(Emma Wood) Journal of Communication Management

ISBN 1-84544-018-8 ISSN 1352-2752
Qualitative Market
Research
An International Journal
Papers from the Business Innovation in the Knowledge
Economy Conference, 2003
Guest Editors: Lynn M. Martin and Julie Abbott
Volume 7 Number 4 2004
www.emeraldinsight.com
qmr_cover_(i).qxd 17/08/2004 9:49 AM Page 1
Contents
238 Access this journal online
239 Abstracts & keywords
241 Guest editorial
243 Customer and company voices in
e-commerce: a qualitative analysis
Rachel McLean and Nigel M. Blackie
250 Qualitative issues in ITand
organizational processes in
implementing marketing strategies
Ashok Ranchhod and Calin Gurau
257 Channel benefits portfolio
management in the eBusiness era
Panos Louvieris and Harmen Oppewal
265 V2C activity on a local level:
qualitative cases Tampere and
Silicon Valley
Hannu Jungman and Marko Seppa
274 A qualitative sense-making
classification of business
incubation environments
Paul D. Hannon
284 Enhancing customer service
and organizational learning
through qualitative research
Peter R.J. Trim and Yang-Im Lee
293 Awards for Excellence
Qualitative Market Research: An International
Journal
Volume 7, Number 4, 2004 ISSN 1352-2752
Papers from the Business Innovation in the Knowledge
Economy Conference, 2003
Guest Editors: Lynn M. Martin and Julie Abbott
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Customer and company voices in e-commerce:
a qualitative analysis
Keywords Knowledge management,
Electronic commerce, Shopping, Consumers
Consumer knowledge is a very important asset for an
organisation. Two types of consumer knowledge have
been identied, knowledge about customers
including customer segments, individual customer
preferences, potential customers, and knowledge
possessed by customers including knowledge about
product ranges, companies, and the marketplace.
Electronic commerce (e-commerce) offers an ideal
medium for the creation and exchange of both types
of knowledge. This paper presents the results of an
initial phase in a research cycle that looks at
e-commerce through the lens of knowledge
management. It examines e-commerce provision
made by organisations for customers across seven
facets ranging from transactional to relational
facilities. The results of a self-evaluation of
companies e-commerce propositions are contrasted
with customer expectations to determine divergence
and alignment. Implications are discussed and
conclusions proposed.
Qualitative issues in IT and organizational
processes in implementing marketing strategies
Ashok Ranchhod and Calin Gurau
Keywords Marketing, Internet, Marketing strategy,
Technology led strategy
Successful marketing strategies depend very much on
an organisations ability to implement them. As the
role of technology grows apace in marketing, it is
important to understand how ITand organizational
processes impact on the implementation of marketing
strategies. This paper attempts to show how
technology is changing the nature of marketing and
then shows its interaction with people and processes.
It also offers organisations an opportunity to
undertake a self-evaluation exercise to determine how
well integrated are their implementation policies.
In general, the argument outlined indicates that for
successful implementation of strategies an
organisation has to integrate people, processes and IT.
Channel benets portfolio management in the
eBusiness era
Keywords Consumer behaviour,
Electronic commerce, Channel relationships
The role of channels and their management in the
eBusiness era is becoming increasingly important to
customer relationship management. Traditional use
of the application portfolio approach has been
concerned with providing an appropriate basis for
making investment decisions about ITapplications for
the rm. This paper argues that there is a gap between
the established IS portfolio application theory and the
requirements to support management investment
decisions about eBusiness applications; Therefore,
the paper proposes a channel benets portfolio (CBP)
approach to inform managers channel investment
decisions concerning business-to-customer channel
interface. The suggested approach provides a
conceptual framework and means to facilitate the
alignment of the rms portfolio with their customers
portfolio. The paper reports exploratory ndings
regarding customer channel preference and customer
channel choice behaviour in the information search
and purchasing stages during the customer decision-
making process on the basis of the CBP.
V2C activity on a local level: qualitative
cases Tampere and Silicon Valley
Keywords Venture capital, Entrepreneurs, Finland,
United States of America
The increased capital intensity of venture capital
supply and the increased knowledge intensity of new
venture supply have created a knowledge gap and
recreated a capital gap between new venture activity
and venture capital industry. This development has
given rise to an all-new breed of players. In this
descriptive, qualitative study, V2C activity is explored
in a local context through comparison of cases
Tampere (Finland) and Silicon Valley (USA). In
Silicon Valley, the dominant group of V2C players is
business angels, whereas in Tampere, publicly funded
incubators play the most visible role in new venture
development. Nevertheless, in both areas, ve
different categories of V2C players are represented,
and, in both, bridge the gaps to a signicant extent.
Abstracts & keywords
Qualitative Market Research: An International Journal
Volume 7 Number 4 2004 Abstracts & keywords
q Emerald Group Publishing Limited ISSN 1352-2752
239
A qualitative sense-making classication of
business incubation environments
Paul D. Hannon
Keywords Metaphors, Start-ups,
Business development
Business incubation is a new and fast growing
industry in the UK. The environments within which
incubation can take place and their descriptors as
used across the industry are many and varied. The
language engaged in by policy-makers, professionals
and practitioners commonly applies metaphors to
convey meaning of loosely dened terms and
concepts in a diverse market seeking increased
clarity. Metaphors can offer a qualitative approach
to sense-making. By articulating ideas through
metaphors, individuals can often expand the
concepts and expressions available through
language. It is asserted that it would be valuable to
incubation communities to provide shared meaning
to the discourse of incubation such that further
confusion is minimised. This paper aims to address
this challenge by proposing a classication of
incubation environment types based upon a
qualitative approach to understand the incubation
marketplace through its language, specically the
application of metaphor.
Enhancing customer service and organizational
learning through qualitative research
Keywords Research, Communication,
Culture (sociology), Learning, Marketing,
Partnership
In order to develop a sustainable competitive
advantage in the knowledge based economy, senior
managers need to ensure that customer relationship
management is placed within a clearly dened
organizational culture that embraces organizational
learning. Senior managers are required to exhibit a
proactive approach to leadership that results in
creative solutions being found to solve complex
problems. Open communication reinforces the
decision-making process and allows mutually based
partnership arrangements to develop. This being the
case, the network approach to business development
can be viewed, as collectivist in orientation and this
should allow partnership arrangements to be
developed through time.
Abstracts & keywords Qualitative Market Research: An International Journal
Volume 7 Number 4 2004 239 240
240
Guest editorial
Guest Editors
Lynn M. Martin
Julie Abbott
About the Guest Editors
Lynn M. Martin is director of EU Asia projects at the Business
School, with key development work under way with India, China,
Germany and Spain. She is also director of the innovation
management interactive exercise (IMIE), a computer-based tool
to aid understanding of the innovation process. In the past she
has worked in universities in the UK and Germany, with
experience as a senior manager in a large organisation and as an
owner-manager in small rms. She has published many papers
on small rm development internationally in academic journals
and contributed to several books on entrepreneurship and
innovation. In addition to supervising doctoral students working
in this area she is also course director for the action-research
based Doctor in Business Administration Programme. A regular
rapporteur and evaluator for the European Union framework
programmes, she also contributes to projects and initiatives run
by NATO and the Commonwealth in terms of innovation and
entrepreneurship.
Julie Abbott runs her own marketing consultancy, specialising
in producing strategic marketing plans for small to medium sized
businesses from their business plans. She lectures widely at
various business schools on marketing topics and runs marketing
planning workshops for clients. She also does general marketing
consultancy for companies that need extra help in understanding
their marketplace or how to position themselves for best
advantage. Prior to this Julie worked in the IT industry for a
number of years, most recently for IBM as marketing manager
for a key product set across EMEA (Europe, Middle East, Africa).
She mainly worked in technical IT roles both for IBM and other
companies. She spent the rst ve years of her IBM career as an
IT consultant before moving into marketing. During her
marketing career, she has worked as marketing manager for a
variety of IBMs leading products and has published papers on
CRM in leading academic journals as well as contributing to
several marketing books. She works closely with many UK
business schools to encourage interaction and thought
leadership between them and the business world as well as
lecturing at postgraduate level on marketing issues.
Welcome to the Business Innovation in the
Knowledge Economy (BIKE) Conference special
issue of QMRIJ. This issue contains six qualitative
papers with a range of insights and applications
into business incubation environments, channel
benets, customer and company voices in
e-commerce, ITand organizational processes,
a two-country comparison in qualitative case
examples and the enhancement of customer
service. As such, this issue presents a different
scenario to the normal qualitative academic papers
by focussing on innovative practices.
As background, the BIKE event was one of a
series of conferences to explore how new business
processes, services and products arise from
innovation and knowledge developments and to
study and discuss realities of business operations in
new technological environments with the benets
of qualitative insights and qualitative inputs to the
management of such areas. A particular feature
of this annual event is that it brings together
academics, practitioners, business people and
policymakers; this year it took place thanks to
the sponsorship of IBM, the West Midlands IT
Association (WMITA) and Stratford-upon-Avon
District Council. The logo for WMITAis shown in
Figure 1. It has a key signicance for the way BIKE
has tried to bridge the gap between commerce
and academia since WMITA is a group of small
and large rms working together as a regional
cluster and its presence here also represents an
important new university-industry partnership.
The involvement of this cluster also indicates the
local and regional impacts of BIKE while the more
international aspects are shown by the EDECAD
involvement. The founding members of BIKE
include Julie Abbott, Lynn Martin and Len Tiu
Wright.
Last July 2003, the BIKE team held a
conference at IBM Warwick and Stratford-upon
Avon District Council. This formed the UK
launch of the EDECAD project that involves
India, China, Spain and the UKand is led by Lynn
Martin from the Business School at the University
of Central England (www.edecad.info). It was
partly funded by the EU Asia ITC programme
which aims to develop European-Asian links in
terms of information technology communications.
The logo for this programme is shown here as its
involvement indicates the truly international
nature of the BIKEevent and the potential impacts
on a wider economic and social community
(www.europa.eu.int/comm/europeaid/projects/
asia-itc) (Figure 2).
Over 30 months, EDECAD took an active role
in developing new elearning and e-commerce
initiatives across the partner countries.
Underpinning issues include techno-ethics, the
Volume 7 Number 4 2004 pp. 241-242
241
societal impacts of new technology and the role
of foreign direct investment in this process with a
particular focus on SMEs. Supporting the initial
stages of this process, participants explored key
issues connected with customer relationship
marketing, industry and the public sector,
knowledge, e-business, small and medium sized
enterprises and digital inclusion.
Knowledge management and organizational
learning formeda central part of the conference and
indeed are high on the agendas of many in business
today, along with customer service, which must
form the central tenet of an organisation if it is to
win in the marketplace. Trim and Lee discuss how
customer service can be enhanced by a business
culture that embraces organizational learning. This
can result in proactive leadership and creative
solutions being put forward to ever more complex
challenges that rms face today when dealing with
day-to-day issues such as managing relationships
with their customers and suppliers.
The papers selected for this issue from the
BIKE conference are examples of the focus and
high quality of the papers presented over the two
days and we believe that they will hold your
interest and provide food for thought.
The rst paper is about customer and company
voices in e-commerce. A companys knowledge
base becomes ever more important in this
networked world and McLean and Blackie have
qualitatively investigated how companies use
knowledge management within their e-commerce
strategies. Customer expectations are matched
against organizational provisions in order to
understand knowledge gaps and customer
requirements. This underlines how important
people and processes still are in business despite
the proliferation of information technology in
markets and its ubiquitous presence everywhere
today. In the second paper, Ranchhod and Gurau
tackle the issues between IT, organizational
processes and people from the viewpoint of how
this is changing the nature of marketing today.
The need for interaction between all three aspects
is vital for marketing strategies to be successful
in an ever-increasingly competitive business
environment. As the Internet is becoming more
mature and accepted across most customer
segments, and so businesses using this channel are
beginning to ourish again, as shown in the third
paper. Louvieris et al. argue, in the third paper,
that closely aligned company and customer
channel portfolios are a strategic imperative for
sustainable success in multi-channel environments
and so propose a Channel Benet Portfolio
approach for successful e-commerce strategies.
The growth of e-commerce coupled with
governmental encouragement in new business is
causing a proliferation of incubation centres and
increased use of venture capitalists once again.
This intensity of supply is causing gaps in
knowledge and capital and has led to a new set of
actors the venture to capitalists (V2C), who
move projects from prospective to investable.
Jungman and Seppa in the fourth paper
qualitatively researched operating models in two
local areas of the US in order to understand
activity in this area and to discover if the models
developed can be used elsewhere. The wide
range of incubation centres has resulted in a whole
series of descriptors being used that has given
rise to a lot of confusion which is slowing down the
development of policy and practice in this area.
In the fth paper, Hannon argues that the
incubation market needs a sense-making
classication of the different incubation types in
order to enhance the meaning of incubation and
allow policy development to move forward at the
required rate. He proposes a classication system
that if accepted would provide a shared meaning to
those both within the communities and outside.
This issue nishes with paper six by Trim and Lee
which consolidates and enhances customer service
elements and the context of organizational
learning with the qualitative orientation.
It can be seen from the papers in this edition of
QMRIJ that the business environment is changing
as rapidly as ever and it is enlightening to take in
research and well articulated academic and
practitioner views from within the various focus
areas to demonstrate how they are driving or
responding quickly to market forces in todays
knowledge economy.
In developing this special edition, both Julie
Abbott and myself are indebted to the EDECAD
Research Assistant Ms Cindy Liu whose own
insights on the Chinese experience of Internet
implementation, plus hard work and careful
support have greatly informed the progress of this
edition.
Figure 2 Logo for EU Asia ITC Programme
Figure 1 Logo for WMITA
Guest editorial Qualitative Market Research: An International Journal
Volume 7 Number 4 2004 241-242
242
Customer and company
voices in e-commerce: a
qualitative analysis
Rachel McLean and
Nigel M. Blackie
The authors
Rachel McLean is a lecturer in Management Information
Systems at the Manchester Metropolitan University Business
School, Manchester, UK.
Nigel M. Blackie is a lecturer in the School of Computing,
Science and Engineering at the University of Salford, Salford, UK.
Keywords
Knowledge management, Electronic commerce, Shopping,
Consumers
Abstract
Consumer knowledge is a very important asset for an
organisation. Two types of consumer knowledge have been
identied, knowledge about customers including customer
segments, individual customer preferences, potential customers,
and knowledge possessed by customers including knowledge
about product ranges, companies, and the marketplace.
e-Commerce offers an ideal medium for the creation and
exchange of both types of knowledge. This paper presents the
results of an initial phase in a research cycle that looks at
e-Commerce through the lens of knowledge management.
It examines e-Commerce provision made by organisations for
customers across seven facets ranging from transactional to
relational facilities. The results of a self-evaluation of companies
e-commerce propositions are contrasted with customer
expectations to determine divergence and alignment.
Implications are discussed and conclusions proposed.
Electronic access
The Emerald Research Register for this journal is
available at
www.emeraldinsight.com/researchregister
The current issue and full text archive of this journal is
available at
Introduction
In the initial start up period of e-commerce, two
clear approaches to developing an electronic
presence emerged: the Informational approach
and the Transactional approach (Holsapple and
Singh, 2000). The Informational approach
focused on building brand presence, and
informing the consumers buying decision, while
the transactional approach focused on facilitating
the retail process exchange of product or service
for nancial value (Kalakota and Whinston, 1997).
There was a general belief that a transactional
approach offered greater competitive advantage.
This was reected by a surge in virtual companies
or dot coms. Although many of these companies
did not survive, business continues to focus on the
Internet as a sales channel. Companies utilize the
communication capabilities of the Internet for
marketing purposes, sending out personalized
promotional material or in pop up advertisements.
Academic literature promotes and supports this
use of the Internet in commercial activity
(Hoffman and Novak, 2000). For companies the
Internet facilitates knowledge gathering.
Consumer knowledge is the knowledge about
consumers collected through the Internet
including individual customer preferences,
lifestyles and key life events for marketing
purposes. They appear almost unaware of a
different type of consumer knowledge that is
increasingly made explicit and exchanged through
the Internet, knowledge possessed by customers
including knowledge about product ranges,
companies, and the marketplace (Rowley, 2002).
Research has shown that many consumers are
not ready to accommodate online purchasing into
current shopping practice. Instead, it is the
information and communication capabilities of the
Internet that consumers more readily make use of.
People currently use the Internet to research
products and services, and increasingly fail to
complete transactions online. Research by eStats
suggests that over 80 per cent of people using the
Internet do so solely to send e-mail or gather news
and information. Only 17.8 per cent of people
using the Internet list shopping as being a primary
motivation (eMarketer, 2002). Consumers are
using the Internet to gather and share knowledge
about products and companies. They are using the
Internet as a consumer knowledge exchange
forum, claiming neutral territory away from the
commercial Web as their own (Pastore, 2000;
Levine et al., 2000). There has been an increase in
the amount of sites such as epinions.com,
notacceptable.com and bitchaboutit.com where,
signicantly, consumers have conversations with
Volume 7 Number 4 2004 pp. 243249
DOI 10.1108/13522750410557049
243
each other, and share their experiences or stories of
interacting with companies and using products.
Electronic commerce is still evolving, but it is
clear that this new channel offers enormous
potential for both consumers and businesses.
Kozinets suggests that:
. . . a cultural battle is in the making. On the one
side are consumers who are just beginning to unite
online (and through it, in person) in order to assert
social power, to unite and to claim symbols and
ways of life that are meaningful to them and the
communities they build. On the other are the
marketing and other corporate industries who seek
to understand these consumers, to address their
concerns without giving away the store and also
to understand how best to take advantage of the
many opportunities the new information media
(such as the World Wide Web) present as a vast
forum for direct sales and advertising (Kozinets,
1999).
Enabling these two sides to interact and align their
expectations and aspirations for e-commerce could
help to realize the enormous potential of the
Internet for customer-to-business relationships.
This paper discusses results of research carried
out in the Centre For Networking and
Telecommunications at the University of Salford.
It presents the trends identied in the initial phase
of a research cycle that looks at e-commerce
through the lens of knowledge management. The
aim of this phase of the research was to examine
e-commerce provision made by organisations for
customers across seven facets ranging from
transactional to relational facilities, and to
compare and contrast the value placed upon
aspects of the provision by customers and
companies. The results of this self-evaluation of
companies e-commerce propositions are
contrasted with customer expectations to
determine divergence and alignment.
Study design
Grounded in the theory that the role of the Internet
in commercially related activity is increasingly as a
knowledge exchange forum (Giga Information
Group, 2001; Holsapple and Singh, 2000; Levine
et al., 2000; Rowley, 2002) this research focuses on
e-commerce through the lens of knowledge
management. From the socially constructed
approach to knowledge management (Demerest,
1997; McAdam and McCreedy, 1999), seven
facets of e-commerce including facilities that
enable both high and low levels of interaction from
consumer to consumer, and from consumer to
company were identied. They are as follows:
(1) communication;
(2) sales;
(3) marketing;
(4) links to related sites;
(5) company information;
(6) online communities;
(7) links to consumer reviews.
Companies and consumers were asked to rate the
value of each facet via a questionnaire, and follow
up interviews with consumers explored the
emergent issues to a greater depth.
Research method
The data were collected from both companies and
customers over a period of a year. In each case the
sample was a non-probability, purposive sample.
A Positivist approach would dictate that a sample
used should be a random probability sample
taken objectively and without bias, enabling
generalisation from sample to population.
In contrast, interpretive researchers employ
theoretical or purposive sampling to uncover
emerging and transferable theories (Easterby-
Smith et al., 2002; Lincoln and Guba, 2000). For
them it is important to survey relevant groups with
high experience levels of the phenomena under
study (Pettigrew, 1990). For this reason
questionnaires were adopted as a preliminary data
collection method, and as a means of identifying
suitable interview participants with high levels of
relevant experience. To ensure consideration of
stable usage patterns the sample was made up of
well established high street retailers and consumers
who were experienced Internet users, having
engaged in commercial activity (transaction,
product/company research) on the Internet for at
least one year. For the companies postal
questionnaires were adopted whilst direct postings
and snowball sampling (Robson, 1993) were used
to contact consumers. A criticism traditionally
levelled at postal questionnaires is the generally
poor response rate and the reduced depth of
information likely to be gathered (Moser and
Kalton, 1971). In recent years it has been
suggested that business and management
researchers particularly are nding it increasingly
difcult to achieve an acceptable response rate to
questionnaires (Berger, 2000). The response to
this has been the increasing adoption of closed
questions or Likert scale questionnaires which are
quick to complete but may bring only supercial
data (Foddy, 1994; Hussey and Hussey, 1997).
The response rates were 36 per cent for company
questionnaires and 86 per cent for consumer
questionnaires. This allowed for the identication
of relevant cases within the sample as Likert scales
were triangulated (Todd, 1979) with more open
ended questions and semi-structured interviews
Customer and company voices in e-commerce
Volume 7 Number 4 2004 243249
244
which allowed the researcher to build a richer
picture of the phenomena under study. Through
the social interaction of an interview, meaning can
be constructed and negotiated between the
participant and the researcher. It is argued that the
interview is the most powerful means for attaining
in-depth understanding of another persons
experience (Woodruffe, 1997).
Companies
The sample used in the analysis was made up of
retailers that appear in British Companies: Best of
British Shopping High Street Stores listings (British
Companies, 1999). The list comprises one
hundred and six companies. Eleven of these were
excluded as they were considered to be service
industries rather than retail companies (six banks,
two travel agencies, two bookmakers, and one mail
delivery company). A further six companies were
excluded as their primary function was not
considered to be retail (two portals to retail
companies, one record label, two charities).Two
other companies were not registered in the UK, or
their Web sites were produced and maintained
outside of the UK thereby excluding them from
the sample. The nal sample comprised of eighty
eight UK based retail companies. A postal
questionnaire was used to collect data. The
questionnaire was addressed to the E-commerce
Manager, and asked companies to rate the
importance, from extremely important to not at all
important, of the seven facets of e-commerce.
Consumers
The sample of consumers was recruited through
mail box postings at two universities in the North
West of England. Participants were professional
staff (lecturers, researchers, professors,
information professionals) and students.
The questionnaire asked consumers to rate the
importance of the same seven features of
e-commerce, adapted to take a consumer
viewpoint (communicating with companies,
making purchases, receiving marketing messages,
links to related Web sites, access to information on
the company, access to an online community, and
links to consumer reviews).
Data analysis
Respondents were asked to rank their opinion
using a four point Likert scale on the importance
of each of the seven facets in the categories:
(1) communication;
(2) sales;
(3) marketing;
(4) links to related sites;
(5) company information;
(6) online communities; and
(7) links to consumer reviews.
From these responses it is possible to build a
prole of interest in a particular category for
business and customers that demonstrates interest
or importance, or indifference.
In order to contrast the degree of t in a
category between company and customer
expectations the responses were weighted to
account for the different number of customer and
company responses and the percentage of
customer respondents within each scale point
subtracted from the corresponding company
value. Thus if the responses between customer and
company expectation were matched the resulting
outcome would approach zero. If however
customers placed more emphasis than companies
within a scale point this would result in a positive
outcome. Conversely a negative resultant would
occur if companies placed more emphasis on a
scale point relative to customers responses.
The outcomes of these comparisons do not
produce results for quantied relative importance.
Thus statements such as category A is twice as
important to companies than customers, or
category 3 is 50 per cent more important than
category 2 should not be derived from the
outcomes. This research is not intended to be
representative or generalisable. Specic
implications can be drawn and viewed as general
tendencies rather than generalisable statements
(Walsham, 1995). The resultants do however allow
a graphical image of congruity between customer
and company expectations (Figure 1). There are
three intuitive evaluations to be made within a
category:
(1) A at, near zero response in all four points of
the scale indicates that customer and company
expectations are well aligned.
(2) Apositive gradient slope (sloping frombottom
left to top right), indicates that companies are
over valuing the importance attached of this
facet relative to customer aspirations, and
hence potentially over providing.
(3) A negative gradient slope (sloping from top
left to bottom right), indicates that companies
are under valuing the importance of this facet
relative to customer aspirations, and hence
potentially under providing.
Figure 1 shows the relative importance of each
facet to customer versus company. It illustrates that
companies and customers were closely aligned in
the importance they placed on only one of the seven
categories; 5 information about the company.
The remaining categories showed a misalignment
245
in the importance attached to them, the greatest
divergence being in category 3 Marketing.
However, 4 Links to related sites, 6 Online
communities, and 7 Links to consumer reviews
also showed substantial differences in the levels of
importance placed on them by companies
and consumers. The remaining two categories,
1 Communicating with customers/companies,
and 2 Sales, showed a marginal misalignment.
The next section will consider the emergent
trend in each category in turn and use qualitative
data from follow up interviews with the consumers
to create a richer picture of that trend.
Facet one: communicating with
companies/customers
This facet of e-commerce showed a marginal
divergence in the importance attached to it by
companies and customers. The general trend is
that companies regard the ability to communicate
with customers as more important than their
customers do. Electronic business-to-customer
communication has strong links with marketing
and this is reected in the wider divergence found
in facet three: marketing. The fact that consumers
assigned little importance to the ability to
communicate with companies through a Web site
was qualied during interviews carried out with
consumers. Many participants noted that
companies frequently fail to respond to customer
e-mails.
At least if youre hanging on a telephone, even if its
for an hour you know youre hanging on a
telephone and somebody eventually is going to
have to speak to you that day. Whereas e-mail they
can leave for a week and youve got no idea when
theyre going to e-mail you back you know. I mean
with some companies you might be checking your
e-mail every hour and still not getting any response
so that can be quite frustrating (Interview 12).
Some commented that when they do reply it is
with a standard script from the theatre of retail
with the illusion of personalization through the
use of a personal name. This standard script
frequently fails to address the customers question,
and they are forced to fall back on more traditional
methods of communication. Participants
commented that a personal e-mail rather than a
standard reply which didnt address their
particular problem would greatly improve their
perception of a company. Some participants
attached little importance to this facet of
e-commerce as they simply preferred to speak to a
company representative than use e-mail to contact
them.
I must admit I like to deal with someone that I can
talk to (Interview 1).
One participant commented that he regarded
communication with companies via the Internet as
a one way thing (Interview 11) where
communication is from company to customer
preventing rather than facilitating social
interacting and exchange.
Facet two: sales
The relative importance of this facet to customer
versus company was rather surprising. Although
only a marginal divergence, the customers
surveyed attached greater importance to the
ability to make purchases than the surveyed
companies did. The companies surveyed were
high street stores, and in the qualitative data,
many companies commented that online sales
made up only a small part of their total sales
gures. The importance customers attached to
Figure 1 Relative importance of each facet to customer versus company
246
the ability to make purchases online is qualied
in this interview data:
Well the only time Ive actually used it to buy
anything was when I needed to buy some world cup
stickers for my nephew and the only means of
accessing them was over the internet. Thats really
the only time Ive done any Internet shopping
(Interview 9).
The range of the products that they sell in the
online shops is almost unlimited so you can nd it
and they deliver it to you as well so you dont even
have to go outside (Interview 8).
The consumers questioned value the ability to
purchase online, particularly where there is a
product that is unavailable elsewhere. One
participant comments that the range of the
products that they sell in the online shops is almost
unlimited and it is this aspect of online sales that
is of value to them.
Facet three: marketing
Marketing was the facet that showed the most
dramatic divergence. Companies attached a great
deal of importance to the ability to use the Internet
for marketing activities. The ability to gather
knowledge about customer preferences, lifestyles,
routines and signicant life events is a very
valuable asset to a retail business, and it is this
aspect of e-commerce that companies have
focused on.
In contrast, it is this aspect of e-commerce that
consumers are most wary about. This interview
participant expressed his concerns over the fact
that companies use the Internet to gather
information about customers:
Ive lled in enquiry forms and that sort of thing,
where they are basically gathering data on me. . .I
just dont like the idea anyway because all they need
to do is put in your postcode and your name and
there you go! Theyve got you! And how do they
link that up with other databases? You dont know
do you? (Interview 4).
Customers attached little or no importance to the
ability to receive marketing messages and
promotional information via the Internet.
Similarly this area prompted the most vehement
responses from the interview participants. Little
distinction was made between unsolicited
messages and those from companies in which the
participant had expressed some interest.
Electronic marketing was experienced as a form of
organisational power over consumers. Narratives
frequently included images of closing down
communication channels. Promotions and
marketing messages were experienced as an
annoyance, adding no value to the consumer
experience, and in some cases prompting the
participant to cease dealing with the company
responsible. These extracts from the consumer
interviews illustrate how strongly the participants
felt.
I dont like getting advertising material. I dont
read it because if I want to nd out about
something then I will nd out about it. So it just
goes in the bin (Interview 10).
I hate it. It irritates the hell out of me. I hate being
bombarded with junk e-mail. I cant stand it. Its
the scourge of the Internet. I really think that it
needs controlling theres no control, you knowwith
the Internet its unstoppable isnt it? Its going to
put people off (Interview 6).
I dont like having to look at advertising. If you log
onto the Internet youre becoming increasingly
bombarded with stuff coming into your computer.
You come off the Internet and you realise that
theres three or four windows up of advertising stuff
and you werent even aware that they had come
into your machine and I dont like that. They do it
so that the window is slightly shifted so that you
cant get to the cross. Somebodys thought all this
through and its just irritating and they should be
shot (Interview 5).
Marketing through the Internet has not developed
into the personalized and targeted messages that
we were promised. For these consumers, mass
messaging from a corporate script addressed to a
named person does not add value to their
experience of online retail. Signicantly the
consumers participating in this research assigned
very little importance to marketing as a facet of
e-commerce.
Facet four: links to related Web site
This category relates to the idea of linking
commercial Web sites to interest related sites, or
other related services, not to competitors sites.
For example, a DIY store may link to an interior
design site with tips on choosing colour schemes, a
toy company may provide links to a child
development Web site with an independent guide
to developing skills through play, or an airline
company may link to hotels or car hire. Again this
category showed a marked divergence in the
relative importance consumers and companies
attached, illustrated by a negative gradient slope
on Figure 1. Companies considered this facility to
be of little importance, where as consumers rated it
as very or extremely important. Qualitative data
from two interview participants illustrate why
customers regard this facet as valuable.
If theres links to another site, say it was the
manufacturer, you can go and see what else theyve
produced whereas if youre in a shop youve got to
247
wait until someone is available or if youre looking
through magazines, that information isnt
necessarily there (Interview 3).
Ive booked ights through Easyjet. . . Then from
doing that Ive then linked to other sites, a hotel site
booked hotels and then also booked car parking at
the airport so it was all just done sitting at a
computer, whereas before youd have had to go out
and be making phone calls so yes, it saves time
(Interview 10).
Customers attach great importance to the ability to
access a range of related information and services
through one gateway. Their expectations are of a
seamless experience. This research suggests that
companies are under providing in this category.
Facet ve: information about the
company
This was the only category that showed a at, near
zero response in all four points of the scale,
indicating that customer and company
expectations are well aligned. Company and
consumer responses illustrate that they attach
equal importance to information about the
company such as company history, staff proles
and contact details. This is borne out both in the
literature on issues of trust and e-commerce and in
the responses from interview participants in this
research project. One participant recounted how
he had telephoned a company to check that the
details given about a company on their Web site
were correct.
When I asked them their address, I said well whats
your address you know just a little thing, questions
just to sort of like check whether their address is
what they say it is on the Web site, just to make sure
(Interview 6).
Others commented that a short company history
telling how old the company is, how they began
trading and other such information made the
company appear more reliable and
trustworthy (Interview 1). This research
suggests that company and customer expectations
are well matched with the actual provision in this
category.
Facet six: online communities
The analysis of the data on access to online
communities showed a negative gradient slope
(sloping from top left to bottom right), indicating
that companies are under valuing the importance
of this facet relative to customer aspirations.
Consumers use online communities based around
shared interests to exchange knowledge of
products and services provided by companies. For
customers consumer knowledge is knowledge
possessed by consumers. On the Internet they are
building a knowledge sharing culture where stories
are told, advice given and opinions shared.
If youve got a complaint about a company you can
put it in a very public space. Customers do actually
know that there are particular Web sites out there
on which they can put their opinions down
(Interview 2).
. . . you can go onto like a discussion forum where
people are talking about it and you can ask specic
questions about something, the specications or
any specic requirements it may have before you
buy it. . . if youve got a lot of knowledgeable
users out there its handy to chat with them
(Interview 8).
Consumers value the potential to communicate
with each other that the Internet offers them. This
research suggests that companies are currently
under providing in this category.
Facet seven: links to consumer reviews
This facet has much in common with the previous
one. The results here showed vast incongruity.
Consumers placed a high value on this facet whilst
the companies surveyed placed little or no value on
it. It is widely accepted that Amazon have
established a successful online retail business, and
consumers frequently mention the customer
reviews as a strong factor in Amazons appeal.
Interview participants spoke enthusiastically
about consumer reviews and stated that they
would inuence a purchase decision
And then for software, buying games software,
I regularly go on line just to check particular
reviews and also check reader reviews and that will
inuence whether I buy that particular product
(Interview 2).
I do take notice of reviews. Even if theyre just
written by other consumers, yes I read reviews,
I would take notice of those, yes (Interview 9).
Despite this, companies explicitly stated that they
regard this facet to be of little or no importance, a
major misalignment in company/customer
aspirations.
Conclusion
Signicantly, in contrast with the companies,
consumers placed a high value on the facets which
facilitate interaction, communication with other
consumers and C2C knowledge exchange.
Companies placed more value on the marketing
facility. Levine et al. state that:
248
The same technology that has opened up a new
kind of conversation in the marketplace has done
the same within the corporation, or has the
potential to do so (Levine et al., 2000).
Corporate, scripted marketing messages are not
enough to convince the customer of the value of
online marketing. They merely enforce the
boundaries and power relations between
customers and companies. Habermas proposed
that where power is present, communication is
systematically distorted, and further that power
would act as a barrier to the free and
unconstrained realization of the human interest in
achieving rational truth or enlightenment (Clegg,
1989). The interview participants of this research
do not construct a view of the Internet as opening
up communication channels with companies
where social interaction may facilitate the
construction and exchange of knowledge.
Companies must now focus on the
communication capabilities of the Internet and use
the technology to facilitate conversations across
the corporate boundary. They must meet
consumers on neutral ground and encourage
consumer-to-consumer and consumer-to-business
interaction in order to leverage a most valuable
resource; the knowledge constructed by and
embodied in the customers. In return they must
share corporate knowledge with the consumer.
Sinkula proposes that for organisations to learn
from their customers:
Particular attention should be paid to
serendipitous, unsolicited, customer information,
particularly that which revolves around complaints.
Marketing managers must do two things to better
listen to customers (Sinkula, 2002).
Firstly he argues they must process the
information better, and secondly they should
become more open to criticism (Sinkula, 2002).
This research suggests that before they can do this,
companies must rst learn to have conversations
with their customers.
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249
Qualitative issues in IT
and organizational
processes in
implementing marketing
strategies
Ashok Ranchhod and
Calin Gurau
The authors
Ashok Ranchhod is the Faculty Professor in Marketing at
Southampton Business School. He has worked in business and
academia., having founded and run a biotechnology company in
the eighties. He has published extensively on e-marketing,
biotechnology marketing and advertising.
Ca lin Gura u is Lecturer in Marketing in the School of
Management, Heriot-Watt University, Edinburgh. He is a Junior
Fellow of the World Academy of Art and Science, Minneapolis,
USA.
Keywords
Marketing, Internet, Marketing strategy, Technology led strategy
Abstract
Successful marketing strategies depend very much on an
organisations ability to implement them. As the role of
technology grows apace in marketing, it is important to
understand how IT and organizational processes impact on the
implementation of marketing strategies. This paper attempts to
show how technology is changing the nature of marketing and
then shows its interaction with people and processes. It also
offers organisations an opportunity to undertake a self-
evaluation exercise to determine how well integrated are their
implementation policies. In general, the argument outlined
indicates that for successful implementation of strategies an
organisation has to integrate people, processes and IT.
Electronic access
available at
available at
Introduction
Marketing strategy and formulation of this strategy
are important aspects of a companys long-term
plans. However, marketing strategy objectives often
fail to materialise. Is this because, the strategy was
unsound in the rst place, or is it because the
implementation was in effective, or both? (Sashittal
and Tankersley, 1997). Companies tend to place a
great deal of time planning strategies and
sometimes they fail to consider the full implications
of implementing the strategies. Several authors
highlight the fact that much emphasis is placed on
strategy formulation and little thought is given to
implement issues even by marketers. Strategy may
or may not drive actual marketing practice
(Crittenden and Bonoma, 1988).
With the explosion of new forms of
communications that have a global reach, it is
incumbent on marketers to consider
implementation as an important issue in marketing
and at the same time consider the relevant speed at
which implementation should take place.
Technology drivers have become increasingly
important over the last ten years as the pace of
information exchange increases rapidly. This in
many ways has destroyed the luxury of developing
strategies over a long period of time. Shorter
periods are available for strategy formulation and
development. Even shorter periods are available
for the implementation of these strategies. Noble
and Mokwa (1999), however, dene marketing
strategy implementation as:
. . . the communication, interpretation, adoption
and enactment of a marketing strategy or strategic
market initiative.
The impact of information technology
The implementation of many marketing strategies,
depend on the effective utilization of sophisticated
Internet technology (Berthon et al., 1996;
Hoffman and Novak, 1996; Kitchen, 1999;
OConnor and Galvin, 1997, 1998). The rapid
growth of the Internet and Internet marketing
suggests that information technology (IT) has an
important role to play in the process implementing
online marketing communications (Kassaye,
1999). Internet based technology can also
facilitate information dissemination, le
transformation, information gathering, and
searching and browsing activities etc. (Keeler,
1995; OConnor and Galvin, 1997). Thus, a better
utilization of the state-of-the-art IT for business
and marketing becomes a fundamental task, which
is too important to leave to IT professionals
(OConnor and Galvin, 1998).
DOI 10.1108/13522750410557058
250
Technological deployment corresponds to the
way in which companies plan and manage IT to
benet from its potential and effectiveness in
marketing implementation (Croteau and
Bergeron, 1991, 1998, and 2001). There are six
components of technology deployment.
(1) The strategic use of IT refers to the IT
applications used to help the organization gain
a competitive advantage, reduce competitive
disadvantage, or meet other strategic
enterprise objectives (Bergeron and
Raymond, 1995; Bergeron et al., 1991).
(2) The management of ITexamines IT related
activities such as the usage of current and new
technologies, the development of specic IT
applications and the degree of ITusage
practised by the employees (Bergeron and
Raymond, 1995; Das et al., 1991).
(3) The role of the information systems (IS)/IT
concerns the organizational importance of IT
planning, the quality of the ITalignment with
organizational structure, the effectiveness of
software development, and the management
of communication networks (Bergeron and
Raymond, 1995).
(4) The technological infrastructure addresses the
ITarchitecture and the formalized procedures
used to guide and control the rms IT
resources (Das et al., 1991).
(5) The organizational infrastructure refers to the
internal functioning of the IT/IS development
such as structure, processes, reporting
relationships, support groups, and skills
(Das et al., 1991; Henderson and
Venkatraman, 1999).
(6) The administrative infrastructure deals with
the managerial policies and actions that
inuence and guide the work of employees
involved with the IT/IS development
(Das et al., 1991).
Marketing is and will continue to be heavily
inuenced by ITand marketers who do not adapt
to the newtechnological era will not survive (Bruce
et al., 1996, Komenar, 1997). It can benet
organisations in many ways, but it has to be
successfully managed. The sensible use of IT
allows creative and innovative strategies to cope
with the new varied and dynamic marketplace
(Schlegelmilch and Sinkovic, 1998). Marketing
helps with automation, information and
transformation (Remenyi et al., 1995; Zuboff,
1988) (Figure 1).
Automation
This argument is used to explain the fact that IT
has been primarily used for automating manual
systems of recording. It is useful for routine and
tactical activities to improve efciency (Peattie and
Peters, 1998).
Information
This is the next stage of development and
translates data into useful information that can be
utilised for developing marketing strategies.
Information is also the stage where the data
obtained through automation are scrutinised and
converted into information.
Transformation
This stage is reached when organisations embrace
ITand start to think out of the box
(Schlegelmilch and Sinkovic, 1998). This is when
companies start to focus on new ideas and
concentrate on adaptation and using knowledge to
transform themselves into effective market
oriented organisations (Brady et al., 1999).
IT is now the key driver in most businesses and
many companies are conducting business through
cyberspace. At the same time, with the growth of
the Internet, companies also need to be able to
work with and undertake transactions on a global
basis. Many companies that implement good
systems to deal with value chains on a global basis
show good returns on investment.
Information and knowledge creation
In addition to this, specic areas of application are
also growing. One area is based on systems
providing market intelligence on a global basis.
As companies become condent of their IT
infrastructures on a global basis, they will be
increasingly looking to have access to systems that
can provide them with business intelligence.
Business intelligence gathering is becoming a
complex issue for most companies as technology
develops further. Increasingly access to
information is possible through hard-wired
systems as well as wireless protocols.
The technology drivers, also create the
following possibilities.
(1) Salesmen, on the road, can be updated on
customer requirements as necessary. This
information can be used for enhancing CRM
and logistics.
(2) As mobile devices become more sophisticated,
customers will be able to access inventories of
their suppliers. This means that they can place
orders and specify delivery times. This can be
done via links to an Intranet or the Internet.
Qualitative issues in IT and organizational processes
Ashok Ranchhod and Ca lin Gura u
251
(3) Individuals, apart from talking to others, will
also be able to communicate with machines.
This is already a reality with consumers being
able to buy soft drinks, chocolates and car
washes via mobile devices.
(4) Consumers will be able to pay for restaurants
meals via secure transactions through a mobile
device.
(5) The blue-tooth devices, can enable retailers
to market special offers to customers on their
mobile devices if they are within a 20 mradius.
This will also allow customers to undertake
transactions with shops and restaurants.
(6) Radio will become an integral part of the
mobile device, allowing an individual access to
a myriad of radio stations. This also has
implications for advertising and branding.
(7) The incorporation of ground positioning
systems (GPS) into mobile devices
(GPS, via satellite), means that individuals
will be able to easily locate their positions
and also the nearest outlets or services that
they need.
Current IT systems (Figure 2) are not uid and
dynamic enough to cope with customers who are
ubiquitous and can contact companies through
mails, mobiles and the Internet.
As customers become uid in the way they
contact and interact with companies, companies in
turn need to be uid enough in their approach.
Often the IT/marketing link is not good. The
marketing function, often does not understand
what happens in ITwith regards to service
provision and prices. There is often a cultural
gap between marketing and ITand therefore there
is a need to integrate data and for computer
experts to work side by side with marketers.
There is a need to share experiences. It is
important that for good customer relationship
management, ITand marketing work together,
with IT being able to understand the internal
customer needs. A change of philosophy is
required, where IT shifts from building
solutions to dening requirements fromthe front-
end with business and customers in building the
best solutions. The one-to-one relationship means
that a customer is known to the enterprise and
interacts with the enterprise, with the enterprise
exing and changing to meet his/her needs.
Figure 1 IT strategies
Figure 2 Current systems architecture
252
The enterprise can then have a unied view of a
single customer across the entire enterprise,
linking other functional and geographical units
together.
As the relationship develops across boundaries,
it is clear that the organisation truly becomes a
learning organisation with the customer nding
that he/she is investing in a continuing relationship
with it. At every given opportunity the organisation
can tailor and ret its behaviour to suit the
customer. In the end the way the relationship is
maintained, grown and nurtured means that a
customer is less likely to spend time in building
such a relationship with a competitor. This
relationship building needs to be regarded as a
business process rather than a technology suite.
The technology needs to be able to support and
enable this process (Figure 3).
Developing measures for successful
implementation
In order to develop a basis for understanding a
companys stance with regards to strategy
implementation, the following questionnaire was
developed. It is generally felt (McKean, 2002),
that most companies have poor records when it
comes to implementing IT strategies. As the
arguments above indicate, IT is now an essential
component of marketing. It is therefore important
to consider both ITand people issues when
considering how marketing strategies should be
implemented. This questionnaire allows
organisations to be self-critical in their approach
and see the quadrant that they fall into (Figure 4).
Once the scores to all the questions have been
totalled according to the ITor the organisation
context, they can be plotted on the horizontal and
the vertical axes. This enables the respondent to
position his/her company within the
implementation matrix (Figure 5). The
implications of the positions within each quadrant
are discussed below.
Integrated marketing implementation
Companies in this quadrant will have a well-
balanced marketing implementation, based on
good IT systems and a dynamic exible
organisation. The people processes and the
technology work in unison. The company is likely
to have a global IS. Integrated systems tend to offer
increased customer service, by increasing
convenience, collecting service performance
information for management use, and extra
services (Furey, 1991). An integrated system can
also create barriers to entry in service industries,
productivity enhancement and revenue generation
(Fitzsimmons and Fitzsimmons, 1997). Effective
IT management requires a set of coordinated
efforts associated with planning, organizing,
Figure 3 Creating a relationship Web
253
controlling, and directing the introduction and use
of ITresources within a rm (Boynton et al., 1987;
McNurlin and Sprague, 1997).
Fragmented marketing implementation
Companies in this quadrant will have excellent
organisation capabilities. However, their
technology resources will be poor and not very well
integrated. Companies in this quadrant will
require extra investment in IT infrastructure. In
some rms the lack of clear organizational
processes for effective IT management prevent
them from using IT strategically (Boynton et al.,
1992, 1994). It could be that the rm would
benet from good IT management processes.
Figure 4 Questions to determine organizational and IT factors
254
Technologically driven marketing
implementation
In this quadrant, companies tend to rely on
technology to a greater extent. The people
processes tend to be poor and often,
mechanistic solutions may be provided leaving
individuals within organisations alienated
and poorly informed. According to the research
carried out (Wilson and McDonald, 2001) it is
important that managers can understand and
control the IT system rather than accepting
technological objectives inuenced by the
management science of prescribing an optimal
solution. Systems are useful in enhancing
mutual understanding in a cross-functional
planning team and hence in building commitment
to marketing plans.
Poor marketing implementation
Companies in this quadrant tend to have
outdated organizational practices and possess
poor technology systems. These companies
need organizational change and technology
investment. The implementation matrix
therefore, provides a useful measure of a
companys ability to implement marketing
strategies within an environment, which is
increasingly driven by technology. As the role
of technology grows and evolves, many companies
do not have to be conned to operating within
national boundaries. Indeed, many companies
are now Born Global.
Summary
In this paper, a wide range of issues surrounding
the effective implementation of marketing have
been considered. Implementing marketing
strategies successfully lies at the heart of successful
company management. However, the process is
fraught with challenges as the market place is
generally turbulent and ever changing. This places
emphasis on developing exible and responsive
organisations. Research also indicates that many
organisations do not follow-through strategies
according to the traditional format and may
implement them in an ad hoc manner. Better
technology helps to speed up processes. It also
helps companies to become global within a short
space of time and some companies can be said to
be born-global from inception. However, it is
important for marketing managers to realise that
the information provided has to make sense and
that the IS actually provide the necessary
nuggets for implementation purposes.
According to Ivan Menezes, Vice President,
Group Marketing, Whirlpool Europe (Ronkainen
and Menezes, 1996):
You have to be exible, the not-invented-here
syndrome is not acceptable, you have to be picking
up ideas and best practices from different markets
and different parts of the business and transferring
them rapidly. It does require an entrepreneurial, as
opposed to a managerial, structured and
disciplined approach. One of the more interesting
parts of being in a global or a European marketing
role is that there is always so much going on. There
is not enough time to go after all the opportunities
that are on your plate and you are juggling lots of
balls at the same time. It requires constantly
Figure 5 Implementation matrix
255
picking and prioritising the big opportunities and
going at them and making decisions fast.
When fast decisions need to be made, the role of
information becomes highly relevant and
important and systems have to be able to offer this
facility. As technology becomes more sophisticated
and can deliver data and video links at increasing
speeds within a mobile environment, marketers
need to understand its capability in effective
marketing implementation. At the same time the
need to understand the impact of globalisation in
the marketplace need to be understood and
embraced. It appears that it is necessary to
integrate the organizational factors with
technological factors in order to develop integrated
marketing implementation strategies that can be
successful in todays marketplace.
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256
Channel benets
portfolio management
in the eBusiness era
Panos Louvieris and
Harmen Oppewal
The authors
Panos Louvieris is based at the School of Management,
University of Surrey, Surrey, UK. E-mail: panos.louvieris@
surrey.ac.uk
Harmen Oppewal is based at Department of Marketing, Faculty
of Business and Economics, Monash University, Monash,
Australia. E-mail: harmen.oppewal@buseco.monash.edu.au
Keywords
Consumer behaviour, Electronic commerce,
Channel relationships
Abstract
The role of channels and their management in the eBusiness era
is becoming increasingly important to customer relationship
management. Traditional use of the application portfolio
approach has been concerned with providing an appropriate
basis for making investment decisions about IT applications for
the rm. This paper argues that there is a gap between the
established IS portfolio application theory and the requirements
to support management investment decisions about eBusiness
applications; Therefore, the paper proposes a channel benets
portfolio (CBP) approach to inform managers channel
investment decisions concerning business-to-customer channel
interface. The suggested approach provides a conceptual
framework and means to facilitate the alignment of the rms
portfolio with their customers portfolio. The paper reports
exploratory ndings regarding customer channel preference and
customer channel choice behaviour in the information search
and purchasing stages during the customer decision-making
process on the basis of the CBP.
Electronic access
available at
available at
Introduction
Realising channel benets of Internet based
eBusiness in the tourismand hospitality industry is
widely accepted as an important subject by both
academics and industry practitioners. However,
a current and major issue in channel benets
management is that there is little research that
explicitly addresses the specic methods necessary
for measuring success in terms of customer
benets realisation in the new computer mediated
eBusiness environments. Moreover, the lack of a
portfolio approach to the analysis and
management of channel benets that embraces the
customer perspective appears to be an important
gap in the existing body of knowledge. This
research, therefore, takes a portfolio management
approach and proposes a channel benet portfolio
(CBP) as an analytical framework and taxonomy
by which channel management investment
decisions may be guided.
The study aims to explore channel preference;
particularly, how channel benets are evaluated
and realised in the information search and
purchasing stages of the customer decision-making
process. In addition, the study aims to identify the
most appropriate channel mix that maximises
benets for the customer. This paper presents
ndings from exploratory interviews and a
small survey into customers perceived channel
benets and perceived channel importance in
terms of existing and future benet contribution
to channel usage during information search and
purchasing. The objectives of the study are
as follows.
(1) Determine customer preferences for different
channels in the information search stage and
purchasing stage of the customer decision-
making process.
(2) Determine how customers current channel
benets differ from their expected future
channel benets within the context of the CBP.
(3) Determine how customers perceived channel
benets differ between the information search
stage and the purchasing stage within the
context of the CBP.
Theoretical background
This research takes an application portfolio
approach to evaluate and realise the channel
DOI 10.1108/13522750410557067
Panos Louvieris and Harmen Oppewal are the
Principal Investigators, and thanks are expressed to
Hyung-Soo Jung who assisted in the initial phase of
this tourism industry funded research project about
(electronic) channel benets management based at
the University of Surrey, UK.
257
benets from the customers point of view.
The concept of the application portfolio was
described by McFarlan and McKenney (1983)
and they proposed the strategic grid framework for
understanding and appropriately positioning a
rms IT investment. McFarlan and McKenney
(1983) described two aspects of strategic relevance
and impact of ITsuch as the strategic impact of the
existing system (current portfolio) and strategic
impact of applications development portfolio
(future portfolio). McFarlan et al. (1983) also
proposed a useful matrix for considering the
portfolios as a whole to position the companys
information systems and the matrix shows four
alternative sectors for describing the portfolio
according to the strategic importance of the
existing and future systems. These are strategic,
factory, support and turnaround. McFarlan
(1984) also developed a matrix concept which
considered the contribution of IS/IT to the
business now and in the future, based on its
industry impact.
With reference to Ward (1990), the limitations
of the original strategic grid were found by the
research of Hirschheim et al. (1988) who found
that IS managers thought it unhelpful to aggregate
an entire rms ITapplications into one category.
Hence, the derivative portfolio model which
classies IS applications into four groups such as
key operational, strategic, high potential and
support has been demonstrated to be much
more meaningful for management purposes
(Ward, 1996).
However, there is a gap between the IS portfolio
application theory and the current eBusiness
application especially in terms of channel benets.
As we move into the eBusiness era, strategic
channel design and channel management are
important issues in todays competitive markets
where tourism/hospitality organisations are
increasingly using eChannels, alongside more
traditional channels, for the distribution of
their products and services. Clearly, customers
have greater channel options (telephone,
WAP/mobile, PC, IDTV, brochure, travel store,
etc.) for information search and booking.
Therefore, a successful eBusiness strategy
requires that the role of channels be carefully
evaluated when developing an optimum channel
mix that is compatible with the preferences
and variety of channel choice available to their
customers.
In order to accomplish the appropriate
assessment of the channel benets, a new
framework to evaluate and realise the channel
benets is required. Therefore, this paper proposes
the CBP model from the customers point of
view based on the existing IS application portfolio.
In this model, all channel options are classied
into four groups namely key operational,
strategic, high potential, and support.
Key operational refers to channels that customers
currently depend on for successful choice.
Strategic refers to channels which are critical
to future (and current) customer choice.
High potential means the channels which may
be important in achieving successful future
customer choice. Finally, support refers to those
channels which are valuable, but not critical to
successful customer choice (Figure 1).
The benets of this CBP management approach
are that a company can identify and prioritise the
customers current/future channel preference and
perceived benets from each channel and create a
proper multiple channel strategy aligned to the
customers channel portfolio. On the basis of the
CBP, customer channel preference and customer
channel choice behaviour in the information
search stage and purchasing stage can be
examined.
Channel strategy
Marketing channel theory is focused to a relative
degree on channels with physical product ows
(Bagozzi, 1975; Barabba and Zaltman, 1991;
Dwyer et al., 1987; Etgar, 1979; Heide and John,
1988). Traditional channel options evolved
primarily around the choice of involving either a
wholesaler or dealer, a distributor or an in-house
sales force to market and distribute products and
services. The advent of information technology, in
particular the world wide Web, in the mid 1990s
made it possible to move from traditional channel
congurations to composite channel
arrangements. In traditional channels, all channel
Figure 1 Customer CBP model
Portfolio management in the eBusiness era
258
functions (from demand generation to after-sales
service) are usually performed by the chosen
conguration. However, in composite electronic
channels, these functions can be distributed over
several channels (Christiaanse and Zimmerman,
1999).
In the new eBusiness environments, the
eChannel concept is a plural concept because
customers use multiple channels for information
search and purchasing (Louvieris and Driver,
2004; Louvieris et al., 2001). The result is a CBP
approach which considers a mix of traditional
channels and eChannels. This CBP can be used to
guide management investment decisions about
customer decision support services across
customer owned multiple/plural channels to
maximise channel benets. The idea of exploiting
the value-adding synergies between channels
has been articulated often in the literature
concerned with channel investment decisions
(Anghern and Meyer, 1997; Venkatraman and
Christiaanse, 1996).
Methodology
As a rst exploration into channel choice
behaviour, in-depth qualitative interviews were
conducted on with ten university students. The
purpose of this preliminary exercise was to obtain
an initial identication of channel preferences for
the information search and booking stages. In the
second stage of the research, a questionnaire
regarding the perceived importance of channels
was distributed among a class of undergraduate
management students. A total of 41 students
volunteered to participate and completed the
questionnaire, which consisted of questions that
asked respondents to rate the current and future
importance of each series of channels on a ten-
point scale (1 not at all important, 10 very
important). For the information search stage 27
channels were presented including relatively new
channels such as WAP mobile phone, Interactive
digital TV, e-mail, consult with people in the
virtual community and so on. For the purchasing
stage, the same channel options were presented
except those such as consult with people in the
virtual community and news/magazine that are not
currently offering booking facilities.
Though the sample obviously represents a
convenience sample, it should be noted that in the
context of this study, students are a highly relevant
group of respondents. Students represent
customers of the future for many eBusiness-based
companies and it is relevant to know how this
segment evaluates their current and future channel
portfolios.
Findings
The pilot interviews suggested several differences
in the channel preference of respondents between
the information search and purchasing stages.
Most respondents regarded the Internet as their
favourite initial choice of channel. They also
regarded the travel shop as their most favoured
choice of channel in the purchasing stage because
they trusted that a store provides a safer method of
payment. Furthermore, it was found that most
respondents were not aware or alert of all the
channel options available to them. WAP mobile,
iDTV, and PDA were not readily perceived as
channel alternatives unless prompted by the
interviewer. Also, the qualitative interviews
highlighted that channel switching behaviour was
most intense during the pre-purchase, information
search phase of the customer journey. This
suggests that a single channel cannot satisfy the
range and variety of customers channel needs.
Therefore, the provision of exible channel
options, online and off-line, that meet customers
diverse information and purchasing needs appears
to be crucial in stopping customers switching to a
competitors channels.
Building on these initial results of the
questionnaire, the second research phase included
more options for the channel choice of
respondents in order to investigate more detailed
and complex channel preference. There were
marked differences in the importance for specic
channels between the information search and
purchasing stage. Figures 2 and 3 show the
respondents mean importance ratings for each
channel in the information search and purchasing
stages.
In the information search stage, respondents
regarded talk to friends as the most important
channel when searching for a holiday product,
closely followed by the Internet and travel shop.
However, WAP mobile phone was perceived as the
least important channel in the information search
stage by respondents. In addition, consult with
people in the virtual community was regarded as a
less important source of information by the
respondents (Figure 2).
Figure 3 shows the results of the perceived
importance of the current booking channel.
Telephone call-overall was regarded as the most
important channel for the booking and talk to
travel agent, e-mail-overall, PC Internet were also
regarded as important channels for booking.
However, Teletext and WAP mobile phone were
not perceived as the key channel option for
booking.
A paired sample t-test revealed a number of
distinct differences between the importance scores
259
of several channels in the current and future. The
more detailed channel options are presented in
Table AI which shows the respondents perceived
current and future importance for each channel
with mean value in the information search stage.
Also, Table AI presents the results of paired sample
t-test and it reveals that there were substantial
differences in the preference for the specic
channel between the current and future timescale.
From Table AI, we see that the mean score for
importance was signicantly different (at the
5 per cent condence level) in the case of several
channels.
There was a statistically signicant decrease in
travel shop channel scores from current to future,
p , 0:05 p 0:000). Also there was a signicant
decrease in other channels such as travel brochure,
talk to travel agent, call-overall, call to travel agent
(Call-TA), call to brochure, fax to brochure, postal
mail and news and magazine from current scores
to future scores.
However, with reference to eight relatively new
Internet based eChannels, including PC Internet,
WAP mobile phone, IDTV, VC, e-mail-overall,
e-mail to travel agent, e-mail to brochure, and
e-mail to PC Internet, there was a statistically
signicant increase from current scores to future
scores. This result demonstrates that customers
perceived benets from the traditional channel in
the information search is expected to become less
important in the future; however, the customers
perceived eChannels benets in the information
search stage is expected to become more important
in the future.
In order to nd out whether there is a difference
between the current and future in the purchasing
stage on the perceived importance of the channels,
a paired sample t-test was conducted to compare
the perceived importance scores of each channel
between the current and future. Table AII shows
the respondents perceived current and future
importance for each channel with mean value
in the purchasing stage and the results of the
paired sample t-test revealed that there were
substantial differences in the preference for the
specic channel between the current and future
timescale.
There was a statistically signicant increase in
the PC Internet channel scores from current to
future, p , 0:05 p 0:000. For other
Figure 2 Channel preference information search stage
Figure 3 Channel preference purchasing stage
260
channels, such as WAP mobile phone, e-mail-
overall, e-mail to travel agent, e-mail to brochure,
e-mail to PC Internet and e-mail to teletext, there
was also a statistically signicant increase from
current scores to future scores. On the contrary,
there was a distinctive decrease from the current
scores to future scores in the traditional channels
including travel brochure, talk to travel agent,
Call-TA, call to brochure, call to teletext,
fax-overall, fax to travel agent and fax to brochure
in the purchasing stage.
To nd out whether there is a difference on the
perceived channel preference between the
information search and purchasing stages, a paired
sample t-test was conducted to compare the
perceived importance scores of each channel
between the information search and purchasing
stages. Table AIII shows the respondents
preferences for each channel with the mean values
for the information search and purchasing stages.
It also presents the results of the paired sample
t-tests. It appears that there are substantial
differences in the preference for the specic
channel between the two stages. There is a
statistically signicant increase in the talk to travel
agent channel scores from information search to
purchasing, p , 0:05 p 0:034. Likewise, there
are statistically signicant increases in the call-TA ,
call to contact number in a brochure (Call-B), call
to contact number from the Internet (Call-I) and
call to contact number in teletext (Call-TXT)
channel scores from information search stage
(Call-TA; Call-B; Call-I; Call-TXT) to purchasing
stage (Call-TA; Call-B; Call-I; Call-TXT),
p , 0:05 p 0:010; p 0:004; p 0:021;
p 0:033:. This result indicates that respondents
regarded these channels as much more important
for purchasing than for seeking holiday product
information.
Figure 4 shows the current and future
customer CBP according to their importance
in the information search and purchasing stage.
The value of the X and Yaxes represent the
current and future importance of each channel,
respectively, and all the channels are located within
the CBP framework i.e. is key operational,
strategic, high potential and support. Each
channel in the CBP framework is plotted as a
diamond symbol for the information search
stage and as a circle for the booking stage.
From Figure 4, it can be seen that in general,
most channels tend to be located in the strategic
or support sectors of the CBP model.
According to the CBP, e-mail channels based on
the Internet such as PC Internet, e-mail-overall,
e-mail to a contact number from the Internet,
e-mail to travel agent, e-mail to a contact number
in a brochure, call to a contact number from the
Internet were regarded as strategic channels
and interestingly talk to friends are very
inuential in the customer decision-making
process in the information search stage.
Respondents perceived that these channels
are highly important both in the current and future
when they nd holiday product information.
However, another group of eChannels, IDTV,
WAP, VC and e-mail to teletext were regarded
as high potential and respondents consider that
these channels are currently less important, but
they may be important in achieving successful
future choice.
Another group of channels including traditional
channels such as call-overall, Call-TA, talk to a
travel agent, TV, travel shop, travel brochure and
newspaper and magazine were also regarded as
strategic, but they were relatively less important
in the future importance compared to the
group of eChannels. Traditional channels
including Fax-overall, Fax to a contact number
from Internet, Fax to a contact number in a
brochure, Fax to a contact number in the teletext,
Teletext-overall, call to a contact number in the
teletext and Postal mail were regarded as support
channels. These channels are currently valuable
and used by the respondents, but they are not
critical to successful customer choice. Only one
channel, call to a contact number in a brochure,
was regarded as key operational in the information
search stage.
Figure 4 CBP [information search and purchasing]
261
In general, the customer channel portfolio
in the information search and purchasing stage
shows a similar picture of channel distribution.
However, a detailed comparison of the channel
portfolio between the information search and
purchasing stages demonstrates that customers
have a different perception about the channels.
In other words, there is a gap between the
customers information search and purchasing
portfolios. For example, call to a contact number
in a brochure was key operational in the
information stage, but in the purchasing stage
it was regarded as strategic. Also fax to travel
agent and call to a contact number in teletext
were considered as support in the information
search stage, but they were regarded as
key operational in the purchasing stage. Even
though customers are currently using or likely
to use these aforementioned channels in the
information search stage, customers do not
intend to use or are not ready to use certain
channels in the purchasing stage.
Conclusions
The research revealed that customers have a
different preference for the channel choice in
the information search and purchasing stages.
In the information search stage, talk to friends
or relatives was regarded as more important
than PC Internet and travel shop for the
preparation of holiday. This result indicates that
private or informal channels have a key role in the
customer decision-making process and the
customer value for the C2C (customer to
customer) or P2P (peer to peer) conversation is
becoming increasingly important during the
customer buying process. The quantitative
ndings generally conrm the in-depth qualitative
interviews conducted during the preliminary
investigation. The implication of this result is
that the importance of socio-technical model of
channel management may be a key aspect for
the success of the Internet-based eBusiness
company in the computer mediated eBusiness
environment. Therefore, it is necessary for tourism
rms to evaluate the customer value for these
informal channels such as friends/relatives, online
conversational interfaces in order to make an
appropriate and successful channel investment
decisions that realise or maximise customer
channel benets.
However, in the purchasing stage, call
related channels, talk to travel agent, e-mail and
Internet were regarded as key channels for the
booking. These results indicate that customers
channel benets are changing according to the
information search and purchasing stages
and therefore, from the rms point of view,
it is critical to identify the customers current
and future channel preference/benets during
their search and booking stages and provide
an optimal channel combination (mix)
according to the customer channel preference/
benets in order to acquire and retain the
customers within the companys channel
conguration/portfolio.
It is worth noting that the future importance of
the customers perceived benets on the Internet
based eChannels is expected to increase both in
the information search and purchasing stage.
Though most of the traditional channels were
regarded as less important in the future, however,
when traditional channels were linked to the
eChannels (e.g. e-mail to travel agent), the future
importance of these channel combinations or
mixed channels increased. The implication of
this result is that it is important for a company to
identify the customer benets and risks of these
relatively new eChannels in order to make an
appropriate channel investment decisions.
Furthermore, there is an opportunity for Internet
based eBusiness company to maximise the
realisation of the customers expected or
unrealised channel benets by providing an
optimal channel mix of traditional channels and
eChannels to the customers i.e. Business Channel
Re-engineering.
The distribution of channels within the CBP
model shows that most of the channels are located
in either the strategic or support quadrant. This
result suggests that there are only a few key
operational channels as far as customers are
concerned, which tends to suggest that customers
do not value channels unless they are critical to
their decision-making needs and is a subject for
further investigation.
The management implications of this CBP
approach is that Internet based eBusiness in
tourism/hospitality companies need to identify
the current and future CBP portfolio of their
existing and prospective customers to be
successful in the multichannel eBusiness
environment. It is critical to assess the
companys current channels and identify
alternative ones according to the customers
CBP in order to make appropriate and successful
channel investment decisions that maximises
channel benets; thus, making the company
much more effective in the management of its
customer decision support services across
multiple customer channels. This is because
in the eBusiness environment, more power
accrues to the customer in the company/consumer
relationship and customers will be a major
262
enabler and driving force and not the rm in
terms of channel strategy (Hagel, 1997).
Therefore, channel management strategy
which consider customers CBP as a key
aspect of future success for the Internet based
eBusiness company in the tourism/hospitality
industry.
This research also demonstrated how CBP can
be used to reveal the channel gap between the
information search and purchasing stages
when considering critical usage. The fact that
customers have a different perception on the
critical usage of these channels implies that for
the booking stage most eChannels are not
sufciently developed for customer to place their
trust in online transactions. The issue of customer
trust in eBusiness seems to be a key aspect for the
future success of the eCommerece environment.
The trust issue was often quoted by respondents
during the qualitative interviews as the main factor
and reason for the reluctance to conduct
transactions online.
Furthermore, while the qualitative results of
the initial investigation indicated differences in
channel usage, the quantitative results were
established where these differences signicant
within the CBP.
Hence, a combined quantitative and qualitative
approach to channel management should ensure
greater reliability in decision-making about
channels.
In the eBusiness environment which is
characterised by multiplicity of eChannels,
one can no longer remain focused solely on
applications, but must address the key
channel investment decisions that underpins
eBusiness performance in the eBusiness
environments.
Future research in the channel benet
evaluation and realisation from the companys
point of view is required in order to establish
legitimate and adequate criteria for decision-
making about strategic channel deployment and
investment. Moreover, research into the
appreciation of the channel attributes and role in
determining customers channel choice is required
to understand what makes an effective channel
benets management strategy, and will provide
further insights for a much more effective CBP
analysis. Moreover, CBP analysis will be an
important input to segmentation strategy decisions
that must take into account the customers
communicationchannel portfolios (Louvieris et al.,
2003).
Finally, the onslaught of new miniaturised
communication technologies with greater
bandwidth capability (e.g. 3G networks, emerging
nanocommunications technologies, etc.) will
mean that channels will become more pervasive.
Therefore, the CBP needs to be managed
dynamically and updated at regular intervals
to ensure continuing alignment of the rms
portfolio with their customers channel
portfolios in order to maximise customer
relationship capital.
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Ward, J. (1987), Integrating information systems into
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pp. 19-29.
Appendix
Table AI Paired sample t-tests comparing mean scores for the current and future
importance of channels in the information search stage
Current Future
Channel Mean SD Mean SD t df
Sig.
(2-tailed)
PC Internet 7.56 1.41 9.17 0.89 29.855 40 0.000*
TS 7.34 2.11 6.02 2.44 3.801 40 0.000*
TB 6.95 2.26 6.07 2.46 3.163 40 0.003*
WAP 2.93 1.94 5.17 2.83 26.465 40 0.000*
TV 6.25 2.26 6.15 2.43 0.539 39 0.593
Teletext 4.29 2.44 4.36 2.51 22.70 40 0.789
IDTV 4.42 2.35 6.77 2.57 27.653 39 0.000*
Talk-F 8.00 1.89 8.07 1.75 20.723 40 0.474
Talk-TA 6.87 2.28 5.70 2.24 5.060 40 0.000*
VC 3.34 2.38 5.04 2.68 26.299 40 0.000*
Call-OA 6.76 2.27 5.97 2.15 2.583 38 0.014*
Call-TA 6.78 2.01 5.41 2.14 4.787 40 0.000*
Call-B 5.70 2.33 4.73 2.20 3.717 40 0.001*
Call-I 6.63 2.15 6.29 2.31 1.236 40 0.224
Call-TXT 4.63 2.53 4.09 2.11 1.89 40 0.066
Fax-OA 4.38 2.41 4.0 2.52 1.793 30 0.083
Fax-TA 4.65 2.60 4.12 2.60 1.934 40 0.060
Fax-B 4.21 2.29 3.82 2.20 2.389 40 0.022*
Fax-I 4.82 2.54 4.68 2.70 0.628 40 0.534
Fax-TXT 3.39 2.07 3.26 1.91 0.625 40 0.535
E-mail-OA 7.19 2.10 8.58 1.97 25.079 30 0.000*
E-mail-TA 6.85 2.21 7.80 2.32 23.854 40 0.000
E-mail-B 6.21 2.28 6.85 2.60 22.549 40 0.015*
E-mail-I 6.97 2.43 7.90 2.36 23.702 40 0.001*
E-mail-TXT 4.70 2.45 5.07 2.78 21.263 40 0.214
Postal mail 4.68 3.11 3.80 2.89 5.009 40 0.000*
News/Mag 6.39 2.07 5.56 2.32 3.148 40 0.003*
Notes: TS: travel shop, TB: travel brochure, Talk-F: talk to friends, Talk-TA: talk to
travel agent, VC: consult with people in the virtual community, Call- OA: call overall,
Call-TA: call to travel agent, Call-B: call to a contact number in a brochure, Call-I: call
to a contact number from the Internet, Call-TXT: call to a contact number in the
teletext, Fax-OA: fax overall, Fax-TA: fax to travel agent, Fax-B: fax to a contact
number in a brochure, Fax-I: fax to a contact number from the Internet, Fax-TXT: fax
to a contact number in the teletext, e-mail-OA: e-mail overall, e-mail-TA: e-mail to
travel agent, e-mail-B: e-mail to a contact address in a brochure, e-mail-I: e-mail to a
contact address from the Internet, e-mail-TXT: e-mail to a contact address in the
teletext, News/Mag: newspaper or magazine. *signicance at p , 0.05
Table AII Paired sample t-test comparing mean scores for the current and future
importance of channels in the purchasing stage
Current
importance
Future
importance
Sig.
(2-tailed)
PC Internet 6.92 1.88 8.85 1.79 210.178 40 0.000*
TB 6.78 2.04 5.92 2.27 3.438 40 0.001*
WAP 3.17 2.16 5.04 3.02 26.077 40 0.000*
Teletext 3.94 2.42 4.05 2.46 20.755 38 0.455
Talk-TA 7.53 1.88 6.07 2.04 5.981 40 0.000*
Call-OA 7.71 1.70 6.56 2.28 3.614 38 0.001*
Call-TA 7.70 1.95 6.65 2.30 3.446 40 0.001*
Call-B 6.58 1.98 5.39 2.37 4.113 40 0.000*
Call-I 7.39 1.65 6.95 2.22 1.371 40 0.178
Call-TXT 5.32 2.64 4.65 2.62 1.2954 39 0.034*
Fax-OA 4.89 2.45 4.21 2.25 2.865 36 0.007*
Fax-TA 5.12 2.80 4.43 2.57 2.765 38 0.009*
Fax-B 4.63 2.61 3.95 2.30 3.332 40 0.002*
Fax-I 4.53 2.37 4.34 2.41 0.805 40 0.426
Fax-TXT 3.67 2.26 3.37 2.09 1.433 39 0.160
E-mail-OA 7.23 2.46 8.58 1.81 24.009 33 0.000*
E-mail-TA 6.82 2.27 8.00 2.22 23.892 39 0.000*
E-mail-B 6.30 2.25 7.46 2.18 24.188 39 0.000*
E-mail-I 7.10 2.09 8.43 2.02 24.462 39 0.000*
E-mail-TXT 4.77 2.46 5.48 2.81 22.351 39 0.024*
Note: *signicance at p , 0.05
Table AIII Paired sample t-test comparing mean score for the importance of channels
in the information search and purchasing stage
Information
search stage
Purchasing
stage
Sig.
(2-tailed)
PC Internet 7.56 1.41 6.92 1.88 1.818 40 0.077
TS 7.34 2.11
TB 6.95 2.26 6.78 2.04 0.505 40 0.617
WAP 2.93 1.94 3.17 2.16 21.056 40 0.298
TV 6.25 2.26
Teletext 4.29 2.44 3.94 2.42 1.634 38 0.111
IDTV 4.42 2.35
Talk-F 8.00 1.89
Talk-TA 6.87 2.28 7.53 1.88 22.198 40 0.034*
VC 3.34 2.38
Call-TA 6.78 2.01 7.70 1.95 22.703 40 0.010*
Call-B 5.70 2.33 6.58 1.98 23.067 40 0.004*
Call-I 6.63 2.15 7.39 1.65 22.394 40 0.021*
Call-TXT 4.63 2.53 5.32 2.64 22.211 39 0.033*
Fax-TA 4.65 2.60 5.12 2.77 21.667 39 0.104
Fax-B 4.21 2.29 4.63 2.61 21.187 40 0.242
Fax-I 4.82 2.54 4.53 2.37 1.182 40 0.244
Fax-TXT 3.39 2.07 3.67 2.26 20.980 39 0.333
E-mail-TA 6.85 2.21 6.82 2.27 0.110 39 0.913
E-mail-B 6.21 2.28 6.30 2.25 20.404 39 0.688
E-mail-I 6.97 2.43 7.10 2.09 20.551 39 0.585
E-mail-TXT 4.70 2.45 4.77 2.46 20.405 39 0.687
Postal mail 4.68 3.11
News/Mag 6.39 2.07
Note: *signicance at p , 0.05
264
V2C activity on a local
level: qualitative
cases Tampere and
Silicon Valley
Hannu Jungman and
Marko Seppa
The authors
Hannu Jungman is based at eBRC, Tampere University of
Technology, Finland. He is a project manager at eBRC and
researcher at Tampere University of Technology (TUT). He is
preparing a doctoral dissertation on new V2C operating models.
Marko Seppa is based at eBRC, Tampere University of
Technology, Finland. He is director of eBRC, a virtual research
centre and joint venture between TUT and University of Tampere
(UTA) and one of the six sub-programs of eTampere, a local pilot
of eEurope.
Keywords
Venture capital, Entrepreneurs, Finland, United States of America
Abstract
The increased capital intensity of venture capital supply and the
increased knowledge intensity of new venture supply have
created a knowledge gap and recreated a capital gap between
new venture activity and venture capital industry. This
development has given rise to an all-new breed of players. In this
descriptive, qualitative study, V2C activity is explored in a local
context through comparison of cases Tampere (Finland) and
Silicon Valley (USA). In Silicon Valley, the dominant group of V2C
players is business angels, whereas in Tampere, publicly funded
incubators play the most visible role in new venture
development. Nevertheless, in both areas, ve different
categories of V2C players are represented, and, in both, bridge
the gaps to a signicant extent.
Electronic access
available at
available at
Introduction
Since 1995, supply of venture capital nancing,
the sizes of venture capital funds and, hence, also
the minimum investment amounts of a given
venture capitalist, have grown substantially,
transforming the venture capital process into the
venture capital spiral (Seppa, 2000).
Consequently, after the boom and bust of the
Internet hype, since 2000, the interest of venture
capital rms has shifted from seed and start-up
situations to more mature investment stages,
because such investments are considered safer,
easier to manage, and markedly more capital than
knowledge (hands-on) intensive. At the same time,
new ventures have become more knowledge than
capital intensive requiring even more hands-on
involvement (Mason and Harrison, 2000; for
observations of an earlier such shift refer Bygrave
and Timmons, 1992).
Thanks to the two phenomena, a knowledge gap
has emerged and a capital gap has re-emerged
between new venture activity and the venture
capital industry. Figure 1 shows an illustration of
the dual gap (Rasila et al., 2002, p. 6).
To bridge the gaps between venture and capital,
an all-new breed of venture to capital or V2C
players has emerged based on a number of distinct
operating models. The mission of these players is
to push prospective ventures towards the radar
scan of the venture capital industry by turning
(rening) them investable in the eyes of the
venture capitalist, i.e. by building business from
venture to capital (Seppa and Nasi, 2001).
V2C activity, aimed at overcoming the capital gap
and the knowledge gap, is a concern on the both
the local, national, as well as the international
level. The benets of successful V2C activity have
been acknowledged, for example, on the European
Union level (Aernoudt, 2002). The benets
include an increase in the number of investable
ventures and jobs, as well as new export income.
The services provided by different types of V2C
players differ by nature and content. However, in
general, V2C players provide, besides nancing
and other capital contribution, signicant
managerial support and/or guidance. Such
support may or may not include businessman
wisdom, growth management insight, technical
management skills and/or introductions to contact
networks (Rasila et al., 2002).
The emerging V2C industry appears to have
assumed a part of the classic role of the venture
capital industry. Lending the classic discussion on
the role of the venture capital nancier from
Brophy (1986), the role of V2C for a country or
area today can be put in perspective.
To put the role of [V2C] in context, it is useful to
think of it as a key part of the economic growth
DOI 10.1108/13522750410557076
265
process now facing the United States and other
countries as well. The [V2C] process is important
in marshalling resources for the attainment of
benets for government, business, and the public at
large . . . It is . . . to the point to think of the [V2C]
nancier as the overseer of the market exchange
system, in a sense deciding through nancing
decisions, on behalf of society at large, which new
projects should go forward and which should not.
This is an important function in the economic
transition now facing many economies. It is
unlikely that a country or area can be competitive
in commercial exploitation of innovative process,
products, and services without a strong local [V2C]
community.
Economically, V2C activity clearly plays a
signicant role in the value chain of the venture
capital industry as a pre-screener of new ventures
and as provider of knowledge and capital for the
most prospective ones the ones with most
potential as future investment targets of the
venture capital industry. Furthermore, this activity
will speed up the growth of new companies and
therefore, increase the pace of job creation.
Today, in the words lent from Brophy (1986),
the V2C players decide, as the overseers of the
market exchange system, on behalf of society at
large, which new projects (businesses) should go
forward and which should not.
The present study focuses on V2C activity on a
local level. More specically, the study explores
V2C activity in Tampere, Finland, and Silicon
Valley, USA. First of all, the study aims to identify
the key players in two regions and the key
differences between them. Second, the study
attempts to build early propositions on how to
develop V2C activity with a focus on Tampere
case. The primary data of the study comprised
of public information on the V2C market and
interviews of selected individuals, both in Tampere
and Silicon Valley. The interviews conducted in
Tampere comprised CEOs of all major V2C
institutions and were semi-structured by nature.
The Tampere study is reported in more detail in
Jungman and Seppa (2002). The present study
also derives on unstructured interviews conducted
in Silicon Valley (Appendix 1). The interviews
were conducted on convenience basis and focused
on the nature of the capital and the knowledge
gaps, as well as the status of the venture capital
industry, in Silicon Valley. A similar study is
underway to understand the nature of V2Cactivity
and the status of the venture capital industry in
St Petersburg, Russia. However, the present study
is limited to cases Tampere and Silicon Valley only.
Categorisation of V2C players
By denition, V2C players operate to push
ventures to capital, help to cross the dual gap.
Many V2C players conceptualise entrepreneurs as
their main clients. Furthermore, it appears that
V2C players are seldom nancially interested in
what happens to the ventures after they have
received venture capital nancing, i.e. once
transferred from the V2C portfolio to the venture
capital industry portfolio. After such transfer it is
considered to be the venture capitalists task to
push the venture from investable to listable.
V2C players can be divided into four categories:
(1) business angels;
(2) incubators;
(3) advisors; and
(4) corporate ventures.
In addition to these basic categories, venture
capitalists themselves may seek to be active in
the V2C space, by setting up funds specialised
in early stage nancing. However, almost
without exception, further funds of such
players tend to eventually slide towards later
stage focus if not premature dissolutions, due
to inability to make small enough investments
(Seppa and Nasi, 2001). As in any other new
industry, new and emerging operating models
have been developed continuously to
overcome the shortcomings of the existing
ones contributing to a fth category;
(5) Emerging V2C models (Rasila and Okkonen,
2003).
In the following sections, a basic overview of each
of the ve categories of V2C players is provided.
Business angels
Business angels are, by denition, wealthy
individuals putting some of their hard-earned
capital, business-experience, and contact-
networks back to the entrepreneurial process.
Business angels are prot-driven, market-educated
players vested with an extensive value-adding
potential. However, they are, by denition, also
hobbyists. This is neither their profession nor full
Figure 1 The capital and knowledge gaps
V2C activity on a local level: qualitative cases Tampere and Silicon Valley
266
time job. Even if this is their main job,
post-retirement, it does not necessarily ll the
hours of their days. Importantly, they are not
dependent on any market forces to maintain a
long-term in what they are doing; they do not need
to serve any particular stakeholder group such as
outside investors or even the entrepreneurs.
They do not seek organised growth of their
business, as do, for example, the players of the
formal venture capital industry. In other words,
their business reality lacks certain dynamism, for
example, the absence of classic stakeholder
pressures from nanciers and customers.
Common to most business angels is that
they like to remain anonymous; hence, it
may be difcult for entrepreneurs to nd such
players let alone the Right One. Anyhow, the
number of business angels has grown in the recent
years due to the increased number of millionaires
produced by the entrepreneurial revolution of the
1990s. On relative terms, business angels serve
more as a solution for the V2C space in the USA
than in Europe. In the USA, it is estimated that
business angels invest about twice as much as the
formal venture capital industry in monetary terms
(Mason and Harrison, 2000).
Incubators
Also business incubators often lack certain
dynamism, but from a different angle than
business angels. Most incubators are based on
a formal process and professional management;
this is someones main job not a mere hobby.
However, whereas business angels personally
participate as owners in underlying ventures,
incubator staff seldomhas such personal incentive.
Many incubators are public sector nanced or
semi-public players under the public eye with little
or no space for making mistakes. In other words,
their activity lacks different aspects of dynamism
than business angels. According to Aernoudt
(2002) a business incubators task is to nurture
young rms, help them survive and grow during
the start-up period when they are most
vulnerable. In addition to premises, business
incubators may also provide services such as
hands-on management, access to nance, legal
advice, operational know-how and access to new
markets. Furthermore, according to Aernoudt
(2002), a business incubators main goal is to
produce successful rms that will leave the
incubator nancially viable and free-standing
within reasonable delay.
Advisors
Compared with business angels and incubators,
business advisors are typically the most focused on
their own short-term gains and protability.
By denition, they are also involved for the
shortest time with a given venture. On the negative
side, a standard image of an advisor relates to
quick-and-dirty, get-the-money-and-run type of
operation. Advisors are sometimes faced with
accusations according to which they do not care
what happens in the client rms once they have
nished. On the more positive tone, advisors are
highly skilled and motivated professionals, who
have seen many cases and can derive, advise from
experience. Most advisors also work under full
market pressure, the requirement of sustainable
direct nancial protability. This is neither a
hobby for them nor are they around to full (soft)
economic-policy-related missions.
Corporate venturing
Corporate venturing brings about new business by
building on internal entrepreneurship, sometimes
referred to as intrapreneurship. In environments
and societies that lack entrepreneurial incentive,
large corporations are natural platforms for new
venture activity. Conversely, in environments
boasting with entrepreneurial incentive,
corporations have tougher time in keeping new
venture activity indoors. Compared with the USA,
Europe relies much more on corporate venturing.
As a form of institutionalised parenthood,
corporations have a signicantly better track
record as a platform for new venture activity than
state or government related entities, but there are
exceptions also to this rule.
It is worthwhile, herein, to make difference
betweencorporate venturing andcorporate venture
capital: The latter refers to investments made from
corporate funds directly in external start-up
companies, i.e. it excludes investments made
through a fund managed by a third party and the
funding of new internal ventures. The former, on
the other hand, refers especially to investments
in-house (Chesbrough, 2002). Regardless of the
fact that there are several signicant corporate V2C
players both in Tampere and Silicon Valley, as a
limitation of the present study, corporate venturing
is not discussed, herein, in any further detail.
Emerging V2C models
The shortcomings such as the lack of long-term
commitment, due to lack of nancial interest of
many of the existing V2C models have opened
space for new and innovative V2C business
models, which seek to integrate the best practises
of the existing players. It seems that ownership
issues and investment of knowledge (intellectual
capital) are the key building elements of the
emergent V2C models. It can be argued that
the emergent V2C models link the eld to the
roots of the classic venture capital industry.
267
(For a more comprehensive overview on emerging
V2C models refer Rasila and Okkonen, 2003.)
All the categories of V2C players are
represented in both Tampere and Silicon Valley.
In the following chapters, an initial overview of
V2C activity in the two regions is provided.
The classication follows the one introduced
above (excluding corporate venturing).
Case Silicon Valley
Silicon Valley is known throughout the world as
the number one new technology venturing market
on the planet. It is also a home for some of the
best-known venture capital companies in the USA,
and draws people from all over the country to seek
and negotiate for venture capital nancing.
In addition, also the universities in the area are well
known for their research and education related to
entrepreneurship and venture capital nancing.
However, based on the interviews conducted for
the present study, it is also noticed in Silicon Valley
that the needs of entrepreneurs and the services
provided by venture capitalists do not always meet.
The issue, as presumed, is two-folded: the capital
injections available for investment are too large
and venture capitalists are unable to provide
sufcient hands-on involvement. Because venture
capitalists have, consequently, been sometimes
forced to return some of their funds back to the
investors, due to inability to make small enough,
hands-on investments, there is market pressure on
the venture capital industry to move towards
smaller investments.
Business angels
Business angels in the USA invest about twice as
much in monetary terms and 20 times more in
terms of the number of ventures nanced as
the formal venture capital industry. According to
the Center for Venture Research[1], located at the
University of New Hampshire, in total there are
ca. 250,000 business angels in the USA who invest
annually a total of $20 billion in ca. 30,000
ventures. A typical investment of a business angel
is less than $200,000, but can also be as much as
$1,000,000. It is typical that business angels
co-invest with other business angels (Mason and
Harrison, 2000). It is evident that, in the USA,
business angels play the most signicant role in
building business from venture to capital.
According to the Capital Connection[2] there
are six business angel networks that operate in
Silicon Valley (Appendix 2). They all provide
capital investments to start-up and/or early stage
companies. In addition to mere nancial capital,
they also invest mental capital; their time as
advisors and board members.
Incubators
In Silicon Valley, there are nine business
incubators (Appendix 3), which are members of
the National Business Incubation Association[3].
Most of the incubators are supported by public
funds. On an average, each incubator has
16 tenants and the average incubation period is
three years. Of the incubators only one appears to
be making capital investments (one sponsored by a
major corporation). The basic services include
ofce space, furnishing and support services.
A majority of the incubators have specialised to
serve certain customer groups like international
companies expanding to the USA, environmental
businesses, art businesses or entrepreneurs from
low-income communities. Common to these
groups is that they may nd it hard to get nancing
and other resources from other sources.
Advisors
The entrepreneurial environment and venture
capital industry together have created numerous
opportunities for various kinds of consultative
advisors in Silicon Valley. One special group of
these namely technology analysts is selected
for introduction herein. This special advisor group
provides entrepreneurs with technology and
market analysis and suggestions for suitable
venture capitalists. Such a service will most likely
bring entrepreneurs and venture capitalists closer
to each other, and make it easier for entrepreneurs
to justify their need to raise capital. However,
technology analysts do not fully solve the problems
related to the knowledge and capital gaps, as they
do not provide any managerial advice.
Emerging V2C models
There is no shortage of emerging V2C operating
models in Silicon Valley. Three models have been
selected for presentation, herein. The rst relates
closely to business angel networks and the second
to individual business angels. The two models can
also be dened as hybrids of the category of
advisors. The third model is closer to the category
of incubators.
CEO Circle consists of chief executive ofcers
with entrepreneurial background. They are hired
to companies in order to solve especially the
problems caused by the knowledge gap, by sharing
their businessman wisdom with the
entrepreneurial teams of the start-up companies.
Payment is received either in cash or equity.
The concept of Virtual CEO is presented by
Randy Komisar in his autobiography Monk and
the Riddle (Komisar, 2001). The book describes
268
his personal work as a business angel without
money possessing skills and networks vital to
entrepreneurial ventures. For the time and money
he contributes to young ventures he receives a
stake in the company.
Garage Technology Ventures[4] helps young
companies developing new technologies in three
ways:
(1) they provide small venture capital investments
($100,000-750,000);
(2) they help ventures raise bigger investments
from venture capitalists, corporate and
individual investors; and
(3) they work as advisors in mergers and
acquisitions.
Of these functions the second is pure V2C activity,
while the two others are similar to the functions of
venture capitalists.
Case Tampere
While the city of Tampere has a good 200,000
inhabitants, over 300,000 people live within
a 20 min drive from the city centre, and half a
million live within a radius of 100km. Empowered
by two universities (Tampere University of
Technology and University of Tampere), other
institutions of higher education and research, and
a number of knowledge centres and science parks,
the Tampere region is rapidly emerging among the
most recognised local knowledge areas in Europe.
One of the drivers of this development, the
eTampere knowledge society development
program, is largely geared at putting eEurope
the vision of Europe into action on a local level.
The goal of the eTampere program is no less
ambitious than to make Tampere the worlds
leading local knowledge society. One mean to
achieve this target is creation of new businesses,
and acceleration of their growth and development.
According to the business development strategy of
the city of Tampere, this activity is supported by
providing help in set-up activities and in evaluation
of business ideas, creating culture that encourages
entrepreneurship, securing appropriate nance,
helping get required working premises, and
promoting networks (Tampereen
elinkeinostrategia, 2002).
The city of Tampere has been active (as key
nancier and part owner) in developing several
specialised incubators. The mission of these V2C
players is to turn prospective ventures
investable in the eyes of venture capitalists,
i.e. to help ventures to cross the dual gap. The city
of Tampere has also invested in venture capital
funds especially targeted to nance early stage
companies.
Business angels
In Europe, and this holds also for Finland, the role
of business angels is, unfortunately, far less
signicant than in the USA. The Internet hype of
the late 1990s, particularly the successful initial
public offerings (IPOs) it enabled, produced
several new players in the business angel arena also
in Finland. Within Finland, the Tampere region
was not among the top scorers of individual IPO
related wealth creation of the hype era, however.
Hence, in Tampere this category of V2C players is
not particularly strong, but of average strength.
Nonetheless, notable measures on the Finnish
national scale to activate business angel activity
have been taken precisely in Tampere. In 1997,
Finnish Business Angel Association[5] was
registered in Tampere. This was the rst registered
business angel association, and still to date the only
one, in Finland. One of the functions of the
association is to arrange elevator pitch sessions
where entrepreneurs are pre-screened for
presentation to participating members. It is to be
noted that the association has not been successful,
so far, in attracting the attention of Finlands
leading business angels. Even within Tampere,
there are unofcial round-table-clubs of business
angels that do not actively participate in the
operations of the association. In Finland, and this
holds also for the Tampere region, business angels
typically make investments between e10,000 and
150,000 and their preferred investment time
ranges from two to four years.
Incubators
In Finland, the number of business incubators has
grown rapidly since 1995. For example, in the
Helsinki region there was only one incubator in
1995 compared to 16 in 2000. Most of the
incubators in Finland are located in one of the
16 science parks, and are strongly afliated with
university research (Aernoudt, 2002).
There are four players in Tampere that can be
labelledas the citys strategic V2Cportfolio. All four
have their own sector specic development
responsibilities. While they differ in target venture
segments, one of their commondenominators is the
V2C process. They all provide help in developing
business plans and in acquiring additional
nancing, contact networks and ofce space.
All four incubators are briey introduced below.
Finn-Medi Research Ltd[6] is a business
development organisation that concentrates on
health technologies. In addition to basic incubator
services they also provide loans that typically range
from e11,000 to 50,000.
Tampere Technology Centre Ltd[7] and
Tampere University of Technology together
constitute an internationally signicant
269
concentration of ICT based business, research and
development activity. Much of the companys
business development services, including Hermia
Incubator, have been outsourced for over ten years
to entrepreneurial (management-controlled)
rms, mainly Hermia Business Development Ltd
(of which Tampere Technology Centre Ltd owns
10 per cent). The incubator is specialised in
technology based product and business
innovations. The V2C player is an exception
among the incubators in the Tampere Region,
and Finland in general, because it is
management-controlled, and public sector based
players are only minority owners. Nonetheless, this
is a close private-public-relationship.
Oy Media Tampere Ltd[8] is minority-held by
the City of Tampere, whereas private sector
(mainly large) enterprises own the majority.
Media Tampere can also make investments in early
stage companies and has creatively outsourced
incubator services. The incubator Media Club was
recently established as an incubator specialised in
content production and media business.
The incubator is not (yet) a legal entity, but a
project fully owned by Tampere Polytechnic.
The project was set-up for two years, in 2001.
Professia Ltd[9] is the latest entrant to the city
of Tamperes strategic sector-specic V2C
portfolio. Professia is owned, in four equal shares,
by the city of Tampere, the University of Tampere,
Finnvera Ltd (a public funding agency), and
Sentio Invest Ltd (a local management-owned
venture capital company). Professia manages
a business incubator that develops
knowledge-intensive advisory and business service
companies.
Advisors
There are several advisory rms, in the Tampere
Region, that are active in the V2C space. Many of
these rms are actually incorporated form of the
activity of a given business angel. One advisory
rm has been selected as a case example of this
category, namely Ledi Oy.
Ledi[10] has been one of the most active
entrepreneurial companies in the Tampere V2C
space. Ledi was established in 1997 and today has
a presence at science parks in both Tampere and
Helsinki. Ledi is a corporate nance boutique that
arranges nancing for mainly early-stage
enterprises. Ledi has also been offered, and
accepted, shares as partial payment for its services.
Ledi and/or its individual partners played
instrumental roles in establishing the business
angel association (introduced above) and in
creating a private-public seed-investment
partnership involving corporate and
government institutions referred to as Seed
consortium which resembles the round-table
sessions of business angels. In the set-up, Ledi has
served as the coordinator that pre-screens target
ventures, helps put their presentations together,
and is engaged in post-investment activities.
The seed consortium provides prot sharing based
subordinated loans, ranging from e50,000 to
200,000, to seed, start-up, and growth stage
companies. The maturity ranges from two to four
(or even to seven), years. The loans are intended to
cover the seeking of nancing options and,
ultimately, the expenses of the due diligence
process related to a potential venture capital
investment. The consortium (the investing
institutions) does not provide any operational help
(Laine, 2002).
Emerging V2C models
eAccelerator[11] is one of the six subprograms of
eTampere. It was launched, in 2001, as a sort of an
ambitious virtual incubator funded by the city of
Tampere. The entity legally responsible for the
eAccelerator project is Tampere Technology
Centre Ltd. In practise, based on an outsourcing
arrangement, the project is managed by Hermia
Business Development Ltd, the partner driven
company introduced above, making eAccelerator
another PPP experiment. In addition to various
incubation services the deliverables may include
small investments. eAccelerator leans on a network
of 15 core experts and an advisory board of 54
persons. The advisory board is designated to help
the core personnel in customer service and, at
present, they are the primary source of knowledge
on legal, managerial and technological matters.
The advisory board also plays a central role in
evaluating new customer ventures and in making
contacts with investors. Contracts with accepted
ventures are made case by case. For compensation
the management company of eAccelerator takes
cash, but more lately has also accepted equity and
success fees.
Tamseed Ky is seed and start-up venture capital
fund managed by Innonance Ltd[12] in
cooperation with Sentio Invest Ltd. The fund was
opened in October 2002 and in the rst stage it
managed to raise 5.6 Me. The fund works in close
cooperation with business development entities
that are part of the city of Tamperes V2C
portfolio. The aim is to effectively utilise the skills
and knowledge of these organisations in
developing seed companies. The fund has already
made its rst investments.
Venture Stables[13] is a support model for
testing innovations and facilitating for
entrepreneurship within the faculty and students
of the Tampere University of Technology.
Also this V2C operation is managed by
270
Hermia Business Development Ltd constituting
for yet another PPP experiment in Tampere.
The ventures accepted to the stables gain an access
to ofce space, computers and ofce equipments
for one year and an option to one additional year.
The contract also covers expert services, patenting
costs, etc. up to e7,000. The stable staff can also
provide contacts to customers and nanciers.
If a company succeeds, it is obliged to pay back the
money the university has invested in it.
Summary and discussion
Key features and differences of the two V2C
arenas
A number of similarities and differences mark the
players of the regional V2C arenas of Tampere and
Silicon Valley. In both regions there are players in
all of the ve V2C categories. In principle, the
markets are dynamic and offer a balanced mix of
V2C related services to entrepreneurs facing the
dual gap. Overall, the players seem to provide
monetary investments in small enough doses, and
offer specialised business development services to
several different business areas and sectors of
economy.
It is also evident that the city of Tamperes
portfolio of V2C players, and the incubators they
manage, play the most visible role in this V2C
arena. Domination of the V2C space by public
sector or public sector funded entities is quite a
common feature in Europe vs the USA, where
business angels play the dominant role. It is worth
mentioning that even though the population in
Silicon Valley is some eight times larger than that
of the Tampere Region, the number of business
incubators is only double. In Tampere, business
incubators work in close contact with the two
universities in the area, whereas in Silicon Valley
incubators are established to serve certain special
groups of the population, which may nd it
difcult to start and expand their businesses in
other ways.
As mentioned above, in Silicon Valley as in the
USA in general, business angels play the dominant
role in turning entrepreneurial ventures
investable in the eyes of venture capitalists.
In Silicon Valley, an average angel investment is
bigger and obviously also the number of active
business angels is larger in both absolute and
relative terms than in Tampere.
In Europe, the mechanisms by which V2C
resources are provided and distributed differ
between countries and regions. In Tampere,
several creative PPP schemes are underway as well
as all some emerging V2C models. In contrast, the
emerging V2C models developed in Silicon Valley
lean heavily on private entities and active
ownership.
However, the picture is in complete neither in
Tampere nor in Silicon Valley. Notably, each of the
key players interviewed for this study agrees that
further development is still needed in the V2C
space, at both ends. These conclusions also reect
upon the differences in entrepreneurial culture
between Finland and the USA. In the USA, the
general attitude towards entrepreneurship, growth
and wealth creation, is by far more encouraging
than in Finland. This is manifested by both annual
birth-rate of new businesses per capita and the
amount of both business angels and angel money
put back to the entrepreneurial process.
Ideas for further development of V2Cservices
in Tampere region
In the words of a Tampere based incubator
representative interviewed for this study:
The biggest challenge in the eld is to clarify and
communicate to each other the needs and
objectives of V2C players and venture capitalists
and, in the course of the dialogue, develop an
operating model that fulls these needs and,
ultimately, makes the growth resource allocation of
young ventures more efcient. Also the other
interviewees underscored the importance of
dialogue and two-way cooperation between the
V2C players and both entrepreneurs and venture
capitalists.
More efcient and appropriate distribution and
use of target venture ownership could be a key
to more successful V2C activity. In fact,
ownership not nancing is key to both venture
capital and V2C activity (Rasila et al., 2002;
Seppa, 2000; Seppa and Nasi, 2001). In return for
the time, money and services, and businessman
wisdom if any, that they contribute to target
ventures, V2C players could receive a minority
share in the target company. In Silicon Valley, two
emerging V2C models have been identied
(CEOCircle and Virtual CEO) that utilise the idea
of using equity to buy committed knowledge.
By denition, a V2C players nancial gains
should be maximised at the point where a
venture capitalist enters the investable venture,
or better yet at the later point where the
venture capitalist completes a successful exit
(Rasila et al., 2002). In Figure 2, the ideal
development of the market valuation of a given
venture is shown as a function of time. The picture
does not reect reality in the Tampere region at the
present moment, since most of the local V2C
players prefer cash to equity and do not exercise
active and responsible ownership.
At the moment, most of the Tampere based
V2C actors have no ownership incentives to pay
271
attention to the time after receipt of venture capital
investment. Likewise, the venture capitalists do
not have an incentive to pay attention to the time
before their own investment. The ownership
structure depicted above could help different
parties to better understand each others motives
and operating logic and enable fruitful long-term
relationships. Such an operating model would
require much closer cooperation between V2C
players and venture capitalists which also brings
about new challenges: V2C players may become
servants to a given venture capitalist leading to
neglect of other stakeholders. Also, misplaced
ownership distribution, for example, in favour of
faceless institutions rather than entrepreneurial
teams responsible for delivering the results, can
cause more harm than good to the entrepreneur.
Besides ownership, another important issue is
the delivery of crucial knowledge to target
ventures. We believe that it is not a matter of lack of
knowledge or businessman wisdom but rather
a lack of sufcient vehicle to acquire and deliver
that wisdom or competence. As committed
competence cannot be bought on the market in the
classic meaning of the word, expansion of owner
base may be a working solution. The limited-life
limited-partnership based fund vehicle of the
venture capital industry could serve as a basis in
developing a vehicle to do the exchange between
knowledge and stake in a company such as the
concept of the Knowledge Fund (Seppa, 2002).
Whereas a venture capital fund is managed by a
venture capitalist, a knowledge fund is managed by
a venture knowledgist. Investors of knowledge
could be found, besides entrepreneur and adviser
communities, for example, inside universities,
major corporations, and other institutions.
The above discussion is meant to stimulate
discussion and lead to further research and
development activity in the V2C space.
In conclusion, probably the highest yield would
come from further work on the development of an
operating model that understands and appreciates
the needs of entrepreneurs, V2C players and
venture capitalists, but is set to serve the stock
market investor (or acquiring corporation) as the
ultimate customer. At least as crucial is the
valuation of businessman wisdom. Since the city of
Tampere and many other key players of the region
recognise the importance of a strong local V2C
community, Tampere continues to facilitate one of
the most potential testing environments for new
V2C laboratories in Europe and the world.
Silicon Valley, for its part, remains as a trendsetter
in growth venturing and venture capital nancing.
Notes
1 www.unh.edu/cvr/
2 www.capital-connection.com/networksangels.html
3 www.nbia.org
4 www.garage.com
5 www.ledi./bisnesenkelit/index.html
6 www.nnmedi.
7 www.hermiayrityskehitys.
8 www.mediaclubi.com
9 www.professia.
10 www.ledi.
11 www.hermia./eAccelerator
12 www.innonance.
13 www.yritystallit.tut./yritystallit
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Figure 2 Development of ownership and market valuation through ventures life
272
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Doctoral Dissertation, University of Jyva skyla , Jyva skyla .
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Abstracts.
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entrepreneurs across the capital gap who, why, and
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Appendix 1. Interviewed professionals
In Tampere
.
Business angel (anonymous);
.
Eskola M., FinnMedi Research Ltd;
.
Jussila, P. and Huhtamella, H., Hermia
Business Development Oy;
.
Jussila, A., Ledi Oy;
.
Sulonen, T., Oy Media Tampere Ltd,
Media Club;
.
Vakkari, L. Ledi Oy.
In Silicon Valley:
.
Dossani, R. and Toyoda, M. Asia/Pacic
Research Center, Stanford University;
.
Guerra, P. Center for Innovation and
Entrepreneurship (CIE), Santa Clara
University;
.
Tyebjee, T. Leavey School of Business, Santa
Clara University.
Appendix 2. List of Silicon Valley business
angel networks
.
Angel Investors;
.
The Angels Forum;
.
The Band of Angels;
.
Angel Breakfast Club;
.
Investors Circle;
.
Net Angels.
Appendix 3. List of Silicon Valley business
incubators
.
Business United in Investing, Lending and
Development;
.
Daly City Business Center;
.
Environmental Business Cluster;
.
International Business Incubator;
.
Panasonic Incubator;
.
Renaissance Business Incubator;
.
San Jose Arts Incubator;
.
Software Business Cluster;
.
US-Japan Business Incubation Center.
273
A qualitative
sense-making
classication of
business incubation
environments
Paul D. Hannon
The author
Paul D. Hannon is a Professor of Incubation and Enterprise at
the University of Central England Business School, Brimingham,
the UKs, and probably Europes, rst professional post in
incubation. Here he applies his 30 years of experience in the eld
of enterprise as an entrepreneur, practitioner, professional and
academic working across many aspects of public and private
sector environments. paul.hannon@uce.ac.uk
Keywords
Metaphors, Start-ups, Business development
Abstract
Business incubation is a newand fast growing industry in the UK.
The environments within which incubation can take place and
their descriptors as used across the industry are many and varied.
The language engaged in by policy-makers, professionals and
practitioners commonly applies metaphors to convey meaning of
loosely dened terms and concepts in a diverse market seeking
increased clarity. Metaphors can offer a qualitative approach to
sense-making. By articulating ideas through metaphors,
individuals can often expand the concepts and expressions
available through language. It is asserted that it would be
valuable to incubation communities to provide shared meaning to
the discourse of incubation such that further confusion is
minimised. This paper aims to address this challenge by proposing
a classication of incubation environment types based upon a
qualitative approach to understand the incubation marketplace
through its language, specically the application of metaphor.
Electronic access
available at
available at
Introduction
It is in the last 10-20 years that phenomenal
growth of the incubation sector has been witnessed
to the extent that most countries around the globe
now boast a growing and thriving incubation
industry. NBIA, the US membership association
for business incubation, identies the origins of
incubators in New York (www.nbia.org). In the
UK it has been suggested that the foundations of
incubators emerged out of the growth of managed
workspace and enterprise centres in the 1970s and
1980s (Hannon 2004, forthcoming, for a further
exploration of the evolution of business
incubation).
In exploring the denitions of incubators and
incubation projects and through examining public
and private sector reports and studies it is clear
that a common language is emerging. However,
this has not necessarily led to a shared meaning of
the purpose, nature or process of incubation.
Incubators and incubation programmes appear
mixed in description of form, function, purpose
and outcomes. In reecting on the diverse range of
dening characteristics of incubators and
incubation programmes this paper rst
investigates the origins of the language in common
parlance.
The use of the terminology applied to such
programmes is purposefully chosen. The noun
used to describe the phenomenon is borrowed
from the natural and life sciences as the range of
adjectives used to describe the incubation
processes and environments: nurturing;
accelerating; safe; protected. These terms have
gained a shared meaning temporally and spatially,
and have strongly inuenced the approaches to
incubation policy formation and management
application. Indeed, some of the issues raised have
been endemic within the enterprise support
environment for many decades and are not
specically unique to the world of incubators and
incubation.
For some readers the origins of the term
incubator will have meaning and purpose in the
context of the challenges of difcult child births
where the newly born infant is unlikely to survive
without the application of a protective and
articial environment, within which the essential
ingredients for life can be monitored and provided
through expert care. An incubator may also have
meaning and purpose in an horticultural sense
where there are attempts to enhance the natural
processes of plant reproduction through providing
seeds or new cuttings with a controlled
environment within which the appropriate
nutrients and atmosphere can be provided to
simulate idealised conditions for effective and
DOI 10.1108/13522750410557085
274
speedy growth. In intensive farming methods, such
approaches are used to force cropping plants to
produce their crops earlier than the processes of a
natural environment. Indeed, incubators can have
meaning in a farming context in the way that some
animals are battery farmed to control and speed up
rates of growth and egg production. It may also be
that some have experienced the use of incubators
in biological research establishments for the use of
generating articial life, developing genetic
cultures and other purposes.
Whatever the exposure it would be reasonable
to expect that a common shared understanding of
the term incubator would include notions of
protection; nurturing the fragile and weak;
accelerating growth; and enhanced survival.
Indeed, such understandings are applied equally to
those engaged in business incubation. One initial
point to emphasise is the way that meanings from
such diverse applications with specic purposes
have formed a conglomerate meaning of mixed
purposes in the context of business incubation.
Why the use of metaphor matters in
qualitative research
The Collins New English Dictionary denes a
metaphor as a gure of speech that makes an
implied comparison between things which are
not literally alike and denes an analogy as
a resemblance in certain essential respects.
These tools are important in qualitative research
because their common use in communicating
meaning provide illustrative insights into others
worlds. For instance, the use of metaphor is well
established in the organisation theory and change
literature both through increased published
research and management articles and books from
the 1980s, popularised in the late 1980s by
Morgan (1986). The metaphor has been widely
applied in organizational analysis and has drawn
upon diverse images frommachines and organisms
to jazz bands and even soap bubbles (Palmer and
Dunford, 1996 for a review). One use of metaphor
is as a tool for making sense of complex and
dynamic organizational environments to provide
insights into key features and characteristics.
From a positive aspect metaphors can be
important tools for the advancement of
knowledge and understanding as in practice, they
entail using a combination of both language and
thought to construct a non-literal meaning and
apply it to reality in order to shape and enhance
our appreciation of that reality (Grant and
Oswick, 1996).
Marshak (1993) cited in Dunford and Palmer
(1996) states:
. . . underlying, usually unarticulated
understandings about a situation are often shaped
and revealed metaphorically. Furthermore,
because these understandings are critical to how
people assess the need for change and indeed
their conception of change itself paying attention
to managing the metaphors of change becomes a
critical competency for leaders and change agents.
This supports the underlying purpose of this
paper, which is to offer a sense-making framework
to support incubation leadership and
management.
Chia (1996) proposes that the process of
metaphorization should force us to re-evaluate,
re-conceptualize and reinterpret what is going
around us and hence will be better equipped to
deal with the increasingly unpredictable and
volatile business world in which they and their
organizations must operate. Chia suggests that
using metaphors is about shifting styles of
thinking from being (i.e. thinking in terms of
states, entities, events, attributes) to become
(i.e. thinking in terms of the primacy of
movement, unfolding, emergence, ux and
transformation) . . . it is this organismic form of
thinking which is more in keeping with a
processual reality. This is a reality in alignment
with the fundamental act of incubation.
Marshak (1996) describes the use of
metaphoric elds that structure perception and
behaviour. Each eld denes reality and Marshak
suggests that where there is consistency with the
operative themes of the metaphoric eld (where
metaphoric eld refers to a system of symbolic
meaning) then change will be readily engaged
because they will be coherent and easily
understood. Using different elds would evoke
very different actions and responses . . .
depending on which metaphor was shaping
perception. This notion of elds, or in the
context of this paper environments is an
underpinning thread throughout.
Inns and Jones (1996) reviewing the work of
Miles and Huberman (1994) identify how
Miles and Huberman explored metaphors as
a qualitative methodological tool, offering the
researcher access to participants interpretations
of situations as they are revealed through
participants use of metaphors. Furthermore,
Inns and Jones also explore metaphor as a means of
access to, and expression of, intuitive, embryonic
perceptions and understanding. These may be
easier to grasp as people attempt to describe their
experiences in novel and unconventional ways.
The indicative sense-making classication
presented in this paper attempts to demonstrate
this point.
Inns and Jones (op.cit.) suggest that the world
is constituted by our shared language and that we
Business incubation environments
Paul D. Hannon
275
can know the world through the particular forms
of discourse our language creates. In applying
Morgan (1986) work, Inns and Jones continue
metaphors link thought and action and can
provoke insights that often allow us to act in ways
that we may not have thought possible before.
Although metaphors are used freely in
incubation environments there is no critical
and qualitative analysis of their application or
their meaning. Addressing this gap enables a
market classication of incubation environment-
types that illuminate differences across
metaphorical proles, thus unearthing a more
sophisticated qualitative description of incubation
landscapes in relation to specied business
incubation goals.
Bolman and Deal (1991) note that metaphors
are liberating because they offer a sense of choice
and new alternatives and ideas (Palmer and
Dunford, 1996). Furthermore, Srivastva and
Barrett (1988) argued that metaphorical
language is superior to literal language because it
captures expressions . . . and because it can
communicate meaning in complex ambiguous
situations . . . (Palmer and Dunford, 1996).
Analogies, similes and metaphors are applied in
the stories told to communicate thoughts, values
and beliefs, and to transfer knowledge and
experiences. Entrepreneurs are noted for their use
of these tools as part of valuable informal peer
learning processes. In business and enterprise
support, gardening analogies abound. References
to growing strong rms (or plants) from new
opportunities (hybrid seeds or seedlings) or new
ventures (germinated seeds) are frequently made
to explain the processes and policies of incubation.
The application of this analogy is so strong that
other words fromthe same context are nowapplied
freely to describe various models in use in the
world of business incubation. For example,
germinators, hothouses, cold frames, and
accelerators can be identied. Table I provides a
selected terminology of incubation landscapes in
the UK. In attempting to differentiate between the
terms it may be useful to identify what are the
essential differentiating characteristics between
these analogical concepts.
This paper continues by exploring specic selected
concepts in common use as the basis for
constructing a sense-making framework to inform
a more sophisticated characterisation and
understanding of the complexity of incubation
environments and contexts. These concepts
are referred to throughout the paper as
environment-types.
An exploration of incubation
environment-types
First, Table II presents the indicative key
characteristics of three commonly used
environment-types as applied within their
originating horticultural context.
The use of this terminology in a different context
such as business incubation implies certain
meanings andunderpinning assumptions about the
phenomenon in question. For instance, in a general
sense, the termincubator may imply for those inthe
incubator that they need to be cared for. Experts
who make decisions about what needs to be
provided by whom, when and for what purpose,
carefully monitor the incubatees. If the desired
outcome is not being achieved then another course
of action is required to bring the incubatee to the
desired condition. Additionally, incubatees in the
incubator are protected from harmful external
inuences and the role of the expert monitor is to
ensure that there are appropriate lters andcontrols
in place to avoid any unwanted contamination.
The incubatee is supported to offer safety and
protection whilst in this environment.
However, there are some obvious contradictions.
Humanincubators are generally usedfor protecting
the survival of very weak human life. On the
contrary, business incubators highly select their
entrants such that only the stronger applicants are
invited to become incubatees. The application of
such a policy seems at odds with the common
shared meaning. In this context incubators would
be selecting those rms less likely to survive and
need signicant support to convert the venture into
a healthy business with a strong future. However,
the purpose of business incubators seems toprovide
the opportunity for accelerating the growth and
development of the incubatee more so than could
be achieved in the external natural environment.
Such a purpose would appear to have closer t with
that of an accelerator, which provides a
controlled environment with specic and intensive
inputs for growth but not necessarily a protective
environment, i.e. some ventures in an accelerator
will not survive.
The importance of careful application of
terminology for the incubation sector is to consider
the overall implications for policy and practice of
Table I Selected descriptors of UK incubation landscapes
UK incubation landscapes
Cold frames Hot-desks Spokes
Germinators Hubs Ideas labs
Hatcheries Graduators Managed workspaces
Hives Grow-on space Venture labs
Innovation centres Incubators Business centres
Enterprise centres Accelerators Fertilizators
Source: Adapted from UKBI, 2003
Paul D. Hannon
276
adopting anincubator environment-type that has
a distinct purpose and specic set of inputs
appropriate for achieving the desired outcomes.
Policies and their implementation in practice
should be t for purpose. Furthermore, the
matching of incubatees with incubation
environment-type is likely to ensure a
more appropriate t between needs, demand
and supply.
Characterising management capability
across incubation environment-types
The above text implies that each incubation
environment-type is likely to require specic and
different management capabilities with respect to
role, style, process tasks and outcomes. Table III
provides an outline characterisation across the
three incubation environment-types already
presented in Table II, but within a business
incubation context.
These components provide a framework for
dening and understanding overall incubation
management capabilities. Clarity of role and
intervention style match with the overarching
policy for each environment-type. For instance,
a hands-in style is unlikely to be the most
appropriate for an Incubator environment-type,
but will be highly relevant for an Accelerator and
possibly a Germinator environment-type.
Undertaking the main process tasks relevant to
each environment-type ensures a focus of resource
usage and activity in achieving target outputs and
outcomes. Mixing process tasks across
environment-types is likely to dilute or confuse
intended outcomes.
It is possible to identify differentiating
characteristics for the three incubation
environment-types. In reviewing the overall
framework presented in Table III certain
observations can be posited.
.
There is clarity in the t across the outcome of
each environment-type with the role, style and
tasks of management.
.
There is clarity in the differentiation of
management capabilities between the three
environment-types.
.
There is an indication of incubation
intensity variations across environment-types
with possibly the Accelerator being
highest and the Incubator being lowest in
intensity.
.
There is an indication of scope variation across
environment-types in that the Germinator is
likely to be less selective and engage with a
higher volume of entrants.
.
There is an implied identication of degrees of
risk across types as Germinators are likely to
operate further from the market than other
types and hence are likely to be engaged in
higher-risk activity.
Developing and applying the above framework to
the context of business incubation enables both
differentiation of management capabilities across
environment-types and identication of linkages
between environment-types where it is appropriate
and benecial to create a seamless ow from type
to type.
The paper now considers the usefulness of
such a framework to the role of incubation
environment-types in supporting
generic incubation goals, from three different
perspectives.
Mapping environment types against
incubation goals
Incubation programmes promote a variety of
goals. Incubation programmes often have
priorities and focus on specic target groups. From
Tables II and III, it is now possible to explore the
Table II Generic indicative characteristics of three environment-types
Incubation environment-types
Generic characteristics Germinator Incubator Accelerator
Purpose To provide a protective
environment for the germination
of new plant life
To provide a protective
environment for the early
growth of new plant life
To provide a controlled
environment for rapid growth
of plant life to crop maturity
Key Inputs Seeds and new cuttings Young seedlings and
taken cuttings
Seeds and new cuttings
Nutrients and water Nutrients and water Nutrients and water
Germination compost Growing compost Enriched compost
Climate control Climate control Disease protection
Full climate control
Main process Germination Growing on Intensive production
Early growth
Primary outcome New seedlings Young plants Early cropping
Paul D. Hannon
277
potential effects of different environment-types in
specic, but common, incubation programme
goals, such as:
(1) creating new ventures;
(2) creating ventures with high-growth
potential; and
(3) supporting new venture growth.
In the context of this paper, creating new
ventures refers to those new rms that are
established as the result of an incubation
programme. Ventures with high-growth potential
will be those rms with identied opportunities for
achieving growth outputs signicantly higher than
the mean for the population of all new and small
rms. Finally, the support category considers
the practices applied to new and small ventures to
enable those rms to achieve growth outputs that
would not have been identied or achieved without
support or could be achieved more readily with
support. Each category is now discussed and
illustrative key points are highlighted and
summarised in Table IV.
Creating new ventures
How do different environment-types affect
programme characteristics if the overall purpose is
creating new ventures?
Germinators aim to maximise opportunities
for creating new ventures through market
intelligence and developing strategic awareness.
Their skills in attracting people with venture
ideas and in motivating them towards
venture creation would lead to new venture
proposals for viable opportunities being
created. Providing a supportive learning
environment with easy exible access is
essential. This environment-type is likely to
demand high volume usage.
The role of the incubator environment-type
would be to build the foundations and
market opportunities of new ventures through
providing local support to selected proposals
and helping to validate these in the market
thereby developing growth capability in these
new ventures. A hands-on approach to build
condence and capability is likely to be
necessary. Developing a clear exit strategy will
be important.
There is unlikely to be a general role for an
accelerator environment-type. Their approach is
highly selective and probably too intensive for
general new venture creation activity as they are
only interested in high/fast growth venture
opportunities.
Table III Characterising management capabilities against the three incubation environment-types within a business incubation context
Incubation environment-types Management
capabilities Germinator Incubator Accelerator
Overall role Overall management of facility
or programme to ensure regular
ow of business ideas, latent
entrepreneurs and proposals for
new ventures
Overall management of facility
or programme to ensure seedling
growth into healthy young plants
Overall management of facility
or programme to ensure
accelerated rates of growth in excess
of natural processes and resource
inputs
Intervention style Hands-in and hands-on Hands-on Hands-in
Main process tasks Finding sources of supply of quality
ideas and people
Databases of ideas and people
Inducting into the germinator
Assessing needs and providing
required inputs
Monitoring and adjusting of inputs
to achieve desired outcome, i.e.
a viable opportunity and
realistic plan
Finding sources of supply of
strong new or young rms, viable
business plans or emerging
spin-outs
Positioning the business or
venture in a relevant incubator
Assessing growth needs and
providing input requirements
Monitoring and adjusting of
inputs to achieve desired
outcome i.e. survival and
growth rates beyond those
in general environment
Finding sources of supply of strong
quality proposals with signicant
potential in targeted growth sectors
Locating in specic environments
Detailed assessment of competitive
global environments and resource
needs
Dedicated supply of resource inputs
Monitoring and adjusting of
inputs to achieve desired
outcome i.e. superior high-growth
rates and IPO
Management
outcomes
Understanding and knowledge of
the needs of individuals in bringing
venture ideas to fruition and testing
for viable business opportunities
the needs of individuals and
teams successfully bringing viable
business opportunities to market
the needs of high growth potential
opportunities and their requirements
in successfully bringing them to a
global market and achieving IPO
Outputs Viable business opportunities and
venture proposals
Sustainable new ventures Exceptional growth rate of
new ventures achieving signicant
returns on investment
Paul D. Hannon
278
Creating ventures with high-growth potential
Another common goal of incubation programmes
is the creation of ventures with high-growth
potential.
Germinators would continue their activity as
for goal (1) but now provide additional inputs
and processes that facilitate the identication
of those ideas or ventures with enhanced
growth orientation and characteristics, probably
ensuring that close links are initiated with specialist
provision at an early stage through either an
incubator or accelerator environment-type,
but probably the latter, where feasible. Exploiting
strong networks and a diverse contacts base is
important.
The incubator would seek to enhance the
ventures potential for high growth through
provision of higher added value services than
generally available and possibly in collaboration
with an accelerator environment-type. A strong
exit policy would be in operation with these
ventures. The approach is likely to be resource
intensive and require access to a wider base of
expertise and knowledge.
Goal (2) fulls the overriding purpose of
accelerator environment-types. They aim to take a
strong hands-in management intervention style
with highly selective venture proposals and provide
intensive resource inputs to achieve a fast IPO
launch with commercially signicant potential
gains for taking very high risks. Accelerator types
may support and collaborate with germinator
types in facilitating the identication of embryonic
ideas and may work closely alongside Incubator
types in providing the expertise and resources to
maximise the potential of high-growth ventures.
However, fast-growth ventures may be less suited
to incubator types.
Supporting new ventures to grow
Supporting new ventures to grow, goal (3) is
another common goal of business incubation
programmes.
In supporting new ventures to grow the role of
germinator types would be to create investment-
ready venture proposals, such that they would be
appropriate for accessing mainstream support
provision. Investments in this context could refer
to advice and information, knowledge and
learning and support tools as well as access to
nancial and human resources. Ventures would
be directed towards an incubator
environment-type.
Goal (3) is a key purpose for incubator types.
Their local support services and networks would
provide clear routes to building growth
opportunities and developing ventures able to
sustain operations at full market rates. Strong
selection and exit policies would ensure
appropriate matches between entrants capabilities
and potential and the resource and experience base
and management capability of the
incubator environment. Some applications may be
referred to germinator or accelerator types as
appropriate.
Accelerator environment-types can support
new ventures to grow where access to commercial
and professional expertise and networks are
Table IV Examples of indicative dening characteristics of three environment-types against three incubation programme goals
Specic programme Incubation environment-types
goals Germinator Incubator Accelerator
Creating new
ventures
Creative, learning environment
Scanning for people with ideas
Identifying lots of opportunities
Open policy, exible?
High use, high turnover
Short-term participation
Easy access
Selective
Hands-on approach
Validating/testing opportunities
Building team capability
Strengthening venture foundations
and market access
Exit strategy
Probably not the key purpose could be
fatal for many new rms unable to manage
fast growth and change
Creating ventures
with high-growth
potential
Fast responses to emerging
opportunities
Tools for quick assessments
Strong networks and contacts
Direct access to accelerator
Hands-on approach, individually focused
Resource intensive
Strong selection and exit policies
Global expertise
Direct access to accelerator
Hands-in approach
Low volume, very selective
Focus on money, markets and management
Direct access to capital markets
IPO goal
Highly commercial
Supporting new
ventures to grow
Investment-preparedness focus
Low-cost inputs
Wide use of networks, peers
Easy access to incubator
Local support
Building to market commercialisation
Strong networks
Exit policy
Extensive professional networks
Commercial environment
Access to global information
and opportunities
Direct access to wide ranging resources
and expertise
Paul D. Hannon
279
appropriate. It is likely that only those ventures at
the growth-ready state with strong capability and
clear market opportunities will be supported
through accelerators.
Table IV presents indicative illustrations of
the three incubation environment-types against
the three specic incubation programme goals
explored above. These which dene
characteristics help to paint a series of pictures,
like landscape shots, that inform our
understanding of what a particular landscape
may look like in the beginning so that we can
recognise, describe it, and differentiate one
landscape shot from another. Collectively they
provide a rich and varied landscape, although we
may only be seeing or experiencing any one part
of it at a particular time, depending where we
are positioned and through which lens we are
looking.
Overall the framework presented as Table IV
proposes nine differentiated incubation
programme opportunities. Through selecting
different environment-types and/or
different incubation programme goals
alternative incubation opportunities can be
dened.
Therefore, in general terms the framework does
not suggest that these should be nine isolated and
disconnected initiatives. On the contrary, the
framework demonstrates the clear potential for
synergistic and benecial linkages across
environment-types and between incubation
programme goals. It is likely that numerous
combinations may co-exist feeding into and off
each other.
Rather, the framework provides a route map
across an incubation landscape for both
management and incubatees, and offers greater
sophistication and understanding of the potential
relationships between incubation programmes and
venture ideas. Each opportunity has its challenges
and requires that the appropriate management
capabilities (Table III) are in place for effective
incubation.
In summary, the insights presented in this
paper aim to provide a rationale for understanding
the meaning attached to business incubation
and its origins in specic metaphors. In doing
so the paper has highlighted the need for a
deeper and more sophisticated categorisation
of environment-types. In Table III, a typology
of business incubation has enabled a
characterisation of management capabilities.
Further these are considered in the context of
three common incubation goals for supporting
and enabling growing new ventures and mapped
against the three incubation environment-types
(Table IV).
Implications of environment-type
classications for incubation policy
and practice
This section discusses the implications of the
environment-type classications for incubation
policy and practice. The incubation industry
and individual incubators and incubation
programmes are continually challenged in
striving for effectiveness and success within a
highly entrepreneurial and dynamic market
environment. Concerns of long-term programme
sustainability, the building of management
capacity and capability, the development of
sophisticated modes of evaluation, and the
overall integration and coherence of regional
incubation systems are current threads within
the professional and practitioner incubation
communities. But can a qualitative sense-making
framework, such as the classication proposed in
this paper offer any further illumination and
insight to those engaged in setting policy and
support practical action?
The nal section of this paper considers
such challenges through the application of the
sense-making framework of environment-types
as an example of how the application of such
tools may provide value. First the germinator
environment-type is considered.
The germinator environment-type
Long-term incubation programme sustainability is
a complex phenomenon that is likely to be highly
contingent upon both incubation environment-
type and venture characterisation. Some areas of
incubation activity can be argued to be higher risk
than others. For instance, germinator types are
operating at the high-risk end of venture
development with low predictability of actual
future outcome. Additionally, embryonic ventures
are also at risk as access to capital and other
resources inuence progress and growth potential,
and they may not be able to pay commercial rates
for expertise and support.
Clarifying incubation goal orientation and
characterising the incubation environment-type
will provide the basis for a more specic choice of
impact assessment indicators that are appropriate
for the particular context within which the
incubation programme is operating. Expectations
of impact may then be more appropriately mapped
against actual intentions of individual incubation
programmes, rather than seeking to apply
generalised indicators to all incubation programme
initiatives.
Such an approach may help to develop a deeper
understanding of how orientations and
environment-types impact on new and young
Paul D. Hannon
280
ventures and the localities in which themselves,
and the incubation programme co-exist.
It may be necessary for regional long-term
achievement of wealth creation opportunities
that policy makers take a broader and more
holistic approach to their funding of incubation
programmes. The unpredictability of a
picking winners approach can mean that
investments in incubation could fail to address the
fundamental need for attracting and encouraging
future winners, i.e. the critical role of
germinators and (early-stage) incubators. This
may also affect sustainability as discussed above.
Regional coherence of an integrated incubation
system is essential for improving long-term
performance and sustainability.
Next the incubator environment-type is
considered.
The incubator environment-type
As the number of incubation programmes
increases each year across the UK the demand for
incubation management and leadership increases.
As the pressures from government and other
stakeholders increase, and as newentrants demand
improved services, then the need for effective,
high-quality management and leadership is also
high. Additionally, as the UK moves towards the
introduction of national benchmarking standards
in incubation then the performance of incubation
and management will attract closer attention.
The management intervention in incubator
environment-types is more intensive than
germinators and likely to be hands-on in style.
Building management capability is crucial.
The frameworks presented in this paper are
likely to be helpful for incubation governance,
management and leadership as they offer increased
clarity of role and purpose and enable a focus of
effort and resources. Mapping functions against
programme goals will also ensure that appropriate
performance indicators are applied.
It can be suggested that a key factor in achieving
incubation success is its embeddedness within
regional strategies for encouraging and/or
supporting the growth of new ventures with
growth potential. Most regions of the UK in
alignment with other similar regions across the
developed world aim to improve wealth creation in
their area. Regional policy makers often see
incubation programmes as a mechanism for
supporting such aims. A deeper understanding
of incubation programme opportunities may aid
holistic policy making through the identication of
synergies and the co-existence of opportunities
within broad based programmes. The three
environment-types do not have to be located in
separate physical or virtual locations, indeed
there are strong arguments for ensuring close
integration.
Finally, the accelerator environment-type is
considered.
The accelerator environment-type
Accelerator types may be more likely to achieve
high growth outcomes and potential, and may be
operating with ventures more able to pay for
services. This would suggest that sustainability is
more critical for some incubation programmes
than others and may therefore be a critical factor in
forming policy for funding future incubation
programmes. Figure 1 shows this main point.
Accelerators, in adopting strong entry and exit
policies, are continually reducing the degree of risk
to the programme funder. They are less likely to
require, or indeed be seeking, public funding,
using their access to private venture and angel
funds to support client growth opportunities.
These incubation programmes of low risk
environment-type working with growing ventures
may be more able to achieve sustainability than
those of a high-risk environment-type working
with embryonic stage ventures.
Therefore, in deciding how to support
incubation across a region it may be useful to
consider the way that incubation environment-
types may contribute to regional wealth creation.
It is likely that regional policies will strive to focus
on supporting those programmes with the greatest
potential for achieving signicant outcomes, for
example, accelerator types.
A nal comment
Attaining greater clarity of the complex
phenomenon of incubation may ensure that the
application of the metaphors and analogies we use
in common parlance may gain a shared meaning
amongst the growing incubation community of
practice. Such shared meanings may lead towards
the construction and implementation of focused
policies and strategies targeted at specic purposes
and ventures. The environment-type and the stage
and orientation of the venture are two possible key
factors inuencing the need for public funding,
affecting the degree of sustainability, and
contributing towards the general overall success
of incubation programmes.
A Darwinian viewpoint in common
interpretation suggests that the ttest or strongest
of the species survives. We should then place many
rms in articial environments where they can
grow strong and t. However, Darwins work
suggests that it is not the strongest of the species
that survives but those best able to respond and
Paul D. Hannon
281
adapt to their environment as quick as the
environmental changes. Slower adapters are less
likely to survive than quicker adapters. This could
imply that being in an articial environment would
not expose the species to the same subtle nuances
of change that could be experienced by existing in
the unprotected and unsupported environment.
Those articial environments able to recreate the
changing external environment may be able to
develop fast-adapting ventures to survive
externally as the environment continues to change.
No rmis exactly the same as another. It may be
that the creation of environment-types will be
appropriate for selected rms only. It will be the
matching of the rm and founder with the
environment-type that is likely to be critical.
The payback from incubation programmes
should be in increased outputs of better quality in
reduced time to market, or healthier, stronger
outputs less susceptible to debilitating processes.
If either is achieved then the investment has been
fruitful. Accelerators and incubators working with
high-growth/growth potential ventures are
probably the most relevant environment-types for
such investments, with accelerators favouring
commercial investors. Germinators on the other
hand are not ideally placed for achieving the types
of investment outcomes described above, and
therefore less likely to attract market investments.
Germinators and (early-stage) incubators
supporting the creation of new ventures and
helping new ventures to grow are arguably
operating in areas of market failure and are
generating ventures to investment-ready state for
the market. These approaches are more likely to
require subsidy to support their activity.
In summary when the incubation environment is
highly diverse, different solutions will be required
for different purposes. The selection of the nine
opportunities for creating and supporting growing
ventures will enable effective choices to be made
for matching incubation goals against
environment-types and management capabilities.
Adopting incubation opportunities within an
integrated incubation system may help in
maximising incubation impact through developing
synergies between environment-types.
A nal word on the discourse of incubation.
Despite its meaning in the context of healthcare,
incubators in a business context are the contrary to
facilities for supporting the weak and the sick.
Similarly, incubators should not be survival
schools supporting those that would otherwise not
survive. The horticultural analogy enables us to
portray a rich and sophisticated landscape of
incubation opportunities. We can change the
labels of the environment-types to better reect
the context in which they are being applied. Other
environment-types can be developed and added to
the framework as our understanding of incubation
grows.
A note on further research
There is a continuing need for robust empirical
work that explores the use of metaphors within
incubation policy rhetoric and practical discourse.
Particularly the language of policy-makers,
incubator managers and incubatees could be
usefully compared and contrasted to determine
how shared is its use and meaning and to what
Figure 1 Mapping likely sustainability success against environment type and venture orientation
Paul D. Hannon
282
degree this creates barriers or provides
opportunities for effective interaction between
stakeholder groups. Furthermore, it would be
useful to identify the creation and source of the
discourse and specically the apparent dominance
of metaphors to understand if this is grown out
from an emerging community that is constructing
sense-making frameworks in the absence of any
other alternative or whether this reects a sense-
giving approach derived from imposed rhetoric.
Further, development of the classication of
environment-types and their compatibility with a
wider range of incubation programme goals would
provide deeper insights and understanding as the
application of the generic framework across
different incubation contexts.
The application of the framework as a means for
developing more meaningful assessment and
evaluation criteria would also be usefully
undertaken.
The continuing development of the frameworks
in this paper, and others, and their analysis in use
would contribute to a more sophisticated
understanding of the diversity of incubation
environments and contexts.
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Organizations, Sage Publications Ltd, Beverley Hills, CA.
Hannon, P.D. (2004), Incubation policy and practice: building
practitioner and professional capability: the case of
the east midlands region, Journal of Small Business and
Enterprise Development (forthcoming).
Inns, D.E. and Jones, P.J. (1996), Metaphor in organization
theory: following in the footsteps of the poet?, in Grant, D.
and Oswick, C. (Eds), Metaphor and Organizations, Sage
Publications Ltd, Beverley Hills, CA.
Marshak, R.J (1993), Managing the metaphors of change,
Organizational Dynamics, Vol. 22 No. 1, cited in Grant, D.
and Oswick, C. (Eds) (1996) Metaphor and Organizations,
Sage Publications Ltd, Beverlay Hills, CA.
Marshak, R.J. (1996), Metaphors in organizational settings:
impact and outcomes, in Grant, D. and Oswick, C. (Eds),
Metaphor and Organizations, Sage Publications Ltd,
Beverley Hills, CA.
Miles, M.A. and Huberman, A.M. (1994), Qualitative Data
Analysis: An Expanded Sourcebook, 2nd ed., cited in
Grant, D. and Oswick, C. (Eds) (1996) Metaphor and
Organizations, Sage Publications Ltd, Sage Publications,
Thousand Oaks, CA.
Morgan, G. (1986), Images of Organization, Sage Publications,
Beverly Hills, CA.
Palmer, I. and Dunford, R. (1996), Conicting uses of
metaphors: reconceptualising their use in the eld of
organizational change, Academy of Management
Review, Vol. 21 No. 3, pp. 691-717.
Srivastva, S. and Barrett, F.J. (1988), The transforming
nature of metaphors in group development: a
study in group theory, Human Relations, Vol. 41,
pp. 31-64.
UKBI (2003), Business incubation creating the right
environment the way forward, a presentation by
Peter Harman, Deputy CEO, UKBI.
Further reading
Barrett, F.J. and Cooperrider, D.L. (1990), Generative metaphor
intervention: a new behavioural approach for working
with systems divided by conict and caught in defensive
perception, Journal of Applied Behavioral Science,
Vol. 26 No. 2.
Lakoff, G. and Johnson, M. (1980), Metaphors we live by,
University of Chicago Press, Chicago, IL. cited in Grant, D.
and Oswick, C. (Eds) (1996) Metaphor and Organizations
Sage Publications Ltd, Beverley Hills, CA.
Tsoukas, H. (1991), The missing link: a transformational view of
metaphors in organizational science, Academy of
Management Review, Vol. 16 No. 3.
Paul D. Hannon
283
Enhancing customer
service and
organizational learning
through qualitative
research
Peter R.J. Trim and
Yang-Im Lee
The authors
Peter R.J. Trimis a Lecturer in Management at Birkbeck College,
University of London, London, UK. He teaches a number of
marketing courses at undergraduate and postgraduate level, and
is currently undertaking research into corporate intelligence and
national security.
Yang-Im Lee is a Lecturer in the School of Business and
Management at Brunel University, Uxbridge, UK. She is a
marketing specialist and is at present researching various
aspects of marketing strategy and international management.
Keywords
Research, Communication, Culture (sociology), Learning,
Marketing, Partnership
Abstract
In order to develop a sustainable competitive advantage in the
knowledge based economy, senior managers need to ensure that
customer relationship management is placed within a clearly
dened organizational culture that embraces organizational
learning. Senior managers are required to exhibit a proactive
approach to leadership that results in creative solutions being
found to solve complex problems. Open communication
reinforces the decision-making process and allows mutually
based partnership arrangements to develop. This being the case,
the network approach to business development can be viewed,
as collectivist in orientation and this should allow partnership
arrangements to be developed through time.
Electronic access
available at
available at
Introduction
The body of marketing knowledge has over the
past two decades been extended and rened, and
as a consequence there does appear an occasion
to merge the body of marketing knowledge and
strategic management knowledge. It is also evident
that as companies enter new markets abroad and
form strategic alliances with previous competitors,
that new bodies of marketing related knowledge
will emerge. However, what is of interest is that the
subject of marketing is being transformed and is to
some degree being linked closely with human
resource management for example. This is to be
understood in the sense that the service economy
is important and as a consequence a distinct body
of knowledge has originated relating to services
marketing. Also to emerge is the concept of
relationship marketing and this is to be placed
within a cultural context. For example,
relationships are developed though time and issues
such as trust and loyalty emerge that are rooted in
organizational culture. Organizational culture
contains the cultural traits and values to be found
in national culture, and is shaped and reshaped by
a set of factors including history, religion and
technology for example.
Qualitative research
In order to understand the complexities of the
issues confronting management academics and
business practitioners, it is necessary to undertake
qualitative research that allows insights to be
drawn from various, but related bodies of
management knowledge. This further underpins
the fact that the strategic marketing concept has
validity, and also suggests that marketing
academics and practitioners, and human resource
management academics and practitioners, have a
number of interests in common. For example, a
service oriented company relies extensively upon
its employees to market the products and services
available, and consumers and potential consumers
pay attention to the value for money concept and
the quality of the after sales service provided.
Therefore, the quality of marketing staff and their
support staff are key factors in determining the
type and amount of business that will be secured.
It is not surprising to learn, therefore, that to
achieve a specic marketing objective(s), staff need
to be adequately trained and motivated, and the
necessary leadership and reward systems need to
be in place. Owing to the fact that organizations
undergo rapid forms of transformation from time
to time (expansion followed by contraction), it is
relevant to suggest that research that provides
DOI 10.1108/13522750410557094
284
insights into how staff feel (the feel good factor);
how they view their own performance and the
performance of their peers; and how they view
their superior from the stance of leadership and
motivation, are all worthy of study. Data can be
collected from attitudinal surveys, however, a
crucial point to note is that if a manager accepts
that organizations undergo periods of
transformation, it would be more relevant to
suggest that the employees themselves are involved
in the research process, as it is the staff who are
going to be responsible for making the necessary
sacrices and changes vis-a`-vis working practices
for example. If senior management is determined
to reward and retain staff, it is vital that in-house
qualitative research is undertaken, that is viewed as
ongoing and relevant. Research that is viewed as
inclusive will sit comfortably within the
organizations culture, because it will produce
factual evidence, and any anomalies can be
thought through and turned into research
objectives and questions, which then form the next
phase of the research. In-house research is useful
with respect to making matters public (feelings,
emotions, programmes and policies, for example),
and it also has the advantage of immersing the
employees in the research process, and making
them more aware of the need for change.
This paper will make clear how action research,
which is a valid and increasingly deployed form of
qualitative research, can be used by staff employed
by an organization to study and inuence the
process of change that is taking place, within
the organization (Easterby-Smith et al., 2003,
pp. 10-11 and 43-44). Action research can be used
to reforman organizations structure, as it provides
a platform for senior managers to devise and
implement new programmes and policies. Action
research has one key advantage. The research/
evaluation is controlled by the people in the
program or community. It is something they
undertake as a formal, reective process for
their own development and empowerment
(Patton, 1990, p. 129).
Collectivist organizational culture
Oakland (1993) has indicated that the concept
of improvement is to be thought as a continuous
process. This suggests that the drive towards
quality needs to be placed within a specic
organizational context, and a collectivist cultural
setting appears to be the main integrating factor as
it considers how everybody can benet and share
in the rewards gained. One is not suggesting that
individualism is to be perceived as unacceptable or
harmful, but that senior management need to have
a specic viewof howgoals and objectives are to be
established and realized. For example, Bae and
Chung (1997) have made some useful
observations regarding the motivation level of
workers in South Korea, and it is clear that South
Korean workers are loyal to the organization they
work for. The advantage of staff being committed
to the organization has been recognized by
Fincham and Rhodes (1999, pp. 417-418), and it
also provides further advantages in the sense that
the necessary style of leadership can be
forthcoming that produces a relationship
marketing focus. In other words, a shared
organizational culture has the benet of allowing
staff within the organization to learn from each
other and this occurs through collaboration
(Porter et al., 2000). Collaboration may be
planned or indeed forced upon an organization.
However, once when partnership arrangements
are entered into they need to be directed and
managed so that a win-win outcome results.
Hofstede (1997) and Schein (1992) have
adopted a holistic view to culture and this allows
marketers to think more deeply about the cultural
setting in which goods are traded and partnership
arrangements are managed. One of the powerful
aspects to emerge relating to a culture is of course
the inuence of religion. If one compares Japan
and South Korea, it is clear that over the centuries,
Buddhism and Confucianism have been adopted,
but adopted at different points in time and as a
consequence, the mindsets of the people from
Japan and South Korea are different. There are a
number of other factors to consider when studying
how a national cultural value system has emerged
and given rise to cultural traits that inuence the
decision-making process. An important point to
note however, is that countries such as
South Korea are now undergoing a process of
transformation and this will result in new hybrid
management models being produced. One can
therefore suggest, that countries such as
South Korea will have more than one type of
organizational model in being (Lee, 2001, p. 271).
As a consequence, South Korean companies will
adapt in various ways to the challenges they face.
There are various ways in which action research
can be used to provide insights into the past,
present and future aspects of organizational
culture. Therefore, it is essential that senior
managers nd ways to utilize the knowledge and
experience of existing staff, and to harness this
knowledge and experience in a meaningful way.
This assumes a degree of urgency when one
understands that organizations compete in what
can be classied as a knowledge management era,
where the speed at which information is exchanged
represents a key success factor. Politis (2003, p. 56)
Enhancing customer service and organizational learning
285
has put this perspective: Transferring knowledge
from one person to another requires that tacit
knowledge be converted into explicit knowledge
through sharing experience, dialogue discussions,
know how exteriorization and teaching.
Action research can be used to explain how
communities (staff in various departments and
partner organizations for example), relate to their
community (or tribe) and the wider community
(the industry within which the organization
competes). Therefore, research undertaken to
study and highlight the impact of cultural traits,
and which at the same time is aimed at inuencing
change, should be viewed as relevant and
necessary. The fact that Schensul and Schensul
(1992), p. 166 have indicated that this type of
research can be conducted over a period of time,
suggests that a whole range of issues can be studied
and explored to provide deep insights into how
organizational culture evolves; who is instrumental
in developing or changing an organizations
culture; and how organizational culture can
complement or hinder marketing strategy
implementation for example.
Organizational learning
De Weerd-Nederhof et al. (2002, pp. 320-321)
have indicated that the word learning encompasses
individual, group and organizational learning. It is
important to place learning in a multidimensional
context because marketing managers do need to
identify which management training and
development programmes are appropriate for their
staff. A customer oriented culture will provide a
platformfor relevant training programmes (Rubin,
1995) that are viewed as relevant and necessary,
which result in organizational learning objectives
being set and achieved. Becoming a learning
organization should prove benecial in the sense
that Hitt (1996, p. 16) has indicated that there are
two interrelated reasons why organizations
become learning organizations: survival and
excellence. In a customer driven era it would seem
logical that an organization is driven by the
concept of excellence owing to the fact that senior
managers are being continually asked to search for
new ways to improve the performance of the
organization to meet specic objectives (increasing
market share and providing higher returns to
shareholders, for example).
It is becoming increasingly important to realize
that this is a day and age characterized by ideas and
knowledge, and staffs are known to work more
independently than earlier (Appelbaum and
Gallagher, 2000, pp. 43-44). By harnessing and
using the knowledge within an organization, it is
possible to turn the knowledge into a competitive
advantage and this will as a consequence allow
those in the organization to learn (Appelbaum and
Gallagher, 2000, p. 46). This means human
resource management specialists need to identify
the skill gaps of the employees and devise training
and management development programmes to
eradicate the skill gaps. Alternatively, a thorough
audit can be undertaken and if necessary, expert
labour can be hired. Appelbaum and Gallagher
(2000), p. 49) have indicated that training must
be designed to help close the gaps between an
organizations current reality and its future
transformation. Therefore, it is not surprising to
note that staff in the human resource management
function need a high prole within the
organization because human resource
management specialists are required to ensure that
the organization has the required skill base. This is
a powerful argument for suggesting that human
resource management specialists should be
involved in work which is of a competitive
intelligence nature and also, human resource
management specialists should be seconded to
various departments/functions/strategic business
units in order to monitor and appraise staff on a
continual basis.
It is clear from the research undertaken that
managers considered it necessary to create an
environment of development and learning
(McKenna, 1999, p. 776). This being the case,
it should be relatively straightforward for training
and development to be viewed as an investment as
opposed to a cost. Whatever be the view, it is clear
that there are a number of advantages associated
with a learning organization. For example,
Appelbaum and Reichart (1997, p. 234) have
stated: Learning organizations are skilled at
systematic problem solving, and each is
accompanied by a distinctive mind-set, tool kit,
and pattern of behaviour. This suggests that a
learning organization can embrace new challenges
and is better able to confront the various threats
that materialize in the environment. Staff in a
learning organization appear to be proactive and
managers appear to be concerned about the
welfare of the employees. This being the case,
managers and their subordinates should be viewed
favourably by the shareholders owing to the fact
that as well as yielding a return on the investment
made, and enhancing the value of the company,
there is also a commitment to incremental growth
and survival in the long term.
The ndings from action research can assist
senior management to develop a holistic approach
to organizational learning. It can also trigger
further research into areas that were previously
thought to be outside the scope of the research
286
objective, and this may result in the original
research questions being rephrased or redened.
This should not be viewed as a weakness, but
should be viewed as useful and appropriate.
Biott (1996, p. 171) has even indicated that:
As projects unfold, questions are often
reformulated and new ones emerge. Interests are
reshaped, foci shift, and observations or ndings
are frequently combined with self-revelation
including practitioners sense of the emerging force
of their own newly established identities as
researchers. This suggests that action research
has a fundamental role to play in areas of staff
development and training, as it can be used to
integrate separate staff development courses into
an overall staff development programme. It can
also be used to highlight the skill deciencies of
marketing staff who are employed by partner
organizations in the marketing channel. This is a
crucial point owing to the fact that external
marketing staff may have the responsibility for after
sales service provision, which includes providing
training to staff employed by the end-user.
Open communication
Communication is an important, but under
recognized aspect of management. One would
think that the better-educated workers are, the
more they will see the need to co-operate and share
information. This is not necessarily the case in
an organizational culture driven by individual
self-esteem and underpinned by the concept of
individualism. Open communication can and does
result in teamwork and the achievement of goals,
however, too much transparency can result in
jealousies and embitterment, and inevitably lead to
conict. Conict may be the result of individuals
competing, but it may transpire as a result of
groups competing (within a department/function/
strategic business unit or between staff at different
locations or between staff in a joint venture/
strategic alliance) for specic rewards.
Appelbaum and Gallagher (2000, p. 50) are
correct in suggesting that communication is a
critical factor with respect to the successful
implementation of change within an organization.
Appelbaum and Gallagher (2000, p. 51) have also
referred to a key point made by Senge, who is
attributed with the saying that a learning
organization encourages and embraces dialogue.
What is evident is that it is essential for managers
to invest sufcient time in developing and
cultivating relationships with staff within the
organization that they work for and with staff in
actual and potential partner organizations.
Research undertaken by McKenna (1999, p. 775)
has highlighted the fact that managers face
signicant problems while dealing with cross-
cultural management issues and relationships, and
that the time put into both building and developing
cross-cultural and global relationships can be
described as enormous.
According to Geissler (2001, p. 489), integrated
marketing communications can assist marketers in
managing relationships. The objective is to view
the communications effort from the eyes of the
consumer, and this will ensure that there is a clear
and consistent message, and maximum
communications impact (Geissler, 2001, p. 489).
Owing to the importance associated with the
process of communication, it is necessary to place
communication within a specic context.
Communication can be thought as internal
(in-house conferences and newsletters, for
example), and as external (a custom designed
promotion strategy). Action research can and does
provide an opportunity for evaluation and is useful
with respect to appraising promotional messages
and strategies. It can also be used to study the link
between an organizations identity and how the
leaders/senior management teams vision is
operationalized. Action research can be
undertaken to establish if there is a match between
the views put forward by senior management and
the views put forward by junior management, for
example. The research ndings can identify the
gaps that exist, and action can be taken to close the
gaps and ensure that everybody that occupies a
management position is on the same wavelength.
Action research can also be used to establish if the
formal communication channels that are in being
are appropriate and work in the way that they
should.
Proactive leadership
Schein (1992) has made various links between
organizational culture and leadership. One of
the key points to emerge from the literature is
that the value system of top management can be
transferred to those lower down the hierarchy and
as a consequence staff throughout the organization
can improve the image of the organization by
transforming their energies into certain outputs.
Bearing this in mind, organizational performance
can be improved through ensuring that the guiding
beliefs of senior managers override the daily beliefs
of subordinate staff (Davis, 1984). This being the
case, it should be possible for new leadership styles
to emerge that lead to change being appropriately
managed. It also means that current thinking
relating to leadership style as explained by
Kakabadse (2000) needs to be viewed positively by
all the employees of the organization as
287
transformational leadership is a necessary form of
empowerment that leads to new initiatives being
put forward which ensure that existing challenges
are dealt with in a positive and speedy manner.
Indeed, one of the advantages of transformational
leadership, for example, is that about changing the
status quo (Hughes et al., 1999, p. 291) and does
to a certain degree require that managers and their
subordinates are on the same wavelength. Hence,
an organizations value system can be dened and
can manifest in a specic corporate
communication process, that underscores the
value of a specic leadership style.
According to Patton (1990, p. 157), action
research can be used to focus on a specic problem
within a programme/organization/community.
Owing to the fact that research can be undertaken
of a condential nature, it is true to say that the
research ndings are not always made available to a
wider public. Aspects of the research outcome can
and do appear in the form of summaries and
recommendations, which are then circulated to
appropriate people for further discussion and
debate (Patton, 1990, p. 158). In the case of an
organization appointing a new leader, it can be
argued that there are reasons for appointing an
internal candidate (to maintain continuity) or an
external candidate (to improve the image of the
organization and raise the level of condence of the
shareholders). Action research can be used to
establish if it is appropriate to appoint an external
leader, and if so, who should be appointed.
The network approach to business
development
Krapfel et al. (1991) have indicated that when
appraising suppliers, it is necessary to think in
terms of substitutability, indispensability and
common interests. A key factor in determining
whether a supplier organization will be given
renewed/increased business is whether their staff
can meet quality objectives, price objectives and
delivery objectives. This means that the level of
customer service provided by the supplier
organization needs to conform to the level of
customer service provided by the manufacturer
(Geyskens et al., 1999).
Achrol and Kotler (1999, p. 151) have indicated
that marketing can be viewed from the stance of a
network integrator and this in turn suggests that
marketing managers will be involved in strategic
decision-making, for example. It also suggests that
marketers will become more involved in the
formulation and implementation of partnership
arrangements, and will participate more fully in
strategic alliances.
Marketing covers a broad range of issues.
Bearing this in mind it can be suggested that action
research can be used to study whether the product
development process needs to be changed; how
pricing policies (and especially Internet pricing, for
example) can be devised and implemented; and
how distribution channels can be recongured.
The issue of market entry may surface and need
attention. Regarding restructuring distribution,
it is possible to suggest that research may need to
be undertaken that involves and incorporates the
viewof staff at several partner organizations. Thus,
collaborative research may be the most appropriate
way in which to obtain relevant data and
information, and may witness the global marketing
group or global brand group establishing the
parameters of the research.
Strategic marketing focus
The strategic marketing concept as outlined by
Aaker (1992) is becoming increasingly relevant
and marketing managers have to think much more
carefully about market entry decisions. In the years
ahead, marketing managers will need to spend
time devising new forms of market intelligence,
both systems and processes, to consider the actions
of organizations involved in strategic alliances, as
these forms of organizational conguration have
changed the dynamics of the market place.
A strategic marketing approach will provide a basis
for relationship marketing and this should facilitate
the customer relationship management process.
The strategic marketing approach can also be used
by marketing managers to identify synergistic
business activities (Doyle, 1994) that result in
tness (Porter, 1996) being achieved.
Pulendran et al. (2003, p. 492) have indicated
that the impact of marketing planning quality on
business performance is indirect rather than
direct. This raises all sorts of questions ranging
from who within the organization is involved in the
marketing planning process to issues such as the
degree of formalization that exists in the planning
process. In some organizations it is possible that
in-house economists provide data and conceptual
inputs and in specic industries that are
susceptible to uctuating market conditions and/or
huge investments in technology, for example, it is
possible that marketing planning is based on or
incorporates some form of scenario analysis.
Should scenario analysis or some other forward
planning device(s) be used, it is possible that
marketers work alongside economists and
mathematicians, and that the organization
sponsors some aspect of a particular university
business schools programme offering or a line
of research or recruits a specic type of student.
288
What one has to remember is that what is deemed
formal in one cultural setting may be perceived as
informal in another, or the degree of formality may
be different. With respect to the latter, it is clear
that Japan and South Korea represent collectivist
cultures, however, Japanese people consider that
disagreement should not result in open conict
even if change is necessary whereas people in
South Korea believe that a disagreement can result
in conict if change is necessary. This may be an
over simplication, but the key point to note is that
cultural traits found in a nations value system are
evident within organizations (they manifest in the
decision-making process). Hence, it is possible to
predict what might happen in a situation where the
values of one cultural group collide with the
cultural values of another cultural group. This is an
important fact to remember when studying
international partnership arrangements. To fully
understand what is happening requires that
marketing staff have a reasonably detailed
knowledge of the country from where the other
cultural group originate, and furthermore, have a
sound appreciation of how exible the cultural
value system is of the people that the organization
is doing business with.
Action research is appropriate for studying
complex issues. It can also be said that action
research can be used to bring about reection
within an organization. In other words, although
senior managers are keen to solve marketing
problems and move on to the next set of problems,
it is essential that there is a period of reection that
allows those that have been involved in the
decision-making process (and their subordinates),
to think through more deeply the consequences of
their actions.
Patton (1990, p. 158) is right to point out
however, that Research can be a highly political
activity that generates opposing opinions and
strong emotions. Often people in positions of
power are reluctant to authorize change as it can be
viewed as an erosion of their own power base
within the organization. A commitment to action
research can change this misconception and
bring about what Biott (1996, pp. 171-2) calls
an emergence of a new researcher identity.
If people at the apex of the organization are
committed to ensure that more transparency
results in more effective decision-making, then
action research can be used to implement a
research culture within the organization that has
the additional benet of encouraging the
employees to think more critically about how
decisions are made and implemented. This would
place the strategic marketing concept within its
rightful context, as the concept itself does
incorporate reection.
It is useful, however, to pause and consider what
a researcher involved in qualitative research is
trying to achieve. For example, Gummesson
(2000, p. 116) has indicated that action research is
both demanding and far-reaching. This would
suggest that those embarking upon action research
should anticipate future problems well before they
materialize and think of ways to deal with the
problems before they become insurmountable.
One can cite many potential problems, however,
the key point to note is that the researcher may
need to formulate a contingency plan in advance of
the research being undertaken and also may need
to lobby a number of senior managers in advance
that the necessary political support is forthcoming.
Action research in organizations does expose a
number of issues and problems, and it is inevitable
that some members of staff will feel that they are at
risk. Staff who are exposed may behave in a
manner that cannot be anticipated, and that is why
it is crucial that those involved in the research
project think through carefully the possible
consequences in advance of the research
commencing.
Customer service policy
Cook (1992) has provided some useful insights
into the concept of customer service and Rowley
(2000) has indicated that satised customers
experience an increasing level of expectation
once their immediate satisfaction level has been
satised. Christopher et al. (1991) and Payne
and Frow (1999, p. 799) have indicated that it is
cheaper for an organization to retain the customers
that it has than for marketers to gain new
customers. Rubin (1995, p. 25) has indicated
that there is a link to customer retention and
protability, and Parasuraman (1997) has made
the link between an organization providing a high
level of customer service and being able to achieve
a sustainable competitive advantage. It is
important to keep in mind that customers are
inherently different (Weitz et al., 1995) and their
differences can be gauged and monitored by
facilitating technology such as the Internet.
The Internet is considered valuable with respect
to gaining feedback from customers (Rich, 2000),
however, Trim and Tanudjaja (2001, p. 91) are
correct to point out that marketers need to study
how the Internet can be used to develop marketing
relationships. The concepts of trust and loyalty
also come to attention and Nooteboom et al.
(1997, pp. 311-15) have made a useful
contribution to the body of knowledge by stating
that the dimensions of trust need to be known in
order that the role which trust plays is fully
289
understood. Therefore, it is clear that marketers
need to think in terms of mutuality if brand loyalty
is to be achieved; and this can be achieved through
accurate market segmentation (Trim and Lee,
1999, p. 65).
There is no doubt that in the years ahead,
marketers will need to undertake research that
provides a better understanding of how customers
think and what motivates them. Various qualitative
research methods can be used including focus
groups, in-depth personal interviews and small
group interviews, for example. Action research
can be used to devise customer focused support
programmes, which result in customer
expectations being met. Case studies highlighting
the best practice of customer service can be used as
in-house training vehicles, and current and future
areas of research activity can be identied.
Relationship marketing
In order to have a customer service policy in place,
it is necessary to have a customer-oriented culture
that underpins the concept of relationship
marketing (Lewis and Gabrielsen, 1998, p. 66).
This being the case, it should be possible for
marketing managers to formulate and implement a
customer driven marketing oriented strategy
(Doyle, 1994; Porter, 1996). When auditing the
marketing strategy process, it is realistic to suggest
that marketers need to have a rm understanding
of how their colleagues view the customer
development and retention process. For example,
Gummesson (1999, p. 9) has suggested that
relationship building, and in particular the
development of long termrelationships, need to be
viewed from a win-win perspective. This suggests
that the relationship marketing concept represents
a paradigm shift in marketing as indeed Gronroos
(1996) has suggested. As a result of this paradigm
shift, both marketing practitioners and marketing
academics need to think in terms of new ways to
develop and test new marketing theories and
approaches.
A number of issues emerge which need
attention. For example, it can be suggested that we
are living in an image-oriented era, and because of
this, both individuals and organizations are
concerned about the way in which they are viewed
and perceived. Wei (2002) has highlighted why it is
necessary to differentiate between image and
identity, and has linked psychology to image
enhancement and perception. Market-driven
companies are implementing customer-focused
strategies and this is to provide higher levels of
customer satisfaction (Achrol and Kotler, 1999,
p. 147). In order to be effective, a long term
relationship needs to be based on mutual trust.
However, trust-based relationships need to be
based on an accurate form of market segmentation
(Christopher et al., 1994, pp. 6 and 30-1;
Gronroos, 1994, pp. 10-13). It also means that
internal relationships (between managers and
subordinate staff) also need to be managed
appropriately (Piercy, 1995, pp. 26-7).
One way in which paradigm shifts can be fully
understood and appreciated is through a research
culture. Aresearch culture can and does get staff to
question events, outcomes and broadens the
decision-making capability of the organization.
Marketing strategists, and marketing planning and
intelligence personnel, can be made responsible for
implementing a culture change within the
marketing function. This will bring to the surface
what is referred to as self and social identities
(Biott, 1996, pp. 173-5), and will result in a
commitment to practitioner-oriented research.
Biott (1996, p. 177) has made a useful
contribution to the body of knowledge by
suggesting that: Insider practitioner research,
like many other aspects of social interaction in
workplaces, is often shaped by caution, strategic
common sense, compromise, reciprocity and
unspoken truces. This is as much about
establishing and maintaining favourable
relationships, as it is about reducing risk and
protecting self-interest. One logical lesson to be
deduced from this quotation would appear to be
that those involved in the action research process
need to think carefully about continued access as it
would seemthat if access is denied at any point, the
research outcome may be less effective than
anticipated. Should this be the case, it might be
that the organization is less inclined to favour a
research culture and as a consequence the status
quo is maintained. What the researcher has to
understand is that the termaccess covers a number
of factors and the consequences associated with
power and authority need to be understood
(Hammersley and Atkinson, 1996, p. 64). When
canvassing support for an action research project,
a researcher needs to demonstrate that they know
what benets will be derived from the research and
what assistance they will need from personnel
within the organization.
Security management
The link between security management and
marketing has not been fully explored in the
literature. Trim (2002, pp. 262-3) has indicated
that security will hold the attention of staff at the
apex of the organization for years to come. As well
as issues of fraud and industrial espionage, the
work of computer hackers will need attention.
Indeed, senior management will need to ensure
290
that there is a formal security policy operating
within the company and that key staff have links
with staff employed by relevant trade associations
(Trim, 2002, p. 264). In order that the necessary
security barriers are in place, senior management
will be required to put in place a framework that
guarantees that the corporate intelligence activity
within an organization is underpinned by a
commitment to security and intelligence work
(Trim, 2001).
Security is an area of activity that can be more
thoroughly researched. At present, too few
individuals within an organization are charged with
determining security policy and implementing
security systems. There is an opportunity in most
types of organization to undertake security-
oriented research that involves staff within the
organization working with staff from computer
security technology companies. Various action
research projects can be devised and implemented
in the area of security, and this is expected to
become a common practice. For example, security
action research projects would meet the criteria
laid down by Easterby-Smith et al. (2003, p. 10)
because they would have a direct and immediate
impact. It would also ensure that those involved
in action research projects learn from the research
process (Easterby-Smith et al., 2003, p. 10).
Ultimately, security-oriented action research
should result in security being viewed as a core
activity and given representation at board level.
Conclusion
The strategic marketing concept is both relevant
and useful as it integrates a number of related and
semi-related bodies of knowledge into a logical way
of analysing and interpreting the actions of
companies, customers and governments. The
strategic marketing concept also allows marketing
mangers to establish how the business
environment is changing and allows various
mechanisms to be put in place to monitor
developments as and when they occur. In order to
remain competitive, a company will be required to
develop a sustainable competitive advantage that it
can maintain through time. This means that senior
management will need to ensure that the company
invests in the latest technology and furthermore,
various marketing managers are required to
identify how their subordinates can develop their
skill base through time. Marketing managers will
increasingly need to work more closely with
specialists in the human resource management
function to put in place staff development
programmes. This should ensure that staff have
the relevant skills that they need to undertake a
growing range of complex assignments.
In order to meet the objectives set, the various
marketing managers will need to be effective
communicators, exhibit a proactive leadership
style and be committed to achieving excellence.
Should this be the case, it is possible that a learning
organization culture will be developed and this will
ensure that long lasting partnership arrangements
are formulated. In order to be successful, long
term partnership arrangements need to be based
on trust, and need to be continually reinforced
through constant communication. There is no
doubt however, that the years ahead will be
reasonably unpredictable, and marketing
intelligence and planning will assume a higher
prole within companies. This means that issues
such as security and intelligence work will need to
be viewed differently than they are at present, and
that security management will become a core
activity.
Qualitative research and in particular, action
research, is expected to provide business
practitioners, with a means for establishing a
research culture within an organization. A number
of action research projects can be devised that are
aimed at improving the performance of individuals
and the organization itself. By ensuring that a
research culture materializes, it should be easier for
senior management to transform the organization
into a learning organization. Once a learning
organization culture has been established, various
initiatives can be introduced to ensure that
managers adopt a proactive approach to problem
solving. This in turn should result in greater
transparency and a highly motivated workforce.
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Literati Club
Awards for Excellence
Annelies Verdurme
and
Jacques Viaene
Ghent University, Ghent, Belgium
are the recipients of the Journals Outstanding Paper Award for Excellence for their paper
Exploring and modelling consumer attitudes towards genetically
modified food
which appeared in Qualitative Market Research: An International Journal, Vol. 6 No. 2,
2003
Jacques Viaene is Professor of Agricultural Economics at the Department
Agricultural Marketing at the Faculty of Agricultural and Applied Biological Sciences,
University of Ghent. Teaching and conducting research on Agricultural Marketing, Price
Analysis, Agricultural Economics and Agricultural Extension. He has been project leader
of many research projects and studies about agro-marketing in Belgium, EU and East and
Central European Countries.
Annelies Verdurme in 1999 graduated as Bio-engineer (masters) in cell and gene
biotechnology at Ghent University. During the next four years she was involved in her
doctoral research at the department of agricultural economics about, Consumer attitudes
towards genetically modified food and the development of a segmented communication.
All together seven papers were published on this topic and she obtained her doctorate in
February 2003. Since then she is marketing manager at Nielsen company.
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