sampling is about is establishing the range of the phenomena, not establishing the proportions of traits in a population at large” (Stewart, 1998, p. 35). This means that to randomly select informants is ill-advised and quite unfeasible in ethnography. As a rule of thumb, the researcher needs to identify those people who are close to the research problem and who are familiar with relevant details (Henard & Szymanski, 2001), or, in other words, those who the researcher expects to be “the best-informed informants” (Dalton, 1967, in Stewart, 1998, p. 36). The selection of informants was a rather straightforward task. After I had gained access to the development process of the new website, those people involved in it, “the developers,” were the natural choice. The development was organized as a project involving people at the bank from different functional areas and external consultants. The informants were divided in three groups: the project board, the core development team, and the reference group.

The Project Board The project board consisted of two informants: Mr. Director of Business Development and Mrs. Director of Human Resources. As a “gatekeeper” (Bogdan & Taylor, 1975; Hammersley & Atkinson, 1983), Mr. Director of Business Development was also the person who granted me access to the development project. Without his consent, the study of customer information use and acquisition in this particular case and setting would not have been possible. According to an insider document labeled “the project plan,” the purpose of the board was “to support the project leader and to ensure that the development process is performed within the limits of the specified budget and time frame” (2005, p. 5). This means, for example, that to formally change the launch date (which happened on six(!) occasions),

Ethnographic Research in Service Marketing

127

the project leader had to meet the project board. The project board was not involved in the actual day-to-day development work and was not responsible for the content, structure, or functionality of the new website.

The Core Development Team The core development team represented the study’s key informants. This group was responsible for the actual development, which means that they were involved in the day-to-day activities of the development. Hence, the majority of the observations are from meetings between members of this group. As key informants, these “core developers” were familiar with relevant details, monitored the development process closely, and were expected to be the best-informed informants. The key informants that belonged to the core development team were Mr. Project Leader and Mr. Technician, Mr. Marketing Manager and Ms. Marketing Manager (from the marketing function), and Mr. Technical Project Leader. As Mr. Project Leader had the main operational responsibility of the development, he represents the study’s main key informant. As the main key informant, he was also the contact person who informed me about meetings, provided me with most documents, and the majority of the recurrent interviews and informal discussions were also conducted with him (see Appendix A). The constellation of the key informants varied to a certain extent depending on the meeting’s agenda. For example, Mr. Technical Project Leader was only present when issues that concerned the underlying technical platform were discussed and decided upon. Additionally, on these occasions, several external technical engineers participated. The most frequent constellation of the observed meetings was Mr. Project Leader, Mr. Technician, Mr. Marketing Manager, and Ms. Marketing Manager. In addition, the core development team cooperated with external consultants in web design, market communication, and technical engineers, and occasionally these people would participate in the development meetings as well. This cooperation was most intense in the beginning of the process and toward the end and launch of the new website.

The Reference Group Four informants, Mrs. Call Center, Mrs. Sales Director, Mr. Private Banking, and Mrs. Business Support, represented the reference group.

128

CATHARINA VON KOSKULL

Based on the information from the core development team, this group gave ideas and feedback on the development, but did not have any formal decision-making power. The reference group’s responsibilities were also to continuously communicate back the proceeding development work to the rest of the organization, and to report internal feedback to the development team, after which the project leader decided upon revision. Thus, the reference group functioned as a formal link between the core development team and the rest of the organization. Although all members of the three groups represented the informants, the extent to which they participated in development meetings, and thus were observed, varied. I observed some informants frequently, but only during a limited period of the process (e.g., in the development of the underlying technology), some frequently throughout the whole process (the core development team), and, finally, I observed some informants throughout the whole process, but only now and then (the project board and the reference group). As a consequence, their contribution to the empirical data varies (see Appendix B).

A Few Words on the Field Relationships As recommended in ethnography, the informants were strangers to me when I started the field study (Bogdan & Taylor, 1975). In addition, I had no prior professional knowledge about service development in practice and I have never worked at a bank. Thus, I did not perceive the ethnographic importance of being naı¨ ve to be a problem. To stay naı¨ ve, I also kept a reflexive and open mind throughout the process and never forgot that my primary purpose to be there was to learn about their use of customer information in the development process. As time went by, relationships were developed with the core development team, or the key informants, and there were no signs of personality clashes, which facilitated the process to gain access and build rapport. To build rapport is important because without it the information collected is likely to be of low quality (Elliott & Jankel-Elliott, 2003). The relationships to the informants could be characterized as “professional” rather than “close friendship.” The informants knew their roles as information providers and that mine was that of the researcher interested and curious about their development process. Proximity in age with most of the informants could be considered to possibly contribute to the establishment of favorable relationships.

Ethnographic Research in Service Marketing

129

STRATEGIES TO INCREASE THE QUALITY OF THE STUDY Ethnographic research has been both criticized and praised in the light of arguments about it satisfying the research criteria of validity, reliability, and generality. It is widely agreed that this qualitative methodology produces highly valid results, but is deficient in regard to reliability and generality (Aull-Davies, 2005; Deshpande, 1983; Jorgensen, 1989; Stewart, 1998). In the following paragraphs I discuss how validity, reliability, and generality should be interpreted in the study I conducted on customer information use in a development process, and the coping tactics that I used to enhance these criteria.

Validity/Veracity A central question of validity in statistics-oriented studies is whether one has measured correctly (e.g., Aull-Davies, 2005; Kirk & Miller, 1986). In ethnography, it is argued that the validity concept is overly laden with connotations of measurement (Wolcott, 1994). Thus, as another term for validity, veracity has been suggested (Stewart, 1998). Veracity means “1: devotion to the truth … 2: power of conveying or perceiving the truth … 3: conformity with truth or fact” (Merriam-Webster’s Collegiate Dictionary, 10th ed., in Stewart, 1998, p. 15). Meaning number two seems attuned to empathic understanding, and is hence the most ethnographic. However, number one and three are also of fundamental importance in ethnographic studies (Stewart, 1998). In every study there are inevitable limits to the capture of the truth, even if one believes, as in my study, that the truth is only provisional and based on one’s best understanding (Antonacopoulou & Tsoukas, 2002; Guba, 1990; Tsoukas, 1989). Stewart (1998) discusses limits that are related to the field and limits related to the ethnographer. Related to the field is the impossibility of the researcher to be everywhere at once; thus, this limit concerns how well the researcher has covered relevant pieces of data. There are also limits related to the fieldworker or ethnographer. Due to information processing limits, the ethnographer misunderstands, forgets, and can attend to only so much at once. “They mishear [and] do not recognize what [they] see” (Stewart, 1998, p. 19), and the unfamiliarity with the observed language and culture makes it difficult to make sense of the observations (ibid.).

130

CATHARINA VON KOSKULL

In my study, I used coping tactics such as prolonged fieldwork, attentiveness to context, and multiple modes of data collection to reduce the aforementioned field- and fieldworker-related limitations and thereby enhance the study’s veracity. I discuss these tactics in the following text.

Prolonged Fieldwork Unlike other qualitative methodologies, ethnography emphasizes, or even requires, that the researcher spend a long time in the field. Alvesson and Deetz (2000) argue, for example, that the minimum amount of time the ethnographer is expected to spend in the field is one year. This prolonged time is the single most important tactic the ethnographer has to enhance veracity (Stewart, 1998). The underlying notion is that the ethnographer who spends time in the field learns to get it right or, simply put, it takes time “to undergo what ethnography is: a process of learning” (Stewart, 1998, p. 21). The current field study lasted for about 13 months. During this period, I observed the development process and interacted with the field and with the same informants. This prolonged engagement helped me to learn not only about the immediate research problem, but also about the development process, the developers, the language used, the greater context of the bank setting, the relationships between the developers and between the development project and the rest of the organization. This understanding helped me in getting it right and thus enhanced the study’s veracity (Lincoln & Guba, 1985). In addition, I relied on informant member checking, which means that I relied on the main key informant, the development project leader, to help me interpret the happenings and meanings of actions and language of the development project members (Woodside & Samuel, 1981). The longer time of the study provides more opportunities to disclose discrepancies between what the informants say and what they actually do, which also enhances the veracity of the findings (Stewart, 1998). These kinds of discrepancies were revealed repeatedly, and they constitute a central aspect of the identified types of customer information use in the studied development process. Additionally, the probability of discovering short-lived factors and changes that might exert important influences (van de Ven & Poole, 1990) on the use of customer information increases with time. On several occasions I discovered that the actual use or nonuse of customer information by the developers was determined by unforeseen circumstances. I decided

131

Ethnographic Research in Service Marketing

that these central findings, the discrepancies between managerial intentions and actions, as well as the coincidences that frequently caused these discrepancies, should transpire in the labels of the different types of use. I named them “the immediate use,” “the almost postponed use,” “the postponed use,” “the almost use,” “the potential use,” and “the immediate nonuse” respectively.

Attentiveness to Context As argued by several researchers (e.g., Miles & Huberman, 1994; Stewart, 1998), the context of the data collection influences veracity. Good ethnography includes not only interviews, but more importantly observation of “speech-in-action.” Interviews with key informants are convenient, but ethnographers should “listen carefully to what people say, watch what they do, and keep their voices down” (Smith, 1990 in Stewart, 1998). The ethnographer needs to be sensitive to the context when he observes and to the context when he interviews as well. For example, employees say different things in the presence of peers and supervisors. Thus, the data collection should take place in different social contexts, that is, multiple contextual biases should be sampled. In this study, observations, interviews, and informal discussions took place in different social contexts. Thus, I collected data from informants in groups and from key informants, one to one. I collected data at various locations such as the bank’s headquarters, the project leader’s office, the headquarters’ lunch restaurant, in public restaurants, and at the consultant’s premises. Miles and Huberman (1994, p. 268) suggest circumstances that may strengthen or weaken the quality of collected data, these are shown in Table 4. Table 4.

Circumstances that May Strengthen or Weaken the Quality of Collected Data.

Stronger Data Collected later, or after repeated contact Seen or reported firsthand Observed behavior, activities Fieldworker is trusted Collected in informal setting Respondent is alone with fieldworker

Weaker Data Collected early, during entry Heard secondhand Reports or statements Fieldworker is not trusted Collected in official or formal setting Respondent is in presence of others, in group

Adapted from Miles and Huberman (1994, p. 268).

132

CATHARINA VON KOSKULL

I collected data during entry and throughout the 13-month period of repeated contact. The analysis of customer information use is based on data that were primarily collected firsthand in observation of speech-in-action, but I also collected secondhand data, such as documents. As the development concerned a website, I observed some of the actual development activities during the meeting, as a laptop was the only physical resource required. Thus, not only did I observe discussions that included negotiations and decision making about the development, but also actual activities of development work. I also observed three user tests on the website prototype. Furthermore, Miles and Huberman (1994) suggest that stronger data are produced if the fieldworker is trusted. Trust is something one earns over time and I believe that after some time I had gained the core development team’s confidence and trust. As ethnographies invariably describe, I was assigned the role of confidant (Johansson, 2008). I collected data in various settings such as formally in meetings and informally during breaks, lunch, and immediately after scheduled interviews. Finally, I collected data from informants in the presence of others, in group settings, as well as from key informants one to one.

Multiple Modes of Data Collection To employ multiple modes of data collection (triangulation) and to use multiple sources is another tactic to enhance the veracity. This is important because different kinds of data are generated by different techniques and no one particular source or informant is error-free (Stewart, 1998). In my study, I collected firsthand real-time data through observation and retrospectively through interviews and informal discussion. An overriding strength with observation is that it produces data with the least response bias of any data collection technique (Boote & Matthews, 1999). I collected secondhand data in documents. In line with Arnould and Wallendorf (1994) suggestion, I used multiple sources or informants to generate varying perspectives of customer information use and acquisition. In addition, the different informants’ views of the same phenomenon may improve the researcher’s understanding of the research problem (Kumar, Stern, & Anderson, 1993). I collected data repeatedly from the same informant; for example, as Woodside (2010) recommends, I reinterviewed the same informants over an extended period of time and in different contexts. Usually, I employed all three techniques (i.e., observation, interview, informal discussion) to generate data from the same informant. In addition to

Ethnographic Research in Service Marketing

133

the fact that it increases the veracity or accuracy of the study, to use multiple data collection methods also enhances the complexity and coverage (ibid.). Reliability/Dependability Reliability concerns consistency of results and refers to the extent to which a procedure or measurement produces the same result with repeated usage. Consistency is likely to be obtained when the procedure is simple, and highly standardized as with most forms of quantitative measurements (Jorgensen, 1989). Ethnographic research cannot be replicated literally in a conventional statistical sense (Aull-Davies, 2005; Jorgensen, 1989; Stewart, 1998). Due to the emergent and open-ended research approach, ethnography is a continuous learning process about the topic of interest the people, their relationships that are themselves in flux. Consequently, replication in a traditional sense is difficult as people and contexts continually change. This seems especially true in a study of a specific development project, which by its very nature is time-specific as it exists only once during a certain period of time. In addition, the majority of the key informants that I studied do not work at the bank anymore, and as pinpointed by Aull-Davies (2005), even the same ethnographer is a different person on subsequent field trips to the same research site. Hence, as with all knowledge, we must accept its incompleteness and contingent character (e.g., Antonacopoulou & Tsoukas, 2002). However, this does not mean that we have to sink into a relativistic hole in which no evaluation or improvement in knowledge is possible. Although reliability in a conventional statistical sense is not applicable and even inappropriate in ethnographic research, a fundamental concern still exists that is central to the independent research approach and that is to generate dependable findings (Guba, 1981; Jorgensen, 1989; Stewart, 1998). A central question in regard to a study’s dependability is (Stewart, 1998, p. 16) “how well do the findings transcend the perspectives of the researcher?” In my study, the tactics of reflexivity and specification of the research were used to enhance the dependability of the findings. I discuss these tactics in the following text. Reflexivity Reflexivity expresses “the researchers’ awareness of their necessary connection to the research situation and hence their effects upon it” (Aull-Davies,

134

CATHARINA VON KOSKULL

2005, p. 7). Due to the subjectivity of the researcher, these effects or biases are inevitable from the initial selection of topic to the final written product. Attempts to minimize these biases can be made if the researcher critically reflects on the biases stemming from researcher effects on the studied field and vice versa. Additionally, by discussing and trying to disclose the choices made throughout the research, the critical sources of biases may provide a picture of “traceability of invariance” (Guba, 1981, p. 81). The discussion in this chapter on tactics used in my study to enhance veracity and reliability is one way in itself to show a consciousness about the potential researcher effects on the current study. In the earlier discussion on data collection methods the ambition is to be up-front about potential researcher effects and to emphasize both the positive and the negative sides of each method. Naturally, I made attempts throughout the 13-month period to be as unobtrusive as possible in every interaction with informants. The main data collection method of observation that I used in the study has been claimed to be unobtrusive, as it allows the researcher to collect data from a distance and to keep interaction to a minimum (Aull-Davies, 2005). This seemed especially true in the case of the telephone observations, where informants occasionally forgot or were not aware of my presence. In addition, as others have noted, the reactivity of the insiders appeared to decline very rapidly over the period of observations (Stewart, 1998). Moreover, as Miles and Huberman (1994) suggest, it was clear that my presence in the lives of the studied informants was not that important, and therefore it is advised not to “overrate” the researcher impact on the insiders and, subsequently, the research results. Hence, it is important that the researcher effect is not given too much weight as the critical question is “whether or not the research process or the characteristics of the researcher have affected the behaviour that was observed … in the respects that are relevant to the claims made (and to a significant degree) [emphasis added]” (Hammersley, 1990, in Stewart, 1998, p. 31).

Specification of the Research Equally as important as reflexivity for the generation of dependable results is to specify the research circumstances, so that readers can make their own informed judgments about the interpretation of findings that are presented. Thus, the researcher needs to specify the ethnographer’s path, which includes a specification of the network of informants that the ethnographer

Ethnographic Research in Service Marketing

135

has engaged (Stewart, 1998). In an earlier section, I presented a description of the informants and how they were selected. In appendices A and B, I specify the extent to which I observed and interviewed informants. This specification is important as it shows the different informants’ or groups of informants’ contribution to the study’s analysis and findings. Additionally, in order to judge the dependability, it should also be possible for the reader to assess the extent and type of partisanship on the part of the author and the success in attaining deep and privileged access within at least some social units (Stewart, 1998). The type of partisanship was also discussed earlier together with the field relationships that I established. In regard to the gained access, Stewart (1998) suggests that the researcher should have a rather good feel for his/her overall success in this respect. I believe that I gained access that can be labeled “deep and privileged.” I had full access to all meetings that concerned the development process. Thus, I was not only privileged to attend all core development meetings, but also the project board meetings that concerned aspects such as the budget for the development and its time schedule. All of the informants had an open and positive attitude toward both me and the study and they never hesitated to help out in any way they could. For example, without asking I received several documents by e-mail from informants who assumed that the document could be of interest to me. As mentioned earlier, I was not only “the fly” or “the researcher,” but several key informants also assigned me the role of confidant. Thus, it appeared as if the insiders trusted me, which is important in order to gain “deep and privileged access.”

Generality/Perspicacity A third important research canon is generality. Ethnographic research has often been criticized for its lack of generality (Aull-Davies, 2005). Whereas research using large samples is perceived as being scientific, proven, and true, the results from small samples, such as those in ethnography, enjoy the dubious pleasure of being labeled tentative, illustrative, and anecdotal (Biemans, 2003). In support of the ethnographic approach Mintzberg (1979) states: Too many of the results have been significant only in the statistical sense of the word … What, for example, is wrong with sample of one? Why should researchers have to apologize for them? … Measuring in real organizational terms means first of all getting into the field, into real organization. Questionnaires often won’t do. (pp. 583, 586)

136

CATHARINA VON KOSKULL

Woodside (2010, p. 72) argues that “achieving accuracy is paramount. Generality and complexity are add-on objectives.” Indeed, to reach generality at the cost of accuracy and complexity will only lead to research of little relevance and less impact (Woodside, 2010). If generality is understood in the statistical notion of samples and populations, then the quest for generality in ethnography will be as pointless as the quest for conventional reliability (Stewart, 1998). However, when interpreted as perspicacity or theoretical inference, generality may be applied to and evaluated in ethnographic research as well (Aull-Davies, 2005; Stewart, 1998). Ethnographers not only could, but should aspire to generate insights that can be applied elsewhere. Perspicacity refers to the extent to which the ethnographer can develop a concept or theory about processes, structures, or relationships and can specify them adequately so as to be applied beyond the site of the research. Hence, perspicacity refers to the transferability of the findings to another time and place than the studied field (Stewart, 1998). Theoretical inference refers to findings or conclusions that are seen to be general in the context of a specific theoretical debate (Aull-Davies, 2005). Relevant questions that concern generality include the following issues: Do the findings include enough “thick description” for readers to assess the potential transferability, appropriateness of their own settings? Does a range of readers report the findings to be consistent with their own experience? (Miles & Huberman, 1994, p. 279).

Thick Enough Description? Thick description refers to the researcher’s attention to detail and has been described as “densely textured facts” (Geertz, 1973, in Folger & Turillo, 1999, p. 743). A thick, richly detailed ethnography allows the reader to step into the described scene, into the circumstances, and assess the transferability to his/her own experiences. To my written report I appended approximately 45 pages of verbal accounts on two types of use and four types of nonuse of customer information in the studied development process. I preserved these detailed accounts un-obscured, together with the detailed description of the empirical investigation, and the description of the analysis process, explicate how the research landed in the findings. I believe that, taken together, this information represents a thick enough description for the reader to assess the transferability to his/her own experiences. Findings can also be general and transferable within the same research site. For example, one observation revealed that the finding of the potential

Ethnographic Research in Service Marketing

137

use of customer information is transferable within the bank. At that particular observation, one developer stated to another that in a previous development project they had similar intentions to acquire and use customer information, but due to skepticism that concerned the usability of the potential information, the intentions were never realized. Thus, that observed statement lends support to the finding’s transferability to other development projects at the bank.

Consistent with Others’ Experiences? When I have discussed the research results with company managers not related to the case company and with fellow researchers, they have revealed that my findings on customer information use are consistent with their experiences. For example, in discussions with product and service managers from various industries (e.g., industrial paper industry, advertising industry), the finding that customer information is acquired, but not used in development, is consistent with their experiences. Another behavior that is familiar to these managers is the finding that the developers in the project themselves discussed, speculated, negotiated, and created a common sense about the customer, and used this as a basis for their decisions in the development, rather than acquiring the information externally, in a conventional way, as dictated in marketing literature. In addition, another fellow researcher found in her study that customer information appears to be implicitly known, and thus, it is not acquired from any particular source. The context of her empirical investigation was the Finnish restaurant industry, where she focused on customers’ and employees’ quality perceptions. Her finding that restaurant employees know that customers do not like to wait for an available table, and that this happens more often on weekends due to peak in demand, is one example that lends support to the transferability of my finding of implicit customer information to the restaurant industry.

LESSONS ABOUT FIELDWORK To be in the field and conduct participant observation for more than one year can, naturally, be rather exhausting. However, while I was there “immersed in the context” I never felt it so. In my case I thought it was

138

CATHARINA VON KOSKULL

very interesting to learn about development work, to get into an organization, into a development project team, and to see and hear for myself firsthand what the developers were actually doing. This, I believe, is still one of the most fascinating ways of collecting data or in qualitative terms to gather empirical material. Following are a few brief personal accounts of some of my fieldwork experiences. In the beginning, the fieldwork was very challenging; I had read somewhere that the only question a real ethnographer should ask him or herself in the field is “what is really going on here?” Thus, initially, I experienced some information overload, as I wanted to absorb everything. I wanted to learn if and how the customer was there in the development discussions and decisions, but I felt very uncertain whether I was capturing it all and how I was suppose to go about it. However, after some time I grew confident as I developed my own system of recording the field interactions in a logbook. Luckily, I was also allowed to use a tape recorder. When I started trying to make sense of it all, the logbook was really invaluable. In the logbook I had marked those meetings where the customer had been discussed, and this saved me a lot of effort as I ended up having hundreds of hours of recorded speech-in-action. From my fieldwork I learnt that ethnography truly is learning by doing. In the fieldwork I did, I laid out fishing nets over and over, and I did get a few goldfish here are there, but I also got everything else! However, I do feel that it was worth it. I learnt so much more than I was looking for. The empirical material gathered by observation is rather uncolored; it has not been generated or instructed by specific questions. Thus, the data can be used for other purposes; it can be studied through other theoretical lenses or angles. At the same time, I must admit, it is tiresome to go back to the same case several times, so although I feel I learnt a great deal about development work and the exotics of a bank, I am moving on and looking forward to my new field study in another setting: elderly care.

REFERENCES Alvesson, M., & Deetz, S. (2000). Doing critical management research. London: Sage. Antonacopoulou, E., & Tsoukas, H. (2002). Time and reflexivity in organization studies: An introduction. Organization Studies, 23(6), 857 862. Arnould, E. J., Price, L. L., & Tierney, P. (1998). Communicative staging of the wilderness servicescape. Service Industries Journal, 3, 90 115.

Ethnographic Research in Service Marketing

139

Arnould, E. J., & Wallendorf, M. (1994). Market-oriented ethnography: Interpretation building and marketing strategy formulation. Journal of Marketing Research, 31(November), 484 504. Atkinson, P., & Coffey, A. (1997). Analysing documentary realities. In D. Silverman (Ed.), Qualitative research theory, method and practice (pp. 45 62). London: Sage. Aull-Davies, C. (2005). Reflexive ethnography: A guide to researching selves and others. London: Routledge. Ball, L. J., & Ormerod, T. C. (2000). Putting ethnography to work: The case for a cognitive ethnography of design. International Journal of Human-Computer Studies, 53, 147 168. Barley, S. R. (1990). Images of imaging: Notes on doing longitudinal field work. Organization Science, 1(3), 220 247. Biemans, W. G. (2003). A picture paints a thousand numbers: A critical look at btb product development research. Journal of Business & Industrial Marketing, 18(6 7), 514 528. Bitner, M. J. (2001). Guru’s view: “Service and technology: Opportunities and paradoxes”. Managing Service Quality, 11(6), 375 379. Bitner, M. J., Faranda, W. T., Hubbert, A. R., & Zeithaml, V. A. (1997). Customer contributions and roles in service delivery. International Journal of Service Industry Management, 8(3), 193 205. Bogdan, R., & Taylor, S. (1975). Introduction to qualitative research methods. Toronto: Wiley. Boote, J., & Matthews, A. (1999). Saying is one thing; doing is another. Qualitative Market Research: An International Journal, 2(1), 15 21. Brown, S. L., & Eisenhardt, K. M. (1995). Product development: Past research, present findings, and future directions. Academy of Management Review, 20(2), 343 378. Cyert, R. M., Simon, H. A., & Trow, D. B. (1956). Observation of a business decision. The Journal of Business, 29(4), 237 248. de Jong, J. P. J., & Vermeulen, P. A. M. (2003). Organizing successful new service development: A literature review. Management Decision, 41(9), 844 858. Deshpande, R. (1983). Paradigms lost: On theory and method in research in marketing. Journal of Marketing, 47(Fall), 101 110. Einarsson, C., & Hammar-Chiriac, E. (2002). Gruppobservationer: Teori och Praktik. Lund: Studentlitteratur. Elliott, R., & Jankel-Elliott, N. (2003). Using ethnography in strategic consumer research. Qualitative Market Research, 6(4), 215 223. Feldman, M. S., & March, J. G. (1981). Information in organizations as signal and symbol. Administrative Science Quarterly, 26, 171 186. Folger, R., & Turillo, C. J. (1999). Theorizing as the thickness of thin abstraction. Academy of Management Review, 24(4), 742 758. Forsythe, D. E. (1999). It’s just a matter of common sense: Ethnography as invisible work. Computer Supported Cooperative Work, 8(1 2), 127 145. Guba, E. G. (1981). Criteria for assessing the trustworthiness of naturalistic inquiries. Educational Technology Research and Development Journal, 29(2), 75 91. Guba, E. G. (1990). The alternative paradigm dialog. In E. G. Guba (Ed.), The paradigm dialog. Newbury Park, CA: Sage. Hamel, J., Dufour, S., & Fortin, D. (1993). Case study methods (Vol. 32). Qualitative Research Methods Series. Newbury Park, CA: Sage. Hamel, G., & Prahalad, C. K. (1990). The core competence of the corporation. Harvard Business Review, 68(3), 79 91.

140

CATHARINA VON KOSKULL

Hamel, G., & Prahalad, C. K. (1994). Competing for the future. Boston, MA: Harvard Business School Press. Hammersley, M. (1998). Reading ethnographic research: A critical guide (2nd ed.). London: Longman. Hammersley, M., & Atkinson, P. (1983). Ethnography: Principles in practice. London: Routledge. Harris, K., & Baron, S. (2004). Consumer-to-consumer conversations in service settings. Journal of Service Research, 6(2), 239 264. Henard, D. H., & Szymanski, D. M. (2001). Why some new products are more successful than others. Journal of Marketing Research, 38(August), 362 375. Howard, J. A., Hulbert, J., & Farley, J. U. (1975). Organizational analysis and informationsystems design: A decision-process perspective. Journal of Business Research, 3(2), 133 148. Hulbert, J., Farley, J. U., & Howard, J. A. (1972). Information processing and decision making in marketing organizations. Journal of Marketing Research, 9(February), 75 77. Johansson, M. (2008). Engaging resources for cultural events. Dissertation, Stockholm School of Economics, Stockholm. Jorgensen, D. L. (1989). Participant observation: A methodology for human studies (Vol. 15). Applied Social Research Methods Series. Newbury Park, CA: Sage. Kirk, J., & Miller, M. L. (1986). Reliability and validity in qualitative research (Vol. 1). Qualitative Research Methods Series. Beverly Hills, CA: Sage. Kumar, N., Stern, L. W., & Anderson, J. (1993). Conducting interorganizational research using key informants. Academy of Management Journal, 36(6), 1633 1651. Langley, A., Mintzberg, H., Pitcher, P., Posada, E., & Saint-Macary, J. (1995). Opening up decision making: The view from the black stool. Organization Science, 6(3), 260 279. Lincoln, Y. S., & Guba, E. G. (1985). Naturalistic inquiry. Beverly Hills, CA: Sage. Lofland, J. (1995). Analytic ethnography: Features, fallings, and futures. Journal of Contemporary Ethnography, 24(1), 30 67. Mariampolski, H. (2006). Ethnography for marketers. Thousand Oaks, CA: Sage. May, T. (1997). Social research: Issues, methods and process (2nd ed.). Buckingham: Open University Press. Meuter, M. L., Ostrom, A. L., Roundtree, R. I., & Bitner, M. J. (2000). Self-service technologies: Understanding customer satisfaction with technology-based service encounters. Journal of Marketing, 64(July), 50 64. Miles, M. B., & Huberman, A. M. (1994). Qualitative data analysis (2nd ed.). London: Sage. Mintzberg, H. (1972). The myths of MIS. California Management Review, 15(1), 92 97. Mintzberg, H. (1979). An emerging strategy of “direct” research. Administrative Science Quarterly, 24, 582 589. Mintzberg, H., Raisinghani, D., & The´oret, A. (1976). The structure of “unstructured” decision processes. Administrative Science Quarterly, 21(June), 246 274. Montoya-Weiss, M. M., & Calantone, R. (1994). Determinants of new product performance: A review and meta-analysis. Journal of Product Innovation Management, 11(11), 397 417. Patton, M. Q. (2002). Qualitative research and evaluation methods (3rd ed.). Thousand Oaks, CA: Sage. Pettigrew, A. M. (1975). The industrial purchasing decision as a political process. European Journal of Marketing, 9(1), 4 19.

Ethnographic Research in Service Marketing

141

Pettigrew, A. W. (1990). Longitudinal field research on change: Theory and practice. Organization Science, 1(3), 267 292. Schwartzman, H. B. (1993). Ethnography in organizations (Vol. 27). Qualitative Research Methods Series. Newbury Park, CA: Sage. Silverman, D. (1998). Qualitative research: Meanings or practices? Information Systems Journal, 8, 3 20. Spradley, J. P. (1980). Participant observation. New York, NY: Holt, Rinehart and Winston. Stevens, E., & Dimitriadis, S. (2005). Managing the new service development process: Towards a systemic model. European Journal of Marketing, 39(1 2), 175 198. Stewart, A. (1998). The ethnographer’s method (Vol. 46). Qualitative Research Methods Series. Thousand Oaks, CA: Sage. Swan, J. E., & Bowers, M. R. (1998). Service quality and satisfaction: The progress of people doing things together. Journal of Services Marketing, 12(1), 59 72. Thomke, S., & von Hippel, E. (2002). Customers as innovators: A new way to create value. Harvard Business Review, April, 74 81. Tsoukas, H. (1989). The validity of idiographic research explanations. Academy of Management Review, 14(4), 551 561. Ulwick, A. W. (2002). Turn customer input into innovation. Harvard Business Review, 80(1), 91 97. van de Ven, A. H., & Poole, M. S. (1990). Methods for studying innovation development in the Minnesota innovation research program. Organization Science, 1(3), 313 335. van Maanen, J. (1988). Tales of the field: On writing ethnography. Chicago, IL: The University of Chicago Press. Wagar, K. (2007). The nature of learning about customers in a customer service setting. Dissertation No. 172, Hanken School of Economics, Helsinki. Wallendorf, M., & Arnould, E. J. (1991). We gather together: Consumption rituals of thanksgiving day. Journal of Consumer Research, 18(1), 13 32. Wolcott, H. F. (1994). Transforming qualitative data description, analysis and interpretation. Thousand Oaks, CA: Sage. Woodside, A. G. (2010). Bridging the chasm between survey and case study research: Research methods for achieving generalization, accuracy, and complexity. Industrial Marketing Management, 39, 64 75. Woodside, A. G., Pattinson, H. M., & Miller, K. E. (2005). Advancing hermeneutic research for interpreting interfirm new product development. Journal of Business & Industrial Marketing, 20(7), 364 379. Woodside, A. G., & Samuel, D. M. (1981). Observations of centralized corporate procurement. Industrial Marketing Management, 10, 191 205. Workman, J. (1992). Use of electronic media in a participant observation study. Qualitative Sociology, 15(4), 419 425. Workman, J. (1993). Marketing’s limited role in new product development in one computer systems firm. Journal of Marketing Research, 30(4), 405 421.

142

CATHARINA VON KOSKULL

APPENDIX A: OVERVIEW OF CONDUCTED SCHEDULED INTERVIEWS Month/Year

Date

Informants

February 2005

16

March 2005 April 2005 May 2005 June 2005 July 2005 August 2005

1, 16 15, 22 9, 16, 17, 27 8, 23, 28 4, 7, 14 4 11 29 9 19 3, 20, 25, 31 3 3 4 9 18 24 24 24 8 9 19 29 9 2, 16 28 2 10 15 21

Mr. Project Leader Mr. Dir Bus. Devel. Mr. Project Leader Ditto Ditto Ditto Ditto Managers at branch offices & Call Center Mr. Project Leader Mr. Marketing Mgr. Mr. Project Leader Ditto Ms. Marketing Mgr. Mr. Technician Mr. Project Leader Ms. Marketing Mgr. Mr. Project Leader Mr. Project Leader Ms. Marketing Mgr. Mr. Technician Ms. Marketing Mgr. Mr. Technician Mr. Project Leader Ditto Ditto Ditto Mr. Marketing Mgr. Mr. Project Leader Mrs. Call Center Mrs. Call Center Mr. Project Leader

September 2005 October 2005 November 2005

December 2005

January 2006 February 2006 March 2006

143

Ethnographic Research in Service Marketing

APPENDIX B: OVERVIEW OF CONDUCTED OBSERVATIONS Month/ Year

Date

Duration

Type

Informants

Number of Participants

March 2005

23

3h

FTFO

2CDT + 2CT

4

April 2005

12

45 min

FTFO/TO

3CDT + 3TN + 1PB

7

14

1h

TO

4CDT + 2TN

6

15

30 min

TO

4CDT + 2TN

6

20

1h

TO

2CDT + 1TN

3

29

1h

FTFO/TO

2CDT + 1TN + 1PB

4

May 2005

13

1h

FTFO/TO

2CDT + 1TN + 1PB

4

June 2005

21

5 h 15 min

FTFO

5CDT + 3CT

8

30

1h

TO

1CDT + 2PB

3

7

2h

FTFO

1CDT + 1CT

2

30

1h

TO

CDT

4

31

1 h 30 min

TO

CDT

4

31

1h

TO

1CDT + 2PB

3

7

45 min

TO

CDT

4

7

30 min

TO

1CDT + 2PB

3

13

1h

FTFO/TO

1CDT + 1PB

2

14

1h

FTFO/TO

CDT

5

21

1h

TO

CDT

5

22

15 min

FTFO

1CDT + 1CU

2

22

30 min

FTFO

1CDT + 1CU

2

22

1 h 30 min

FTFO

CDT

4

28

1h

TO

CDT

5

28

1h

TO

CDT

4

30

1h

FTFO/TO

CDT

3

July 2005 August 2005

September 2005

144

CATHARINA VON KOSKULL

Appendix B. Month/ Year

Date

October 2005

4

1h

TO

CDT

5

5

1h

FTFO

CDT

5

5

15 min

FTFO

CDT

3

5

1h

FTFO

CDT

2

5

2 h 30 min

FTFO

CDT

4

12

1h

TO

CDT

5

13

30 min

TO

1CDT + 4RG

5

19

1h

TO

CDT

4

2

1h

TO

CDT

5

9

1h

TO

CDT

5

10

1h

FTFO/TO

1CDT + 2PB

3

16

1h

TO

CDT

5

24

1h

FTFO/TO

CDT

5

30

1h

TO

CDT

5

30

1 h 15 min

TO

CDT

4

4h

TO

CDT

4

14

3 h 30 min

TO

CDT

4

14

1h

TO

1CDT + 2PB

3

16

1h

TO

1CDT + 4RG

5

29

1 h 30 min

FTFO/TO

CDT

4

4

1 h 30 min

TO

CDT

4

11

5 h 30 min

FTFO

CDT

4

12

1h

FTFO/TO

1CDT + 2PB

3

12

1h

FTFO/TO

1CDT + 1PB + 3TN

5

18

1h

TO

CDT

3

19

1h

TO

1CDT + 2PB

3

25

1 h 30 min

TO

CDT

3

26

1h

TO

CDT

3

November 2005

December 2005

January 2006

8

Duration

(Continued )

Type

Informants

Number of Participants

145

Ethnographic Research in Service Marketing

Appendix B. Month/ Year February 2006

Date

Duration

(Continued )

Type

Informants

Number of Participants

1

30 min

TO

1CDT + 4RG

5

1

30 min

TO

CDT

2

1h

FTFO/TO

1CDT + 1CT

2

21

Type of Observation Face-to-face Telephone Face-to-face/Telephone

FTFO TO FTFO/TO

Total amount of observations: 54 meetings + 2 user tests Observed Informants Core development team Project board Reference group Consultant Technician Customer

CDT PB RG CT TN CU

10 + 2 32 12

A PRIMER TO THE GENERAL THEORY OF BEHAVIORAL STRATEGIES IN BUSINESS-TOBUSINESS MARKETING Arch G. Woodside ABSTRACT The general theory of behavioral strategies includes a set of propositions supporting alternative configurations of objectives, contextual features, and beliefs/assessments by executives. The theory includes the outcomes of selections of specific decision alternatives. Building behavioral-strategy models in contexts enriches one or more goals of science and practice: description, understanding, prediction, and influence/control. This chapter is a primer to the general theory. A brief review of relevant empirical studies supports the general theory. The empirical studies include the use of alternative data collection and analytically tools including true field experiments, think aloud methods, long interviews, statistical hypothesis testing, ethnographic decision tree modeling, and building and testing algorithms (e.g., qualitative comparative analysis, QCA). The general theory is the blending of cognitive science, economics, marketing, psychology, and implemented practices in explicit contexts. Consequently,

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 147 166 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021012

147

148

ARCH G. WOODSIDE

behavioral-strategy theory is distinct from context-free microeconomics, market-driven, and competitor-only decision-making. Capturing and reporting contextually driven alternative routines to strategy setting by a compelling set of propositions represents what is particularly new and valuable about the general theory. The general theory serves as a useful foundation for advances theory and improving the practice of implemented strategies. Keywords: Behavioral; business-to-business; configuration; empiricism; pricing; theory

INTRODUCTION Strategy theory has converged on a view that the crucial problem in strategic management is firm heterogeneity why firms adopt different strategies and structures, why heterogeneity persists, and why competitors perform differently. (Powell, Lovallo, & Fox, 2011, p. 1370)

Powell et al. (2011, p. 1371) go on to define “behavioral strategy” as follows: “Behavioral strategy merges cognitive and social psychology with strategic management theory and practice. Behavioral strategy aims to bring realistic assumptions about human cognition, emotions, and social behavior to the strategic management of organizations and, thereby, to enrich strategy theory, empirical research, and real-world practice.” “Merges” is the operative word for describing, understanding, predicting, and influencing behavioral strategy and its subfields including behavioral pricing. The focus on capturing heterogeneity, realistic assumptions, and the centrality of the merging proposition builds from the behavioral theory of the firm’s viewing of organizations as comprising differentiated subunits with conflicting goals, resources, and time horizons (Cyert & March, 1963). Marketing, pricing, and organizational buying strategies are largely political processes involving coalition building, bargaining, and conflict resolution among representatives of differentiated subunits with conflicting goals, resources, and time horizons (Cyert & March, 1963; Pettigrew, 1975). However, while including strategy as a political process, behavioral pricing theory goes beyond this perspective to include cognitive science theory and findings especially on how executives process information into knowledge and how they create and apply highly useful heuristics (i.e., rules on how-to-decide usually leading to desirable outcomes) in selecting choices

A Primer to the General Theory of Behavioral Strategies

149

outcomes (e.g., specific price points and increases/decreases in prices). Examples of such cognitive science advances in behavioral pricing in business-to-business contexts include the studies by Morgenroth (1964), Howard and Morgenroth (1968), Woodside and Wilson (2000), and Woodside (2003). These B2B studies and additional studies in business-toconsumer contexts (e.g., Woodside, Schpektor, & Xia, 2013) support the conclusion that the general theory of pricing is an insightful and useful blending of cognitive science, economics, marketing, psychology, and implemented practices in explicit contexts. Following this introduction, the second section presents the general theory of behavior strategy with respect to pricing. The discussion presents relevant major tenets of theory; the discussion examines applications of these tenets in the industrial marketing and B2B service contexts. The third section describes alternative-to-complementary research methods useful for examining the tenets of the general theory and advancing new tenets. The fourth section concludes with implications for the strategist’s workbench in thinking about creating pricing heuristics that are effective in specific contexts.

THE GENERAL THEORY OF BEHAVIOR PRICING Three major objectives of the general theory include capturing heterogeneity of pricing decisions by marketers and responses to pricing decisions by customers; building isomorphic models of information-in-use within reallife heuristics in the context of the marketing and customer organizations participating in price-setting and price-responses (customer price-responses include evaluating, negotiating, and accepting/rejecting proposal and specific price points of a vendor); and achieving high predictive validity (accuracy) and highly accurate predictions via heuristics-in-use by the vendor and the customer in deciding issues relating to setting and accepting/ rejecting products/services at different price points. To capture heterogeneity, the general theory of behavioral pricing does not rely alone on the use of written surveys with fixed-point scales and symmetric statistical tests of observable choices by vendors and customers but includes “direct research” (Mintzberg, 1979) ethnographic tools to record tacit knowledge and cognitive processes preceding the observable choices. These ethnographic tools include participant observation, applications of the think aloud method, historical analysis of documents, and the long

150

ARCH G. WOODSIDE

interview method (Woodside, 2010) and the use of asymmetric tools such as reporting on the use/value of fast and frugal heuristics (Gigerenzer, Todd, & the ABC Research Group, 1999) and QCA (Ragin, 2008). Direct research is going physically into the context of study to observe, interview, and examine rather than rely principally on data from an internet, mail, or telephone survey that typically involves one executive responding per firm and less than 20 in 100 firms providing useable responses to fixed-point scales items. Direct research seeks confirmatory evidence from multiple sources having direct knowledge of processes and outcomes of thinking and actions of participants enacting behaviors of interest related to a given context or issue. While the core tenets of the general theory apply across B2B context and firms in different industries, to increase clarity and understanding the descriptions here of the tenets make use of findings from a specific industrial marketing and buying pricing study (Woodside & Wilson, 2000). Taking a small step toward generalization, the study here describes how the tenets apply to a second study on pricing petroleum at the wholesale level. The first study (Woodside & Wilson, 2000) included multiple rounds of meetings of executives by the researchers at the marketing headquarters of a solvents manufacturer in Houston and long interviews, face-to-face, with four of the manufacturer’s customers; the customers interviewed were located in Cleveland, north-central Pennsylvania, and western South Carolina. Each customer interview was 90 minutes; customers were selected that filled certain profiles of interest in the study configurations of customers with large versus small purchasing requirements for solvents and both aggressive versus mannered customers. Fig. 1 is an “ethnographic decision tree model (EDTM)” (Gladwin, 1989) of the marketer’s framing and point selection processes for four customers in the study and more than 250 additional customers. EDTMs are suitable for linear programming and for use in testing the predictive accuracy of the algorithms appearing in subroutines in the model. EDTMs are isomorphic representations of reality in the thinking and doing processes of pricing and responding to specific price points. While being a complex, heterogeneous model, the thoughts and actions of the product managers and sales representatives in this firm are centered on asking a brief series of questions: how much business does the customer represent (box 2)? How does the customer frame key aspects of his/her firm’s relationship with us and our competitors (boxes 3 7)? Which objectives should dominate our response to the customer’s response to our proposal (boxes 15 and 16)? For example, if the customer firm is a key account (i.e., large business for

151

A Primer to the General Theory of Behavioral Strategies

1. Current customer requests proposal form BIGCHEM Chemical

2. Is customer large key “consumer” customer for BIGCHEM

Yes

3. Is customer focused on 4. Will customer Yes achieving cost reduction single-source (lowering price for new requirements if price contract period) reduction offered?

No

No

5. Is BIGCHEM sole source supplier? 16. BIGCHEM pricing objectives; • Retain customer at a profitable price point • Capture 100% of customer’s business • Design proposal customer prefers with higher, more profitable price

No 7. Will customer use 50–50 split of business?

6. Is customer focused on cost avoidance? No

8. Is customer receiving a competitive bid one cent below our current price

Yes

14. Attempt to set price equal to known competitor’s price

15. Observe customer response to price point set in bid proposal; adjust price in second round if necessary

No

11. Increase price 10% above current price point

Yes

No

9. Will customer sole-source if price increase is less than inflation? No

10. Set price one cent below competitor that BIGCHEM refuses to lose customer’s business

13. Use lowest price strategy (set price at–1.0 in standard units)

No

Yes

Yes

Yes

Yes

12. Set price increase less than inflation rate

Fig. 1. Summary Pricing and Sales Negotiations Decision Model for BIGCHEM Based on Customer Decision Profiles. Source: Adapted from Figure 6 in Woodside and Wilson (2000, p. 363).

the marketer) and the customer insists on achieving a price reduction, the marketer is likely to respond with a “creative proposal” that includes: first, a low price; second, funding for storage equipment or related facilities at the customer’s sites; and third, “price protection” against price increases during some of the contract period. Whether or not such an outcome occurs depends on the marketer’s belief that “preferred supplier participation” status was given to the marketer’s firm by the customer a euphemism for being awarded the largest share or 100 percent of the customer requirements for solvents. The following discussion covers the core tenets of the general theory of behavior pricing. While the discussion of each tenant refers to findings in the study by Woodside and Wilson (2000), the proposal is that these tenets are applicable and prevalent for nearly all pricing contexts in business and industrial marketing/purchasing contexts. “High score” in the following discussion refers to a calibrated score in fuzzy or crisp set QCA. All QCA calibrated scores range from 0.00 to 1.00. Such calibrated scores indicate the degree of membership in a condition, for example, the score may indicate membership in “high price.” From a practical as well as theoretical

152

ARCH G. WOODSIDE

perspective, changes in calibration reference points rarely change the substantive impact of findings in studies using QCA (for additional details, see Ragin, 2008). 1. A high score in one antecedent condition is rarely sufficient in associating with a high or low price point. A few specific combinations of two-plus antecedent conditions are sufficient in identifying with an outcome condition of particular interest (e.g., a high or low price point). Consciously and/or unconsciously decision-makers (DMs) process two-plus antecedent conditions to reach a conclusion, decision, and action. For example, in Fig. 1 the shortest path to an outcome involves asking and answering three questions. In Fig. 1 “cost reduction” is a B2B purchasing term that refers to seeking price decreases in purchasing requirements from a supplier; “cost avoidance” refers to seeking price increases less than the industry price inflation rate. Cost reduction is a more aggressive stance some buyers assume than cost avoidance. A “market price” stance is less aggressive than cost avoidance; willing to accept “list price” is the least aggressive purchasing stance. Not all key account customers adopt a highly aggressive stance with respect to price. Consequently, a key account may or may not receive a low price quote or the lowest price quote. A specific price point in a response to an RFQ depends on the combination of two-plus antecedent conditions. From the perspectives of data analysis and sensemaking, a discussion of net effects and relative sizes of net effects of independent variables provide limited usefulness in comparison to adopting a configural (i.e., recipe or combination) perspective. 2. Decision-makers rarely (read never) use all available information in real-life cognitive processes. From a property-space perspective, every theoretically possible combination of antecedent conditions does not occur in behavioral pricing models. For example, the marketer considers the aggressiveness of customers’ responses to price points only for key account customers. The marketer rarely considers how aggressive the customer stands for non-key account customers (Fig. 1 does not include such a path). Customer price-lowering aggressiveness is a necessary but not sufficient condition for the customer to achieve the lowest priced point that the marketer is willing to offer (see Fig. 2). Such a necessary but not sufficient condition for lowering price provides valuable information for customers being a large requirements (volume) customer who is willing to single-source

153

A Primer to the General Theory of Behavioral Strategies 1.0 Final (low) price point (negative calibrated scale: ∼P = 1–P)

All key accounts

Some key but mostly mid-size accounts

0.5

0.0 0.0

0.5

1.0 Calibrated scale

Customer price-lowering aggressiveness

Fig. 2. XY Plot of Pricing Antecedent Condition for a Necessary but Not Sufficient Condition. Note: Each dot is a case, that is, a customer firm, plotted on the customer’s price-lowering aggressiveness and the final price quoted to the customer by the marketer’s firm. Data (n = 80) and plot are from additional analysis of marketer’s responses to customers’ requests for proposals (RFQs) and follow-up documents of customers’ responses to marketer’s proposals from the study by Woodside and Wilson (2000).

a purchase requirement with a supplier is not sufficient, in addition such a customer needs to aggressively pursue a lower price. For nearly all individual cases with a configuration of high membership scores for all three antecedent conditions was sufficient for a very low price in the Woodside and Wilson (2000) study except for one customer firm. Using Boolean algebra, the following configuration identifies a “causal recipe” that is sufficient for the marketer to include a very low price point in the response to the RFQ: K • S • A ≥ 0.80, where K = key (large volume) customer account; S = willing to single-source; A = aggressively pursuing a price-lowering strategy. The mid-level dot (“•”) represents the logical “and” condition in Boolean algebra. A sideway tilde (“∼”) represents negation or one minus the membership score, for example, ∼S = 1 S, and represents a membership score in not being willing to single-source. The score equal to or greater than 0.80 indicates for this configuration that such customers have a high membership scores for all three of these antecedent conditions. For a complex antecedent statement (i.e., the combination of two-plus simple antecedent conditions), the total score for the statement is equal to

154

ARCH G. WOODSIDE

the lowest score among the scores in the configural statement. Thus, a customer having the following scores, K = 1.00; S = 1.00; and A = 0.80 would have a membership score equal to 0.80 for K•S•A. See Fig. 3 for an XY plot that shows a pattern indicating high consistency scores high on X associate with scores high on Y with the exception of one case customer number 11. Woodside and Baxter (2013) describe contexts where a very limited number of customers do not fit the general pattern of findings in a study and how to create and test alternative models to explain such instances as case 11. The note at the bottom of Fig. 3 describes additional information on case 11 and how to refine the model to account for similar cases. 3. Decision-makers do not tradeoff high accuracy for low effort but create and use heuristics that are fast, frugal, and accurate/useful in achieving their objectives. 1.0

Final price point (negative calibrated scale: ∼P = 1–P) 0.5

Case 11, for K•S•A

Case 11, for K•S•A∼H

0.0 0.0

0.5

0.8

1.0 K•S•A, calibrated scale

Fig. 3. Complex Antecedent Condition that is Sufficient but Not Necessary: K•S•A where K = Key Account; S = Willingness to Single-Source; A = Customer Aggressiveness in Seeking to Lower Price. Note: Customers with high membership scores (≥0.8) on K•S•A receive very low final price quotes with the exception of case 11. The explanation for case 11 relates to the title of Van Maanen (1978), “The Asshole.” Case 11 is super-aggressive in attempting to lower price. Assuming that case 11 to be the only asshole (H), the membership scores on not an asshole (∼H) for case 11 equals 0.0. Creating a configuration that includes K•S•A•∼H serves to shift the position of case 11 on the X axis to the far left. Thus, a very complex antecedent condition is necessary to include case 11 to result in very high consistency.

A Primer to the General Theory of Behavioral Strategies

155

The suggestion implied by Powell et al. (2011) that individuals fail to do as well as they can do in deciding and the proposition that DMs tradeoff high accuracy to achieve low effort (Payne, Bettman, & Johnson, 1982) are inaccurate. Professional B2B marketers and buyers likely are able to create and use relatively simple heuristics to achieve high accuracy and high speed that enables these DMs to achieve their objectives more than is possible by using all the available information and statistical multivariate procedures. While individuals are limited in their conscious cognitive capacity, the available evidence does not support a conclusion of lower competence by decision makers by not using all information available with symmetric tests as the following perspective implies: Research in behavioral decision theory (BDT) shows that individuals lack the cognitive capacity to make fully informed and unbiased decisions in complex environments (Kahneman, Slovic, & Tversky, 1982; Payne, Bettman, & Johnson, 1993). To cope with complex judgments and decisions, people use simplifying heuristics that are prone to systematic biases. Decision makers do not maximize the subjective expected utility of total wealth, but focus on deviations from cognitive reference points. BDT has found many applications in the social sciences, including strategic management (Bazerman & Moore, 2008). (Powell et al., 2011)

Gigerenzer and Brighton (2009) provide an extensive review of compelling evidence that simple heuristics (i.e., simple algorithms) using limited amounts of information outperform the symmetric-based statistical models using all information available. They conclude, “Heuristics are efficient cognitive processes that ignore information. In contrast to the widely held view that less processing reduces accuracy, the study of heuristics shows that less information, computation, and time can in fact improve accuracy” (Gigerenzer & Brighton, 2009, p. 107). They describe how, “In the 1970s, the term heuristic acquired a different connotation, undergoing a shift from being regarded as a method that makes computers smart to one that explains why people are not smart. Daniel Kahneman, Amos Tversky, and their collaborators published a series of experiments in which people’s reasoning was interpreted as exhibiting fallacies. ‘Heuristics and biases’ became one phrase. It was repeatedly emphasized that heuristics are sometimes good and sometimes bad, but virtually every experiment was designed to show that people violate a law of logic, probability, or some other standard of rationality … Another negative and substantial consequence was that computational models of heuristics, such as lexicographic rules (Fishburn, 1974) and elimination-by-aspects (Tversky, 1972), became replaced by one-word labels: availability, representativeness, and anchoring. These were seen as the mind’s substitutes for rational cognitive procedures. By the end

156

ARCH G. WOODSIDE

of the 20th century, the use of heuristics became associated with shoddy mental software, generating three widespread misconceptions: (1) heuristics are always second-best; (2) we use heuristics only because of our cognitive limitations; (3) more information, more computation, and more time would always be better” (Gigerenzer & Brighton, 2009, p. 109). Gigerenzer and Brighton (2009) show how multiple regression analysis (MRA) and additional symmetric statistical tests outperform simple algorithms for fit validity but the opposite holds for predictive validity (via cross-validation with holdout samples). In cross-validation a model is fitted to one half of the data and tested on the other half and vice versa. Test of sufficiency models in industrial pricing context support the conclusion that simple heuristics provide high validity in predicting decision choices. Given that the proof of a model’s worth lies in predictive validity, algorithm models such as the model appearing in Fig. 1 need to be tested on fresh data data not used in creating the model. In a behavioral-pricing research example, in a study creating and using simple heuristics in a B2B pricing context, Morgenroth (1964, p. 21) reports, “To determine its predictive accuracy [of the behavioral pricing model] fresh data were introduced into the [whole pricing algorithm] model. From a series of cabinets in the office of the division one file drawer in each cabinet was haphazardly chosen. The cabinets contained pricing data and decisions of the division over a six-year period. A systematic sample of every tenth filing was taken. The filings were arranged internally in chronological order, with the date that a competitor’s move was initially made (the triggering) serving as the specific criterion of order. This sample yielded 32 decisions which were compared with the decisions predicted by the model … Agreement existed in all cases tried. Hence the hypothesis that the model can predict the executive’s decision was not disconfirmed by the tests.” Unfortunately, neither Morgenroth (1964) nor Woodside and Wilson (2000) provide a side-by-side comparison of MRA and QCA tests for predictive validity in B2B contexts. Woodside and Wilson (2000) also do not report testing for predictive validity using a holdout (fresh) sample of customer cases. Thus, the evidence is not conclusion in the context of pricing in B2B contexts but the studies by Gigerenzer and colleagues (Gigerenzer & Selten, 2001; Gigerenzer et al., 1999) present consistent findings that algorithms created by biased minds will provide more accurate models in predicting outcomes in behavioral pricing than the use of MRA and models that maximize subjective expected utility; additional field studies using both symmetric (e.g., MRA) and asymmetric tests (e.g., QCA) are necessary to confirm this claim.

A Primer to the General Theory of Behavioral Strategies

157

4. Necessary but insufficient conditions (NBICs) are always present in behavioral pricing but often are unreported. Both marketers and buyers “do not think” to report on NBICs that researchers may find of great interest for advancing theory and practice. NBICs include antecedents that appear in a limited number of branches in an EDTM such as the one appearing in Fig. 1 as well as antecedents that pricing decision participants fail to mention and researchers fail to ask about. Information on both types of NBICs can be learned by asking participants in using “the think aloud method” (van Someren, Barnard, & Sandberg, 1994) in responding to different highly relevant pricing scenarioproblems. Such scenario-problems can be presented to participants in the form of paragraphs and/or choice and conjoint experiments. In one instance of doing so, a buyer announced, “I would never buy from a supplier I never heard of.” “Buyer awareness of the supplier” is a seemingly obvious NBIC that did not occur in the study before this moment. NBICs are often put forth explicitly in marketers’ and buyers’ documents and face-to-face statements as well as appearing without warning in long interviews without warning during long interviews. The second category of NBICs represents one form of “tacit knowledge” (Nonaka, 1994; Polanyi, 1958/2002). Tacit knowledge is unconscious and semi-conscious beliefs “the type of knowledge that you gain through personal experience of working in an organization, but that is not written down and is difficult to share” (FT Lexicon, 2013). 5. Participants in setting price and responding to a price point use neither equally weighted or unequally weighted conditions in compensatory rules when crafting a price point or responding to a price point marketers and buyers make use of conditional statements. Examples of the conditional statements with respect to price points that marketers use appear in Table 1 and further below in Table 2. These conditional statements refer to specific contexts and require asymmetric, rather than symmetric, test of their efficacy, that is, for high sufficiency, low outcome scores associate with both low and high outcome scores, only high scores on the path in the statement associate with a high score for the outcome condition. A simple antecedent condition may have a statistically significant positive relationship with price for all cases while at the same time have a highly negative association with price for several individual cases. Consequently, the study of how participants weight the importance of simple antecedent conditions and whether or not a series of simple

158

ARCH G. WOODSIDE

Table 1. Examples of Industrial Solvents Conditional Pricing in Alternative Contexts. Configuration (Alternative Path/Boolean Expression)

Conditional Statement

A Path: 1→2→3→4 = 13 reduces in Boolean algebra to K•R•S ≤ (Price ≤ 1.0)

Lowering-price-strategy: If a key (K) account customer who is focused on aggressively on lowering-price (A) and is willing to single-source (S), then price more than 35% below the annual average price.

B Path: 1→3→6→9 = 11 Boolean: K•∼A•∼V ≤ 11

High-price-increase strategy: If key (K) account customer who is not focused aggressively (∼A) on price reductions and not focused on cost avoidance (∼V), then increase price 10% above the current price that K is now paying. (A rare context.)

C Path: (1→2→5→8 = 10) →15 Boolean: (∼K•S•C ≤ 10) • 15)

Signaling competitor pricing for small but important customer: If customer is not a key account (∼K) but does single-source (S), but has received an RFQ response from a competitor (C), then price 1¢ below competitor’s bid; observe customer’s response.

D Path: 1→2→5→8 = 11 Boolean: ∼K•S•∼C ≤ 11

Highest-price-increase strategy: If customer is not a key account (∼) but does single-source (S) and has not received a competitor’s response (∼C) to an RFQ, then increase the price above the already high price by 10% that this customer is now paying.

E Path: (1→2→3→4→7 = 14)→15 Boolean: (K•R•∼S•L = 14) • 15

Competitor-pairing pricing: If customer is a key account (K) and is focused on cost reductions (R) but is unwilling to single-source (∼S) but will split business 50 50 (L), then set new price equal to competitor’s price and watch competitor’s response.

antecedent conditions each have a significant positive or negative influence on price is not very informative. For example, the positive impact of customer aggressiveness on lowering price changes to an apparent negative impact if the customer scores high on being an asshole. Useful accurate interpreting of what is happening depends on focusing on multiple configurations (paths) of complex antecedent conditions. Table 1 includes the main paths (i.e., configurations or recipes) that appear in Fig. 1. The findings in both illustrate the tenet that a marketer

A Primer to the General Theory of Behavioral Strategies

Table 2.

159

Example Heuristics in the Wholesale Petroleum Pricing Model.

Alternate Route No

English Equivalent

A.

1

2

1

B.

1

2 Yes

C.

1

2 Yes

Yes 5

Yes

4

Another raises his local wholesale price. DSO says not to raise price, but price analyst (PA) believes others may follow, so company meets the price.

D.

1

2 No

Yes 4 No 7 No 1

6

Another raises his price. DSO says not to raise price. PA is dubious. The company waits 24 48 hours. The other competitors follow up, so the company meets the price.

E.

1

2 No

Yes 3 6 No

F.

1

G.

H.

3 Yes

3

Watch others’ local wholesale price. Is it different from the company’s price? If “no,” watch. 4 Yes

5

Another raises his local wholesale price. District sales office (DSO) says to raise price so the Company meets the price

Yes 4 7 1

Same as D, but others do not follow, so the company watches market.

2 Yes 3 10 Yes 5

Yes

9

Another drops his local wholesale price. DSO says to follow down. The other’s local market share is larger than the company’s local market share. The company’s local market volume is larger than its nearby market volume. The company meets the price.

1

2 Yes 3 Yes 9 Yes Yes 5

No 10

8 11

1

2 Yes No 8 Yes 9 Yes 10 No 11 No 12 1

Same as F, except that the company’s nearby market volume is larger than its local market volume. The nearby market wholesale price is below the local wholesale price, so the company meets the price. Same as G, except that the company’s local wholesale price is below its nearby market wholesale price. This will funnel the larger market, so the company does not change price.

Source: Morgenroth (1964, p. 23).

may apply price increasing and price decreasing strategies for the same B2B product/service for different customers, strategies that do not depend exclusively on the buyers’ purchase quantities the implementation of quantity discount sizes depends on the presence and absence of additional antecedents in the configurations.

160

ARCH G. WOODSIDE

6. Average price increase or decrease across all customers provides insufficient information for advancing theory because price changes are contingent on several complex antecedent conditions prices may increase on average for most customers but decrease for a substantial minority, while some customers receive the same price quote as one given last year. Fig. 4 illustrates this sixth tenet for data from the Woodside and Wilson (2000) study not appearing in the 2000 report. Fig. 4 shows most customers receiving price increases of varying amounts contingent on the membership score of a combination of three antecedent conditions. However, customers with high scores on all three antecedent conditions (location B in Fig. 4) receive substantial price decreases. Customers knowing their configural location within such three- to fivesided spaces are more likely to more likely to create effective strategies to reduce price increases or even gain price decreases than customers without such knowledge. One strategy planning take-away is that an average price increase rarely (read never) applies to all customers. 7. Equifinality occurs: more than one configuration leads to the same solution (outcome), that is, a specific price point. A

B –1.5

Low

F –0.5

+0.5 +2.5

+1.0

G Very Low

tus

E

?

D

No Ke yc us tom Yes er sta

High S= Customer willingness to single source? Moderate

Empty, no customers

H Very low

Moderate

Very High

R = Customer price aggressiveness?

K=

C Very High

Fig. 4. Price Increase and Decrease Points in Standard Units (Z-scores) with Cylinders Indicating Number of Customers (Not Volume of Business). Note: Most customers accept price increases. High scores in all three antecedent conditions (K•R•S) are sufficient for lowest price point. Focusing on the overall average price change (Z = +0.2) is misleading because specific configurations of antecedent conditions associate with a specific price point.

161

A Primer to the General Theory of Behavioral Strategies

For example, several routes lead to outcomes 11 and 12 in Fig. 1. Behavioral pricing theory and research includes observations of usually two to five combinations of complex antecedent conditions that lead to the same outcome. The findings from the wholesale pricing study by Morgenroth (1964) and Howard and Morgenroth (1968) illustrate tenet 7 vividly. Fig. 5 summarizes this behavioral pricing model in an ethnographic decision tree diagram. The model includes three outcomes: an increase in price (top-third of Fig. 5), a price decrease (bottom two-thirds of Fig. 5), and no change in price (box 1 in Fig. 5). Fig. 5 looks complex at first blush but examining a few paths in the model signals that such isomorphic models are easy to grasp. The shortest

yes 4

6 yes

1

2

Does PA believe Pwo ?

no

3 yes

Is pwolt ≠ Pwxit?

Watch Pwolt

Set PwxI(t+1)=PwoIt

Does DSO say ?

no

Is Pwolt > Pwxlt?

yes

no

7

Wait 24+ hours Do Pwo Rise?

no

5

yes

no

8

no

9

yes

Does DSO say ?

10 Is QoI > QxI?

no 13 Does DSO say wait 24-48 hrs?

yes

yes

Is QxI > Qxn?

no

no 11 yes Is PwxIt > Pwxnt ?

yes no 12 no Will Pwxn(t+1) ?

no no

14 Wait 24-48 hrs; does Pwo drop?

15 yes

Is QxI > Qxn ?

yes yes

Fig. 5. Wholesale Pricing of Petroleum. Key: P = price; t = time, at present; PA = price analyst; r = retail; (t + l) = time, subsequent to considering price change; w = wholesale; Q = quantity; ≠ is not equal to or is different from; x = our company; l = local market, wherein price change being considered is greater than; o→ is other major competitor in local market; n = nearby market with funnel influences; ↑ = raise price; x = our price; o = other major competitor initiator; DSO = district sales office; ↓ = drop price. Source: Morgenroth (1964, p. 19).

162

ARCH G. WOODSIDE

path in Fig. 5 appears at the top of Table 2 makes no change in our (X) price if the competitor’s (O) price remains the same as our price. Price increases are less complex than price decreases in this model because the market has few competitors and demand is inelastic; consequently if O increases its price, then X can increase price and profits for both will increase. Thus, the second path in Table 2, as appearing in Fig. 5, includes boxes 1 2 3 4 5 for such a price increase by O and then by X. Price decreases in Fig. 5 and Table 2 are more complex than price increases because firm X wants to limit the possibility of a price war between X and Y. Additional antecedent conditions are activated for price decreases that do not appear for price increases such as information on the market shares for O and X in the local and nearby markets (boxes 9 and 10 in Fig. 5). This point illustrates the eighth tenet. 8. Causal asymmetry occurs: the explanations for price increases are not the mirror opposites of the explanations for price decreases different complex configurations sometimes having different simple antecedent conditions occur for different outcomes in behavioral pricing. Fiss (2011), Ragin (2008), and Woodside (2013) all stress the reality of causal asymmetry. “While a correlational understanding of causality implies causal symmetry because correlations tend to be symmetric. For instance, if one were to model the inverse of high performance, then the results of a correlational analysis would be unchanged, except for the sign of the coefficients. However, a causal understanding of necessary and sufficient conditions is causally asymmetric that is, the set of causal conditions leading to the presence of the outcome may frequently be different from the set of conditions leading to the absence of the outcome” (Fiss, 2011, p. 394). Such findings in behavioral pricing as in Fig. 1 by Woodside and Wilson (2000) and Fig. 5 by Morgenroth (1964) and Howard and Morgenroth (1968) support the causal asymmetry stance for theory development and theory testing. Relying solely on symmetric testing tools such as MRA and structural equation modeling does not reflect the reality of asymmetric relationships in behavioral pricing. As Gigerenzer (1991) stresses, tools shape theory as well as how a researcher goes about analyzing data. Tools and theory are necessary to use that support consistent findings of causal asymmetry as well as equifinality and configural complexity (i.e., heterogeneity) in relationships among antecedent conditions and outcomes of interest such as specific price points and price increases/decreases.

A Primer to the General Theory of Behavioral Strategies

163

9. From a behavioral pricing perspective, two or more participants engage in interactions involving setting a specific price point resulting in a sale/ purchase. Behavioral pricing theory recognizes that B2B price-setting usually involves multiple participants influencing the selection and calibration of antecedents in the pricing process. In the Morgenroth (1964) study for example, Fig. 5 shows three persons are involved in setting price: the pricing manager, the district sales officer, and the pricing analyst. A set price is frequently negotiation between the marketer and customer. The customer frequently includes multiple-parties in B2B contexts as well (Woodside & Samuel, 1981). 10. Price-setting frequently involved a series of feedback loops in real-life contexts. Formal meetings often occur in negotiating annual contracts among manufacturers buying component parts and informal meetings both precede and follow these formal meetings. Woodside and Samuel (1981) provide a marketing-purchasing participant observation study that confirms this tenth tenet. Their study includes a decision systems analysis (DSA) showing several feedback loops in the negotiations processes involving centralized purchasing office and various plant-level purchasing officers and well as company-wide purchasing committees negotiating with global suppliers. The use of DSA is a useful precursor tool for the creation of more formal ethnographic decision tree models and the use of fuzzy set QCA. The Informant (Eichenwald, 2001) is viewable correctly as a report on a marketing anthropological study of behavioral pricing by the United States Federal Bureau of Investigation (FBI). The study includes in-depth reporting on several (in this case, illegal) meetings of competing manufacturers jointly setting prices globally for agricultural-related products with several feedback loops in discussions of the same issues. The FBI study employs a mixed-methods design. Along with unobtrusively (secretly) filming these price-setting meetings and recording verbal exchanges occurring during the meetings, the FBI analyzed thousands of pricing-fixing documents from several years, and completed multiple rounds of interviews with a participant observer (the informant). The result is a treasure trove that appears to support the tenth tenet and all tenets of the general theory of behavioral pricing; this conclusion needs formal testing via a separate study that compares data from the FBI case with the behavioral pricing and classic microeconomic pricing theory.

164

ARCH G. WOODSIDE

LIMITATIONS The intention here does not include a complete exposition of the general theory of behavioral pricing. While Woodside et al. (2013) provide direct comparisons of theory and findings using symmetric versus asymmetric tools (e.g., MRA vs. QCA), they do so for a field experiment focusing on pricing in a consumer goods context and not a B2B context. Certainly, direct comparisons of using both theory/method approaches in B2B contexts warrant our attention. The presentation here focuses on an early stage in developing the general theory and to call for the use of marketing and consumer anthropological studies focusing on the tenets of behavioral pricing. One objective for the study here is to encourage additional research and literature reviews on behavioral pricing topics to both confirm and extend the core tenets of the theory.

CONCLUSION Behavioral pricing modeling and testing has been around a while now but still is a mouse next to dominating elephant of symmetrical theory and testing approaches to pricing. The availability of behavioral pricing studies is spotting in comparison to the plethora of studies by authors adopting a combination of net effects, finality, and causal symmetry stance. The principle objective of this chapter is to generate the start-up of continuing behavioral pricing research that provides an annual stream of useful studies capturing heterogeneity, realism, and accurate predictive not only fit validity. The intention is to present a set of tenets that together offers a new reality-based behavioral pricing theory that has much promise in describing, explaining, and predicting price-related decisions and actions by marketers and buyers. The set of tenets itself includes a configuration of theory and tools.

REFERENCES Bazerman, M. H., & Moore, D. (2008). Judgment in managerial decision making (7th ed.). Hoboken, NJ: Wiley. Cyert, R. M., & March, J. G. (1963). A behavioral theory of the firm. Englewood Cliffs, NJ: Prentice-Hall.

A Primer to the General Theory of Behavioral Strategies

165

Eichenwald, K. (2001). The informant. New York, NY: Broadway Books. Fishburn, P. C. (1974). Lexicographic orders, utilities and decision rules: A survey. Management Science, 20, 1442 1471. Fiss, P. (2011). Building better causal theories: A fuzzy set approach to typologies in organization research. Academy of Management Journal, 54, 393 420. FT (Financial Times) Lexicon. (2013). Tacit knowledge. Retrieved from http://lexicon.ft.com/ Term?term=tacit-knowledge Gigerenzer, G. (1991). From tools to theories: A heuristic of discovery in cognitive psychology. Psychological Review, 98, 254 267. Gigerenzer, G., & Brighton, H. (2009). Homo heuristicus: Why biased minds make better inferences. Topics in Cognitive Science, 1, 107 143. Gigerenzer, G., & Selten, R. (Eds.). (2001). Bounded rationality: The adaptive toolbox. Cambridge, MA: MIT Press. Gigerenzer, G., Todd, P. M., & the ABC Research Group. (1999). Simple heuristics that make us smart. New York, NY: Oxford University Press. Gladwin, C. H. (1989). Ethnographic decision tree modeling. Thousand Oaks, CA: Sage. Howard, J. A., & Morgenroth, W. M. (1968). Information processing model of executive decision. Management Science, 14, 416 428. Kahneman, D., Slovic, P., & Tversky, A. (1982). Judgment under uncertainty: Heuristics and biases. New York, NY: Cambridge University Press. Mintzberg, H. (1979). An emerging strategy of “direct” research. Administrative Science Quarterly, 24, 582 589. Morgenroth, W. M. (1964). Method for understanding price determinants. Journal of Marketing Research, 1, 17 26. Nonaka, I. (1994). A dynamic theory of organizational knowledge creation. Organization Science, 5(1), 14 37. Payne, J. W., Bettman, J. R., & Johnson, E. J. (1988). Adaptive strategy selection in decision making. Journal of Experimental Psychology: Learning, Memory, and Cognition, 14, 534 552. Payne, J. W., Bettman, J. R., & Johnson, E. J. (1993). The adaptive decision maker. Cambridge, UK: Cambridge University Press. Pettigrew, A. (1975). The industrial purchasing decision as a political process. European Journal of Marketing, 9, 4 19. Polanyi, M. (1958/2002). Personal knowledge: Towards a post-critical philosophy. London: Routledge. Powell, T. C., Lovallo, D., & Fox, C. R. (2011). Behavioral strategy. Strategic Management Journal, 32, 1369 1386. Ragin, C. C. (2008). Redesigning social inquiry: Fuzzy sets and beyond. Chicago, IL: Chicago University Press. Tversky, A. (1972). Elimination by aspects: A theory of choice. Psychological Review, 79, 281 299. Van Maanen, J. (1978). The asshole. In P. K. Manning & J. Van Maanen (Eds.), Policing: A view from the street. Santa Monica, CA: Goodyear Publishing. Retrieved from http:// petermoskos.com/readings/Van_Maanen_1978.pdf Van Someren, M. W., Barnard, Y. F., & Sandberg, J. A. C. (1994). The think aloud method. London: Academic Press.

166

ARCH G. WOODSIDE

Woodside, A. G. (2003). Middle-range theory construction of the dynamics of organizational marketing-buying behavior. Journal of Business & Industrial Marketing, 18, 305 335. Woodside, A. G. (2010). Case study research: Theory, methods and practice. Bingley, UK: Emerald Group Publishing Limited. Woodside, A. G. (2013). Moving beyond multiple regression analysis to algorithms: Call for adoption of a paradigm shift from symmetric to asymmetric thinking in data analysis and crafting theory. Journal of Business Research, 66, 463 472. Woodside, A. G., Schpektor, A., & Xia, X. (2013). Triple sense-making of findings from marketing experiments. International Journal of Business and Economics, 12, 131 153. Woodside, A. G., & Baxter, R. (2013). Achieving accuracy, generalization-to-contexts, and complexity in theories of business-to-business decision process. Industrial Marketing Management, 42, 382 393. Woodside, A. G., & Samuel, D. M. (1981). Observations of centralized corporate procurement. Industrial Marketing Management, 10, 191 205. Woodside, A. G., & Wilson, E. J. (2000). Constructing thick descriptions of marketers’ and buyers’ decision processes in business to business relationships. Journal of Business and Industrial Marketing, 15, 354 369.

B2B INTERACTIONS AT TRADE FAIRS AND RELATIONSHIP QUALITY: A CONCEPTUAL APPROACH Maria Sarmento, Cla´udia Simo˜es and Minoo Farhangmehr ABSTRACT This case study discusses the importance of studying buyer and seller interactions, as they are relevant to understand how relationships evolve. It further presents a conceptual foundation for investigating B2B interactions, particularly in the context of the trade fair. The trade fair is presented as a privileged field for relationship building and development, where socialization episodes occupy a relevant role. Data were gathered through observations, interactions, and interviews, spread over a twelvemonth field-study of participants at trade fairs, and their comments analyzed within a framework of relationship building. Insights revealed include the importance of innovation versus relational interactions; the informality of interactions; the opportunity for information exchange and learning; social interactions, and relationship development. The chapter concludes by considering that a relationship marketing strategy

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 167 189 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021005

167

168

MARIA SARMENTO ET AL.

to B2B trade fair participation is vital for the effectiveness of this business activity and a challenge for exhibitors, visitors, and trade fair organizers. Keywords: Trade fair; relationship development; informality; social interaction

INTRODUCTION Relationship marketing can be analyzed at different levels, encompassing the study of interactions, relationships, and networks (Gummesson, 1994). The interactions, depicted in the interaction approach as interaction episodes, constitute a fundamental level to understand business relationships (Ha˚kansson, 1982). Understanding relationships at the interaction level of analysis contributes to better explaining changes at the upper levels, namely changes in relationship and network states (Holmlund, 2004). In fact, the management of an interaction process is core to relationship marketing (Gro¨nroos, 2004). Despite the existence of important contributions from previous research that included this level of analysis (Dwyer, Schurr, & Oh, 1987; Ha˚kansson, 1982; Halinen, Salmi, & Havila, 1999; Holmlund, 2004; Johanson & Mattsson 1987; Medlin, 2004; Ramani & Kumar, 2008; Schurr, 2007), relationship marketing literature focuses primarily on the study of relationships and business networks, overlooking the study of interactions (Schurr, 2007). Yet, a complete understanding of relationships requires a deep study of interaction dynamics because relationships develop through interactions (Ford, 1980). Interaction in an industrial market relationship is the process of exchanging one of four different elements, or some combination of them: product or service; information; financial issues and social contacts (Ha˚kansson, 1982). One or more interactions make up interaction episodes (Schurr, Hedaa, & Geersbro, 2008). The interaction episodes are either critical or noncritical; when an interaction episode deviates from the norm and causes radical changes, it is considered critical (Edvardsson, 1992; Schurr, 2007). The interaction is developed through a process and generates an outcome that impacts on higher levels of analysis, comprising a vulnerable period of time during which the parties make crucial evaluations about the relationship (Holmlund, 2004). Although the study of the effects of critical interaction episodes on relationships is reported in the literature (Halinen et al., 1999), there is still the need for a deeper understanding of how less critical interactions change relationships, and how interactions change the state of a relationship.

B2B Interactions at Trade Fairs and Relationship Quality

169

The management of the interaction process is particularly relevant in industrial and in business-to-business (B2B) situations, as firms often establish buyer − seller relationships which are characterized as close, complex, and (frequently) long term (Ford, 1980). Against such a background, a full comprehension of the interaction level also requires the analysis of the interaction context as, depending on its main characteristics and environment, it influences how interactions develop. For example, buyer seller interactions in the context of trade fairs are particularly relevant as such business events attract qualified and interested publics (Shipley, Egan, & Sun Wong, 1993). Nevertheless, it seems that managers are not making the most out of trade fair participation (Blythe, 2002). Historically, these events have been associated with a transactional approach and relational benefits have been largely ignored (Geigenmu¨ller, 2010; Rice, 1992). By being a privileged venue for interaction, where exhibitors and visitors are naturally more available for relational interactions, adopting a relationship marketing perspective to trade fair participation can open new opportunities to exploit the benefits these events may offer. Despite the importance of trade fair participation, little systematic/ empirical research on this subject exists (Hansen, 1996; Kerin & Cron, 1987) and there are few established guidelines on how to capitalize on these meeting occasions (Li, 2006). Moreover, the majority of existing research has been conducted from the exhibitor’s point of view, neglecting the visitor’s perspective (Rosson & Seringhaus, 1995). This study aims to gain deeper insight into how the trade fair context may contribute to trigger and develop business relationships. We gathered insights from direct observation of exhibitors and visitors’ behaviors at trade fairs and from interviews with practitioners. During one year, we observed people and behaviors at trade fairs, and analyzed visible relational dynamics. Additionally, we conducted semi-structured interviews with trade fair organizers, experts, and practitioners with experience in trade fair participation either as exhibitors or visitors. The discussion around the main implications and conclusions systemized in this chapter is based both on the literature review and on these insights from practitioners.

INTERACTIONS AND RELATIONSHIPS The concept of relationship management as a process of managing interactions between supplier and customer has received considerable attention in Europe. In the 1970s, the Industrial Marketing and Purchasing (IMP)

170

MARIA SARMENTO ET AL.

Group studied how relationships are established, the factors which foster or hinder the development of close interactions between suppliers and customers and the ways in which companies can formulate strategies for handling a portfolio of different types of relationships. The interaction approach states that four main types of variables describe and influence the interaction: variables related to the process of interaction (products and services; information; finance; social); variables characterizing the parties involved (organization; individuals); variables describing the environment (market structure; dynamism; internationalization; social system), and variables related to the atmosphere affecting and affected by the interaction (power/ dependence; level of cooperation; social distance) (Ha˚kansson, 1982). Interaction episodes are defined as “several interconnected actions” (Holmlund, 2004, p. 281). The hierarchy of effects travels upward from interaction episodes, to relationships and to networks (Schurr, 2007). Networks, which represent the highest level of analysis, offer a macro view as well as many direct and indirect connections of companies engaged in a business relationship (Anderson, Ha˚kansson, & Johanson, 1994). Johanson and Mattsson (1987) specify that the difference between relationships and interactions lays in the fact that relationships refer to long-term generalizing characteristics, while interactions are dynamic, short-term, and composed of actions associated with exchange and adaptation between firms. Holmlund (2004) suggests that the use of only two aggregation levels, that is, short-term episodes and long-term relationships offers an incomplete and limited analytical depth. To overcome this limitation, the author proposes five levels of aggregation, namely action, episode, sequence, relationship, and partner base (Fig. 1). The idea is to gain a deeper understanding of the interaction dimension, and such conceptualization is relevant because it sets clear boundaries for studying interactions. Actions on the first level may include any kind of exchange element and therefore relate to products, money, information, or social contacts. Interrelated actions can be grouped into a higher aggregation level that corresponds to episodes, depicted, for example, as short-term episodes in the interaction model. Interrelated episodes can be, in turn, grouped into a sequence, which constitutes a larger and more extensive entity on a higher interaction level. The relationship, the next level of analysis, includes all sequences. All the relationships of a company at a given point in time constitute the partner base, the highest level of analysis (Holmlund, 2004). Thus, the interaction phenomena are dynamic processes circumscribed in time and space. The interpretation and evaluation of each level of analysis is determinant for the next level and the evaluation of a specific sequence of

B2B Interactions at Trade Fairs and Relationship Quality

Fig.

1.

Five

Different Aggregation Levels of Relationship Source: Holmlund (2004, p. 281).

171

Interactions.

interaction may, for instance, have a major impact on the assessment of the relationship as a whole. By establishing boundaries, each level becomes meaningful as a specific unit of analysis. However, since the study of the interaction dimension is still in its infancy, we observe that the terms action, interaction, and episode are, sometimes, used interchangeably, suggesting that the boundaries of each construct have not yet been clearly specified. For example, Schurr et al. (2008) use the term interact while others use the term act, explaining that the term interact derives from the fact that individuals act, while exchange partners interact, “shaking hands, exchanging hellos, and taking turns talking about a business problem, agreeing to a solution and saying goodbye suggest the interacts in a problem-solving interaction episode” (p. 879). Important interactions involve social exchange. According to Granovetter (1985, p. 481), “economic action is embedded in structures of social relations in modern industrial society.” In this sense, social influence is at least as important as economic influence in organizational behavior, and communication within interaction episodes is driven by desire for both economic and social gains. The interaction reveals the activity of the relationship and consists of one or several interactions that occur in a given period of time. The

172

MARIA SARMENTO ET AL.

organization of time into past, present, and future provides a measurement and ordering of events that allow cognitive closure. However, although interaction is constrained as the present, the objects of cognition and the focus of interaction may be positioned anywhere in time (Medlin, 2004). In exchange relations, parties tend to merge past, present, and future, in a continuum, taking into account the experiential learning in past interactions, and projecting the present into the future through anticipatory actions and planning (Easton & Arau´jo, 1994). Depending on parties’ interpretation, interaction episodes may have a generative, degenerative or neutral effect on the relationship. A generative interaction episode positively affects the state of the relationship because the outcome of the interaction increases cooperation, trust, understanding and generates joint benefits. A degenerative episode has a negative effect in that state. Neutral episodes overall sustain, but do not change the capacity for interaction and mutual gain. A generative or degenerative episode can be considered critical when the parties agree on a change in the resource links or activities, leading to radical changes (Schurr, 2007; Schurr et al., 2008). Edvardsson (1992) classifies an episode as critical when it deviates from the norm. A critical episode may be confined to the single dyad or may also affect other relationships and actors in the network forming, in this case, a connected change. The notion of connected change entails the idea that a dyad may function both as receiver or transmitter of change (Halinen et al., 1999). Business relationships change, grow, or dissipate as a function of interaction episodes (Ha˚kansson, 1982), going through development (Dwyer et al., 1987; Ford, 1980). The relationship development process evolves through five general phases identified by Dwyer et al. (1987) as awareness, exploration, expansion, commitment, and dissolution. Each phase represents a major transition in how parties regard one another. Similarly, Ford (1980) classifies the different phases into five categories such as pre-relationship stage, early stage, development stage, long-term stage, and final stage, introducing the concept of relationship distance to explain the main differences along the stages. Table 1 systemizes the literature that addresses the study of interactions within the scope of relationship marketing.

TRADE FAIRS AS INTERACTION CONTEXTS A trade fair was initially defined as “a facilitating marketing event which takes place at periodically recurring intervals (…) whose primary objective is to disseminate information about, and display the goods and services of competing and complementary sellers (…) whose audience is a selected

173

B2B Interactions at Trade Fairs and Relationship Quality

concentration of customers, potential buyers, decision influencers” (Banting & Blenkhorn, 1974, pp. 286 287). Although historically trade fairs have been viewed as an extension of a firm’s personal selling effort, several authors point out that trade fairs have a much broader role than just making sales (Blythe, 2002; Bonoma, 1983; Cavanaugh, 1976; Rosson & Seringhaus, 1995; Sharland & Balogh, 1996; Shipley et al., 1993). As such, the role of trade fairs has expanded beyond selling to include a wider range of functions. Trade fairs represent an important context of interaction and a relevant instrument for relationship marketing. For example, gathering competitive information, improving corporate morale and the establishment of relationships are as (or even more) important as selling. Image enhancement is another benefit widely mentioned in the literature. Under the relational perspective, Li (2006) points to the powerful influence of relationship learning activities on relationship performance outcomes as perceived by exhibitors at trade fairs. Rosson and Seringhaus (1995) specify learning between exhibitors and visitors as key for attending trade fairs. Rice (1992), Hansen (1999) and Blythe (2002) also emphasize the importance of the relationship between suppliers and customers at trade fairs, rather than focusing on discrete purchase occasions. Moreover, trade fairs may be conceptualized as networks, since they are a microcosm of the industries they represent. Besides the interaction between buyers and sellers, these events represent an important arena for interaction between a multitude of market actors (e.g., service providers, partners, industry, and regulatory bodies) all Table 1.

Literature that Discusses Interactions within the Scope of Relationship Marketing.

Subject/Contribution Relationship stages Interaction approach applied to industrial marketing Importance of social interaction Relationship development through interaction Main differences between interaction episodes and relationships

Author (Year) Ford (1980) Ha˚kansson (1982) Granovetter (1985) Dwyer et al. (1987) Johanson and Mattsson (1987) Halinen et al. (1999) Holmlund (2004)

Changes in relationships arise from critical incidents Five aggregation levels of relationship interactions: actions, episodes, sequences, relationships, and partner base Time dimension in the study of interactions and relationships: past, Medlin (2004) present, and future Definition of episode categories: generative, degenerative, and neutral Schurr (2007) episodes Interaction episodes as engines of relationship change Schurr et al. (2008)

174

MARIA SARMENTO ET AL.

gathered in one venue to do business (Borghini, Golfetto, & Rinallo, 2006; Rinallo, Borghini, & Golfetto, 2010; Rosson & Seringhaus, 1995). Therefore, from a relationship marketing perspective, trade fairs are important events because they offer favorable conditions and opportunities for interactions that may have a positive impact upon the relationship. In this specific context, there is a natural predisposition for interaction and dialogue, a key feature for enhancing relationship quality and strengthening relationships. Trade fairs create the opportunity for information and social exchange on a formal and informal basis, which are considered important interaction episodes to reduce relational distance and raise the levels of trust between the interchange partners (Hansen, 1999).

TRADE FAIRS AND BUSINESS RELATIONSHIPS: INSIGHTS FROM PRACTITIONERS We gathered insights from practitioners through direct observation, informal contacts, and interviews. During one year of fieldwork, we observed and interacted informally with exhibitors and visitors at several trade fairs, and conducted 14 interviews with key representatives of trade fair organizers, experts and top managers in small and medium-sized firms representing industries such as building materials, home furnishings, raw materials for food industry, machinery and new technologies, all having significant experience in B2B trade fair participation. The findings highlight the importance of trade fair participation from an eminently relational perspective, because they encourage and favor information and social exchange. These are considered particularly relevant when relationship distance is higher, as is generally the case of relationships between foreign companies. The fact that high levels of informality, facilitating the exchange dynamics between buyers and sellers, characterize the trade fair environment was also stressed. Trade fairs were mentioned as important venues to develop relationships, raising the levels of trust between exchange partners. The following themes emerged from the observations and from the interviews: (i) innovation and relational interactions; (ii) informality; (iii) information exchange and learning; (iv) social interaction; (v) relationship development. Table 2 indicates the interviewee’s reference to each topic that we now discuss in more detail.

No.

Interviews Industry

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Trade fair organizer Trade fair organizer Expert Expert Building materials Building materials New technologies New technologies Machinery and equipment Pharmaceutical Raw materials for food Industry Home furnishings Home decor wholesalers Home furnishings

Category Innovation and relational interactions ✓ ✓ ✓ ✓ ✓ ✓

Informality

Info. exchange and learning

✓

✓ ✓

✓ ✓ ✓ ✓

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Social interaction

Relationship development

✓ ✓

✓ ✓ ✓ ✓

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

✓ ✓

B2B Interactions at Trade Fairs and Relationship Quality

Table 2. Interactions and Relationships at Trade Fairs.

✓ ✓ ✓

175

176

MARIA SARMENTO ET AL.

Innovation and Relational Interactions Innovation was among the most important factors contributing to a trade fair’s attractiveness. Yet, since currently innovation is virtually a continuous phenomenon, trade fairs should highlight and explore its most striking aspect: the promotion of interpersonal relationships. Nowadays, with the spread of new technologies, relationships tend to be more ‘mechanical’ and, therefore, all opportunities for interpersonal human relationships gain particular relevance. The possibility of face-to-face interaction and the breaking of relational barriers are major advantages of trade fairs, particularly in the case of international contacts in which relational distance tends to be greater (Hansen, 1999; Rice, 1992). Table 3 illustrates how interviewees supported these ideas. Informality Findings suggest that the trade fair context is characterized by a neutral environment where the distribution of power is diluted, encouraging a more informal interaction. Since the pressure of the daily working routine is not felt, the predisposition for interaction is higher. Away from their companies, visitors are encouraged to develop informal contacts with suppliers, visitors, and other participants attending the trade fair. Such informal interactions may occur in technical seminars, cocktail hours at the Table 3. Interviewee/ Industry 1 Trade fair organizer

3 Expert

5 Building materials

7 New technologies

Innovation and Relational Interactions. Illustrative Quotes

“In the past, novelty at trade fairs was very important. All the new things were there! Today, with the internet, the car is launched and immediately is on the computer (…) Now; nobody goes to the fair to see the new car (…) The issue of novelty is losing strength.” “The negotiation is still a face-to-face process (…). Trade fairs might play an important role in these processes because there [at the trade fair] people meet each other” “The relational perspective is fundamental with the buyers we work with for years. The trade fair is an opportunity to know the face of the person who talks with us at the phone or to know the administrator of the company whom, in other circumstances, it would be very difficult to meet” “Nowadays, the main aspect of the trade fair is the personal contact, as the issue of novelty is gone. The trade fair must be sold as a meeting point and not anymore as an area of novelty”

B2B Interactions at Trade Fairs and Relationship Quality

Table 4. Interviewee/Industry 6

Building materials

7

New technologies

8

New technologies

11 Raw materials for food industry

177

Informality. Illustrative Quotes

“As the environment is not inside buyer or seller’s company we see that the levels of defense get lower and the interaction is established in a more friendly way” “At trade fairs the atmosphere is more open and people talk in an informal basis, which is not so frequent on a daily contact” “Often, many of the relationships overcome the barrier of formality on these professional events” “During the fair, the informal atmosphere and the higher dedication to the interaction process give rise to closer and long term relationships”

exhibitor stands or at social events prepared by the trade fair organizers (Rinallo et al., 2010) becoming inspirational sources of knowledge and new ideas (Borghini et al., 2006). Table 4 illustrates how practitioners highlight the informal atmosphere at trade fairs. Social Interaction Another aspect emerging from the data relates to the social dimension at trade fairs. Trade fairs may be considered as social systems defined in time and space (Bello, 1992) that naturally provide an atmosphere that leads to formal or informal social exchanges (Hansen, 1999), reducing the social distance between buyers and sellers (Godar & O’Connor, 2001). People drive relationships between buyers and sellers, even though the relationship concerns companies; this means that social and psychological factors affect the relationship development (Ha˚kansson, 1982). Social settings provide an informal environment, which increases information flow, closer interpersonal relationships and better understanding of mutual needs (Doney & Cannon, 1997). These events function as prime business meeting points, encouraging social interactions between buyers and sellers and leading to relationship reinforcement. Table 5 reflects how practitioners referred to these ideas. Information Exchange and Learning The relationship established between buyers and sellers at trade fairs becomes more relevant than discrete purchase situations (Blythe, 2002).

178

MARIA SARMENTO ET AL.

Table 5. Social Interaction. Interviewee/Industry 2

Trade fair organizer

6

Building materials

5

Building materials

12 Home furnishings 14 Home furnishings

Illustrative Quotes “… the exhibitor must show new things, but, above all, must provide a very informal meeting, almost familiar, in which the visitor feels almost like a member of the company” “Empathy becomes higher in the first contact when it is initiated in the informal atmosphere of the trade fair. The contexts influence ‘lovers;’ the same goes for the customer relationship” “… international buyers could have come on the bus to the fair, but no! We got them. We had breakfast with them” “I made great friendships with my competition through trade fair participation” “Social interaction often opens the door to new and different ideas (…) people are more active (at the trade fair)”

Trade fairs are an important place for learning, where knowledge and information exchange occurs (Hansen, 1999; Li, 2006; Rinallo et al., 2010). Parasuraman (1981) refers to trade fairs as a helpful tool for gathering information in the industrial buying process. This learning experience is carried out either at the individual level or at the organization level. That is, the knowledge generated at trade fairs is often disseminated within the company when the participants return to their workplace. Furthermore, participation at trade fairs can create a collective awareness of belonging to a group which may be a company, a professional entity, a business association or other. Viewing trade fairs as networks goes beyond the buyer seller relationship to extend to all other agents of the industry participating in the event (Borghini et al., 2006; Rinallo et al., 2010; Rosson & Seringhaus, 1995). Table 6 captures interviewees’ views.

Relationship Development Trade fair participation reduces uncertainty and distance between the players and signals commitment to the development of the relationship (Hansen, 1999). Interaction at trade fairs is considered a valuable experience, facilitating social links among the business community (Rinallo et al., 2010). Given the importance of B2B trade fairs as facilitating venues for the development of interpersonal relationships through the informal climate and social closeness, relationship marketing at trade fairs seems to be particularly important to enhance trust and confidence between the parties (Hansen, 1999; Rice, 1992). Table 7 illustrates these ideas in the interviewees’ words.

B2B Interactions at Trade Fairs and Relationship Quality

Table 6.

Information Exchange and Learning.

Interviewee/Industry 2

Trade fair organizer

9

Machinery and equipment New technologies

7

10 Pharmaceutical

12 Home furnishings

14 Home furnishings

Illustrative Quotes “The trade fair is no longer a mere agglomeration of stands … Now, we have parallel activities, workshops and we are increasingly working with visitors in order to schedule meetings and appointments prior to trade fair participation (…) it is very important to help the visitor with useful information” “At trade fairs you see the machines working and you have the mechanics to explain how they work … at trade fairs you learn a lot!” “The trade fair is an important learning context, through contacts with the product and participating in seminars and parallel activities” “The interaction at fairs is very different! Within daily routine (normal working hours), the conversations are often too brief and it is difficult to deepen knowledge” “… talking about the market and with the customers (at the trade fair) has always been a very important source of information; it helped us avoiding some mistakes.” “At trade fairs we obtain information from everywhere and that can contribute to update knowledge”

Table 7. Interviewee/Industry 2

Trade fair organizer

4

Expert

9

Machinery and equipment

11 Raw materials for food industry 13 Home decor wholesalers

179

Relationship Development. Illustrative Quotes

“What an exhibiting company most desires is a new business contact, but today it is also very important to keep relationships alive” “Given the importance of relationship marketing at trade fairs, currently, there are initiatives to stimulate interactions (…) business meetings are scheduled in advance and gatherings are organized for foreign buyers” “Regarding one of our represented companies with whom we started working recently, on the first opportunity we went to the trade fair to get to know each other personally … and that helped … it is good for both sides … if we ever had any problems, e.g. financial, we may have another support” “The interaction at trade fairs has proved important to increase trust levels … this has happened especially with our equipment suppliers” “When trust is established a number of formal issues, normal in any process of buying decision, tend to disappear. Trust makes the processes more agile and faster decisions. The trade fair can be a vehicle to increase the proximity between the parties”

180

MARIA SARMENTO ET AL.

SOCIALIZATION EPISODES AT TRADE FAIRS, RELATIONSHIP QUALITY AND DEVELOPMENT According to the interaction approach, the process of interaction between a buyer and a seller comprises four types of interaction: interaction regarding the exchange of a product or a service, financial interaction, exchange of information and social interaction (Ha˚kansson, 1982). Considering these four types of short-term exchange episodes, we argue (Fig. 2) that information and social interaction, which we coin “socialization episodes” due to their intrinsic relational nature, have the ability to support the relationship, while the interaction episodes related to product or financial exchange are more transactional in nature expressing facets of relationship materialization (Sarmento, Simo˜es, & Farhangmehr, 2014). Various forums encourage the exchange of information and the establishment of interpersonal ties (Metcalf, Frear, & Krishnan, 1992). Trade fairs are an example of such forums; a specific context that encourages socialization episodes that lead to relationship reinforcement. The insights collected from practitioners also reinforce the importance of a relationship marketing strategy to trade fair participation, highlighting the role of social and information exchange in such context. The importance of the informal nature of interactions and the learning experience that is generally carried out was also stressed. This seems to suggest that socialization episodes at business trade fairs are relevant to the quality of the relationship. Such short-term interaction episodes take place at both formal and informal levels. They are especially useful to reduce distance and uncertainty, strengthening the relationship (Hansen, 1999). Social exchange enables both parties to get to know each other better and to understand each other’s objectives supporting problem resolution. This interchange seems to foster closer and more trusting

s

an Tr

Re

lat

a ion

l na tio FINANCIAL c a

Materialization of the Relationship

PRODUCT

l

SOCIAL INFORMATION

Fig. 2.

Support of the Relationship (Socialization Episodes)

Types of B2B Interaction Episodes.

181

B2B Interactions at Trade Fairs and Relationship Quality

relationships (Campbell, 1985). By sharing information and by being knowledgeable about each other’s business, partners are more capable of maintaining the relationship in the future (Mohr & Spekman, 1994). The exchange of information and interpersonal contacts are believed to produce a cooperative atmosphere between a buyer and a seller. Thus, buyers and sellers need to create mechanisms, which facilitate the exchange of information and the establishment of personal relationships between members of the two firms. Therefore, from a relationship marketing perspective, trade fairs are important events because they offer favorable conditions and opportunities for interactions that may impact positively in the relationship. There is a natural predisposition for interaction and dialogue, a key feature for enhancing relationship quality and strengthening relationships. The rationale is that participating at B2B trade fairs offers a privileged venue for the development of relationship marketing. Socialization episodes impact on relationship quality as they allow partners to know each other better, by sharing information and knowledge about each other’s businesses and also by improving social proximity and friendship. These potential benefits are based on the argument that information sharing and social interaction at B2B trade fairs have a positive impact on relationship quality because they raise the levels of trust, satisfaction, and commitment, which are fundamental requirements for long-term relationships (Sarmento et al., 2014). Fig. 3 depicts this rationale. Socialization episodes are short-term interaction episodes that take place on both formal and informal levels, which generate learning and have the capacity to reduce distance and uncertainty between parties. Socialization episodes comprise the exchange of information and social exchange elements (op cit). Information Exchange is defined as “expectations of open sharing of information that may be useful to both parties” (Cannon & Perreault, 1999, p. 441). Information sharing refers to the extent to which critical, often proprietary information is communicated to one’s partner TRADE FAIR CONTEXT

Socialization Episodes

Fig. 3.

Relationship Quality

Relationship Development

B2B Socialization Episodes and Relationship Development.

182

MARIA SARMENTO ET AL.

(Mohr & Spekman, 1994). Scholars in general conceptualize information exchange in terms of formal and informal sharing of timely and meaningful information between parties in an empathetic manner (Anderson & Narus, 1984; Morgan & Hunt, 1994). Companies can develop better customer relationships (Mohr & Spekman, 1994; Wong, Hung, & Chow, 2007) and foster more confidence in the continuity of the relationship (Dwyer et al., 1987) by frequently contacting customers, answering their queries and conducting follow-up contacts. Social Exchange, named in the literature interchangeably as social interaction, refers to “the interpersonal relationships which exists between members of the buying and selling centers” (Metcalf et al., 1992, p. 29). Interpersonal relationships between members of the buying and selling firms build mutual trust which serves as a risk reduction mechanism (Ford, 1980; Ha˚kansson, 1982; Halle´n, Johanson, & SeyedMohamed, 1991) and facilitates problem solving and communication (Metcalf et al., 1992). Relationship Quality between customers and firms is the “degree of appropriateness of a relationship to fulfil the needs of the customer associated with the relationship” (Hennig-Thurau & Klee, 1997, p. 751). Crosby, Evans, and Cowles (1990, p. 70) also define relationship quality as when “the customer is able to rely on the salesperson’s integrity and has confidence in the salesperson’s future performance.” Relationship quality is generally considered a higher order construct (Huntley, 2006), measured through three related and ultimately entwined constructs: trust, satisfaction, and commitment (Athanasopoulou, 2009). Trust is considered a building block in relationship marketing theory and is conceptualized as existing “when one party has confidence in an exchange partner’s reliability and integrity” (Morgan & Hunt, 1994, p. 23). Moorman, Zaltman, and Deshpande (1992, p. 315) also emphasize the confidence level defining trust “as a willingness to rely on an exchange partner in whom one has confidence.” In general, most definitions of trust involve a belief that one relationship partner will act in the best interests of the other partner (Wilson, 1995). Satisfaction is defined as a positive affective state resulting from the appraisal of all aspects of a firm’s working relationship with another firm (Anderson & Narus, 1984, p. 66). According to Ganesan (1994), satisfaction with past outcomes indicates equity in the exchange and that both parties are concerned about the other’s welfare. Similarly, empirical findings of Homburg, Giering, and Menon (2003) indicate that increasing customer satisfaction leads to increase customer loyalty. Commitment implies importance of the relationship to the partners and a desire to continue the relationship into the future (Wilson, 1995). Dwyer et al. (1987, p. 19) define

B2B Interactions at Trade Fairs and Relationship Quality

183

commitment as an “implicit or explicit pledge of relational continuity between exchange partners” and, similarly, Moorman et al. (1992, p. 316) state that constitutes “an enduring desire to maintain a valuable relationship.” Relationship development reflects the expectations regarding how the relationship will evolve overtime. It comprises both parties’ expectations about future collaboration expressing the intention to maintain the relationship in the long term (Anderson & Weitz, 1989; Wong et al., 2007).

IMPLICATIONS FOR TRADE FAIR PARTICIPANTS AND ORGANIZERS Understanding the influence of B2B interactions at trade fairs on the development of relationships helps to delineate and adopt more effective strategies of interaction and derive managerial implications for trade fair participation. This section gives insights into how managers exhibitors, visitors, and trade fair organizers may develop a relationship marketing strategy for trade fair participation. Table 8 presents the main objectives and implications of a relationship marketing strategy to trade fair participation.

Implications for Exhibitors A relationship marketing strategy for exhibiting at B2B trade fairs should include a relationship portfolio analysis entailing objectives to be attained and activities to be undertaken in such context. Therefore, exhibitors should set relationship-based goals for trade fair participation for current, alternative and new relationships. In addition, visitors have the opportunity to examine products and to interact with exhibitors (professionally or socially). Social interaction between the parties and consequent enhancement of the relationship quality may be facilitated by the exhibitors’ organization of social events and/or scheduled product presentation seminars. Such events allow for informal interactions and for the exchange of relevant information with visitors enhancing mutual understanding. Exhibitors must also be concerned about the quality of their stand collaborators. The interaction with competent staff is key to turn the visit to a trade fair into a valuable experience (Rinallo et al., 2010). The visitor wants

184

MARIA SARMENTO ET AL.

Table 8. Adopting a Relationship Marketing Strategy for Trade Fair Participation: Main Implications. Objectives

Implications

Exhibitors • Management of the company’s relationships portfolio • Search and identification of new business relationships • Interaction with other industry players and establishment of informal business networks • Adoption of a strategic orientation in the composition of the booth staff

• Creating spaces for leisure and socialization within the stand • Offering entertainment • Organizing social events • Promoting workshops for product/service presentations • Implementing experiential marketing initiatives • Training and diversifying the booth staff • Promoting the presence of top management in the fair • Participating in parallel activities promoted by the trade fair organizer • Evaluating trade fair participation from a relationship marketing perspective

Visitors • Management of the company’s relationships portfolio • Identification of new suppliers • Interaction with other industry players and establishment of informal business networks

• Early preparation of the visit • Schedule of meetings • Participating in parallel activities promoted by the trade fair organizer • Participating in social events • Evaluating trade fair participation from a relationship marketing perspective

Trade fair organizers • Designing more attractive events, facilitators of relationship marketing • Increasing efficiency and return on investment with trade fair participation • Repositioning of the trade fair concept • Adopting a communication strategy based on the relational benefits of trade fair participation

• Organizing the exhibition space to facilitate interaction • Previous provision of relevant information to exhibitors and visitors to enable the scheduling of meetings • Organizing professional and social events • Promoting seminars, conferences, and other parallel activities • Creating lounge places at the trade fair • Carrying out workshops and awareness sessions specific to exhibitors • Offering a wider range of services

to interact with qualified staff. It is desirable that the team presenting at the stand is proactive enough to act upon the diverse needs from visitors. Equally important is the participation of top management, as their presence is crucial to the success of the trade fair (Hansen, 1999).

B2B Interactions at Trade Fairs and Relationship Quality

185

Implications for Visitors Participating in B2B trade fairs from a relationship marketing perspective is also relevant to visitors. A key feature of relationship marketing is that buyers and sellers are active elements in the market and, therefore, either of them may take the initiative to develop the relationship (Ha˚kansson, 1982). Similarly to exhibitors, visitors may use trade fairs to manage the existing portfolio of relationships and ought to include the relationship marketing dimension in their assessment of a trade fair participation. Such a procedure outlines ways to continually increase the payoff of these business encounters. Trade fair participation may also be used to evaluate alternative relationships, by contacting potential suppliers at the fair. In order to capitalize on benefits, visitors should previously prepare their participation, drawing a roadmap for the visit and scheduling meetings. In addition, visitors may explore trade fair participation to better identify with a particular professional group, generating new knowledge through interaction with people who play similar or related roles in other companies.

Implications for Trade Fairs Organizers Satisfaction with participation in a trade fair depends largely on the activities promoted by the organizer. Therefore, it is desirable that exhibitors, visitors, and trade fair organizers share goals and key objectives. The trade fair organizer occupies a central role in this effort by coordinating, mediating, and communicating the dissemination of such common grounds. Thus, the trade fair organizer must draw attractive events and diverse activities that foster relational interactions among participants. The communication strategy should emphasize the benefits of a relationship marketing argument for the trade fair participation. In particular, the physical space, activities, and planned events should comply with the logic of relationship marketing. For example, organizers may articulate the following aspects: the distribution of exhibition space, the dining and recreation areas, the availability of information for participants, and the planning and organizing of professional and social events. In addition, the trade fair organizer has to provide training sessions for exhibitors to enhance the effectiveness of their participation abandoning the idea that trade fair is essentially a sales venue. Attention should be drawn to the need of training staff members to adopt a dynamic stance initiating and encouraging interaction and dialogue.

186

MARIA SARMENTO ET AL.

CONCLUSION Developing a relationship marketing strategy for B2B trade fair participation is a key issue to increase the effectiveness of this business activity and a future challenge for managers. Although trade fairs have been associated with a transactional perspective with managers assessing trade fairs participation based on selling expectations, such a transactional paradigm no longer answers to the challenges of the business activity. In general, companies emphasize the importance of close and enduring customer and other market relationships and, under this logic, trade fairs become an effective and powerful tool for relationship marketing. Trade fairs are a privileged venue for formal and informal interactions. Such contacts enable and encourage B2B socialization episodes between the parties that are generally more receptive to interactions in this context. Trade fairs are the business equivalent of the dance hall (Blythe, 2002), where participants have the possibility to meet each other, know each other better and reinforce the bonds and the quality of their relationships. Because buyers and sellers are far from their busy professional daily routines, there seems to be higher receptiveness to share information and socialize. Such episodes are core to break relational hurdles and raise the levels of mutual understanding and friendship. They also foster trust and commitment. Trade fair participation is a valuable asset in a relationship marketing strategy. These events offer major opportunities for relationship building and development that ought to be conveniently explored by all the players to attain its maximum effectiveness. Exhibitors and visitors should explore trade fair participation to start new relationships, but also to reinforce the bonds in existing relationships. Because this environment favors informality, conflict and relationship misunderstandings can also be easily dissipated. Additionally, trade fair participation allows for networking that goes beyond buyer seller interactions to include all of the other industry actors involved with the event. Trade fair organizers, on the other hand, have the main responsibility to promote the trade fair by highlighting its relational benefits and setting up the necessary conditions to explore and capitalize on these benefits.

REFERENCES Anderson, J., Ha˚kansson, H., & Johanson, J. (1994). Dyadic business relationships within a business network context. Journal of Marketing, 58, 1 15.

B2B Interactions at Trade Fairs and Relationship Quality

187

Anderson, J., & Narus, J. (1984). A model of distributor’s perspective of distributormanufacturer working relationships. Journal of Marketing, 48, 62 74. Anderson, J., & Weitz, B. (1989). Determinants of continuity in conventional industrial channel dyads. Marketing Science, 8(4), 310 323. Athanasopoulou, P. (2009). Relationship quality: A critical literature review and research agenda. European Journal of Marketing, 43, 583 610. Banting, P., & Blenkhorn, D. (1974). The role of industrial trade shows. Industrial Marketing Management, 3, 285 295. Bello, D. (1992). Industrial buyer behaviour at trade shows: Implications for selling effectiveness. Journal of Business Research, 25, 59 80. Blythe, J. (2002). Using trade fairs in key account management. Industrial Marketing Management, 31, 627 635. Bonoma, T. (1983). Get more out of your trade shows. Harvard Business Review, 61(January), 75 83. Borghini, S., Golfetto, F., & Rinallo, D. (2006). Ongoing search among industrial buyers. Journal of Business Research, 59, 1151 1159. Campbell, N. (1985). Buyer seller relationships in Japan and Germany: An interaction approach. European Journal of Marketing, 19(3), 57 66. Cannon, J., & Perreault, W. (1999). Buyer-seller relationships in business markets. Journal of Marketing Research, 34, 439 460. Cavanaugh, S. (1976). Setting objectives and evaluating the effectiveness of trade show exhibits. Journal of Marketing, 40(4), 100 103. Crosby, L., Evans, K., & Cowles, D. (1990). Relationship quality in services selling: An interpersonal influence perspective. Journal of Marketing, 54, 68 81. Doney, P., & Cannon, J. (1997). An examination of the nature of trust in buyer-seller relationships. Journal of Marketing, 61, 35 51. Dwyer, R., Schurr, P., & Oh, S. (1987). Developing buyer-seller relationships. Journal of Marketing, 51, 11 27. Easton, G., & Araujo, L. (1994). Market exchange, social structures and time. European Journal of Marketing, 28(3), 72 84. Edvardsson, B. (1992). Service breakdowns: A study of critical incidents in an airline. International Journal of Service Industry Management, 3(4), 17 29. Ford, D. (1980). The development of buyer-seller relationships in industrial markets. European Journal of Marketing, 14(5 6), 339 353. Ganesan, S. (1994). Determinants of long-term orientation in buyer-seller relationships. Journal of Marketing, 58, 2, 1 19. Geigenmu¨ller, A. (2010). The role of virtual trade fairs in relationship value creation. Journal of Business and Industrial Marketing, 25(4), 284 292. Godar, S., & O’Connor, P. (2001). Same time next year Buyer trade show motives. Industrial Marketing Management, 30, 77 86. Granovetter, M. (1985). Economic action and social structure: The problem of embeddedness. American Journal of Sociology, 91(3), 481 510. Gro¨nroos, C. (2004). The relationship marketing process: Communication, interaction, dialogue, value. Journal of Business and Industrial Marketing, 19(2), 99 113. Gummesson, E. (1994). Making relationship marketing operational. International Journal of Service, 5(5), 5 20. Ha˚kansson, H. (1982). International marketing and purchasing of industrial goods: An interaction approach. Chichester, UK: Wiley.

188

MARIA SARMENTO ET AL.

Halinen, A., Salmi, A., & Havila, V. (1999). From dyadic change to changing business networks: An analytical framework. Journal of Management Studies, 36(6), 779 794. Halle´n, L., Johanson, J., & Seyed-Mohamed, N. (1991). Interfirm adaptation in business relationships. Journal of Marketing, 55, 29 37. Hansen, K. (1996). The dual motives of participants at international trade shows. International Marketing Review, 13(2), 39 53. Hansen, K. (1999). From selling to relationship marketing at international trade fairs. Journal of Convention and Exhibit Management, 2(1), 37 53. Hennig-Thurau, T., & Klee, A. (1997). The impact of customer satisfaction and relationship quality on customer retention: A critical reassessment and model development. Psychology and Marketing, 14, 737 764. Holmlund, M. (2004). Analyzing business relationships and distinguishing different interaction levels. Industrial Marketing Management, 33, 279 287. Homburg, C., Giering, A., & Menon, A. (2003). Relationship characteristics as moderators of the satisfaction-loyalty link: Findings in a business-to-business context. Journal of Business-to-Business Marketing, 10(3), 35 62. Huntley, J. (2006). Conceptualization and measurement of relationship quality: Linking relationship quality to actual sales and recommendation intention. Industrial Marketing Management, 35, 703 714. Johanson, J., & Mattsson, L. (1987). Interorganizational relations in industrial systems: A network approach compared with the transaction cost approach. International Studies of Management and Organization, 18(1), 34 48. Kerin, R., & Cron, W. (1987). Assessing trade show functions and performance: An exploratory study. Journal of Marketing, 51, 87 94. Li, L.-y. (2006). Relationship learning at trade shows: Its antecedents and consequences. Industrial Marketing Management, 35, 166 177. Medlin, C. (2004). Interaction in business relationships: A time perspective. Industrial Marketing Management, 33, 185 193. Metcalf, L., Frear, C., & Krishnan, R. (1992). Buyer-seller relationships: An application of the IMP interaction model. European Journal of Marketing, 26(2), 27 46. Mohr, J., & Spekman, R. (1994). Characteristics of partnership success: Partnership attributes, communication behaviour, and conflict resolution techniques. Strategic Management Journal, 15, 135 152. Moorman, C., Zaltman, G., & Deshpande, R. (1992). Relationship between providers and users of market research: The dynamics of trust within and between organizations. Journal of Marketing Research, 29(3), 314 328. Morgan, R., & Hunt, S. (1994). The commitment trust theory of relationship marketing. Journal of Marketing, 58, 20 38. Parasuraman, A. (1981). The relative importance of industrial promotional tools. Industrial Marketing Management, 10, 277 281. Ramani, G., & Kumar, V. (2008). Interaction orientation and firm performance. Journal of Marketing, 72, 27 45. Rice, G. (1992). Using the interaction approach to understand international trade shows. International Marketing Review, 9, 32 45. Rinallo, D., Borghini, S., & Golfetto, F. (2010). Exploring visitor experiences at trade shows. Journal of Business and Industrial Marketing, 25(4), 249 258.

B2B Interactions at Trade Fairs and Relationship Quality

189

Rosson, P., & Seringhaus, F. (1995). Visitor and exhibitor interaction at industrial trade fairs. Journal of Business Research, 32, 81 91. Schurr, P. (2007). Buyer-seller relationship development episodes: Theories and methods. Journal of Business and Industrial Marketing, 22(3), 161 170. Schurr, P., Hedaa, L., & Geersbro, J. (2008). Interaction episodes as engines of relationship change. Journal of Business Research, 61, 877 884. Sharland, A., & Balogh, P. (1996). The value of non-selling activities at international trade shows. Industrial Marketing Management, 25, 59 66. Shipley, D., Egan, C., & Sun Wong, K. (1993). Dimensions of trade show exhibiting management. Journal of Marketing Management, 9, 53 65. Sarmento, M. L., Simo˜es, C., & Farhangmehr, M. (2014, forthcoming). Applying a relationship marketing perspective to B2B trade fairs: The role of socialization episodes. Industrial marketing management. Wilson, D. (1995). An integrated model of buyer-seller relationships. Journal of the Academy of Marketing Science, 23, 335 345. Wong, Y., Hung, H., & Chow, W. (2007). Mediating effects of relationship quality on customer relationships: An empirical study in Hong Kong. Marketing Intelligence and Planning, 25(6), 581 596.

IMPLEMENTING STRATEGIC CHANGES TO GENERATE SUSTAINABLE COMPETITIVE ADVANTAGE Rube´n Llop and In˜aki Garcı´ a-Arrizabalaga ABSTRACT This study examines fifteen business cases, focusing on change management in ten countries on three continents between 1996 and 2007. The companies are from different sectors (industrial and services), sizes (from 30 to 10,000 employees; from 1 million euros turnover up to 1,000 million euros), and different cultural and ethnographic backgrounds. The research, based in case studies and action research, introduces a model to implement strategic change in order to generate sustainable competitive advantage in companies under situations of deep change or crisis. From the conceptual point of view this model breaks some of the basic principles of strategy formulation. The model does not begin with a strategic diagnosis that influences the implementation of planned strategic decisions. The model begins instead after the detection of a need for deep strategic change, and forces outside the organization have already determined some of the required changes (market recession, for instance).

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 191 210 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021006

191

192

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

The model is also atypical regarding the basic principles of implementing strategic change, because existing literature ignores competitive advantage during crisis management, probably because the firm’s executives assume that the firm has no competitive advantage, and only after the implementation of the required changes will conditions exist to create a competitive advantage. Nevertheless, the model introduces competitive advantage as a central element when managers implement change, and takes the long-term strategic requirements into consideration without forgetting the challenge for short-term management brought about by deep crisis. Keywords: Crisis management; strategic change; sustainable competitive advantage

STRATEGIC PLANNING AND CRISIS MANAGEMENT Strategic planning and crisis management generate opposing approaches. Considering the first approach, strategic planners consider longer periods of time both in analysis and execution, and consider the existing business environment as relatively stable within a given period. Strategic planners analyze the internal resources, the external requirements, define specific action plans and mechanisms to control the evolution of these defined plans, expend time and resources to define vision and missions, balanced score cards, ratios, and gap closure plans. Strategic planning works from an established starting point and, from different perspectives in their analysis, identifies a goal and an ending point and the way to reach that goal (Kaplan & Norton, 1996; Porter, 1980). The possibility to create a sustainable competitive advantage is only considered within the strategic planning approach (Porter, 1985). Strategy formulation is classifiable and has been viewed from different perspectives over the last decades (Mintzberg & Lampel, 1999). However, no matter what view of strategic planning is espoused, the general comment above holds true. On the other hand, when one considers the change and crisis management literature, the approach is completely different. Researchers and managers in crisis mode invariably focus only on survival. Only short-term actions occur in order to arrive at the next corner and, after arriving at that corner, they then have to focus on the next break point (Kotter, 1996;

Implementing Strategic Changes to Generate Competitive Advantage

193

Kotter & Cohen, 2002). Naturally enough, creating a competitive advantage receives little, if any, mention in the crisis management literature. Thus, it seems as if managers are either strategically reflecting, planning, in a relatively stable business environment, or they are in survival mode during a crisis.

MANAGEMENT IN EXECUTION From a conceptual point of view our research defies some of the basic principles of strategic formulation. Our investigation does not begin with a strategic diagnosis that determines the strategic decisions to be implemented. It begins from an already-detected need for a deep strategic change; due to crises the businesses are already experiencing. The model we suggest is also atypical regarding the basic principles of implementing strategic change. While existing literature ignores competitive advantage during times of crisis management probably because it is assumed that only after the implementation of the required changes will there be appropriate conditions to create one in the model proposed here competitive advantage is a central element in the implementation of strategic change (Llop & Garcı´ a-Arrizabalaga, 2011). Therefore, in our research we have to cope with “management in execution,” where theories must be useful for the companies to survive. It is on this specific approach that our research is focused. As Beer, Voelpel, Leibold, and Tekie (2005) describe, companies need a strategic approach that fits with the existing external environment and with the internal resources, capabilities, and knowledge. But companies also need to adapt to and cope with the changing environment, and this requires a level of preparedness in order to achieve the goal of having strategy, action, and reality aligned. The focus of managing in execution, and our proposal to create a sustainable competitive advantage through managing change and crisis business situations, stands upon a number of theoretical pillars. First are the approaches of permanent learning and acting (Garvin, 2000, 2002), and creating new knowledge (Nonaka, 1991, 1994; Nonaka, Peltokorpi, & Tomae, 2005; Nonaka & Toyama, 2002, 2003; Nonaka, Toyama, & Nagata, 2000; Senge, 2006; Senge, Scharmer, Jaworsky, & Flowers, 2005). Second, is the idea of building up new capabilities (Helfat, Finkelstein, Mitchell, & Teece, 2007) through teamwork (Katzenbach & Smith, 1993)

194

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

and lean management of key processes (Womack & Jones, 1996). Finally, the integrated approach of how to overcome breakpoints (Strebel, 1992), and breaking some existing rules while creating new game rules (Buckingham & Coffman, 1999) in learning companies (De Geus, 1988, 1998) using disruptive strategies (Christensen, 2003) are all part of our integrating research and the derived model.

RESEARCH METHOD Our research is based on three approaches; qualitative, case study, and action research. According to Rodrı´ guez, Gil, and Garcı´ a (1996), when a qualitative research methodology is used the researchers have to collect and use very different materials and kinds of information in order to describe a problematic situation. The approach needs to be holistic, the tools are not standardized and the researchers themselves are the key measurement instruments. Following the same idea, Herna´ndez, Ferna´ndez-Collado, and Baptista (2006) note that the researchers start examining a given social reality and develop a theory consistent with their observations. The hypotheses are generated along the process, and are refined with new data collection and/or obtained results. The methodology is flexible and typically does not involve statistical analysis. Fifteen business cases are studied from this qualitative perspective, in twelve countries on three continents; the cases draw on events that took place between 1996 and 2007. The case study research methodology has been deeply reviewed by Woodside (2010) and widely applied (Woodside, Pattinson, & Miller, 2005). According to Rodrı´ guez et al. (1996), an inductive approach is used in case study methodology. The common aspects of a given reality, the concepts, the hypothesis, or the fundamental theory appear from the interpretation of the data collected for each case study. The case study methodology usually does not look for the acceptance or refutation of previously defined hypotheses, but rather facilitates a holistic comprehension of the phenomena studied. Finally, according to Eisenhardt (1989) and Eisenhardt and Graebner (2007), theory built from a case study can later be generalized and verified. Table 1 summarizes the cases in the present study. All of the companies have experienced business situations of deep internal or external changes or crisis. Llop (2009) provides a full description of these business cases. Note that in each case one of the researchers has been the company CEO.

Iterations and Cases Characterization.

Years

Case

Type of Change

Activity

Size (Mil.)

Country

Owners

1996 1998

1.1 1.2

New SBU New SBU

Production, sales Production, sales

h60 h10

Spain Spain/UK

Subsidiary Subsidiary

1999 2000

2.1 2.2 2.3

Restructuring JV Start-up SBU Sale

Production, sales Production, sales Production, sales

£30 n/a £300

UK UK/Venezuela UK/USA

Public, London Private Public, London

2000 2002

3.1

New SBU

Production, sales

$300

USA/Mexico

Public (NY)

2002 2004

4.1 4.2 4.3 4.4 4.5 4.6

Restructuring Restructuring Restructuring Restructuring Restructuring Restructuring

Production, sales Production, sales Stock and sale Stock and sale Stock and sale Production, sales

h50 h6 h2 h10 h5 h1

Portugal Brazil Argentina UK Norway Angola

Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

2004 2007

5.1 5.2 5.3

Privatization Merger & Acquisition Merger & Acquisition

Energy Energy Energy

h1,000 h25 h25

Spain Spain/Portugal Spain/Portugal

Public (Lisbon) Governmental Governmental

Implementing Strategic Changes to Generate Competitive Advantage

Table 1.

195

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

196

These cases were studied over five iterations, in order to define and refine the model of diagnosis (obtaining key information about the business situation), and understand the intervention required to create a sustainable competitive advantage in these situations of deep change or crisis. This iterative approach of observing, reflecting, planning, and acting along a given iteration and, after finalizing the cycle, starting the next iteration is described by Zuber-Scherrit (2001). This approach is shown in Fig. 1. Finally, the research is based in an action research methodology (Coghlan, 2007; Coughlan & Coghlan, 2002; Eden & Huxham, 1996; Zuber-Scherrit, 2001, 2007), even though expressed through case studies. According to Altrichter, Kemmis, McTaggart, and Zuber-Skerritt (2002), when people reflect and improve (or develop) their own work, combining reflection and action, communicate their findings with other participants, collect data, define the problems or questions to be answered, increasing the learning through the process, then this represents an action research methodology. According to Herna´ndez et al. (2006), action research transforms a given reality through the people involved in those realities assuming their role in the transformation process. This approach completely fits with our research in Management in Execution.

3

Revised plan Act 2 Reflect Observe Reflect Plan 1 Observe Act

Fig. 1.

The Iterative Approach. Source: Zuber-Skerrit (2001).

Implementing Strategic Changes to Generate Competitive Advantage

197

LESSONS LEARNED During the first two iterations a set of secondary and primary sources were selected in order to obtain the key information about the business unit, including the executive teams and their individual profiles, the key aspects of the change or crisis processes and the related competitiveness position. The secondary sources used are mainly annual reports, memorandums of board and management meetings (overall, close to 1,200 documents were analyzed). Primary sources involved interviews (more than 350 interviews of 1 2 hours each). Individual interviews were held with board members, management team members, second-tier managers, union representatives, and key customers. Team meetings (more than 150 in total) were held with management teams, departmental leader teams, and production teams. “Climate analysis” exercises (15 enquiries through interviews, written enquires or Internet tools) and “360º exercises” were held with more than 110 executives and managers. This diagnosis forms the first output of our research. Although critical, there is little time to waste so the process needs to be managed swiftly, taking no more than a quarter of the total time available for analysis and implementation. This diagnostic method leads to the discovery of outputs about key processes, people to be used during the revitalization process of creating the competitive advantage, people to be lost during the early stages of the transformation process, relevant knowledge already existing in the organization, lack of know-how, resources needed, and financial priorities. The interrelationship among the key findings is shown in Fig. 2. Despite the differences in size, cultural approaches, sectors and type of change or crisis several management aspects appeared in each of the cases and iterations. These key management aspects that allow transformation of the crisis into an opportunity are the second key output from our research. These key management aspects are related to five management fields and are described in some detail below.

Top-Level Support The first aspect is related to top management, board members, and owners. We note that supporting the CEO through the change and crisis processes is a key factor to help the progress of the company and, if not forthcoming, then to damage all the change processes thus avoiding the creation of any

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

198

Other stakeholders perspective

Definition and management of key business risks

Results

• Vision definition • Getting success • Managing failures

Customer perspective

Key processes teamwork and lean management

Human resources leadership • Team selection • Change agents vs Breaks • Results vs culture • Knowledge management

COMMUNICATION

Fig. 2.

Diagnosis Model: Key Management Actions and Relationships.

competitive advantage. Either the CEO is fully supported by the board or owners, or he/she has to be immediately replaced.

Human Resources Management The second key aspect is related to human resources management. After the interviews a management team has to be created. In the studied cases the majority of the selected team members were already inside the organization. Only on a few occasions were external members needed. In other words, the required talent to transform a crisis situation in an opportunity was already inside the stressed organizations. It had to be released and given an opportunity to show, but it was there. At the same time, through the diagnosis period it was possible to identify the change agents that were able to promote the transformation, and they have to be given the chance to lead the transformation. Brakes were also identified. Nevertheless, the brakes were usually more difficult to identify at first sight. Close focus and analysis were always required by the CEO in order to identify and fire those dangerous individuals from the organization that, instead of helping the transformation to occur, use all their skills and capabilities to abort the transformation process. For the

Implementing Strategic Changes to Generate Competitive Advantage

199

decision of dismissal a tough, but clear, conclusion was reached; the sooner the better. In order to better handle the difficult process of identifying and selecting the key human resources during the change and crisis business cases two tools have been developed, defined, and refined along the research journey. From the information and data collected (mainly through the interviews and meetings) the human resources of a given social reality have been classified according a two-by-two matrix (Fig. 3). According to the relative weight (influence) that a given individual could have in a given company (considering both the actual and the virtual organization chart) every member of a collective can be classified as a high-influence individual or lower-influence. After this simple classification the second perspective applies “change agent” or “breaks.” In other words, each individual can be classified as one who will help to transform the crisis into an opportunity and to revamp a company or, possibly, if he or she will hinder the process through a lack of commitment, contribution, and a positive approach. The second tool to analyze and classify the human resources is shown in Fig. 4. This approach refers to the required organizational culture (according to our findings) to create a competitive advantage through a crisis. The culture (values applied to decisions) and the alignment to it, is also key to manage the crisis in our model. The required values are open and honest communication, transparency through all the process, respect for other members of the team, ethical behavior, maintenance of a high level of commitment, and obtaining results. The top management will have to show Exit Highly Influential

IV

I

Less Influential

III

II

Breaks

Change agents Profiles

Fig. 3.

Change Agents and Breaks.

200

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

Highly aligned

IV

I

Poorly aligned

III

II

Poor

Fig. 4.

Good Results

Exit

Cultural Alignment versus Results.

that attaining this culture is a non-negotiable item. When the individuals of an organization are classified according to the alignment to the culture and the results they generate another difficult moment of truth appears. Obviously, the results have to be obtained but, at the same time, how to obtain them becomes crucial. There is only one option, either the results are obtained according to the new culture or the member of the team has to be dismissed. Multidisciplinary teamwork focused on key processes has been proven as one of the most powerful tools. It enables use of existing knowledge in order to create new understanding about the real problems and solutions and to drastically improve the key performance indicators of a business. The promotion of a company culture based in openness, team success, and honesty (leading by values) is without doubt the main cause of good results generated during a crisis, and a key success factor for the transformation process. During the transforming processes one must celebrate the small progress that occurs at the beginning of the turnaround. This has also been a key aspect to assist manage the failures that always happen during these early stages of the transformation.

Communication The third management area that has huge relevance during the transformation process is communication. It has to be omnipresent during the process.

Implementing Strategic Changes to Generate Competitive Advantage

201

It has to be clear, direct, and honest throughout the whole organization; it must be frequent, defining CEO commitments and achieving them. Clear communications are a key aspect of the required culture in order to transform the crisis into a sustainable competitive position.

Lean Management The fourth management area that is also shown as a key tool through the transformation processes is the lean management of all the key business processes, from the customer (and other stakeholders) perspective. This is fairly obvious, but does call for the deliberate and sustained attention of senior management.

Financial Control Obviously, along the transformation route, financial control and obtaining the minimum required results in order to progress towards becoming once again a sustainable business unit, calls for resources and priorities; this is the fifth key management aspect. Nevertheless, it is not the time to implement all the existing financial tools and key performance indicators defined for long-term management and stable environments, as in a strategic planning approach. A few key financial parameters have to be defined and followed, but the focus of the organization has to be placed on the business itself, not on attaining the goals of the finance department or on maintaining overall parent company profit levels. At this point all these five key managerial aspects come together, to enable the transformation. To manage the existing and create new knowledge, to generate a new strategic approach based in adapting the company to the internal and external requirements, to build up the permanent capability to adapt the unit to the new requirements and react to unexpected events are the bases of the sustainable competitive advantage that this kind of crisis management and leadership can generate. All these aspects of management, that are recurrently found in each of the studied cases, required a level of open, frequent, and honest communication among the entire organization, and that has to be one of the priorities of the CEO during the transformation process.

202

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

Fig. 2 shows the first two outputs from our research (the diagnosis model and its information tools, and the identification of the key management priorities), with their interrelations. The third output of our investigation is a model of intervention, and this is now described. After the first two iterations, a model to manage the crisis situation and to transform it into an opportunity to create a sustainable competitive advantage was defined. The model’s implementation gave us the opportunity to refine the model, and to test it in the third and fourth iteration of our case studies. In the intervention model we describe three temporal phases, and the key management actions that each phase requires in order to successfully negotiate. The first phase is the diagnosis model itself. At the same time all the key management areas and actions that have been described as our second output are executed along with our intervention model and its phases. All of them are shown diagrammatically in Fig. 5. During the first three months, using all the tools commented upon in the diagnosis model (secondary information analysis, interviews, meetings, climate enquiries, 360º exercises), actions in the five management areas have to be made. Two of them are critical and constant during all of the transformation process; CEO support and communication actions. In the other three management areas (human resources, key processes management and financial aspects) three different periods have been found and defined in our intervention model. In Phase 1 the Management Team has to be selected and announced. The key business risks have to be identified from all the stakeholders’ perspectives and, finally, the key financial constraint have to be clearly identified. These actions have to be performed in the first quarter. During the first six quarters (Phase 2) the human resources selection has to reach the second-tier management. Change agents have to be identified, selected and empowered while breaks have to be fired. The honest culture based in managing by values has to be in place, and has to be a clear priority even before getting financial results. During this period there is always one, or some, failure situations that have damaged the team and have become serious obstacles to the transformation processes. Carefully managing these situations by balancing management priorities and human care is a key factor in a successful transformation. At the same time, celebrating the small successes and/or progresses obtained during this period is very much appreciated by the teams. In this Phase 2 the lean management of the key processes through a multidisciplinary teamwork is the base not only for a huge improvement of the

Implementing Strategic Changes to Generate Competitive Advantage

203

PHASE 1

PHASE 2

PHASE 3

First and second quarter

Six first quarters (first 18 months)

From 7th to 12th quarter

CEO SUPPORT Management team selection

• Results vs. Culture

Stabilizing change

• Change agents vs. Breaks

Knowledge management

• Obtaining success • Managing failures Key business risk identification from the stakeholders’ perspective

• Process management • Teamwork

Keep improving the key business processes

• Lean management Key processes from customer’s perspective Key financial aspects

Vision definition

Obtaining predicted and solid results

Strategic planning Overcome major financial constraints COMMUNICATION

Fig. 5.

Intervention Model.

key performance indicators, but also for the construction of the company culture lead by values. From the financing perspective a short-term strategic plan is built while the very short-term management remains a top priority. During the final stage, Phase 3, and before restarting the whole process, the CEO has to establish change management as a permanent tool. Teams have to be alert to new signals and anticipate the requirements that the new situation could demand. Both the old and new knowledge have to be expanded throughout the organization. The key processes have to be

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

204     

Results vs Culture Change agents vs brakes Obtaining success Failure management Process management

    

Teamwork Lean management Strategic planning Vision Managing negative financial impacts

Phase 2 6 First quarters (first 18 months)

er

 Key processes from customer’s perspective (and other stakeholders)

COMMUNICATION

e 1 rt as ua Ph nd q 2

 Key risks identification

t& 1s

 Management team selection

Fr om Pha 7 se qu th to 3 ar ter 12t h

 Stabilizing change management  Knowledge management  Keep improving the key processes  Forecasting and achieving solid financial results

 Key financial parameters

Key process management from customer (and other stakeholder) perspective through leading the human resources

Fig. 6.

The Revamping Cycle.

redefined and improved with a second generation of team members. The financial results will be well forecasted and achieved. It could seem at this point that the “good old times” have returned, but this is illusory. In all the cases studied, the next wave of crisis or change arrived at the end of a three-year period. The organizations had to start the transformation process from a crisis to an opportunity to create a sustainable competitive advantage all over again. The model then becomes a cycle; the cycle of revamping the organization. This is the fourth major output of our research and is illustrated in Fig. 6. .

THE EVIDENCE All these conceptual findings are backed by the results obtained along the case study research path. The results have been analyzed from three different perspectives. First, the financial and economic results were monitored in order to both find out if the companies survived and to compare these results to those of related business units. The business units studied all obtained superior economical and financial results to comparable business.

205

Implementing Strategic Changes to Generate Competitive Advantage

Table 2 includes some of the results and Llop (2009) offers detailed results. Table 2 summarizes some of the financial results obtained during the fourth iteration (2002 and 2003). The findings include significant improvements of the business units themselves but also in comparison to other business units within the same industry and market. The second major aspect that was evaluated and monitored along the research trail was human resource management. As “leading by values” proved such a key factor in all these cases, the human resources climate was evaluated twice in the last two iterations. With this tool the researchers were able to evaluate the evolution of the unit through the process and, at the same time, to compare the relative position of these units with the existing databases of human resources climate monitoring. Both evaluations were extremely positive. As shown in Table 3, the internal evolution reflected improvements from 20 to 30 percentage points. The scores achieved are among the best that the databases are able to show (Llop, 2007, 2009). Finally, the third measured aspect is the improvements found in the key processes defined in each of the studied cases. These processes were Table 2. Financial Results in the Fourth Iteration Case (YTD October (h Thousands)). Budget YTD’03 Trading profit Portugal 2041 Brazil 173 Norway −140 Argentina −22 Total 2052 Operating profit Portugal 1128 Brazil 173 Norway −140 Argentina −22 Total 1139 Net profit Portugal 838 Brazil 750 Norway −132 Argentina −363 Total 1093

Difference

Difference

2003

YTD’02

YTD’03 versus B’03

YTD’03 versus YTD’02

1067 3 296 −16 1350

−2092 −304 −122 −435 −2953

974 170 −436 −6 702

4133 477 −18 413 5005

1067 3 296 −16 1350

−2842 −304 −122 −435 −3703

61 170 −436 −6 −211

3970 477 −18 413 4842

649 2 172 −20 803

−3162 −1758 −57 −465 −5442

189 748 −304 −343 290

4000 2508 −75 102 6535

206

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

Table 3. Human Resources Climate Enquires Results, Fifth Iteration, 2005 2006 Percentage of Highly or Completely Satisfied. Question

2005

2006

Improvement

Are you informed about the main objectives of your unit? Does your boss help you in your professional development? Is your personal contribution appreciated by your boss? Does good communication and trust between your boss and yourself exist? Is your boss attitude appropriate in front of the achievements of the team members? Does your boss communicate clear messages and objectives? Does the existing relationship with your boss motivate your engagement? Are you motivated to accept new challenges? Does the relationship with the other team members motivate your engagement? Do you know your major individual objectives? Does your boss delegate according to your resources and capabilities? Are the organization changes an opportunity for your human and professional development?

33.4

65.9

32.5

29.0

52.8

23.8

28.4

51.7

23.3

43.1

64.9

21.8

26.8

48.4

21.6

38.2

59.4

21.2

30.0

50.6

20.6

62.9 57.4

82.5 76.9

19.6 19.5

60.1

79.2

19.1

45.9

62.7

16.8

34.4

50.6

16.2

identified as the key success factors in each of the business units, taking into considering the different stakeholders’ priorities. From the beginning of each case study a measurement of performance was defined for each process. A multidisciplinary team was formed and weekly follow-up meetings were held. In every single case, the methodology of analyzing the situation, defining the problem precisely, listing the alternative actions to be taken in order to drastically improve those processes, defining and implementing an action plan and monitoring the results was applied. The improvement of the results was always a two-digit percentage and, in several cases, the obtained results were twice or more times the starting value. More than 150 key processes were studied and improved, and some selected results are shown in Table 4 (for more detailed results, see Llop, 2009).

207

Implementing Strategic Changes to Generate Competitive Advantage

Table 4.

Some Examples of the Process Management Improvements Achieved.

First iteration − Reduction in production items through product rationalization − Increase in production productivity − Minimum production lot reduction Second iteration − Increase in Production Productivity

Third iteration − Increase in production productivity − Production cycle reduction − On-time deliveries − Bidding time − Market share recovery mainly due to customer service improvement Fourth iteration − Finished goods stock reduction (in items or SKU) − Finished goods stock reduction (in free cash flow generation) − Production and delivery time cycle reduction Fifth iteration − New customer in-take − Company culture modification through leading by values, multifunctional teamwork and communication action plan

75% 30% From 5 to 1 (80%) From 10 to 30%, depending of different product lines 30% From 12 to 3 weeks (75%) From 56% to 93% From 9 to 3 days (66%) From 10% to 50%

70% h1 Million From 4 weeks to 48 hours 280,000 See results in Table 3

CONCLUSION The research here defines a model to diagnosis a business unit through a change or crisis process. Additionally, we have defined and implemented a model to help managers act through the crisis in order to transform the difficult business situation into an opportunity to create new capabilities to succeed from the existing knowledge (intervention model). Those tools and models have been defined, refined and used in fifteen international business cases of change and crisis. Despite the urgency, the need to change or to handle a crisis we managed to identify a sustainable competitive advantage in those cases while we observed the business. Our findings are summarized as follows. The companies studied suffered deep changes and crises in short periods. These periods can, however, be used to create the capability to adapt the unit to the new challenges faster

208

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

than competitors and thus achieve a sustainable competitive advantage. This is attained through combining “leadership by values,” increasing existing knowledge, managing by processes, using a teamwork approach, and through lean management of critical systems and processes. This competitive advantage seems to be sustainable as far as the model is applied as a cycle of revamping the unit continuously, having the business permanently fitting in with the environment. As Fig. 6 suggests, it is a matter of consistently and constantly restarting the adaption process.

LIMITATIONS AND FUTURE RESEARCH Our research has been limited to 15 cases. Therefore, as this is just a convenience sample, we do not pretend to extend our conclusions directly to other business, change, crisis or management situations or countries. Nevertheless, future research could usefully focus on testing our models and findings (totally or partially) in other business cases or non-profitable organizations, in order to improve results in other fields of business activity.

REFERENCES Altrichter, H., Kemmis, S., McTaggart, R., & Zuber-Skerritt, O. (2002). The concept of action research. The Learning Organization, 9(3), 125 131. Beer, M., Voelpel, S. C., Leibold, M., & Tekie, E. B. (2005). Strategic management as organizational learning: Developing fit and alignment through a disciplined process. Long Range Planning, 38(5), 445 465. Buckingham, M., & Coffman, C. (1999). First, break all the rules. New York, NY: Simon & Schuster. Christensen, C. (2003). The innovator’s dilemma. New York, NY: Harper Paperbacks. Coghlan, D. (2007). Insider action research: Opportunities and challenges. Management Research News, 30(5), 335 343. Coughlan, P., & Coghlan, D. (2002). Action research for operations management. International Journal of Operations & Production Management, 22(2), 220 240. De Geus, A. (1988). Planning as learning. Harvard Business Review, 66(2), 70 74. De Geus, A. (1998). La empresa viviente. Buenos Aires, Argentina: Ediciones Granica, S.A. Eden, C., & Huxham, C. (1996). Action research for management research. British Journal of Management, 7(1), 75 86. Eisenhardt, K. M. (1989). Building theory from case study research. The Academy of Management Review, 14(4), 532 550. Eisenhardt, K. M., & Graebner, M. E. (2007). Theory building from cases: Opportunities and challenges. Academy of Journal Management, 50(1), 25 32.

Implementing Strategic Changes to Generate Competitive Advantage

209

Garvin, D. A. (2000). Learning in action: A guide to putting the learning organization to work. Boston, MA.: Harvard Business School Press. Garvin, D. A. (2002). General management: Processes and action. New York, NY: McGraw-Hill. Helfat, C., Finkelstein, S., Mitchell, W. D., & Teece, D. J. (2007). Dynamic capabilities: Understanding strategic change in organizations. Malden, MA: Blackwell Publishing. Herna´ndez, R., Ferna´ndez-Collado, C., & Baptista, L. (2006). Metodologı´a de la investigacio´n (4ª edicio´n). Me´xico D.F., Me´xico: McGraw-Hill Interamericana. Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Boston, MA: Harvard Business School Press. Katzenbach, J. R., & Smith, D. K. (1993). The wisdom of teams: Creating the high-performance organization. Boston, MA: Harvard Business School Press. Kotter, P. J. (1996). Leading change: Boston, MA: Harvard Business School Press. Kotter, P. J., & Cohen, D. S. (2002). The heart of change: Real-life stories of how people change. Boston, MA: Harvard Business School Press. Llop, R. (2007). La responsabilidad social corporativa en e´pocas de cambio y crisis. Harvard Deusto Business Review, 158, 40 49. Llop, R. (2009). Creacio´n e implementacio´n de un modelo de diagno´stico y un modelo de intervencio´n en situaciones empresariales de cambio y crisis. San Sebastia´n (Tesis Doctoral). San Sebastia´n, Spain: Universidad de Deusto, Facultad de Ciencias Econo´micas y Empresariales. Llop, R., & Garcı´ a-Arrizabalaga, I. (2011). Using change and crisis management as an opportunity to create a sustainable competitive advantage. In E. Kaynak & T. D. Harcar (Eds.), Advances in global management development (Vol. 20, pp. 552 559). Hummelstown, PA: IMDA Press. Mintzberg, H., & Lampel, J. (1999). Reflecting on the strategy process. Sloan Management Review, 40(3), 21 30. Nonaka, I. (1991). The knowledge creating company. Harvard Business Review, 69(November December), 96 104. Nonaka, I. (1994). A dynamic theory of organizational learning creation. Organization Science, 5(1), 14 37. Nonaka, I., Peltokorpi, V., & Tomae, H. (2005). Strategic knowledge creation: The case of Hamamatsu Photonics. International Journal of Technology Management, 30(3 4), 248 264. Nonaka, I., & Toyama, R. (2002). A firm as a dialectic being: Towards a dynamic theory of the firm. Industrial and Corporate Change, 11, 995 1109. Nonaka, I., & Toyama, R. (2003). The knowledge-creating theory revisited: Knowledge creation as a synthesizing process. Knowledge Management Research & Practice, 1(1), 2 10. Nonaka, I., Toyama, R., & Nagata, A. (2000). A firm as a knowledge creating entity: A new perspective of the theory of the firm. Industrial and Corporate Change, 9(1), 1 20. Porter, M. E. (1980). Competitive strategy. New York, NY: Free Press. Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York, NY: Free Press. Rodrı´ guez, G., Gil, J., & Garcı´ a, E. (1996). Metodologı´a de la Investigacio´n Cualitativa. Archidona, Ma´laga, Espan˜a: Ediciones Aljibe, S.L. Senge, P. M. (2006). The fifth discipline: The art and practice of the learning organization (2nd ed.). New York, NY: Currency/Doubleday.

210

RUBE´N LLOP AND IN˜AKI GARCI´A-ARRIZABALAGA

Senge, P. M., Scharmer, C. O., Jaworsky, J., & Flowers, B. S. (2005). Presence: An exploration of profound change in people, organizations and society. New York, NY: Currency/ Doubleday. Strebel, P. (1992). Breakpoints: How managers exploit radical business change. Boston, MA: Harvard Business School Press. Womack, P. J., & Jones, D. J. (1996). Lean thinking. New York, NY: Simon and Schuster. Woodside, A. (2010). Case study research: Theory, methods and practice. Bingley, UK: Emerald Group Publishing Limited. Woodside, A. G., Pattinson, H. H., & Miller, K. E. (2005). Advancing hermeneutic research of interpreting interfirm new product development. Journal of Business & Industrial Marketing, 20, 364 379. Zuber-Scherrit, O. (2001). Action learning and action research: Paradigm, praxis and programs. In S. Sanskaran, B. Dick, R. Passfield, & P. Svenson (Eds.), Effective change management using action research and action learning: Concepts, frameworks, processes and applications (pp. 1 20). Lismore, Australia: Cross University Press. Zuber-Scherrit, O. (2007). A model for designing action learning and action research programs. The Learning Organization, 9(4), 143 149.

MAKING SENSE OF MARKETING DECISION SYSTEMS THROUGH PICTORIAL REPRESENTATION: DECISION SYSTEM ANALYSIS Roger Marshall, David Bibby and WoonBong Na ABSTRACT Decision system analysis is a conceptually simple technique that maps the process of group decisions over time. The data is gathered in a variety of ways, but most often some form of protocol analysis is the foremost tool. The data is then condensed and depicted as a flowchart for a specific decision. If several such flowcharts can be assembled within an industry, they can be melded together to form a generic guide that is very useful to practitioners and very interesting to theorists. Here, a brief history of the development of the technique leads to a description of the process. This is followed by a comparison to cognitive mapping (a similar technique applied to mapping thought processes rather than physical processes), and an illustrative longitudinal example of DSA. Keywords: Decision system analysis; protocols; decision maps; business decisions

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 211 226 Copyright r 2014 Roger Marshall, David Bibby and WoonBong Na All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021007

211

212

ROGER MARSHALL ET AL.

DECISION SYSTEM ANALYSIS Decision System Analysis (DSA), does what only the truly wise can do makes complex phenomenon seem simple. In this instance complex, multiperson, iterative decisions are reduced to flowcharts. DSA is simple to understand conceptually and it is simple to interpret the output. In this chapter, the research technique is first described, and then the relationship it bears to similar analytical techniques is discussed. Finally, a fortuitous situation has arisen that allows an old DSA study (of advertising agency decisions) to be compared to partial results of a wider study currently in progress in the same industry. This comparison nicely illustrates not only the usefulness of the technique from an academic perspective, but also the value placed upon it by business decision-makers.

THE ORIGIN AND DEVELOPMENT OF DSA Churchman, Ackoff, and Arnoff (1957), wrote one of the most influential early books on operations research; Russel Ackoff, who was Churchman’s first doctoral student, was trained in the philosophy of science and is commonly considered the father of operations research. Yet he was also the greatest and most vociferous critic of the way that operations research developed. He observed the science developing into a narrow, quantitative tool only applicable to understanding and aiding low-level problems of limited scope. Often operations research models could even mislead, as they increasingly ignored the social and psychological variables that he considers such an integral part of group decisions (Ackoff, 1961). It is Ackoff who, in a sense, is the first proponent of DSA. By the 1970s DSA began evolving into the form it has today. Noel Capon and James Hulbert (1975) published a landmark paper, in which they analyzed four marketing decision systems purely using qualitative descriptions. They, like Churchman and Ackoff before them, bemoaned the fact that few DSA studies had been conducted. Moreover, although many industrial and managerial decisions involve several people, decision science appeared to be more focused on individual decisions. The research conducted at an organizational level seemed to them focused mainly on the technological development of information systems. Capon and Hulbert’s (1975) work provides a model for later research into marketing decision systems.

Making Sense of Marketing Decision Systems

213

The next burst of DSA activity centered on industrial purchasing behavior (Bonoma, Zaltman, & Johnson, 1978; Robinson, Faris, & Wind, 1967; Sheth, 1973; Vyas & Woodside, 1984; Webster & Wind, 1972). All of these researchers used inductive methods; providing descriptions of observations in many similar situations and generalizing from them, using a flowchart or diagram to depict a decision system. Again, although these researchers’ deep insights still endure, there has been a remarkably small body of DSA published work since the 1970s. Many of the studies conducted after 1970 were either single product or single company studies (Cyert, Simon, Herbert, & Trow, 1956; Pettigrew, 1975; Wilson, 1984). Vyas and Woodside (1984), however, show that studying several companies allows inductive model building, and suggest that this can provide useful knowledge for industry. Na, Marshall, and Woodside (2009) followed this advice and explored the decision systems within advertising agencies this work, one of relatively few DSA studies in marketing this century, is described a little later. Why is it, then, that so few DSA studies are conducted? One explanation is that research in marketing during the latter end of last century followed a pendulum swing and became highly quantitative. It seems more likely, though, that researchers eschew the technique as they simply consider that the method takes too much time and effort. In the next section the methods of DSA are discussed, before comparing DSA to similar research methods.

HOW TO CONDUCT A DSA STUDY DSA is a form of case study and, as in many case studies, mixed methods are used (Vyas & Woodside, 1984; Woodside & Sherrel, 1980). One of the principal tools in a decision system researcher’s kitbag is observation. Thus Moore (1969) collected data about purchasing systems by sitting in the purchasing department of various companies for three days, on seven occasions. But observation, although powerful, reveals little about motivation and little about the typicality of the behavior observed. Furthermore, in an attempt to not miss something, it is tempting for the observer to record everything for later analysis; but Capon and Hulbert (1975) expressly warn against this practice, as it can become a very time-consuming and expensive technique, rather like ethnography, if much material not directly germane to the issue is also collected and subsequently filtered out.

214

ROGER MARSHALL ET AL.

Most researchers do not take such a general approach, but rather conduct a series of recorded interviews with the decision-making team, that complements their observations. These often take the form of protocol analysis, where a respondent is asked to talk through his or her typical decision process. Thus, perhaps, a face-to-face observation of a group meeting will expose the process, the group dynamics and even the outcomes but, when supplemented with individual interviews, motivations and possible variations from the norm may be exposed. Other methods can also help. Documents such as minutes of meetings, formal procedural guidelines, and so on can help flesh out interview and observational data. Group decisions are often iterative, and also often follow a pattern. Even where there is no strict procedural guideline followed people are driven by habitual behavior so soon fall into a pattern, which is possibly adjusted over time and reinforced by the success of the outcomes. This indicates that it is possible to map the decisions as flowcharts; showing who speaks to whom and in what order, and offering alternative paths of action at each stage, that are taken in the light of the outputs from the previous stage. In Fig. 1 such a map is shown. It is taken from Capon and Hulbert (1975), and describes the process of allocating an annual advertising budget. An oblong box in the chart represents a process, a diamond shape a decision; the circle represents the outcome. This chart allows feedback loops to be used so that if the “costs do not appear reasonable,” then the feedback loop takes the process back to a revision of the plans. This is easy to follow and provides a useful overview of a complex decision system that executives can use to identify weaknesses in the decision process and consequently improve the system. This chart, of course, represents the thoughts and actions of a number of people, all those in the decision group. Thus, constructing such a process map requires an iterative technique, where each individual represented in the decision is satisfied that his or her actions are correctly reflected in the model. There are issues of subjectivity, as with all interpretive work, but there are also ways of minimizing subjective bias. One way is for two, or even three, researchers to independently draw the charts, working from the original data (protocols, interview transcripts, observations, and documents) and then triangulate the charts to ensure reliability. Another way is to revalidate the charts by taking the finished flowchart(s) back to the decision-makers and seeking their agreement that they do indeed fairly represent the way their joint decision is made.

Making Sense of Marketing Decision Systems

Fig. 1.

215

Typical Process Map Output from a DSA Research Project. Source: Capon and Hulbert (1975).

RELATED ANALYSIS TECHNIQUES, COGNITIVE MAPPING Harking back to Ackoff (1961), many quantitative researchers attempt modeling complex systems. Complex systems, in a technical, modeling, context refers to the interaction of multiple participants combined in some holistic model. Pepinsky (2005) defines complex systems as “Those phenomena that appear at an aggregate level, based not on specific micro-level interactions of agents but rather on the complex and often unpredicted

216

ROGER MARSHALL ET AL.

effects of many such interactions.” Quite often researchers in marketing use quantitative simulations to attempt to understand the result of these interactions between players, and these simulations form the basis of further fieldwork using a variety of techniques. Brand and latent class choice models using multinomial probit, hybrid logit, and non-parametric methods (Ben-Akiva et al., 1997; LabeagaAzcona, Lado-Couste´, & Martos-Partal, 2010) are all used in an attempt to understand the dynamics of a variety of complex marketing systems. A wide variety of such systems include the diffusion of information and innovations, opinion leadership retail location decisions, inter-firm relationships, strategy and competition, marketing mix models (Rand & Rust, 2011). Of these simulations, it is perhaps the agent-based models that could best cope with the iterative nature of a decision system such as that used by an advertising agency working on a campaign with their client, even though most applications to date are within a social context. This class of model works “bottom-up;” designating agents in the system and creating quantitative rules for their behavior. Again, such models are typically not an end in themselves, but rather serve to offer a picture of a system that provides a framework for further study and makes more detailed field study viable. The comments of Ackoff regarding both external reliability and the participation of the decision-makers, though, still stand. It is intuitive to depict processes visually in a chart, and the idea is certainly not unique to DSA. Accounting systems and operations research projects commonly use such flowcharts to depict the flow of papers, money, responsibilities, contacts, and key performance attainments. It is the social scientists attempting to understand individual decisions who come closest to DSA in terms of method and rationale. The problem, that group decisions simply become entrenched in habitual routines, is echoed in cognitive psychology; in that individuals also often make decisions based not on a consideration of the specific circumstances, but on the basis of prior decisions made to solve the same problem in some earlier situation (Armstrong & Brodie, 1994; Armstrong & Collopy, 1996). In order to understand exactly how individuals make important strategic decisions (and how they could do better) a process called cognitive mapping has been developed. It is worth discussing this process here, as it bears a very strong relationship to DSA, but applied to thought processes rather than overt decision processes, and the practice is far better developed. The process of mapping the mental thoughts of decision-makers always starts with a single decision-maker (Chaney, 2010). As in DSA, though, strategic decisions are usually made in a group setting and the thoughts of a single

Making Sense of Marketing Decision Systems

217

decision-maker are rarely sufficient to represent the group (Barr & Huff, 1997). Thus, as in DSA, the charts of individuals are often fused together to form a common thought-path leading to a particular joint decision. Of relevance to the purpose of cognitive mapping of strategic thoughts is that whilst it is clearly possible to infer the thoughts of a manager, or a group of managers, from their explicit, considered, actions, cognitive mapping provides access to the implicit reasoning of individuals at a particular time (Swan & Newell, 1994). In particular, these mental maps can be usefully developed to show linkages between ideas and constructs, which not only hold theoretical interest to the external observer, but also assist decision-makers to improve their decisions. Cognitive cartographers attempt to identify cause and effect relationships between different cognitive elements and constructs, and represent them in a chart showing which concept will influence another; the links between the ideas can be shown as directional arrows that can carry a signifier such as a positive or negative sign, or even an indicator of the strength of the relationship. This rationale has strong relevance to DSA. For the reader these charts are simple and intuitive to follow, even though they are often very difficult for the researcher to construct (Marshall, 2012). Again, there is a great deal of variety of research approach to collecting data to enable the construction of cognitive maps. Durif, Geay, and Graf (2012) take a rather positivist approach, for instance, and use spontaneous questions in interviews to explore the extent to which financial account managers are too focused upon commercial performance. The answers to these questions are recorded in systematic exploration grids (following a method suggested by Cossette (2004)), and then the researchers conduct further analysis using Decision Explorer software. In contrast, Martin and Isozaki (2012) only very lightly structure a set of interviews designed to follow the way hotel management structure strategic decisions in poor economic circumstances. They use McCracken’s (1988) long interview technique to provide sufficient data to establish decision maps of executives formulating strategy for two major hotel chains.

AN ILLUSTRATIVE EXAMPLE, MAPPING ADVERTISING AGENCY DECISIONS In 2009 Na, Marshall, and Woodside conducted DSA on data collected some 15 years earlier, about how advertising agencies make decisions about

218

ROGER MARSHALL ET AL.

advertising campaigns. The data was first re-verified, and then, in preliminary discussion with the agents, the research team decided that there are four distinct types of decision system to be analyzed; the annual campaign decision, development of the creative campaign, developing the promotional campaign and, finally, media decisions. The research followed a classical design. Data were gathered mainly by protocol analysis, supported by interviews, observation of meetings and the scrutiny of some documents. In fact there were very few documents to scrutinize, other than for some minutes of meetings and the customers’ briefing documents. The sample was composed of two agencies, each offering two clients. The campaigns involved advertising for industrial, consumer and services. The principle researcher carried out all the interviews, over a period of some eight months. In fact the data from six cases were gathered simultaneously, with the longest protocol taking 40 weeks to complete. In order to guide their initial research, Na et al. designed some propositions by making assumptions based on a review of the relevant literature. These propositions are presented here as they are formative to the research process, and illustrate that DSA is not ethnography, but a more focused research method. The first proposition is that the advertising agency’s organizational structure (team or functional system) influences the structure of decisionmaking groups enacting decision processes. This is quite intuitive but guides the choice of both sample key informants. Second, the type of advertising decision (creative, media, promotion, or campaign) will affect the structure of decision-making groups. Not only is this noted in the literature but it also makes good sense. A creative process requires different players, different timing, and has a different purpose to, say, a media decision. Also quite obvious, but influential, is that the decision situation (complexity, novelty, or importance) influences the decision process and the size of a decision-making group (Doyle, Woodside, & Michell, 1979; McQuiston, 1989). In a similar vein, the function, decision situation, and decisions types (complexity, novelty, and importance) affect the structuring criteria. Vyas and Woodside again provide evidence (1984) as do Na, Marshall, and Son (2003), but again it is intuitively clear that minor decisions will call for a different group composition and structure than more significant, complex ones. Finally, Na and his colleagues assumed that conflicts are rare and are resolved in a rational manner. Personalities and interpersonal relationships

Making Sense of Marketing Decision Systems

219

will always intrude on joint decisions, but this is professional situation where there is a common goal and the agency stands to “win” rather than any particular individual within it. In order to construct the decision maps, the protocol statements were each shortened, following a technique suggested in prior research (Bettman & Park, 1980). The trimmed statements were then sequence-ordered and the maps drawn. As is typical, the decision participants confirmed the maps before final versions were completed, and then the researchers further validated them by showing them to four other advertising agencies in the same city, but not in the sample, to gain their general agreement. In fact, in the Na et al. research, all the maps were collapsed into a single, simple, generic process chart (Fig. 3). For the purpose of the present discussion, though, the map for the development of a creative campaign is also shown, in Fig. 2. This map is based upon six cases and involved 68 protocols. This figure looks complicated, but actually a decision path is clearly discernable. This path is linear, with small groups meeting in sequence, feedback loops acting as safety avenues at each stage, and clearly even from a cursory inspection of the diagram takes much time. The summary chart (Fig. 3), where decision maps from four different decision types is amalgamated into a single, generic chart, grossly simplifies the base charts but does indicate the linear nature of the decisions as they were made, and observed, at the time. In early 2012 another team went back to five agencies in the same city to conduct an investigation with a slightly different, integrated marketing communications, brief. As part of the study, though, it became necessary to conduct DSA analysis in order to understand how agency decisions are made, so the integrating mechanisms can be identified. In this particular DSA research use is made of a wider range of data sources. The researcher first interviewed all the main decision-group participants, including the managing director, head of planning, group account director, digital creative director, operations/production director, and the client’s marketing manager. At these semi-structured interviews discussion was recorded, and later transcribed and then, where necessary, a further interview was conducted to clarify some obscure point or confirm some key fact. In addition, many useful documents were discovered. These include the agency’s client planning brief and long templates, the agency Creative Process Model, the Creative Process Teams/Triangles model (Fig. 4), an Account Planning Process model and an agency Post-campaign analysis template. The planning briefs are exactly what they seem; an initial and

220

ROGER MARSHALL ET AL.

Fig. 2.

Creative Campaign Decision Process.

expanded campaign plan that covers all the necessary bases of objectives, target audience, style, mood, and so on, and are strongly related to the Account Planning Process Model. The Teams triangle model is unique to this agency, as far as the researchers are aware, and simply designates two

221

Making Sense of Marketing Decision Systems

START

PROBLEM AREA DECISION STAGE (1) Annual campaign decision

Creative campaign decision

Promotional campaign decision

Media decision

DECISION-MAKER GROUP COMPOSITION DECISION STAGE (2) The specific decision type

The degree of importance

The organizational system

DECISION-MAKING PROCESSES (3) Information search (3a) Need primary research? Need secondary research?

Problem solving (3b) Need a one-step solution process? Need a two-step solution process?

Evaluation (3c) Need a pre-test for alternative(s)? Need a review board committee?

Final decision (3d) Need a formal meeting/presentation? Need ratification from Head Office?

FEEDBACK PROCESS (4) -Building a relationship Need a revision?

Fig. 3.

Has the situation changed?

Customer satisfied?

Global Agency Client Decision Process.

teams. Although simple, the model obviously has a major normative impact on how these decisions are made the definition of these teams dictates, to a point, the decision process and, consequently, the DSA flowchart depicting that process. The researcher was part way through charting this process in the approved manner when it was discovered that the Agency Creative Process Model made the researcher’s task easy why is discussed shortly. Three quite startling facts swiftly came into focus. Startling because although some change was expected, it was assumed that the basic decision structure would remain. These facts concern the decision team, the DSA analysis itself and the striking difference in the maps created by Na et al. and those of the current research.

222

ROGER MARSHALL ET AL.

Upstream business

Execution Team

Planner

Creatives

Client

Client

Creative Director

Fig. 4.

Group Account Director

Producer

Account Director

Creative Process: Teams/“Triangles.”

With regard to the decision team, there is a new actor present within advertising agency decision teams, the Account Planner. This new position was first noted by Griffiths (2008), who suggests that they started to appear around the late 1960s; now most agencies employ such a person. This has ramifications for the decision process as the account planner acts as a product champion and shepherds the decision through all its stages. The second finding is that both of the two agencies so far contacted have already conducted a form of DSA and have produced decision maps designed to guide the decision team efficiently through the process. One of these maps is shown in Fig. 5. The researcher found that his attempts to map the agency’s decision process became almost redundant, as the chart in Fig. 5 echoes, in fact dictates, how decisions are made in this agency. His task in this situation became confirmatory rather than exploratory. In the opening paragraphs of this chapter, mention was made of Ackoff, who was a critical father figure of operations research. One of his major criticisms of operations research at that time was that planning and decisionmaking must be participatory (Ackoff, 1961). That is, he was disturbed that researchers or consultants not using or personally involved in the managerial decision-making were developing a decision system, rather than the decision-makers themselves developing their own models. Ackoff would enjoy this fact; that some 30 years after an academic DSA exercise with advertising agencies and their decision systems, agencies in the same city and industry are now creating and using their own DSA analyses. It would be good to think that there is a causal connection, but that is very speculative!

223

Making Sense of Marketing Decision Systems

Client to brief Creative and Media Agencies together

Client Planning Brief Reverse Brief Creative

Creative and media agency

Media Agency information

The Reverse Brief Long brief

Audience analysis

Communications platform presentation Tissue session Creative ideas

Audience analysis

Evaluation and feedback

Agencies review the brief together, agree on the process and on a combined time-line for their response Audience analysis feeds into the long brief

Combined tissue session for media and creative ideas

Creative concept and media architecture approved by client

Implementation plan Refined creative Territory

Detailed media scope

Refined recommendations based on feedback. Expansion of creative ideas and media thinking

Production

Fig. 5.

Agency’s Own Creative Process Model.

The third finding that surprises is the difference in the two path diagrams. In the agency version (which is, admittedly, more generic) the process is far shorter, far quicker. Interviews with decision-making participants to discuss this aspect elicits the information that time has become more valuable over the years, and that communication technologies in particular have facilitated significant increases in the speed with which group decision processes can be conducted.

BACK TO THE BEGINNING The title of this research contains the purpose of DSA; which is to depict complex, multi-person strategic and marketing decision systems in a simple visual format, so that the system can be improved in the light of the current decision environment. The implication is that a DSA analysis should be part of the regular marketing audits smart companies carry out to keep

224

ROGER MARSHALL ET AL.

abreast of technologies, trends and rapidly changing environments. As with individual decision-makers, it is so easy for group decision-makers to fall into habitual decision patterns, but this is dangerous as the members of group, the precise nature of the decisions and the environment on which the decision is to applied all change so swiftly, so automatic decisions made on the basis of “it worked last time” can easily lead to disaster. The technique is not difficult, even though it can be tedious and time-consuming. The pay-off is immense, however, as the decision systems under scrutiny within a company often deliver the key value that keeps the company profitable.

ACKNOWLEDGMENT The authors gratefully acknowledge the permission granted by the International Journal of Business & Economics to reproduce an adapted and expanded version here, of a paper published in IJBE in 2013 (Marshall, R., Bibby, D., & Na, W. (2013). Making sense of complex marketing decision systems: Decision system analysis. International Journal of Business & Economics, 12(2), 121 130).

REFERENCES Ackoff, R. L. (1961). The meaning, scope and methods of operations research. In R. L. Ackoff (Ed.), Progress in operations research (Vol. 1, pp. 1 34). New York, NY: Wiley. Armstrong, J. S., & Brodie, R. (1994). Effects of portfolio planning methods on decision making: Experimental results. International Journal of Research in Marketing, 11(1), 73 84. Armstrong, J. S., & Collopy, F. (1996). Competitor orientation: Effects of objectives and information on managerial decisions and profitability. Journal of Marketing Research, 33(2), 188 199. Barr, P. S., & Huff, A. S. (1997). Seeing isn’t believing: Understanding diversity in the timing of strategic response. Journal of Management Studies, 34(3), 337 370. Ben-Akiva, M., McFadden, D., Abe, M., Bo¨ckenholt, U., Bolduc, D., Gopinath, D. … Steinberg, D. (1997). Modeling methods for discrete choice analysis. Marketing Letters, 8(3), 273 286. Bettman, J. R., & Park, C. W. (1980). Effects of prior knowledge and experience and phase of choice process on consumer decision processes: A protocol analysis. Journal of Consumer Research, 7(3), 234 246. Bonoma, T. V., Zaltman, G., & Johnson, W. (1978). Industrial buying behavior. Boston, MA: The Marketing Science Institute. Capon, N., & Hulbert, J. (1975). Decision system analysis. Industrial Marketing Management, 4, 143 160.

Making Sense of Marketing Decision Systems

225

Chaney, D. (2010). Analyzing mental representations: The contribution of cognitive maps. Recherche et Applications en Marketing, 25(2), 93 115. Churchman, C. W., Ackoff, R. L., & Arnoff, E. L. (1957). Introduction to operations research. New York, NY: Wiley. Cossette, P. (2004). L’organisation: Une perspective cognitive. Quebec, Canada: Les Presses de l’Universite´. Cyert, R., Simon, M., Herbert, A., & Trow, D. M. (1956). Observation of a business decision. Journal of Business, 29, 237 248. Doyle, P., Woodside, A. G., & Michell, P. (1979). Organizational buying in new task and rebuy situations. Industrial Marketing Management, 8, 7 11. Durif, F., Geay, B., & Graf, R. (2012). Do key account managers focus too much on commercial performance? A cognitive mapping application. Journal of Business Research, 66(9), 1559 1567. Griffiths, J. (2008). Where to next? Account planning at 40. Admap, 493, 24 27. Labeaga-Azcona, J. M., Lado-Couste´, N., & Martos-Partal, M. (2010). The double jeopardy loyalty effect using discrete choice models. International Journal of Marketing Research, 52(5), 633 652. Marshall, R. (2012). Cognitive mapping of strategy in marketing. Journal of Business Research, 66(9), 1541 1543. Marshall, R., Bibby, D., & Na, W. (2013). Making sense of complex marketing decision systems: Decision system analysis. International Journal of Business & Economics, 12(2), 121 130. Martin, D., & Isozaki, M. (2012). Hotel marketing strategies in turbulent times: Path analysis of strategic decisions. Journal of Business Research, 66(9), 1544 1549. McCracken, G. (1988). The long interview. Newbury Park, CA: Sage. McQuiston, D. H. (1989). Novelty, complexity and importance as causal determinants of industrial buyer behavior. Journal of Marketing, 53, 66 79. Moore, C. G. (1969). A descriptive model of the international purchasing process: The supplier selection routine. In C. E. Weber & G. Peter (Eds.), Management action: Models of administrative decisions (pp. 76 114). Scranton, PA: International Textbooks. Na, W., Marshall, R., & Son, Y. (2003). How businesses buy advertising agency services: A way to segment advertising agencies. Journal of Advertising Research, 43(1), 83 95. Na, W., Marshall, R., & Woodside, A. G. (2009). Decision system analysis of advertising agency decisions. Qualitative Market Research: An International Journal, 12(2), 153 170. Pepinsky, T. B. (2005). From agents to outcomes: Simulation in international relations. European Journal of International Relations, 11(3), 367 394. Pettigrew, A. (1975). The politics of organizational decision making. London: Tavistock. Rand, W., & Rust, R. (2011). Agent-based modeling in marketing: Guidelines for rigor. International Journal of Research in Marketing, 28(3), 181 193. Robinson, P., Faris, C., & Wind, Y. (1967). Industrial buying and creative marketing. Boston, MA: Allyn and Bacon. Sheth, J. N. (1973). A model of industrial buying behavior. Journal of Marketing, 37, 50 56. Swan, J. A., & Newell, S. (1994). Managers’ beliefs about factors affecting the adoption of technological innovation: A study using cognitive maps. Journal of Management Psychology, 9(2), 3 11.

226

ROGER MARSHALL ET AL.

Vyas, N., & Woodside, A. G. (1984). An inductive model of industrial supplier choice processes. Journal of Marketing, 48(1), 30 45. Webster, F. E. J., & Wind, Y. (1972). A general model for understanding organizational buying behavior. Journal of Marketing, 36(2), 12 18. Wilson, E. J. (1984). A case study of repeat buying for a commodity. Industrial Marketing Management, 13(3), 195 200. Woodside, A. G., & Sherrel, D. L. (1980). New replacement part buying. Industrial Marketing Management, 9(2), 123 132.

NEW B2B METHODS, TECHNIQUES AND TECHNOLOGIES FOR CAPTURING INSIGHTS OF MAJOR ACCOUNT MANAGERS: DEVELOPING B2B COMMUNITIES FOR ENERGY SUPPLY Suresh C. Sood and Hugh M. Pattinson ABSTRACT This chapter covers a diverse range of alternative methods for capturing deep major account insights online. Increasingly in the twenty first century, B2B decision-makers remain abreast of industry innovations and product information through participation in online communities. Through using social mobile technologies businesses exchange product and service experiences online amongst peers not just vendor organisations. A key aspect of this chapter shares rationale for selection of a marketing versus research community, community objectives, online techniques to gain major account insights using big data, resourcing, integration with existing marketing systems and budgeting for ongoing

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 227 253 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021008

227

228

SURESH C. SOOD AND HUGH M. PATTINSON

maintenance of marketing communities supporting B2B sales and marketing initiatives. This chapter focuses on the emerging area of B2B sales activities for creation and management of online communities for Major Account management of energy supply customers. A case-based research strategy specifically honed towards sensemaking of major account activities through using B2B online communities in conjunction with emerging research methods is outlined and critiqued. Keywords: Online communities; social media; sales; sensemaking; Major Account management; big data; netnography

INTRODUCTION The emergence of new technologies radically transforms the relationships between business and customers. Traditional customer acquisition strategies in B2B drive transactions through a variety of offline techniques embracing seminars, industry events, breakfast briefings, trade publications and whitepapers. In effect, the niche industry content from these techniques helps the B2B marketer develop relationships prior to generating the transaction. Relationship management is the overall approach and mechanism supporting the business marketer to nurture prospects through to a sale. This existing model of segmenting the target customer businesses, executing campaigns inclusive of events and subsequent measurement of results based on sales requires business marketers operate in a multi-channel environment. Business decision-making units face disruption from the incessant onslaught of digital technology. The disruptive force of technology is the central theme of the Australian study ‘short fuse big bang’ (Swiegers, 2013) laying claim to ‘One-third of the Australian economy faces imminent and substantial disruption by digital technologies and business models’. The transforming environment B2B marketers find themselves operating within requires targeting individual business customers one on one, replacement of start and stop media campaigns with continuous communication using social technologies and an ability to close the loop and measure results on an event by event basis. Continuous communication is possible with customers via mobile devices as the individual is no longer tied to a single office or desktop location. While one to one (1:1) marketing is approaching two decades of conceptualisation (Peppers & Rogers, 1996), the practice of one to one marketing for business marketers is only now

New B2B Methods, Techniques and Technologies for Capturing Insights

229

turning towards a reality in a world of social media and mobile technologies. Customers seeking information on a product or service have the ability to readily search for information without recourse to the vendor or involving any salespeople. Key elements combine to form the Zero Moment-oftruth (ZMOT; Lecinski, 2011) framework (Fig. 1). A stimulus in the form of a new requirement for a product or service emerges in the mind of the customer. Furthermore, this requirement leads the buyer to decompose the products or service into an association with keywords at a ‘zero momentof-truth’ (ibid.). If the customer is just about to acquire the product or researching at the first moment-of-truth, the ZMOT effectively gets in the way of the path to purchase by offering a variety of different user experiences held online within Web sites, industry forums or reviews. A subsequent second moment-of-truth represents the customer experience with the product or service. If the experience is unfavourable or surprising the user feeds the information back to other users online in the form of a positive or negative review. The initial concept of the moment-of-truth is over 30 years old appearing in the story of providing legendary service by Scandinavian Airlines

Search engines Social media Testimonials

Stimulus Social discovery with salesperson In office

First Moment of Truth

Second Moment of Truth

In demonstration Or trade show

Experience

Which becomes the next decision maker’s ZMOT

Fig. 1.

Zero-Moment-of-Truth (ZMOT) Framework. Source: Adapted from Lecinski (2011).

230

SURESH C. SOOD AND HUGH M. PATTINSON

recognising ‘the first 15-second encounter between a passenger and the frontline people, from ticket agent to flight attendant, sets the tone of the entire company in the mind of the customer’ (Carlzon, 1987). This ZMOT framework serves to remind business marketers the importance of relevant B2B content, support of mobile technology, social media and online search with customers seeking information about a product or service.

IDENTIFYING THE BUSINESS CUSTOMER ARCHETYPE The marketing and sales capability supporting customer needs and service with relevant vendor information proves extremely difficult. This primary challenge stems from the changing needs of major accounts owing to the digital disruption of industries (Swiegers, 2013). The resulting transformation drives B2B companies to embrace a direct to consumer model (B2C) leveraging online and mobile technologies. The marketing task is made all the more daunting as the members of the customer decision-making unit has the potential to research information quiet independently of the vendor on products and services. The seller no longer requires consultation with regard to pricing guidance. All vendor information is available not only from online, talking with other users at trade shows or user group meetings but major accounts participating in online communities provides information anytime and anywhere. The initial step to focusing on the online needs of the customer is the modelling of business customers searching information online with hypothetical representations. A subsequent refinement helps mirror the customer with greater accuracy as further information emerges from online customer engagement. Traditional Jungian archetypes (e.g. caregiver, jokester and lover) are usually inappropriate or incomplete representations of business customers. However, the business marketing role includes helping sales find prospects. Thus, the ideal archetypes best align with a major account sales methodology. The ‘Challenger Sales Model’ (Dixon & Adamson, 2011) emerges from a longitudinal study of over 1400 B2B customers and encourages sales people to move away from a transactional model and use research to educate customers on new ways of doing business. The centrepiece of the challenger sales model is the profile of the challenger salesperson building trust through getting the customer to understand how to do things

New B2B Methods, Techniques and Technologies for Capturing Insights

231

differently in a changing world. Most importantly, this sales research (ibid.) draws attention to seven different archetypes of buyer profiles the go-getter, teacher, sceptic, guide, friend, climber and blocker (ibid.). These profiles represent the marketing archetypes of buyers prior to the salesperson meeting with a customer and getting to understand the individual first hand. Understanding the motivations of the buyers when searching online helps to determine the best possible keywords each type of buyer expects to understand. Archetype profiles help generate relevant content in social media environments inclusive of environments outside of the B2B marketer control beyond the website. These properties include LinkedIn, Slideshare, Pinterest and Google YouTube or Vimeo. Understanding the archetype of the buyer provides an ability to directly tailor messages for major accounts and the members of the decision-making units within these organisations once individual buyers engage with the array of touch points (Table 1).

SOCIAL MEDIA AND BUSINESS TO REVENUE LIFE CYCLE (B2RL) Increasing revenues through collaborating with major accounts faces challenges from the explosion in social media along with changing buyer behaviours stemming from generational changes. Lead generation requires shifting to social media with more buyers in customer decision-making units tweeting, blogging and sharing professional experiences in LinkedIn. Social networks represent a veritable goldmine for sales and marketing with an opportunity to precisely target customers and messages using the buyer archetype profiles and the precise targeting capability of the social media platform. To overcome these challenges and avoid ‘time wasting’ activities in social media the starting point is to directly link all marketing activities in social media directly with a revenue impact. The ‘Business-to-Revenue Life Cycle’ framework (B2RL, see Fig. 2) captures the life cycle process from the first touch point a major account becomes aware of the business as a potential partner through to an initial transaction and beyond with the establishment of ongoing revenue as the buyer moves to consider the business salespeople to as ‘trusted advisors’. B2RL is a strategic perspective impacting all customer-facing employees (marketing, sales and customer service). The B2RL comprises the

Touch Point Marketing Activities or Campaigns and B2RL Stages.

Touch Point, Marketing Activities or Campaigns Company website Road shows, seminars and other events (offline) Public relations/analyst relations Sales Email marketing (campaigns) Webinars, webcasts and zipcasts (Slideshare) Content marketing (whitepapers/podcasts) Search engines Google/Bing/Social Industry groups via sponsorships Video marketing (YouTube/Vimeo) Telesales and telemarketing e-Newsletters Twitter Blogging Community marketing and forums Online adverts (banner/search/pop up) Paid search via Adwords and Facebook ads Organic search and social media optimisation Facebook LinkedIn Pinterest Print/QR code (link offline and online)/mobile Social bookmarks Short URLs for campaign monitoring Embed code for business on partner sites Virtual events and virtual trade shows Mobile marketing Apple Google TV/Yahoo/Sony/Internet radio

Stage I: Customer Acquisition

Stage II: Social Selling

Stage III: Ongoing Customer Service

X X X X X X X X X X X X X X X X X X X X X X X X X X X X

X

X

X X

X X

X

SURESH C. SOOD AND HUGH M. PATTINSON

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.

232

Table 1.

I. Marketing (Acquisition)

Social Listening: New Ideas, Vocabulary, Topics, Blogs and Forums Participation in social media

Build Awareness through SM: YouTube/ Facebook/ LinkedIn/ Twitter Participate in blogs and communities on topics

II. Social Selling

Social Content and Education via social media and options providing knowledge and insights to nurture leads (5-7 touches)

Build Relationship with Business Decision Making unit via Social Listening, email + Conversations

III. Customer Service (Retention)

Fig. 2.

Acquisition of Online Lead from each social media channel and capture into SCRM

Social Selling

Social Loyalty Retention, New trading Ideas and Voice of Customer Feedback

New B2B Methods, Techniques and Technologies for Capturing Insights

Acquisition of Business to Revenue Life Cycle (B2RL)

‘Business-to-Revenue Life Cycle’ Framework (B2RL). 233

234

SURESH C. SOOD AND HUGH M. PATTINSON

orchestration of three key stages of marketing activities: customer acquisition, social selling and ongoing customer service (retention). Leveraging the B2RL framework requires the business marketer anticipate the touch points where buyers/customers seek information online and actual content sought. The client decision-making process drives through the stages of the B2RL process. Understanding the steps in the client journey proves invaluable to accurately define the process steps in B2RL, for example learning from sales to understand which factors truly determine qualified leads. From a marketing perspective the social media touch points are not just channels but they profoundly change the marketing approach taken by business marketers. Social media allows the marketer to test ideas before interacting with all other customer points of interaction. All conversations in social are two-way and the importance of generating conversations is central to the business marketing strategy. In the short term going beyond the potential transaction revenue opportunity using social media drives three key areas: (a) Cost reduction and efficient support of customers using social media forums and enhancing FAQs (frequently asked questions) generated from the first hand conversations taking place. (b) The ‘Voice of the Customer’ body of knowledge is directly customer generated and represents dynamic marketing input as a source of big data (Mayer-Schonberger & Cukier, 2013). Focus groups fail to provide the level of detailed information customers provide through community forums and online discussions with marketing and sales staff. (c) Co-creation and learning is the joint sharing of practices and lessons learnt firsthand through spontaneous customer discussions online not only with marketing and sales but between customers. This customer to customer interaction is the most fundamental departure from the traditional broadcast communications model employed by businesses when acquiring customers (see Fig. 3).

BUSINESS CUSTOMER ENGAGEMENT TOUCHES Business customer touch points and engagement tactics vary across the B2RL life cycle as indicated by the table and B2RL stage. Mapping touch points to stages of the B2RL (see Table 1) provides insights into exemplary combinations for developing business customer engagement.

New B2B Methods, Techniques and Technologies for Capturing Insights

235

Business brand owner (traditional broadcast)

Customer to customer interactions

Fig. 3.

Customer Acquisition: Traditional Broadcast Communications Model versus Customer to Customer Interaction.

ONLINE CUSTOMER LIFE CYCLE For planning purposes and Customer Relationships Management (CRM) tracking leveraging the B2RL and the touch points (Table 1) establish the following customer life cycle: stranger turns up at say the business website; the stranger converts to a prospect through opting in via completing a form on the web site, social media or any touch point; engagement is ongoing through continuous messaging with the business through a variety of marketing activities; the sales lead is qualified; opportunity to put back the lead to marketing for further ‘nurturing’ if not won or lost. Information flows through business customer touch points through the customer life cycle represent streams of B2B big data. Analysing and using big data to develop insights and sensemaking represents a nascent area of research into B2B online communities.

ONLINE COMMUNITIES: BACKGROUND, DEVELOPMENT, STUDY AND RESEARCH An online community presents the potential to transform the marketing process from dealing with one to many to one-to-one marketing,

236

SURESH C. SOOD AND HUGH M. PATTINSON

individualised market research or a business sales focus. Ongoing conversations with major accounts are measurable through ongoing customer feedback online. ‘Virtual’ communities emerged with the advent of news and user group services within the Internet in the Mid-1980s, then onto the Worldwide Web from the early 1990s. Initial research into virtual communities focused deep observer participant narratives as exemplified by Rheingold’s (1993) account of his own experiences with ‘The Well’ virtual community. Rheingold defines virtual communities as, ‘social aggregations that emerge from net when enough people carry on … public discussions long enough, with sufficient human feeling, to webs of personal relationships in cyberspace’ (1993, p. 5). Hagel and Armstrong (1997) conceptualise virtual communities as a foundation for a new business and form of value creation. Hagel (2007) offers an updated definition of ‘virtual communities’ on ten years of research, consulting and research experience as outlined in his blog ‘Edge Perspectives with John Hagel: Community 2.0’: ‘virtual community involves establishing connections on electronic networks among people with common needs, so that they can engage in shared discussions, that persist and accumulate over time, leading to complex webs of personal relationships and an increasing sense of identification with the overall community … The key elements of virtual community, therefore, are shared discussions, shared relationships and shared identity’. Hagel (2007) positioned ‘virtual communities’ as different from other Internet enterprises and entities including social networks, electronic markets and content aggregation sites. However, this positioning was before Web 2.0 and social media applications had permeated into business activities. At about the same time as virtual communities were emerging and being defined from a social and business value creation perspective, relevant research approaches were also developing. Adaptation of ethnography for research into online communities was a logical progression and is currently exemplified from a marketing perspective by Kozinets’ development over about a decade framework for ‘netnography’. Kozinets (2010) developed principles for netnographic research building on ethnographic research principles and methods. He reinforces the links between ethnography and netnography in his Brandthroposophy: A Marketing, Social Media, and Research Blog: 2013 entry: ‘Developing Netnography’: I have always emphasized how netnography adapts a range of extant ethnographic practices such as making cultural entre´e, keeping field notes, interviewing

New B2B Methods, Techniques and Technologies for Capturing Insights

237

participants, using hermeneutic interpretation, and ensuring consent and a fair cultural representation to new internet-mediated contingencies. (Kozinets, 2013)

Kozinets emphasises ethical netnography research with clear member checking and validation of data representation. Netnographic research still requires triangulation using offline sources. The researcher’s identity and activities within an online community should be known, disclosed and collected information should be checked with the community. Kozinets also directly traces definition of and rationale for ‘online communities’ back to Rheingold with his own enhancements: ‘social aggregations’ (collective); ‘emerge from the net’ (internet is focal source of data, also may in one or more online location and/and application); ‘discussions’ or ‘communications’ (focus on exchange of meaningful multimedia symbols and information); enough people (minimum number of people to feel like a community); public discussions, (accessibility to discussions); long enough (community with ongoing relationships); Sufficient human feeling (authentic contact with people in community); to form webs of personal relationships (social engagement of individuals with each other in community) (Kozinets, 2010, pp. 8 9).

ONLINE COMMUNITY DEVELOPMENT, STUDY AND RESEARCH BASED ON SOCIAL COMPUTING A different perspective on both research into and development of virtual (online) communities based on Social Computing emerged at the same time as netnography. According to Wang, Zeng, Carley, and Mao (2007), social computing can be traced back to Vannevar Bush in 1945 conceiving and describing a ‘memex’ memory and communication device, Bush also discussed additional perspectives including augmentation, groupware and computer-supported collaborative work (Bush cited in Wang et al., 2007, p. 79). Schuler (1994) describes social computing as ‘any type of computing application in which software serves as an intermediary or a focus for a social relation’ (Schuler, 1994, p. 2). Virtual and online communities emerged as exemplars of social computing development and study, inclusive of the study and modelling of social interactions and communications (Zeng, Wang, & Carley, 2007). Over the last ten years, social computing has evolved to be based around interaction. Vrasidas and Veletsianos (2010) developed a theoretical foundation for social computing based on

238

SURESH C. SOOD AND HUGH M. PATTINSON

human activities and theories and technologies contributing to interaction. Meaning and enculturation are developed and studied as interrelated to interaction. Fig. 4 highlights a social computing perspective on development and study of virtual communities. Human activities contributing to interaction in virtual communities include cognition, constructivism and communities of practice. Theory and technologies viewed as contributing to interaction in virtual communities include activity theory, affordances, social presence theory and technology and social activity including computer-supported collaborative work/learning (CSCL), and virtual social networking and Web 2.0 (including social media). Wang et al. (2007, p. 80) position online communities as collections of applications based on social computing. Studying, tracking and researching

Cognition • Situated and Distributed Constructivism • Personal and Social Communities of Practice • Local and Nonlocal Human Activity

Activity Theory • Participants • Mediating Artefacts • Rules

Interaction Meaning Enculturation

Virtual Communities • Establishment • Ongoing Development

Affordances • Properties and Perceived Uses Social Presence Theory • Degree to which a medium allows a person to feel socially present, mediated via technology Technology and Social activity • Computer-Supported Collaborative Work/Learning (CSCL) • Virtual Social Networking and Web 2.0 (Social Media)

Theories and Technologies

Fig. 4.

Social Computing and Virtual Communities. Source: Adapted from Vrasidas and Veletsianos (2010, pp. 3 11).

New B2B Methods, Techniques and Technologies for Capturing Insights

239

social computing applications associated with an online community such as blogs, wikis, social networks, collaborative bookmarking and social tagging, podcasts could constitute contemporary netnography.

ONLINE COMMUNITY DEVELOPMENT, STUDY AND RESEARCH BASED ON BIG DATA AND BEHAVIOURAL COMPUTING In the second decade of the 21st century, the Internet associates individuals with mobile social networking spawning an unprecedented volume of mobile data with ‘as many mobile-cellular subscriptions as people in the world’ (ITU, 2013). Currently, this ‘Internet of Things’ network has more than a billion uniquely identified devices in 2012 forecast to over 27 billion by 2020 (Varley, 2013). Each mobile connection generates streams of data no longer a statistical sampling of the individual but an ongoing representation of the individual business customer behaviour. These business behaviours include online interactions, response to business marketing actions, transactions and changing customer details. Even scaling back to a handful of individual business customers, the online business community is capable of generating ‘big data’ flows requiring intensive study and research. To address big data analysis and incorporate big data into sensemaking, social computing moves to the stage of Behavioural Computing. Behavioural computing builds on the availability of big data from online communities, social networks pushing business marketing researchers and practitioners to undertake deep and dynamic behavioural analysis in the ever converging online and offline environments. Behavioural computing takes a cue from Erving Goffman, one of the most influential sociologists of the last century publishing the Presentation of Self in Everyday Life (PSEL; Goffman, 1959). This is the most definitive 20th century study of the patterns of human behaviour in mundane social situations. This classical research builds strongly on case study method and theory. An understanding of the human behaviour emerges from rich PSEL type ‘thick’ qualitative case studies. However, a pathway to generalisable or predictive models of behaviour has not been possible without accessing big data. Cao and Yu (2012) define behavioural computing as, ‘Behaviour computing, or behaviour informatics, consists of methodologies, techniques and practical tools for representing, modelling, analysing, understanding and utilizing human, organismal, organizational, societal, artificial and

240

SURESH C. SOOD AND HUGH M. PATTINSON

virtual behaviours, behavioural interactions and relationships, behavioural networks, behavioural patterns, behavioural impacts, the formation and decomposition of behaviour-oriented groups and collective intelligence, and the emergence of behavioural intelligence. Behaviour computing contributes to the in-depth understanding, discovery, applications and management of behaviour intelligence’ (Cao & Yu, 2012, p. vi). Research into Online Communities needs to be not just updated for recent social computing developments, but needs to be transformed for the emerging big data and behavioural computing principles. The time is right for marketing to morph to a new script for ‘bigbenetnog’ community development and research. Research into online communities based on netnography and social computing principles from a marketing perspective has been deployed almost exclusively to Business-to-Consumer (B2C) marketing related projects, focused largely on consumers’ conversations about products, services and experiences. Examples include B2C marketing related projects (Belz & Baumbach, 2010), new service development (Sigala, 2012), exploring Consumer + Consumer-to-Business (CC2B) online buying groups (Chen, 2012), and cruise liner experiences and wine estate events (Sloan, Dolan, Gyrd-Jones, & Pattinson, 2012).

A NEW B2B ONLINE COMMUNITY RESEARCH APPROACH Given that netnography into B2B online communities is scarce and research approaches need to be transformed, a new way forward is possible for B2B online community research. The overall method is based on researching specific B2B sales and marketing activities associated with setting up and developing B2B online communities, drawing on behavioural computing principles, big data flows and enhanced supporting netnography. The behavioural computing or ‘bigbenetnog’ online research strategy steps and principles are: • B2B marketer sets up and develops B2B online communities • B2B online communities for business and for research follow the same set-up, development, study and research principles • The Internet of things associated with each B2B online community and associated individuals requires identification

New B2B Methods, Techniques and Technologies for Capturing Insights

241

• All online B2B community content collected as big data streams requires triangulation and validation with member checking incorporating offline validation of data • Sensemaking derives from netnographic insights and context representing the input for knowledge elicitation (KE) and downstream business behavioural computing applications, systems and platforms. Insights into development of B2B online communities including B2RL stages and elements are discussed in the following section, within the context of an energy supply case study.

DEVELOPING B2B ONLINE COMMUNITIES: THE CASE STUDY OF ENERGY SUPPLY Energy (electricity and gas) purchasing by major accounts helps illustrate the overall approach advocated to B2B marketers. An electricity scenario is not atypical of pressures marketers face across a diverse range of asset intensive industries and the negotiation of complex business supply contracts. Consideration of the scenario of electricity or energy contract purchasing by a major account shows the sale and negotiation by the major account salesperson remains relatively unchanged over the last decade. Traditionally, the sales cycle of electricity or energy contract purchasing follows a one to five year supply contract for electricity with negotiation discussions often taking place towards the end of the contract period. Key drivers resulting in change to the electricity sales process include environmental concerns and directives towards reducing carbon dioxide (CO2). These driving forces now mean major energy customers are embarking on smart energy projects and carbon accounting solutions with information technology service organisations further eroding the stranglehold of the electricity supplier and forcing greater pricing pressure at contract negotiation time. Against this backdrop, the marketing team expectation is to provide necessary support to help sales achieve successful closure of contracts. However, achieving successful marketing requires understanding the following issues. How do major accounts interact with energy suppliers and make decisions regarding renewal of energy contracts against a growing awareness of environmental concerns? Why do account managers wait until contract renewal time before significantly interacting with a major account?

242

SURESH C. SOOD AND HUGH M. PATTINSON

How does a major account make an informed decision regarding changing an energy supplier? How do major accounts select energy saving techniques and devices? Why do major accounts consider reducing carbon emissions in isolation of a sustainability agenda? These questions reflect a desire for marketing to undertake exploratory research in an environment affecting different stakeholders from buyer and seller organisations. In light of these broad criteria, the authors select the qualitative case study method for the capture of major account insights. A purpose built online marketing research online community (MROC) for major accounts desiring to understand energy supply issues and new techniques provides the marketer with a laboratory for data collection. However, the major account customers have opportunities to participate in forums outside the control of the energy supplier. For example, the LinkedIn groups available online for energy purchasers include energy marketplace, energy contracts and procurement professionals, total electricity-power generation, renewable energy, infrastructure, who won it energy RFPs and Contracts, electricity sales network and applied energy partners news.

THE B2B UNDERSTANDING IN ELECTRICITY SUPPLY: SUPPLY CONTRACTS, MARKET SEGMENTATION, MAJOR ACCOUNT MANAGEMENT AND CUSTOMER INTIMACY Major changes are disrupting the electricity supply chain across the globe with the advent of smart electricity, clean technologies and plug in electrical vehicles contributing innovations and new business models. These changes are occurring in an industry with heavy regulation inclusive of pricing controls and government ownership in many instances of electricity intensive assets. In deregulating markets moving away from monopolisation, the electricity supply chain comprises companies positioning as electricity generators, transmission infrastructure operators, electricity distributors and retailers. Other energy sources including gas, biomass, sun, waves and wind are available to customers with incentives to transition towards increasing levels of renewable power generation. Distribution also faces significant challenges with increasing focus on local power generation with users becoming ‘power neutral’ or actually pushing power back into local

New B2B Methods, Techniques and Technologies for Capturing Insights

243

distribution systems. A direct consequence of the regulatory and technological disruptions in the energy value chain is volatility in energy pricing and the emergence of a new B2B actor, the energy buyer for large users of energy. Notwithstanding these disruptive changes, some markets have energy supply companies in existence for well over a century including Pacific Gas & Electric California (PG&E; 118 years), Consolidated Edison (previously New York Gas Light Company; 210 years) and the Australian Gas Light Company (AGL; 175 years) to name but a few. These organisations contrast with one of the larger European electricity and gas energy companies, Energie Baden-Wu¨rttemberg AG (EnBW) founded in 1997. Owing to the industry disruptions, volatility in electricity pricing and emergence of the energy buyer a greater focus on major accounts or corporate marketing is desirable within electricity industry players controlling the entire end-to-end process from electricity generation through to the wholesale and retail availability of electricity. Although online trading markets for wholesale electricity supporting increasingly deregulated markets have been operating for over two decades, commentary, analysis and research on B2B sales and marketing in online communities is scarce. This is especially important if major account relationships are no longer stable or characterised with a low churn rate. Furthermore, the longer term contracts running from 2 to 25 years facing renewals are appearing as open tenders for the purchase of electricity (e.g. Riga Airport, 2013). Major accounts for electricity supply comprise Major Accounts, hierarchies of companies, public utilities, distributors, local government and industrials. The hallmarks of major accounts are complex individual contracts for energy supply, connection and service tailorable to the energy buyer requirements. EnBW exemplifies the variety of energy contracts with an ability for buyers to link pricing to stock market trends, meet sustainability requirements, provision back up supply and insulate against price fluctuations in the electricity wholesale markets through the supplier locking in forward contracts. On the other hand, while still B2B, the small and medium enterprises (SMEs) are satisfied by a high degree of standard contracts mirroring retail purchase of electricity free of exposure to volatile pricing. Major account segmentation follows a tradition of valuing customers on historical energy spend patterns. Alinta Energy segments major and industrial customers with upwards of AUD10 million per annum in electricity and gas expenditures (Jobseeker, 2013). AGL Energy the largest Australian gas and electricity retailer desires to ‘retain and win disproportionate share

244

SURESH C. SOOD AND HUGH M. PATTINSON

of the highest value customers through superior segmentation, customer management and marketing’ (Fraser, 2008). In light of this, AGL manages the largest and most valuable customers on a 1:1 relationship with a team of over 25 business development managers and Major Account managers. Energy buyers not only look towards fulfilling forecast supply at low risk but seeking to gain advice on managing and reducing energy consumption. Hence, the electricity supplier positions as a value add partner through supporting Major Account management with carbon and energy management experts working within major accounts to fulfil requirements on a project basis. Equally, the energy buyer seeks independent advice on energy saving beyond the traditional suppliers.

SENSEMAKING B2B SALES ACTIVITIES Sensemaking B2B sales and marketing activities for decision-making is well established in B2B marketing research. Deep insights into antecedents, key influences, motivations, and possible enactment are captured through interpretive research methods using case-study approaches including ethnography, hermeneutic analysis, event history analysis, cognitive mapping and storytelling methods (Pattinson & Woodside, 2007). Sood and Pattinson (2010) present a scenario of a perfect storm transforming B2B sales, marketing and consulting activities into servicedominant (Vargo & Lusch, 2004) online social media business networks. Recognising this scenario, research into sensemaking B2B sales and marketing and online communities is an urgent priority.

B2B MAJOR ACCOUNT MANAGEMENT ONLINE COMMUNITY RESEARCH CASE STUDY: STRATEGY AND DESIGN The overarching purpose of the major account community is in line with a social media approach to engendering conversations. The working name of the community is ‘Energy Insider’ (EI) signalling value becoming available once membership is achieved. Unlike social networking sites where the primary focus is the individual profile and friends network the EI community is a private online community requiring username and passwords to gain

New B2B Methods, Techniques and Technologies for Capturing Insights

245

access to social content as well as social networking with fellow members. Fellow members are expected to include the ‘techies’ the specialist staff, consultants and friendly eco-system of suppliers and contractors warm to supporting the electricity supplier. Most importantly, the business development managers and account managers have to offer more than just being educators given the flow of specialist and commercial information available online to business executives. In the context of the community, this group of electricity aware salespeople require to become ‘trusted advisors’ through an extensive transfer of knowledge through sales workshops and online education. The online community follows a life cycle at appropriate times requiring the ‘nudging’ (Thaler & Sunstein, 2008) of key conversations by the community manager to areas of interest or resolution of customer issues ensuring minimal surprise when major accounts resign contracts. The nature of major account sales is experiential and the community unlike traditional major account marketing has potential to inject fun and emotional feelings into a typically bland offering by increasing the informational content through using the richness of social media to create thought leadership. This means, less focus on just the transaction, which is left in the hands of the sales team and the retention creation, occurs through the ongoing persistent information flows. However, the presentation of interesting case studies and special offers coached through an educational process can result in transactions with major accounts, which are otherwise not expected. The overall goal of the community significantly helps reduce the cost of sale by acting as an ongoing retention mechanism through providing engaging content repurposed for social media and new devices and educating accounts with advisory energy information as well as online education events engaging both electricity consultants and major accounts. A secondary but important aspect of the community includes ability to message and educate members in real time on issues of supply interruption and other supply challenges. However, a protocol is necessary to ensure correct channels including Twitter usage is understood by major accounts for this purpose. From time to time offers or information available to community members is worthy of dissemination via existing popular social networks, for example Facebook or LinkedIn or visual content mechanisms, for example YouTube, Instagram or Pinterest. The primary purpose for this is reiterating the importance of the community as well as reducing the cost of disseminating rich media information case studies and brochures which upcoming accounts are likely to find of interest but not currently invited members of the online community.

246

SURESH C. SOOD AND HUGH M. PATTINSON

EI enables an ongoing dialogue and conversation around energy and electricity matters including sustainability. Dynamic content of social content helps members return to the community comprising events/meet-ups, conversations, tips, shared experiences, special promotions, videos, photos, blog posts, applications and a real time news feed ensures all interactions with major accounts and electricity company staff and ecosystem members are an important aspect of maintaining ongoing customer engagement. An important aspect of the community is accessibility via smartphones allowing ease of access for all members of the community outside of normal working hours and during travel time.

COMMUNITY INTEGRATION WITH EXISTING MARKETING ACTIVITIES The online community focus is retention of major accounts and seamlessly interacts with physical activities planned for major accounts throughout the year. This includes integration with existing offline marketing strategy and feed into electronic direct marketing campaigns. The community provides sales and marketing with access to natural and spontaneous conversations on the way in which major accounts are thinking and in their own language/vocabulary. The responses provide an immediacy and topicality of the issues being discussed and provide both sales and marketing an opportunity to get feedback in real time. This means issues can be resolved as events emerge rather than when the marketplace picks up the issue. The community aims to directly assist the Major Account team through increasing information flows to major accounts resulting in improvements in customer engagement (interaction and sentiment), decrease marketing costs owing to ongoing electronic education of products and events within community rather than just coverage advertising or paper based flyers. Further benefits include brand awareness/PR generated within social media, real time feedback from interactions and inputs for product development. The private community of ‘Energy Insider’ (EI) provides advisory postings using rich social media. The content postings generate thought leadership using whitepapers, handbooks, video education, scenarios and case studies.

New B2B Methods, Techniques and Technologies for Capturing Insights

247

Key elements contributing to the success of the community include the following antecedents: • The promise of efficiency and effectiveness of electricity advices; • Weekly 5 10 minute video briefing and notes via social media; • Unique virtual and face to face events involving alliances and ecosystem partners (e.g. savings from low energy lighting); • 18 36 month Relationship-Conversation calendar; • Ongoing community discussions.

VALUABLE B2B CONTENT While notionally a concept, the programme enables thought leadership for the electricity supply company amongst major accounts and other B2B activities. Planning for the EI programme is useful for the provision of providing budgetary guidelines for allocating time towards content generation. ‘The Insider Programme’ is a way of opening the safe to reveal content on energy efficiency and sustainability showing the account exactly what needs to be done to achieve the results of a proven case study and provide explanations step-by-step. Everything a major account needs to know about achieving world class energy efficiencies and long term sustainability is broken down into a series of 104 advisory notices provided on a weekly basis for the duration of the supply contract. As an Energy Insider Programme member, the Major Account contact receives access to the community with a quick 10-minute video, which will steadily expand knowledge of how to get immediate results. Implementing the suggestions might take an account a matter of hours or in consultation with the electricity company consultants as a project. Over time, major accounts recognise the value of gaining access to the expertise and reporting available via the community. At this stage, the signing of a new contract accompanied by community membership will become a major differentiator for the electricity supplier. A marketing of skills and knowledge becomes substantially more valuable than the products and service products.

CAPTURING MAJOR ACCOUNT INSIGHTS The major account centric communication generated by the community fosters insight for the major account team. The insights garnered from the

248

SURESH C. SOOD AND HUGH M. PATTINSON

community allows for successful new product launches or service engagements. Additionally, a variety of approaches to capture as well as spark conversations (including but not limited to): 1. Community Discussion on a contemporary topic of interest, for example smart energy, LEDs, new energy saving appliances with a 5 10 minute video. Moderator facilitates discussion in which electricity supplier experts and major accounts people participate. 2. Brainstorm on new product names, issues or planning. 3. Senior Executive chat with senior executives of major accounts and with electricity supplier executives. 4. Sharing Photos relevant to the topic as well as to gain familiarity with members of electricity company staff and major accounts. 5. Video Tours of a new installation inside the premises of the major account, discussions regarding a case study. The video is available for later retrieval and training. 6. Twitter to capture real-time thoughts and on the spot surveys. 7. F2F Events Use of the community to create/request face to face events achieving further depth to the online relationship. 8. Netnography providing deep feedback from listening to the major accounts talking about issues and opportunities. The netnography can be fed directly into a voice of customer programme.

SOCIAL MEDIA B2B TEAM Two key roles within the B2B marketing and sales teams ensure a successful community build and subsequent retention of major accounts participating within the community. 1. Social Media Strategist (SM) This is an ex-marketing manager role leading the overall thinking behind the technical elements of the community as well as choice of software and hosting partners if applicable. After launch of the community manages ongoing budget, resources and staff. Aligns social media efforts with the initial business objectives of customer acquisition. This role requires an understanding of ROI for social media as well as the entire social media landscape inclusive of new innovations and interplay with traditional media.

New B2B Methods, Techniques and Technologies for Capturing Insights

249

2. Major Account Community Manager (CM) This important role supports day-to-day activities. The majority of time spent to support and educate the community. The role requires familiarity with forums, blogs, social networks, tagging and media. This is primarily an online conversational marketing expert building relationships with community members and promoting events and products as part of community as long as trust is not harmed. So this role must first earn trust. Collecting feedback to help refine future variations of the community and reporting insights to marketing are paramount. Much of the time is spent listening, monitoring and responding to conversations and requests within the community and email. At the initial stage (pre-launch and immediately after) the role is key to executing content strategy using podcasts, video and forums. Most importantly, the CM mediates disputes and handles issues, for example competitor planted as community member and is pivotal in facilitating relationships between electricity company employees and community members.

METHOD OF B2B COMMUNITY DEVELOPMENT The community development follows the following steps. 1. Appoint Team Community Manager and Social Media Strategist and kick-off meeting 2. Review existing best practice in energy supply B2B communities and study competitor involvement with communities 3. Allocate Budget: • Choice of community vendor and tools • Social networking, sharing, and rating and publication, for example wikis, forums, rating and ranking, widgets, RSS feeds • Community design and storyboard • Launch investment • Ongoing expenses • Staffing allocation 4. Policies and training including: • Community management process • Guidelines for dealing with negative issues from community • Briefing and training for all stakeholders

250

SURESH C. SOOD AND HUGH M. PATTINSON

5. Community Launch: • Jointly Create communications newsletters, promos, web site and IVR messages • Popular social media support LinkedIn, Facebook and Twitter (if applicable) • LinkedIn profiles for Electricity Supplier experts 6. Plans and Measurement: • Editorial plan conversation timetable • Strategy for member retention and milestones/timetable. • Measures: ○ Amount of major account conversational activity on site ○ Type of content created by company and major accounts ○ Number of connections/relationships maintained ○ Time on site ○ Frequency of visits ○ Recommendations from major accounts ○ Referrals (not essential at this stage for retention activities)

COMMUNITY MANAGEMENT The proposed online community is an interactive group of major accounts joined together by the common interest of with the most immediate need to serve prospects and customers looking for information on energy supply in the short and longer term (6 36 months). The community is a custom application with profiles and connections and potentially uses ‘white label’ community building software or an online service, for example Elgg.org or an online service such as Ning.com. The community manager serves customers through listening and responding to needs rather than marketing or advertising. Focus on launching and growing the community (maintenance and continual improvement comes later) through: • Invite creators and influencers amongst major accounts to become early charter members of the community and attend roundtable. • Create evangelists through providing exclusive access to new information, attendance at pre-launch party and have them provide feedback for future initiatives. • Start community with conversations and have community manager encourage sharing stories of problems, overcoming issues and successes.

New B2B Methods, Techniques and Technologies for Capturing Insights

251

• Ensure community can be readily navigated through early release to small group of staff and major accounts. Use links from existing web sites and blogs to readily direct major accounts. • Accelerate community adoption through existing marketing efforts including emails newsletters and create a sense of urgency for all major accounts to join.

MARKET LEADERSHIP IN B2B SOCIAL SALES By establishing a community within the energy supply industry the opportunity exists to leverage the positioning and insights from major accounts to help drive new business opportunities. The community provides a showcase for the sale of the company skills and knowledge (Vargo & Lusch, 2004) which Major Accounts desire and provides collateral for securing future business.

CLOSING COMMENTS This chapter highlights creation, development and retention of online communities as vital for Major Account management of energy supply. Business customer engagement though online communities offer new possibilities and combinations for customer touch points, framework and streams of B2B big data for rich analysis, research and insights for newfound sensemaking. ‘Traditional’ forms of online community information flows, social computing perspectives and research approaches, are giving way to social information emanating from an Internet of things as streams of big data flowing through a variety of customer touch points requiring behavioural computing principles to offer insights into zero moments-of-truth and different B2B sensemaking perspectives. Case study based research strategies are essential to offering exciting options and opportunities to explore development of B2B online communities drawing from the best of past ethnographic research principles and to discover, learn and apply new and emerging social information applications and approaches. B2B online community research stands at the beginning of a truly new era in B2B field research with the best online dynamic B2B case study research yet to come. When the 2020 B2B Case Study Research Stream is

252

SURESH C. SOOD AND HUGH M. PATTINSON

recreated from big data, the stories, insights and sensemaking presented for researchers going into the third decade of the 21st century is truly an opportunity to transform B2B marketing, research and sales from the traditional campaign driven activities to continuous streams of data. This richness of dynamic business relationships and interactions has not previously been seen in over 50 years since Goffman and returns us to the convergence of case study and theory.

REFERENCES Belz, F. M., & Baumbach, W. (2010). Netnography as a method of lead user identification. Creativity and Innovation Management, 19(3), 304 313. Cao, L., & Yu, P. S. (2012). Behavior computing: Modeling, analysis, mining and decision. London: Springer. Carlzon, J. (1987). Moments of truth: New strategies for today’s customer-driven economy. New York, NY: Ballinger Publishing. Chen, C. P. (2012). Online group buying behavior in CC2B e-commerce: Understanding consumer motivations. Journal of Internet Commerce, 11, 254 270. Dixon, M., & Adamson, B. (2011). The challenger sale: Taking care of the customer conversation. New York, NY: Portfolio/Penguin. Fraser, M. (2008). Winning in the energy market. Retrieved from http://www.agl.com.au/ ∼/media/AGL/About%20AGL/Documents/Media%20Center/Investor%20Center/2008/ September/AGL%20Annual%20Report%202008.pdf. Accessed on July 29, 2013. Goffman, E. (1959). The presentation of self in everyday life. New York, NY: Anchor. Hagel, J. III. (2007). Community 2.0. Edge Perspectives with John Hagel, April 17. Retrieved from http://edgeperspectives.typepad.com/edge_perspectives/2007/03/community_20. html. Accessed on June 16, 2013. Hagel, J. III, & Armstrong, J. G. (1997). Net gain: Expanding markets through virtual communities. Boston, MA: Harvard Business Press. ITU. (2013). The world in 2013 facts and figures. Retrieved from http://www.itu.int/en/ITUD/ Statistics/Documents/facts/ICTFactsFigures2013.pdf. Accessed on September 27, 2013. Jobseeker. (2013). Major account executive. Retrieved from www.jobseeker.com.au/job/MajorAccount-Executive-f421754bd2e9c356da5b5036e41f834c. Accessed on July 23, 2013. Kozinets, R. V. (2010). Netnography: Doing ethnographic research online. Thousand Oaks, CA: Sage. Kozinets, R. V. (2013, May 11). Developing netnography. Brandthroposophy: A marketing, social media, and research blog. Retrieved from http://kozinets.net/ Lecinski, J. (2011). Winning the zero moment-of-truth: ZMOT (Enhanced Version, Kindle Edition). New York, NY: Vook. Mayer-Schonberger, V., & Cukier, K. (2013). Big data: A revolution that will transform how we live, work, and think. London: John Murray Publishers. Pattinson, H. M., & Woodside, A. G. (2007). Innovation and diffusion of software technology: Mapping strategies. Oxford: Elsevier.

New B2B Methods, Techniques and Technologies for Capturing Insights

253

Peppers, D., & Rogers, M. (1996). The one to one future: Building relationship one customer at a time. New York, NY: Currency. Rheingold, H. (1993). The virtual community: Homesteading on the electronic frontier. Reading, MA: Addison-Wesley. Riga Airport. (2013). Purchase of electricity (Identification No RIX 2013/324-AK). Retrieved from www.riga-airport.com/en/main/b2b/purchases-tenders/purchases/open-tenders/ purchase-of-electricity-identification-no-rix-2013-324-ak. Accessed on July 23, 2013. Schuler, D. (1994). Social computing. Communications of the ACM, 37(January), 1 2. Sigala, M. (2012). Social networks and customer involvement in new service development (NSD). International Journal of Contemporary Hospitality Management, 24(7), 966 990. Sloan, S., Dolan, R., Gyrd-Jones, R., & Pattinson, H. M. (2012, December 3 5). Facebook netnography: Sharing experiences of using netnography to assess the impact of social media on brands. Special Session, 2012 Australian and New Zealand Marketing Academy Conference, Adelaide, Australia. Sood, S. C., & Pattinson, H. M. (2010, September 2 4). After the perfect storm: B2B sales and consulting representations in service-dominant markets. Paper presented at IMP 2010, Budapest, Hungary. Swiegers, G. (2013). Digital disruption: Short fuse, big bang? Deloitte. Retrieved from http:// www.unisa.edu.au/Global/business/centres/cags/docs/seminars/Deloitte_Digital_ Disruption_Whitepaper_Sep20121.pdf. Accessed on July 23, 2013. Thaler, R., & Sunstein, C. (2008). Nudge: Improving decisions about health, wealth, and happiness. New Haven, CN: Yale University Press. Vargo, S. L., & Lusch, R. F. (2004). Evolving a new dominant logic for marketing. Journal of Marketing, 68, 1 17. Varley, N. (2013). Welcome to the thingternet. The Economist, The World in 2013, London, pp. 148 149. Vrasidas, C., & Veletsianos, G. (2010). Chapter 1: Theoretical foundations of social computing and virtual communities. In P. Zaphiris & C. S. Ang (Eds.) (2011), Social computing and virtual communities (pp. 1 20). Boca Raton, FL: CRC Press. Wang, F. Y., Zeng, D., Carley, K. M., & Mao, W. (2007). Social computing: From social informatics to social intelligence. IEEE Intelligent Systems, 22(2), 79 83. Zeng, D., Wang, F. Y., & Carley, K. M. (2007). Guest editors’ introduction: Social computing. IEEE Intelligent Systems, 22(5), 20 22.

FACTORS DRIVING MANUFACTURING FLEXIBILITY: THE TAIWANESE CASE Wen-Hsiang Lai and Roger Marshall ABSTRACT An issue that is becoming yet more relevant to modern manufacturers is that of flexibility. As life cycles become shorter a manufacturing firm can easily be left with redundant stock and dated processes. In Taiwan this issue has been addressed at several levels, this case study describes one such project. A Taiwanese academic conducted a study, gaining business acceptance of a hierarchical set of theoretical flexibility factors, then rearranging these via pictorial representations of fuzzy logic-derived plane surfaces, and finally re-presenting them to business as a set of ordered propositions designed to identify the key factors contributing to flexibility. The learning points relate, first, to the empirical facts uncovered about the specific factors that have a major bearing on manufacturing flexibility. These factors are, of course, specific to Taiwan and the current environment there. Second, though, is the more enduring illustration of a mixed-method case approach; where interviews, fuzzy logic analytical methods, and pictorial representation of the fuzzy logic output all combine to give clear guidance to managers of an industrial sector under

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 255 270 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021009

255

256

WEN-HSIANG LAI AND ROGER MARSHALL

stress, and to the policy makers who exert significant control over their environment. Keywords: Manufacturing; flexibility; relationships; fuzzy logic; Taiwan

BACKGROUND Product life cycles are getting shorter, consumer tastes are changing more swiftly, local and global communications are becoming more integrated, so the ability to change strategic direction is becoming more and more of a marketing imperative. As Johnson, Lee, Saini, and Grohmann (2003, p. 74) put it, “… a firm’s ability to quickly change direction and reconfigure strategically becomes crucial if it is to succeed and achieve sustainable competitive advantage.” Service flexibility must not be confused with flexibility of marketed services, as it applies equally to manufacturers and service marketers. Upton (1995) suggests that service flexibility is the ability to plan and implement a directional change in manufacturing, including responding to dramatic environmental events with little penalty in time, effort, cost, or performance. Although most researchers and manufacturers understand the concept of manufacturing flexibility, they struggle with its application (Gerwin, 1987; Sethi & Sethi, 1990). This struggle occurs in Taiwan. Taiwan has a substantial share of the global manufacturing industry, particularly in some sectors. Taiwan has an intensive, high technology, manufacturing sector composed of many cooperating small to medium-sized companies for whom flexibility is a necessary but extremely complex requirement. The country’s business organizations exhibit high levels of agility, synergistic collaboration, and are generally acclaimed throughout the world. The relationships underpinning this industrial model are slightly unusual, though, in that many are among individuals and family-run companies. Such relationship networks enable a company to both obtain raw materials and attract customers more easily. Manufacturing companies offer both upstream and downstream services to partners in the supply chain and to customers. The more complex supply and distribution chains become the more constrained flexibility becomes. Flexibility is linked to innovation, and innovation is a key to success in modern business; the CEO of Google, Eric Schmidt, states, “industrial service flexibility has a close relation with target-oriented enterprises’ innovation activities” (The New Yorker, October 12, 2009, p. 46). Flexibility can

Factors Driving Manufacturing Flexibility: The Taiwanese Case

257

extend a company’s range of available products and can shorten the time that a company needs to respond to demand. Attaining flexibility is clearly a worthy objective for a manufacturing organization.

THE RESEARCH PURPOSE AND OUTLINE OF THE RESEARCH PROCESS Typically, a major block to making swift strategic changes to the service offered by a manufacturing company lies in the inflexibility of the manufacturing processes themselves. This inflexibility is exacerbated by the extent to which the company operates with a network of purchasing and outsourcing alliances. This research empirically investigates, hierarchically orders, and reports the critical factors that lead to the flexibility of service in the manufacturing sector. The research is conducted in Taiwan, and the burden of the research project fell mainly on a Taiwanese business school professor, Wen-Hsiang Lai, at a large university in Taichung City. It is not unusual in many Asian countries for governments to commission or task prominent business school professors to undertake this type of work; the reports the professors produce are often influential. The academic contribution of the work is not so much the empirical work that is so interesting to the Taiwanese Government, but rather to demonstrate a method to assess critical flexibility factors within any sector at some point in time. Professor Lai is an experienced researcher, so conducted his research over a number of distinct phases. First, in Phase One, a preliminary list of theoretical factors that should influence flexibility is gleaned from a survey of published research. This list is discussed and refined, with the help of some expert colleagues, into a four-level hierarchy of factors and subfactors. Phase Two requires validation of the hierarchically ordered theoretical factors by a wider business audience. A survey is mounted and weights derived for each factor in the hierarchy. Phase Three designs a set of fuzzy logic statements taken from the hierarchy, to assess the results of various combinations of factors. MATLAB software is used to convert the fuzzy logic analysis into a set of plane surfaces. Phase Four involves drawing off a set of flexibility propositions from the survey and fuzzy logic plane surface data. These propositions are refined and confirmed through further consultation with a small group of experts and a confirmatory survey of a wider industry group.

258

WEN-HSIANG LAI AND ROGER MARSHALL

Phase 1: Constructing a Model from the Service Flexibility Literature Professor Lai started his task with an analysis of the literature to identify and order relevant factors. Although he understands that different environments may demand a different optimal configuration of the relevant factors, he considers such an endeavor useful, if only to provide an analytical frame. The first classification that came to view is from Volberda and Rutges (1999), who suggest a hierarchy based first on internal manufacturing flexibility and, second, on the external connection of partners in collaborative frameworks. This seems reasonable, and others have also used a hierarchical approach (e.g., Gerwin, 1987). Sethi and Sethi (1990), suggest the third level of such a hierarchy should be composed of fundamental, systemic, and overall strategy as sub-strata of manufacturing flexibility Fig. 1 shows this arrangement. Labor Flexibility Fundamental Operation

Machine Flexibility Material Flexibility Expansion Flexibility

Manufacturing Flexibility

Systemic Structure

Routing Flexibility Delivery Flexibility New Product Flexibility

Overall Strategy

Process Flexibility Production Flexibility

SF Performance

Vertical Specialization External Driving Force Cooperative Network

Horizontal Specialization Symbiotic Specialization Interpersonal Relationship

Internal Driving Force

Governmental Policy Skill and Capability

Level 1

Fig. 1.

Level 2

Level 3

Level 4

Hierarchical Model Providing the Research Framework.

Factors Driving Manufacturing Flexibility: The Taiwanese Case

259

Fundamental strategy is further broken down to three factors; machine and material-handling flexibility (Koste & Malhotra, 1999), and labor flexibility (Upton, 1995). Systemic structure flexibility, the second fundamental strategy sub-factor, is composed of routing flexibility (Koste & Malhotra, 1999), expansion flexibility Sethi and Sethi (1990) and delivery flexibility (Dixon, Nanni, & Vollmann, 1991). The last third-level factor relating to manufacturing flexibility is composed of process flexibility (Aprile, Garavelli, & Giannoccaro, 2005), production flexibility (Gerwin, 1987), and new product flexibility (Narasimhan, Talluri, & Das, 2004). The second set of factors suggested in the literature concern the collaborative networks manufacturing companies invariably develop. Many writers stress the emerging importance of such networks, particularly to small and medium-sized companies (Achrol, 1997; Johnson, 2011). There also seems agreement that these factors can be further divided between external and internal drivers of flexibility. With regard to the external driving forces of a collaborative network, Battat, Frank, and Shen (1996) distinguish three types of cooperative networks; vertical, horizontal, and symbiotic systems. The internal driving forces of collaborative networks include interpersonal relationships (Kiong & Kee, 1998), while Laumann and Knoke (1998) and Sullivan and Skelcher (2002) state that it is important for both business collaborators to have similar, or complementary, technological skills, and capabilities. Additionally, governments often promulgate regulations and policies to encourage industrial integration and collaboration. At this point, Lai took the model and showed it to several academic colleagues and several other colleagues holding high-level managerial positions in manufacturing enterprises. This discussion generated no new ideas and no disagreement with the general framework the professor now felt free to move to the next stage of the research.

Phase 2: Establishing Weights for the Factors The analytical hierarchical process (AHP) is akin to conjoint, or trade-off analysis, in that data is generated to create an order of factors by presenting respondents with a series of pairwise comparisons. Professor Lai chose to use the software “Expert Choice 2000” to conduct the analysis. First, a simple questionnaire is designed, where respondents use a nine-point semantic differential scale (absolutely important to equal importance) to compare the relative importance of each pair of factors. The factors include all those in the model, and each factor is rated against every other.

260

WEN-HSIANG LAI AND ROGER MARSHALL

Lai again used his extensive industry network to contact 29 managers of industrial companies and asked them each to complete the comparative rating task; 27 responded with completed questionnaires that they had no trouble with. This is, of course, a convenience sample, but Professor Lai made the subjective judgment that they together represented a reasonable cross-section of Taiwanese manufacturers. Table 1 replicates the model in Fig. 1 but also shows the weights of factors derived from the AHP.

Phase 3: The Fuzzy Logic Analysis The term “fuzzy logic” emerged during the development of fuzzy set theory by Zadeh (1965). Formally, fuzzy logic is a structured and model-free estimator that approximates a function through linguistic input/output associations. Fuzzy rule-based systems apply fuzzy methods to solve many types of “real-world” problems, especially in cases where a system is difficult to model, is controlled by a human operator or expert, or where ambiguity or vagueness is common. In the last decade, research in fuzzy set theory has been extended to the field of Fuzzy Logic Decision Systems (FLDS), which are especially useful for aiding management decisionmaking (Yoshino & Rangan, 1995).

Table 1. Main Factor (Level 2) Manufacturing flexibility (w = 0.428)

Weights of Factors Derived from AHP Analysis. Sub-Factors (Level 3) Fundamental operation (weight = 0.223) System structure (weight = 0.184) Overall strategy (weight = 0.593)

Cooperative networking (w = 0.572)

External driving force (weight = 0.343) Internal driving force (weight = 0.657)

Sub-Factors (Level 4)

Weight

Labor flexibility Machine flexibility Material flexibility Expansion flexibility Routing flexibility Delivery flexibility New product flexibility Process flexibility Production flexibility Vertical specialization Horizontal specialization Symbiotic specialization Interpersonal relationships Government policies Skills and capabilities

0.283 0.452 0.265 0.102 0.467 0.431 0.332 0.558 0.110 0.216 0.138 0.646 0.427 0.143 0.430

Factors Driving Manufacturing Flexibility: The Taiwanese Case

261

A typical fuzzy system consists of an inference system, a membership function, and rule bases. Based on Lai and Tsai’s (2009) fuzzy rule-based procedures and the MATLAB fuzzy toolbox, this study uses the inference system described by Mamdani (1977). This system utilizes a continuous rather than discrete output value, and a membership function (Table 2 shows the range, from zero representing no membership to 1 representing full membership). This study builds IF-THEN rules using the high (H), moderate high (MH), moderate middle (MM), moderate low (ML), and low (L) values of input and output criteria, including individual main factors and subfactors. Some IF-THEN values relate sub-factors with a single major factor, while other IF-THEN rules relate major factors to each other. Each of the 15 level 4 sub-factors, five level 3 sub-factors, and two major factors can be used as a rule input. First, the IF-THEN rules for major factors are described, followed by rules involving sub-factors. All rules have a unique output defined for every possible set of inputs. For example, the IF-THEN rules involving the main factors of flexible service performance must accommodate every combination of the two main factors, namely manufacturing flexibility and cooperative networking. Because each of these factors can, in this case, take on five values, there are 5 × 5 = 25 rules (Table 3). Professor Lai works with business people frequently, and understands that many are relatively uncomfortable with numbers, and prefer charts. Accordingly, by combining the weights derived from the hierarchical process and the data from the fuzzy logic analysis, he is able to generate a number of fuzzy surfaces (using MATLAB). These surfaces appear in Table 4, along with an explanation of what they mean.

Table 2.

Membership Function and Output Interval Ranges. Ranges of Y

Linguistic Term

Abbr.

2.6 < Y ≦ 3 2.2 < Y ≦ 2.6 1.8 < Y ≦ 2.2 1.4 < Y ≦ 1.8 1 ≦ Y ≦ 1.4

High Moderate High Moderate Middle Moderate Low Low

H MH MM ML L

262

WEN-HSIANG LAI AND ROGER MARSHALL

Table 3. If

An Example of Fuzzy Rule-Based Calculations Involving the Main Influencing Factors.

Manufacturing Flexibility (w = 0.428)

and

Cooperative Networking (w = 0.572)

Then

Output Value

Linguistic Term

1 2 3 4 …

H H H H

H H H H

3.00 2.71 2.43 2.14

High High Moderate High Moderate Middle

22 23 24 25

Low Low Low Low

L L L L

1.86 1.57 1.29 1.00

Moderate Middle Moderate Low Low Low

At this juncture, the first author established a number of propositions for different managerial levels regarding operationization based on the analysis of fuzzy surfaces. A typical proposition is, for example, “For internal manufacturing service flexibility, the high-level managers who deal with the flexibilities of product, process, and production in response to environmental changes are more influential than the middle-level managers who handle the adjustments of production lines and delivery schedules.”

Phase 4: Producing and Testing the Research Output Propositions Armed with the fuzzy plane surfaces and the information about the relative effectiveness of managers of different levels, the researcher constructed a set of 13 propositions that seemed to him to reflect the most important contributors to manufacturers’ flexibility. Table 5 contains these propositions. The final act in the research process was to take the propositions to a wider set of executive respondents from Taiwan manufacturers to see if they agree with the list and to ascertain their relative importance. One hundred and twenty-seven responses were received from this convenience sample, representing a response rate of 53.2% (53.7% are high-level managers, 31.7% middle-level managers, and 14.6% low-level managers). Table 5 includes the mean value according to each proposition; the propositions are ordered in terms of importance in the table, according to the perceptions of these respondents.

Factors Driving Manufacturing Flexibility: The Taiwanese Case

Table 4.

263

Fuzzy Surfaces and Explanations.

“Collaborative Networking” versus “Manufacturing Flexibility”

“System Structure” versus “Fundamental Operations”

• “Collaborative Networking” has a greater • “Fundamental Operations” has a greater • •

influence on SF than “Manufacturing Flexibility.” When the two factors cooperate with each other, the best “Manufacturing Flexibility” can occur. When the two factors reach ML strength, their influences on SF stagnate, and they will not rise until the MH level is exceeded.

“Overall Strategy” versus “Fundamental Operations”

• • •

influence on “Manufacturing Flexibility” than does “System Structure.” When the two factors cooperate with each other, the best “Manufacturing Flexibility” can occur. At the ML level, the two factors have a largely similar influence on “Manufacturing Flexibility.” At the ML level, “System Structure” does not increase its influence on “Manufacturing Flexibility.” However, the influence of “Fundamental Operations” stagnates at this stage, but it begins to rise again after the MH level has been exceeded.

“Overall Strategy” versus “System Structure”

• “Overall Strategy” has greater influence on • “Overall Strategy” has greater influence on •

“Manufacturing Flexibility” than does “Fundamental Operations.” After exceeding the ML level, “Fundamental Operations” does not exert a positive influence on “Manufacturing Flexibility.”

•

“Manufacturing Flexibility” than does “System Structure.” After exceeding the ML level, “System Structure” does not exert a positive influence on “Manufacturing Flexibility.”

264

WEN-HSIANG LAI AND ROGER MARSHALL

Table 4.

(Continued )

• After exceeding the MH level,

“Fundamental Operations” combines with “Overall Strategy” to exert a strong influence on “Manufacturing Flexibility.”

• After exceeding the MH level, “System

Structure” combines with “Overall Strategy” to exert a strong influence on “Manufacturing Flexibility.”

“Internal Driving Force” versus “External Driving Force”

• “Internal Driving Force” and “External •

Driving Force” within “Collaborative Networking” had a largely similar degree of influence on “Collaborative Networking.” After reaching the MH level, the two factors exert a significant and increasing influence on “Collaborative Networking,” in which “Internal Driving Force” is the most outstanding factor.

“Machine Flexibility” versus “Labor Flexibility”

• “Machine Flexibility” has a greater • •

“Labor Flexibility” versus “Material Flexibility”

influence on “Fundamental Operations” than does “Labor Flexibility.” When the two factors cooperate with each other, the best effect can be obtained on “Fundamental Operations.” After exceeding the MH level, “Labor Flexibility” has an increasing influence on “Fundamental Operations.” “Machine Flexibility” versus “Material Flexibility”

• “Labor Flexibility” has a greater influence • “Machine Flexibility” has a greater • •

on “Fundamental Operations” than does “Material Flexibility.” After reaching the M level, “Material Flexibility” does not increase its influence on “Fundamental Operations.” At the M and MH levels, inflection points occur in “Labor Flexibility.”

• •

influence on “Fundamental Operations” than on “System Structure.” After exceeding the ML level, “System Structure” does not exert a positive influence on “Manufacturing Flexibility.” After exceeding the MH level, “System Structure” combines with “Overall Strategy” to continue to have a strong influence on “Manufacturing Flexibility.”

Factors Driving Manufacturing Flexibility: The Taiwanese Case

Table 4.

(Continued )

“Routing Flexibility” versus “Expansion Flexibility”

“Delivery Flexibility” versus “Expansion Flexibility”

• “Routing Flexibility” has a far greater

• “Delivery Flexibility” has a greater

•

•

•

influence on “System Structure” than does “Expansion Flexibility.” “Expansion Flexibility” has little influence on “System Structure.” Although “Expansion Flexibility” has almost zero influence on “System Structure,” the combination of high levels of “Expansion Flexibility” and “Routing Flexibility” still exerts a significant influence on “System Structure.”

265

•

“Delivery Flexibility” versus “Routing Flexibility”

influence on “System Structure” than does “Expansion Flexibility.” Only when “Expansion Flexibility” reaches a value greater than MH does it begin to exert a significant influence on “System Structure.” The combination of “Delivery Flexibility” and M-level-stage “Expansion Flexibility” exerts the greatest influence on “System Structure.”

“Process Flexibility” versus “New Product Flexibility”

• “Routing Flexibility” has a greater

• “Process Flexibility” has a greater influence

•

•

•

influence on “System Structure” than does “Delivery Flexibility.” When the two factors collaborate with each other, the greatest influence on “System Structure” occurs. Before reaching the MH level, the two factors have almost the same influence on “System Structure.” However, after “Routing Flexibility” reaches the MH level, its influence increases substantially.

on “Overall Strategy” than does “New Product Flexibility.” After reaching the MH level, “Process Flexibility” tends to have an increasing influence.

266

WEN-HSIANG LAI AND ROGER MARSHALL

Table 4.

(Continued )

“New Product Flexibility” versus “Volume Flexibility”

“Process Flexibility” versus “Volume Flexibility”

• “New Product Flexibility” has greater

• “Process Flexibility” has a far greater

•

•

•

influence on “Overall Strategy” than does “Volume Flexibility.” After reaching the MH level, “Volume Flexibility” tends to have an increasing influence. When “New Product Flexibility” and “Process Flexibility” both reach the MH level, their combination exerts a strong influence on “Overall Strategy.”

•

“Horizontal Specialization” versus “Vertical Specialization”

• In the first stage, “Horizontal

•

Specialization” exerts an influence on the external pattern of “Collaborative Networking,” but its influence does not grow after it reaches the ML level. “Vertical Specialization” has a greater influence on the external pattern of “Collaborative Networking” than does “Horizontal Specialization.”

“Symbiotic Cooperation” versus “Horizontal Specialization”

influence on “Overall Strategy” than does “Volume Flexibility.” After exceeding the ML stage, “Process Flexibility” does not exert a further positive influence on “Overall Strategy.” After exceeding the MH level, “Process Flexibility” combines with “Overall Strategy” to exert a strong influence on “Manufacturing Flexibility.” “Symbiotic Cooperation” versus “Vertical Specialization”

• “Symbiotic Cooperation” has a far greater •

influence on the external pattern of “Collaborative Networking” than does “Vertical Specialization.” The best external pattern of “Collaborative Networking” requires the contribution of “Vertical Specialization” at a level above MH. “Interpersonal Relationships” versus “Government Policies”

Factors Driving Manufacturing Flexibility: The Taiwanese Case

Table 4.

267

(Continued )

• “Symbiotic Cooperation” has a far greater • “Interpersonal Relationships” has a greater •

influence on the external pattern of “Collaborative Networking” than does “Horizontal Specialization.” The best external pattern of “Collaborative Networking” requires the contribution of “Horizontal Specialization” at a level above MH.

“Interpersonal Relationships” versus “Skills and Capabilities”

• •

influence on “Internal Driving Force” in “Collaborative Networking” than does “Government Policies.” In the first stage, “Government Policies” exerts little influence. The combination of “Government Policies” at a level above MH and “Interpersonal Relationships” results in the best influence on “Internal Driving Force” in “Collaborative Networking.”

“Skills and Capabilities” versus “Government Policies”

• “Skills and Capabilities” has a greater

• “Skills and Capabilities” has a greater

•

•

influence on “Internal Driving Force” in “Collaborative Networking” than does “Interpersonal Relationships.” When these two factors collaborate with each other, the best influence on “Internal Driving Force” in “Collaborative Networking” occurs.

•

influence on “Internal Driving Force” in “Collaborative Networking” than does “Government Policies.” In the first stage, “Government Policies” exerts little influence. The combination of “Government Policies” at a level above MH and “Skills and Capabilities” results in the best influence on “Internal Driving Force” within “Collaborative Networking.”

DISCUSSION Lessons from the Results Some of Lai’s findings are common sense that high-level managers are more influential at the strategic level in attaining manufacturing flexibility than lower levels of management at an operational level does not surprise, for instance. Some are less obvious, however. That co-creative technological cooperation among personnel and among partners seems more

268

WEN-HSIANG LAI AND ROGER MARSHALL

Table 5.

11

10

12

13

8

3

5 6 4

1 2 9

7

Propositions Drawn from Analysis of Fuzzy Planes and Survey Data. Propositions

Mean (from 5)

When building a cooperative network, the symbiotic relationship achieved by an integrated pattern of vertical and horizontal cooperation results in a greater effect than any one independent collaboration Internal collaboration (e.g., personnel cooperation, partners’ technical capabilities) are more important to flexibility than any combination of patterns of collaborative networking (i.e., vertical, horizontal) Laws or policies enacted by government are usually not helpful in encouraging collaboration among enterprises. Incentives are the main reasons for constructing mutual collaborations among enterprises Compared with persuasion through government policies and interpersonal relationships with vendors, an enterprise’s possession of a good technical background exerts a greater influence on its collaborative network Compared with changing the delivery time to fit customers’ needs, adding different product lines to produce specific products will have more influence on manufacturing flexibility within an enterprise High-level managers who deal with the flexibilities of product, process, and production in response to environmental changes are more influential regarding flexibility than the low-level managers who handle the adjustments of manpower, machines, and materials Effective utilization of manufacturing machines is more important to flexibility than effective deployment of manpower Effective deployment of manpower is more important to flexibility than effective utilization and adjustment of materials High-level managers who deal with the flexibilities of product, process, and production in response to environmental changes are more influential regarding flexibility than the middle-level managers who handle the adjustments of production lines and delivery schedules If an enterprise intends to achieve operational flexibility, external collaboration is more important than internal collaboration Low-level managers are more influential than middle-level managers in dealing with the manpower and materials handling factors To obtain substantial improvements, high-level managers are usually more willing to adjust manufacturing processes than to develop new products to fit market needs Expanding production lines, recruiting new employees, and introducing new technologies will not significantly influence manufacturing flexibility within an enterprise

4.4

4.1

4.1

4.1

4.0

3.9

3.9 3.9 3.8

3.8 3.7 3.7

3.0

Factors Driving Manufacturing Flexibility: The Taiwanese Case

269

important than any vertical or horizontal combination of contractual collaborative networks is a surprise to Lai. Moreover, also against expectations (in Taiwan at least), is that laws or policies enacted by government are usually not helpful in encouraging collaboration among enterprises; an enterprise’s possession of a good technical background exerts a greater influence on the collaborative network. This really follows from the previous point about co-creation, as such collaboration is only effective when partners in an environment of mutual trust share resources, and this environment is better fostered by informal relationships than by contract. A major finding confirms what many have known or suspected, that it is internal flexibility that matters, rather than the ability to buy in new machinery or personnel; “growing your own” rather than “external grafting” is the superior strategy. The ability to add new or modified products, and adjust volumes and delivery time to satisfy customers’ requests, are the elements that enterprises need to address to meet customers’ requirements. It is counter-productive to purchase additional machines or recruit new employees to optimize operational flexibility; it is better to take advantage of existing equipment and manpower to undertake process reengineering, and to cultivate a multi-skilled workforce through education and training.

Contribution Lai’s work has immediate empirical value to the Taiwanese manufacturing sector. The main contribution of the research in this case study, though, is to provide the first application of fuzzy logic to a hierarchical structure of the components of manufacturing service flexibility. This technique is neither particularly hard nor expensive, and can be readily applied in other settings. That this is a requirement is because the empirical findings are clearly not generalizable outside the Taiwan case, where a particular set of relational, cultural, and legal factors dominate the manufacturing environment and these particular findings are thus irrelevant if taken directly to some other environment. The method Lai provides has a further advantage. Managers relate far more strongly to the MATLAB fuzzy plane diagrams than they do tables or statistics, and this appeals and adds greater managerial credibility to the findings.

270

WEN-HSIANG LAI AND ROGER MARSHALL

REFERENCES Achrol, R. S. (1997). Changes in the theory of interorganizational relations in marketing: Toward a network paradigm. Journal of the Academy of Marketing Science, 25(1), 56 71. Aprile, D. A., Garavelli, C., & Giannoccaro, I. (2005). Operations planning and flexibility in a supply chain. Production Planning & Control: The Management of Operations, 16(1), 21 23. Battat, J. Y., Frank, I., & Shen, X. (1996). Suppliers to multinationals: Linkage programs to strengthen local companies in developing countries. Foreign Investment Advisory Service, Occasional Paper 6, World Bank, Washington DC. Dixon, J. R., Nanni, A. J., & Vollmann, T. E. (1991). Effective performance measurement: Operational versus accounting measures. Boston, MA: Boston University, School of Management Gerwin, D. (1987). An agenda for research on the flexibility of manufacturing processes. International Journal of Operations & Production Management, 7(1), 38 49. Johnson, J. L., Lee, R. P.-W., Saini, A., & Grohmann, B. (2003). Market-focused strategic flexibility: Conceptual advances and an integrative model. Journal of the Academy of Marketing Science, 31(1), 74 89. Johnson, M. (2011). Supply chain benefits from consortia e-marketplaces: A case study of AeroDefence. International Journal of Services and Operations Management, 8(4), 449 470. Kiong, T. C., & Kee, Y. P. (1998). Guanxi bases, Xinyong and Chinese business networks. British Journal of Sociology, 49(1), 75 96. Koste, L. L., & Malhotra, M. K. (1999). Conceptual note: A theoretical framework for analyzing the dimensions of manufacturing flexibility. Journal of Operations Management, 18, 75 93. Lai, W.-H., & Tsai, C.-T. (2009). Fuzzy rule-based analysis of firm’s technology transfer in Taiwan’s machinery industry. Expert Systems with Applications, 36, 12012 12022. Laumann, E. O., & Knoke, D. (1998). The increasingly organizational state. Society, 25(2), 21 28. Mamdani, E. H. (1977). Application of fuzzy logic to approximate reasoning using linguistic synthesis. Computers, IEEE Transactions on Computers, C-26(12), 1182 1191. Narasimhan, R., Talluri, S., & Das, A. (2004). Exploring flexibility and execution competencies of manufacturing firms. Journal of Operations Management, 22(2004), 91 106. Sethi, A. K., & Sethi, S. P. (1990). Flexibility in manufacturing: A survey. International Journal of Flexible Manufacturing Systems, 2(4), 289 328. Sullivan, H., & Skelcher, C. (2002). Working across boundaries: Collaboration in public services. Basingstoke, UK: Palgrave Macmillan. Upton, D. (1995). Flexibility as process mobility: The management of plant capabilities for quick response manufacturing. Journal of Operations Management, 12(3 4), 205 224. Volberda, H. W., & Rutges, A. (1999). FARSYS: A knowledge-based system for managing strategic change. Decision Support Systems, 26(2), 99 123. Yoshino, M. Y., & Rangan, U. S. (1995). Strategic alliances: An entrepreneurial approach to globalization. Boston, MA: Harvard Business School Press. Zadeh, L. A. (1965). Fuzzy sets. Information and Control, 8(3), 338 353.

USING CASE-BASED RESEARCH FOR AGENT-BASED MODELLING Sharon Purchase, Sara Denize and Doina Olaru ABSTRACT This chapter outlines a method for developing simulation code from casebased data using narrative sequence analysis. This analytical method allows researchers to systematically specify the ‘real-world’ behaviours and causal mechanisms that describe the research problem and translate this mechanism into simulation code. An illustrative example of the process used for code development from case-based data is detailed using a well-documented case of photovoltaic innovation. Narrative sequence analysis is used to analyse case data. Micro-sequences are identified and simplified. Each micro-sequence is presented first in pseudo-code and then in simulation code. This chapter demonstrates the coding process using Netlogo code. Narrative sequence analysis provides a rigorous and systematic approach to identifying the underlying mechanisms to be described when building simulation models. This analytical technique also provides necessary and sufficient information to write simulation code. This chapter addresses a current gap in the methodology literature by including case data within agent-based model building processes. It

Field Guide to Case Study Research in Business-to-Business Marketing and Purchasing Advances in Business Marketing & Purchasing, Volume 21, 271 288 Copyright r 2014 by Emerald Group Publishing Limited All rights of reproduction in any form reserved ISSN: 1069-0964/doi:10.1108/S1069-096420140000021010

271

272

SHARON PURCHASE ET AL.

benefits B2B marketing researchers by outlining guiding processes and principles in the use of case-based data to build simulation models. Keywords: Agent-based models; narrative sequence analysis; innovation networks; mechanisms

INTRODUCTION Business-to-business (B2B) behaviour is complex, interdependent and emergent (Ritter, Wilkinson, & Johnston, 2004; Wilkinson & Young, 2013). Case-based research (CBR) has a well-established role in the empirical consideration of such behaviours, and provides nuanced and rich descriptions that can address requirements both for accuracy and for detail. Additionally, CBR may be the only available source of evidence for developing simulation models of complex B2B processes. Simulation models offer the unique possibility of handling high complexity while simultaneously addressing both generality and accuracy in describing B2B behaviours; the lack of such qualities is often a criticism of other CBR methodologies (Woodside, 2010). CBR and simulation methods offer complementary benefits when used together within research projects (Maguire, McKelvey, Mirabeau, & O¨ztas, 2006). Maguire et al. (2006) argue further that case data provides evidence of the correspondence between the ‘real world’ and a simulation of that ‘reality’. CBR has a well-established role within B2B research, as evidenced by its long history of use, particularly within the Industrial Marketing and Purchasing (IMP) group of researchers. Interpretive methods allow researchers to investigate complex phenomena over time, while incorporating multiple actor perspectives (e.g. Ha˚kansson & Ford, 2002; Lowe, Ellis, & Purchase, 2008; Lowe, Purchase, & Ellis, 2012; Mitleton-Kelly, 2003; Mo¨ller & Svahn, 2003, 2005). CBR allows researchers to investigate phenomena accurately and in detail, although it has limitations, in that few researchers employ rigorous case methodology; often they fail to address complexity properly (Piekkari, Plakoyiannaki, & Welch, 2010). Agent-based models (ABM) extend current CBR approaches by allowing (i) further investigation of ‘what-if’ scenarios through manipulation of the phenomena; (ii) the incorporation of behaviours where data is often difficult to collect or recall, such as conflicting behaviours, or the bankruptcy of network actors, etc.; (iii) consideration of the possible generality of the cases outside of their original context (Woodside, 2010); and (iv) inclusion

Using Case-Based Research for Agent-Based Modelling

273

of many different possible outcomes while considering emergent patterns in dynamic behaviour; this is difficult in CBR (Anderson, 1999; Macy & Willer, 2002). CBR also informs and extends current simulation research in a number of ways: (i) enhancing theory building and model specification; (ii) providing evidence for validation processes (Denize, Purchase, & Olaru, 2012); and (iii) assisting in the development of simulation rules. Modellers have used both theory (Robertson, 2003) and a range of research methods to inform rule development. Research techniques such as conjoint analysis (e.g. Midgley, Marks, & Kumchamwar, 2007; Zhang, Gensler, & Garcia, 2011) and economic data analysis (Følgesvold & Prenkert, 2009) also inform rule development. However, B2B phenomena are inadequately researched in respect of such techniques. Consequently, this chapter’s objective is to consider how CBR can be used with simulation models and, in particular, how CBR informs rule development within the ABM modelling process. Developing rigorous processes for rule development from CBR is important, since future research will focus on complex aspects of B2B marketing, and particularly those focused on business networks (Wilkinson & Young, 2013). With the development of simulation tools (e.g. Netlogo) that are more accessible to a wider community, researchers have opportunities to investigate research problems that receive scant attention in the literature. Yet, these new research approaches are limited by the lack of community knowledge about, and discourse on, the rigors of the research process, particularly within the social sciences (Maguire et al., 2006). Therefore, outlining a structured technique for rule development from CBR contributes to the discourse on rigorous research methods for future researchers considering simulation methods. B2B marketing requires researchers to consider complex phenomena (Ritter et al., 2004), from which the data often is available only via CBR. Therefore, simulation rule development, verification and validation processes rely on case data (Denize et al., 2012). Given the importance of these processes, documenting rigorous research methods is essential for the future development of B2B research on complex systems (Wilkinson & Young, 2013). Responding to the call for research that considers the ‘momentum, sequences, turning points and path dependencies’ (Powell, White, Koput, & Owen-Smith, 2005, p. 1133) of networks, the evolutionary process of innovation networks is illustrated in this chapter. As with most B2B research, a combination of CBR and simulation is particularly suited to these problem spaces. The illustrative case centres on the development of

274

SHARON PURCHASE ET AL.

second-generation photovoltaic innovation at the University of New South Wales, Australia, which illuminates a diverse set of emergent phenomena. The following section outlines a few background considerations; the simulation engine, the theoretical framework, and the case description, as well as data collection and analysis. Next, the chapter illustrates how the simulation rules can be extracted from CBR using narrative sequence analysis and concludes by considering the lessons learned for researchers interested in using this approach to develop simulation models. This has implications for the CBR researcher designing their data collection to this end.

BACKGROUND CONSIDERATIONS Modelling Environment Netlogo™ (Wilensky, 1999) is used to illustrate how CBR can be used to develop simulation rules; however, the processes described here can be generalised to other simulation environments. Netlogo is an agent-based simulation program requiring researchers to set up the simulation (describing model constructs, specifying initial relations), develop a ‘run’ section (describing micro-behaviours in rules) and define required outputs (output data to consider research objectives) that simulate a real-world system. More specifically, the simulation comprises agents called turtles, patches and links. Patches are the ground over which the turtles move, and links are connections between turtles (Wilensky, 2013). For a detailed discussion on Netlogo it is recommended that interested readers go to the following website: http://ccl.northwestern.edu/netlogo/.

Research Problem An initial literature search focused on the research problem of network evolution, with a focus on the dynamics of innovation networks. There is a significant research gap in regard to the emergence of innovative networks, with previous research having focused on intra-organisational or dyadic issues (e.g. Land, Engelen, & Brettel, 2012; Lichtenstein & Brush, 2001). The extant research on innovation network emergence, albeit limited, uses case analysis (e.g. Hoholm & Olsen, 2012; Mo¨ller & Svahn, 2003) and

Using Case-Based Research for Agent-Based Modelling

275

seldom includes a wide range of dynamics or considered network emergence over extended time periods. This chapter does not go into the literature concerning this research gap, yet an extensive literature review has highlighted a number of variables that need to be included in simulation development. These variables, their descriptions, relevant references and their setup within Netlogo, are given in the Appendix.

Case Description, Data Collection and Analysis The case study selected describes the development of photovoltaic (PV) technology research and the commercialisation of a range of technologies, beginning with a focal actor (University of New South Wales PV) during the period 1985 2008 in Australia (and internationally, as the case develops). The case focuses on the emergence of a new technology; thin-film crystalline silicon on glass (CSG) photovoltaic solar cells. It considers the innovation and commercialisation story, describing the formation and demise of businesses and spin-off companies as well as the exploratory and exploitative research undertaken by various actors on the path to commercialisation of this second-generation solar technology. The case begins during the pre-innovation period, looking at precursor technology, and ends where businesses who bought the CSG technology ceased operations at the end of 2008. It is also interesting because there are storylines that deal with the precursor technologies and the secondary actors; these form a subplot to the main storyline, which is based on the innovation and commercialisation of the second-generation solar cells. The case was selected because there is a large quantity of publically available empirical data, including reports and case summaries published by government departments and research institutions, as well as journal articles, press releases, popular media reports and company websites that were published over an extended period. Bairstow and Young (2012) point out that the availability of archival data from wide range of data sources provides an historical perspective that (i) enables consideration of deep processes in evolutionary systems and (ii) highlights events that trigger change (iii) within a suitably long time frame to allow for some causal attribution. The data were collated and analysed using narrative sequence analysis (NSA) to identify the micro-behaviours to be represented in the simulation model. NSA is one of many approaches that can be used to analyse CBR. Other analytical approaches are also useful in identifying important phenomena. However, NSA is an approach that is particularly suited to

276

SHARON PURCHASE ET AL.

identifying ‘the way actions and events unfold over time’ by systematically analysing the narratives that form the basis of CBR data (Buttriss & Wilkinson, 2006, p. 160) and consequently is particularly useful as a basis for describing micro-behaviours in the ‘run’ section of the simulation model (this is the section of Netlogo code that specifies how the agents or variables interact; it sets out the behaviours of interest). The next section provides a detailed illustration of how to generate simulation rules using CBR and narrative sequence analysis.

RULE EXTRACTION USING NSA Generalised Process The researcher begins by specifying a theoretical framework, which is used both to identify the variables in the simulation model and as a guide for selecting appropriate cases. The next step uses NSA to identify the mechanisms and events leading to significant changes in the business network; these are termed micro-sequences. Each micro-sequence represents a small part of the broader narrative sequence and has defined boundaries. The theoretical framework clarifies the boundaries and the relative importance of a microsequence (to the research problem under investigation). The researcher must also consider the goals of the modelling process, and the inherent trade-off between the parsimony and sufficiency of the simulation. Significant microsequences are used to write blocks of pseudo-code for the ABM model. The pseudo-code can then be combined to develop the logic of the simulation model and consequently to write the run instructions in the Netlogo code, to simulate the particular real-world behaviour of interest.

Illustration Using the PV Case Narrative sequence analysis comprises three broad steps. The first step describes the types of event in the narratives (e.g. a new manufacturer emerges; funds are transferred; knowledge is created). Once these events are identified, the temporal sequence of events is established and the connections (or lack of connections) between them are clarified. Finally, the researcher considers the ‘causal mechanisms that drive the flow of events’ (Buttriss & Wilkinson, 2006, p. 62).

277

Using Case-Based Research for Agent-Based Modelling

Fig. 1 shows a sequence from the analysis of the PV case. Data for this sequence analysis was mainly sourced from Watt (2003) and the Centre for Photovoltaic Devices and Systems Annual Report (1992), though many more data sources were used for the full case analysis. The sequence illustrates a series of events pertaining to the creation of knowledge during the period 1985 1999. In the mid-1980s, researchers at the School of Engineering at the University of New South Wales (UNSW) developed a significant international reputation for PV research. Researchers with established reputations successfully secured grant funding from a range of state and federal government bodies as well as private institutions and organisations. Moreover, together with the UNSW commercialisation company (Unisearch Ltd.) the research team had successfully sold buried-cell PV technology to BP Solar, creating a stream of royalty revenue. In late 1980 the UNSW research team applied for a major research grant, which enabled them to establish a PV Research Centre at UNSW. The Centre also secured significant funding from a NSW government owned utility company (Pacific Power), as well as numerous other grant funding bodies. This funding enabled the research team to increase the research effort to produce exploratory knowledge (conversion efficiency with first generation technologies; developing second-generation CSG technologies) and exploitative knowledge (incorporating improvements into existing commercial applications; developing new commercial devices; improving the cost-effectiveness of power supply systems). A

UNSW researchers conduct research

BP Solar pay royalties to UNSW for Buried Cell technology

Various FB pay UNSW for research

B

UNSW researchers achieve PV research success

R&D has Explor/Exploit Knowledge

UNSW researchers apply for ARC grant

R&D creates Explor/Exploit Knowledge

conducts research

pa

s nk

ys

li

FB provides financial resources

ARC confirms grant success

PV Research Centre (PVRC) established at end 1990

PVRC conducts research / creates knowledge (1991 – 1999)

ARC pays PV Research Centre $2.5 over three years

Pacific Power pays PV Research Centre $1.2m over four years

Various FB pay PV Research Centre (1991 – 1999)

Simplified Micro Sequence

Fig. 1.

Partial NSA Showing a Micro-Sequence and Associated Simplified Micro-Sequence for ‘Create Knowledge’.

278

SHARON PURCHASE ET AL.

The micro-sequence begins at point A on the Fig. 1 and ends with the creation of knowledge at point B. At the beginning of the sequence the researchers (R&D in the simulation) have knowledge, exemplified by the status of the research team, their publications and their research into the commercialisation of PV technologies. During the micro-sequence various granting bodies (financial backers in the simulation) provide funding to the research team, enabling the group to consolidate their expertise by establishing a research centre and subsequently conducting further research. To generate the simplified micro-sequence, researchers need to make decisions concerning important behaviours and outcomes relative to the research objective. The following criteria assist in the decision making process that is involved in building the simplified micro-sequence: • Behaviours that distract the focus away from the research objective/ question under investigation are not included: for example UNSW researchers apply for an Australian Research Council Grant. This behaviour doesn’t directly relate to the creation of knowledge, even though researchers need to apply for grants to ensure future funding. • Behaviours that are common are grouped together, for example funding for the research centre. In the above example the research centre receives funding from numerous sources. Each of these funding sources is aimed at the development of new knowledge in relation to second-generation PV panels. Therefore, grouping these behaviours into a single microbehaviour simplifies and improves the generality of the research. • Behaviours that have little consequence for the outcome generated are not included: for example UNSW researchers conducting research. Although this behaviour seems important, it isn’t conducting the research but the success of knowledge generation that is the focus of the research. Therefore, achieving PV research success is a better indicator of knowledge generation than just conducting research. As indicated in the narrative preceding Fig. 1, a considerable body of new knowledge was created by PV Centre researchers. Once a simplified micro-sequence is developed, consideration turns to development of the pseudo-code, which informs the building of the ABM model. Pseudo-code is an informal description of the behaviour to be modelled that allows non-programmers to consider the logic of the program (Gilbert, 2007); the pseudo-code for eight simplified micro-sequences is contained in Table 1. Notably, many more micro-sequences are identified in the total case than the eight highlighted in Table 1; they are restricted to

Using Case-Based Research for Agent-Based Modelling

279

eight for simplification purposes in this chapter. These eight examples illustrate some useful points. Multiple examples of common micro-sequences are found in the data. In Table 1 there are two examples of ‘create knowledge’ and three examples of a new manufacturer entering the network: ‘create manufacturer’. Although these micro-sequences have been grouped together (e.g. create knowledge) they have slightly different descriptions in one case creating exploratory knowledge, and in another creating exploitative knowledge. These differences can be seen in the descriptions of the micro-sequences in Table 1. The case generates many different types of micro-sequence, of which Table 1 illustrates five: ‘create knowledge,’ ‘create manufacturer,’ ‘create financier,’ ‘financier leaves,’ and ‘manufacturer leaves’. When examining the micro-sequences and pseudo-code, researchers must sort and cluster together similar types of sequence for consideration. Clustering similar examples of pseudo-code allows researchers to compare and contrast different mechanisms and their importance to the research objective. For example, there are two examples of ‘create knowledge’ in Table 1. These examples are similar; in each, the R&D company creates knowledge, albeit different knowledge (exploratory and exploitative knowledge) when environmental munificence and access to financial resources are high. These similarities are combined into common patterns of behaviour, highlighting the real-world frequency and significance of these mechanisms. Capturing these similarities improves the efficiency of code development. The two examples also highlight the subtle differences in creating exploratory and exploitative knowledge, in that a greater financial investment is required to generate exploitative knowledge (notice the distinction in Table 1). These differences may create tensions between the mechanisms, yet some tensions are required to ensure variety in behaviour and randomness. Researchers are required to decide which ‘example’ takes precedence over the other. In turn, this ordering, or hierarchy, must be reflected in the building of the simulation. Netlogo prioritises later instructions over those earlier in the program. The ordering should be guided by the evidence from the case, by prior literature focusing on similar behaviours, and the research problem under investigation. Therefore, researchers will need to articulate their decisions and provide a justification for them. The blocks of pseudo-code can be refined into coding examples for further consideration and for inclusion into the ABM at later stages. This step allows multiple researchers working on the project to follow through with model development and to develop a thorough understanding of the logic behind the simulation program. Understanding the logic of the

Micro-Sequence, Pseudo-Code and Rule Examples for Eight Illustrations.

Micro-Sequence

Generalised Action

Create Knowledge: Sponsored exploratory research PV Group at UNSW set up within a university setting by photovoltaic research centre numerous Government Grants through Australian Government Funding (ARC) detailed example illustrated in the chapter

Preliminary Pseudo-Code Wording

Rule Example

Create exploratory knowledge Exploratory (randomly doubled) and exploitative (randomly 10%) knowledge is created when munificence is high and the financiers they are linked to have high financial resources that are consequently randomly lowered

ask R&D if [[patch >x + σ] and link-neighbor VC [financial >x+ σ]] set R&D [exploratory random-normal [exploratory*2] σ][exploitative [random-normal [exploitative *1.1] σ]; fb [financial random-normal [x/2] σ]].

R&D receiving research funds aimed at improving commercialisation knowledge when munificence is high

Create exploitative knowledge ask R&D if [[patch > x + σ] and Exploratory (randomly 10%) and link-neighbor fb [financial >x + exploitative (randomly 20%) 1.5*σ]] set R&D [exploratory are created when munificence is random-normal high and the financiers the [exploratory*1.1] σ; exploitative R&D companies are linked to, random-normal have extremely high financial [x * 1.2]σ]; fb [financial resources that are random-normal consequently halved [[x + 1.5*σ]/2] σ].

Create Manufacturer: Pacific Solar (sub 1) is a wholly owned subsidiary established to commercialise complementary modular inverter technology

Creation of manufacturer to product necessary complementary technology

Manufacturer created to produce complementary technology

Create Financier: New commercial private investors New Financier entering network Eurosolar eSpA entering the with existing photovoltaic Private investors own the average network to invest large amounts knowledge entering the of all the financial resources of

ask R&D If [[exploitative > x] and link-neighbor fb [financial >x]] create manufacturer [exploitative random-normal [x/2] σ; financial[[sum [ask manufacturer-on neighbor financial]]/sum [count manufacturer-here] of neighbor]] ask R&D if [patch >x + 1.5*σ] and [exploratory >x + 1.5*σ] create fb [financial [[sum [ask

SHARON PURCHASE ET AL.

Create Knowledge: Pacific Solar established to conduct research into the commercialisation of thin-film solar technology through incoming research investment funds, due to pressure to consider ‘green’ power generation technologies

280

Table 1.

network to invest in research when the exploratory & exploitative knowledge builds further

the financiers linked to the R&D company

Create Manufacturer: CSG Solar formed to commercialise the thin-film technology through to manufacturing processes

Commercialisation of the technology requires investment in both knowledge and (extremely high) financial resources

Create manufacturer when high levels of exploratory and exploitative knowledge and extremely high levels of financial resources exist

Financier Leaving Network: Pacific Power leaves network due to inability to invest funds to further commercialise technology

Investors leave the network when Investors leave the network financial resources limited and they can no longer invest in the network

ask fb if [financial < x] then die

Create Manufacturer: Suntech formed to manufacture low technology PV Panels in China, with support from Chinese Government

With extremely high levels of munificence and financial resources, manufacturer begins

ask R&D if [near neighbor fb >x + 1.5*σ] and [patch >x + 1.5*σ] then create manufacturer [exploitative random-normal x σ; financial randomnormal x σ]

Manufacturer Leaving Network: Closure of CSG Germany manufacturing plant

Closure of manufacturing plant Manufacturer leaves the network due to issues with technology when exploitative knowledge (panels not as efficient, and are drops and investors unwilling expensive to make) and an to invest. unwillingness of investors to keep putting money into the process

Manufacturer is created when munificence and financial resources are extremely high.

fb-on neighbor financial]]/sum [count fb-here] of neighbor]].

ask R&D if [exploratory > x and exploitative > x and linkneighbor fb financial >x] then create manufacturer [exploitative random-normal [x/2]; complementary[sum [ask manufacturer-on neighbor complementary]]/sum [count manufacturer-here] of neighbor]

Using Case-Based Research for Agent-Based Modelling

of financial resources in Pacific Solar, taking 25% ownership of the company

ask manufacturer if [exploitative < x and sum [link-neighbor fb < x]] then die

281

Note: A normal distribution curve for each variable was used as a standard, where x is the mean of the variable and σ is the standard deviation of the variable.

282

SHARON PURCHASE ET AL.

simulation model is important in terms of ensuring that the ABM model aligns with the theoretical framework, verification and validation purposes, and interpretation of the results. Further, the completed Netlogo instructions and micro-sequences may be published (in much the same way as is common for variables-based researchers to publish their covariance matrix). This opens up the modelling, the coding and the data to inspection by other researchers something that seldom happens with CBR.

CONCLUSION Overall, this chapter highlights a process by which case-based researchers can extend their case data to build simulation models and consider different and new theoretical questions. Case data gives researchers insights into the temporality and richness of data that highlight the frequency and variety of micro-behaviours occurring within B2B marketing settings. Applying rich data into simulation models requires further processing of the data into a form suitable for the simulation approach undertaken. Yet, the process of converting this rich data into micro-sequences is not without a number of issues. For example: 1. Two important principles to consider in the building of ABM simulations are parsimony and sufficiency. Models need sufficient detail to describe the real world, yet must be appropriately parsimonious to allow interpretation of the results. NSA allows researchers to consider which mechanisms and events are necessary and sufficient, which should be and which need not be included in the model, to describe the real world. Parsimony affects decisions about the behaviours to include in simplified micro-sequences and regarding which micro-sequences need to be included in the simulation model. 2. NSA develops a cumulative explanation of the main mechanisms that reflects the relative importance of mechanisms within the focal case. The mechanisms can be prioritised according to their generality, salience and accuracy to the real world. Developing an ordering sequence for the micro-sequences to be included within the simulation model allows researchers to consider the importance of behaviours to other contexts (outside the case), links to the main causal mechanism, and which micro-sequences diverge from the main causal sequence in producing other effects. The development of an ordering sequence also assists when combining pseudo-code processes into a logical sequential order

Using Case-Based Research for Agent-Based Modelling

283

before writing the Netlogo code. The ordering of simulation code has important implications for output generation, and will differ from chronological sequencing, as time is in many cases not the most important criterion for deciding on the importance of micro-sequences relative to the research problem. The ordering of simulation code needs to be such that micro-behaviours placed early in the run sequence are less important than those placed later. 3. Mechanisms in tension may also emerge through the analysis and the researcher needs to consider how such mechanisms ought to be included in the simulation model. Different actors will undertake different processes to reach similar outcomes and therefore, the researcher needs to consider the conflicts or the paradoxical nature of the mechanisms when combining the pseudo-code into sequential ordering. Also, mechanisms may lead to goals that neither align nor conflict with other goals and thus create scenarios where one mechanism negates another. CBR allows the researcher to develop a richer understanding of the contexts wherein mechanisms in tension develop, before developing the simulation model. Wilkinson, Held, Marks, and Young (2014) highlight a number of mechanisms that are susceptible to being in tension. We have developed a decision framework that brings together some of the issues highlighted in this discussion for the consideration of case-based researchers in research and simulation projects. This framework is illustrated in Fig. 2. This framework is based on the Woodside box metaphor of case-based research (Woodside, 2010) and highlights how NSA case-based approaches and simulation processes converge. As the figure highlights, the decision process regarding the inclusion, or not, of different aspects of case data into simulation models, is a trade-off between research criteria, parsimony and sufficiency. Researchers make trade-off decisions that require consideration of how the different aspects of the research fit together. Sufficiency and parsimony tend to balance each other, in that simple models are best, but they require sufficient detail to enable realistic replication of the realworld behaviours under investigation. Future research needs to consider complexity science (Wilkinson & Young, 2013) and, given the Woodside box metaphor (Woodside, 2010), this requires researchers to address generality, complexity and accuracy (point eight in Woodside’s Box). The approach outlined in this chapter demonstrates a process that takes case data that is both complex and accurate (in Woodside’s box at point six, toward point eight), to higher

284

Fig. 2.

SHARON PURCHASE ET AL.

Decision Framework for Extracting Simulation Code from Case-Based Research.

generality. Woodside (2010) highlights that building ABM is very ambitious and that researchers need to be able to work with contradictions, feedback loops and path dependence that influence outcomes. However, these aspects are not currently included in most B2B marketing research approaches. Given the acceptance and experience of case-based approaches within B2B marketing, there is a strong foundation on which different research approaches, such as agent-based simulations of B2B environments, can be built.

REFERENCES Anderson, P. (1999). Complexity theory and organization science. Organization Science, 10(3), 216 232. Andriani, P. (2011). Complexity and innovation. In P. Allen, S. Maguire, & B. McKelvey (Eds.), The Sage handbook of complexity and management (pp. 454 470). New York, NY: Sage.

Using Case-Based Research for Agent-Based Modelling

285

Bairstow, N., & Young, L. (2012). How channels evolve: A historical explanation. Industrial Marketing Management, 41(3), 385 393. Buttriss, G., & Wilkinson, I. F. (2006). Using narrative sequence methods to advance international entrepreneurship theory. Journal of International Entrepreneurship, 4, 157 174. Centre for Photovoltaic Devices and Systems. (1992). Annual report. Sydney, Australia: University of New South Wales. Denize, S., Purchase, S., & Olaru, D. (2012). Using case data to ensure ‘real world’ input validation within fuzzy set theory models. In A. Meier & L. Donze´ (Eds.), Fuzzy methods for customer relationship management and marketing: Applications and classifications (pp. 61 90). Hershey, PA: IGI Global. Dougherty, D., & Dunne, D. (2011). Organizing ecologies of complex innovation. Organization Science, 22(5), 1214 1223. Ferrary, M., & Granovetter, M. (2009). The role of venture capital firms in Silicon Valley’s complex innovation network. Economy and Society, 38(2), 326 359. Følgesvold, F., & Prenkert, F. (2009). Magic pelagic An agent-based simulation of 20 years of emergent value accumulation in the North Atlantic herring exchange system. Industrial Marketing Management, 38, 529 540. Gilbert, N. (2007). Agent-based models. Thousand Oaks, CA: Sage. Ha˚kansson, H., & Ford, D. (2002). How should companies interact in business networks? Journal of Business Research, 55(2), 133 139. Hoholm, T., & Olsen, P. (2012). The contrary forces of innovation: A conceptual model for studying networked innovation processes. Industrial Marketing Management, 41(2), 344 356. Koka, B., Madhavan, R., & Prescott, J. (2006). The evolution of interfirm networks: Environmental effects on patterns of network change. The Academy of Management Review, 31(3), 721 737. Land, S., Engelen, A., & Brettel, M. (2012). Top management’s social capital and learning in new product development and its interaction with external uncertainties. Industrial Marketing Management, 41, 521 530. Lichtenstein, B., & Brush, C. (2001). How do “resource bundles” develop and change in new ventures? A dynamic model and longitudinal exploration. Entrepreneurship Theory and Practice, 25(Spring), 37 58. Lowe, S., Ellis, N., & Purchase, S. (2008). Rethinking language in IMP research: Networking processes in other words. The Scandinavian Journal of Management, 24(4), 296 307. Lowe, S., Purchase, S., & Ellis, N. (2012). The drama of interaction within business networks. Industrial Marketing Management, 41(3), 421 428. Macy, M., & Willer, R. (2002). From factors to actors: Computational sociology and agentbased modelling. Annual Review of Sociology, 28, 143 166. Maguire, S., McKelvey, B., Mirabeau, L., & O¨ztas, N. (2006). Complexity science and organization studies. In S. Clegg, C. Hardy, W. Nord, & T. Lawrence (Eds.), Handbook of organization studies (pp. 164 214). London, UK: Sage. Midgley, D., Marks, R., & Kumchamwar, D. (2007). Building and assurance of agent-based models: An example and challenge to the field. Journal of Business Research, 60(8), 884 893. Mitleton-Kelly, E. (2003). Ten principles of complexity and enabling infrastructures. In E. Mitleton-Kelly (Ed.), Complex systems and evolutionary perspectives on organisations:

286

SHARON PURCHASE ET AL.

The application of complexity theory to organisations (pp. 23 50). Bingley, UK: Emerald. Mo¨ller, K., & Svahn, S. (2003). Managing strategic nets: A capability perspective. Marketing Theory, 3(2), 209 234. Mo¨ller, K., & Svahn, S. (2005). Managing in emergence: Capabilities for influencing the birth of new business fields. In R. Sanchez & J. Freiling (Eds.), Research in competence-based management (pp. 73 97). Amsterdam: Elsevier. Philippen, S., & Riccaboni, M. (2007). Radical innovation and network evolution: The effect of the genomic revolution on the evolution of the pharmaceutical R&D network. Annals of Economics and Statistics, 87 88, 325 350. Piekkari, R., Plakoyiannaki, E., & Welch, C. (2010). “Good” case research in industrial marketing: Insights from research practice. Industrial Marketing Management, 39(1), 109 117. Powell, W., White, D., Koput, K., & Owen-Smith, J. (2005). Network dynamics and field evolution: The growth of interorganizational collaboration in the life sciences. American Journal of Sociology, 110(4), 1132 1205. Ritter, T., Wilkinson, I., & Johnston, W. (2004). Managing in complex business networks. Industrial Marketing Management, 33(3), 175 184. Robertson, D. (2003). Agent-based models of a banking network as an example of a turbulent environment: The deliberate vs. emergent strategy debate revisited. Emergence, 5(2), 56 71. Watt, M. (2003). The commercialisation of photovoltaics research in Australia: A report for science and innovation mapping. Sydney, Australia: Department of Education Science and Training. Wilensky, U. (1999). NetLogo. Evanston, IL: Center for Connected Learning and ComputerBased Modeling, Northwestern University. Retrieved from http://ccl.northwestern.edu/ netlogo/ Wilensky, U. (2013). Netlogo user manual 5.0.4. Evanston, IL: Center for Connected Learning and Computer-Based Modeling, Northwestern University. (Tutorial 2: Commands). Retrieved from http://ccl.northwestern.edu/netlogo/docs/ Wilkinson, I., Held, F., Marks, R., & Young, L. (2014). Developing agent based models of business relationships and networks. In R. Stocker & T. Bossomaier (Eds.), Networks in society: Links and language. Boca Raton, FL: CRC Press, Taylor & Francis Group. Wilkinson, I., & Young, L. (2013). The past and the future of business marketing theory. Industrial Marketing Management, 42(3), 394 404. Woodside, A. G. (2010). Case study research: Theory, methods and practice. Bingley, UK: Emerald Group Publishing Limited. Zhang, T., Gensler, S., & Garcia, R. (2011). A study of the diffusion of alternative fuel vehicles: An agent-based modeling approach. Journal of Product Innovation Management, 28, 152 168.

287

Using Case-Based Research for Agent-Based Modelling

APPENDIX: TABLE OF VARIABLE DESCRIPTIONS Variable Actor type

Environmental munificence

Financial resources

Exploratory knowledge

Exploitative knowledge

Description Three types of actors are involved in the network: R&D companies that conduct research; manufacturing companies that produce the innovation to sell, and financial backers that fund the research process and the setting up of new manufacturing facilities. Amount of resources available to an actor in the environment; an indication of the capacity of the environment to support innovation. Financial capital investment into innovation projects through research or commercialisation. Financial resources are owned by actors that are financial backers. Knowledge involved in discovery and new product development. Exploratory knowledge is owned by actors that are R&D organisations. Knowledge involved in the commercialisation or manufacturing of a product. Exploitative knowledge is owned by both R&D and manufacturing

References

Example Code Breed [R&Ds R&D];; specifies a set of actors that are R&D companies Breed [manufs manuf];; specifies a set of actors that are manufacturing companies Breed [fbs fb];; specifies a set of actors that are financiers

Koka, Madhavan, and Prescott (2006); Philippen and Riccaboni (2007)

Patches-own [munificence];; specifies that patches represent the environment

Ferrary and Granovetter (2009); Lichtenstein and Brush (2001)

fbs-own [finance];; all financiers own financial resources

Hoholm and Olsen (2012); Land et al. (2012)

R&Ds-own [exploratory exploitative];; all R&D companies own exploratory and exploitative knowledge

Land et al. (2012)

manufs-own [exploitative finance];; all manufacturers own exploitative knowledge and financial capital

288

SHARON PURCHASE ET AL.

Appendix. Variable

Complementary technology

Social capital

Description

(Continued ) References

companies. Generate financial capital through sales. Other technologies to Andriani (2011); which the focal Dougherty and innovation needs to be Dunne (2011) connected into a system to offer value. Manufacturers develop knowledge in complementary systems. Resources embedded in Ferrary and the relationship Granovetter bonding between actors (2009)

Example Code

Links-own [social complementary];; all links own social capital and complementary technology knowledge (both of these variables may be measured through actor positioning: that is centrality) As above