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The Commodity Adoption Paradox Dr. Brad Poulson Business Systems Director, Retail Operations - Store Systems, Boots The Chemists

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Presentation on theme: "The Commodity Adoption Paradox Dr. Brad Poulson Business Systems Director, Retail Operations - Store Systems, Boots The Chemists"— Presentation transcript:

1 The Commodity Adoption Paradox Dr. Brad Poulson Business Systems Director, Retail Operations - Store Systems, Boots The Chemists

2 Agenda Introduction Share findings from research I did in a major UK retailer Background to the research Findings Conclusions

3 Introduction My background Questions and timing

4 Background to the research Who architects the business? If a process is truly a commodity then why dont companies just adopt it? The research examines the ability (logic) of organisations to adopt commodity work business processes

5 Overview of the cases Four case studies taken from within one major UK retailer and contain the call centres business process as the focus of the research. They were chosen for their contrasting approaches to the business problem and diversity of the final outcomes thus encouraging theoretical replication. The ventures were approached as independent activities and were launched during a thirteen-month period between March 1997 and April The four cases are: Loyalty scheme (LS), Mail order (MO), Insurance (INS), Customer service (CS).

6 The context of Boots The Chemists "Not many companies today can claim that their core business activity benefits from the cumulative experience of trading in the 19th, 20th and now 21st centuries." Steve Russell, Boots Chief Executive April May 2003 Boots have been operating for 132 years 1000 stores by stores upon entering computing in 1960 Over 500 systems keep our business running 80,000 employees

7 Historical context... Jesse Boot Lord Trent of Nottingham

8 Group structure The UKs leading lifestyle website for women The Boots Company PLC Boots RetailHandbag.com The UK and Ireland businesses work together as Boots Retail Boots Retail International operates as the international extension of Boots Retail Boots Healthcare International Boots Healthcare International allows us to grow our share of the global self- medication markets

9 Case Study 1: Customer Service (CS) The first of these, Customer Service, is a redesigned internal venture That developed and implemented a new in-house call centre capability. Boots Customer Services: Launched March 1997 Effective management of customer complaint handling Development of a customer relationship strategy Centralised facility handling 1,000 calls and 500 letters, faxes, and s daily

10 Case Study 2: Loyalty Card (LC) Launched September 1997 Loyalty card (Smartcard) 4 points for every £1 spent Lifestyle positioning rather than discount 14 million cardholders (93% women) 52% of sales linked to card First serious step into CRM Advantage Credit Card Boots Advantage Card: The second case, Loyalty Card, was a completely new venture that started with an outsourced call centre, which was later brought in-house.

11 Case Study 3: Mail Order (MO) The third case, Mail Order, was another new venture but with a completely outsourced call centre. Mother & Baby Direct: Home shopping catalogue Launched April products Home delivery experience Outsourced call centre Early Internet ordering capability Channel learning's

12 Case Study 4: Insurance (INS) Finally, the Insurance case is a new joint venture with the call centre operated by the partner organisation. Boots Health & Travel Insurance: Boots Insurance Services (BIS) provides a range of health and travel insurance products including: Dental; Family Health; Accident Insurance (especially for children).

13 Research Methodology Longitudinal multiple case studies (over 5 years) Interviews, documents, archives, observation Involved with the culture Three techniques: Activity Records (Werner & Schoepfle 1987) Strategic Choice Analysis (Friend & Hickling 1987) Actor Network Theory (Callon & Latour 1992)

14 Terminology (i) Commodity work business process A process that is not specific to any particular business, is readily obtained, and is more or less equally valuable to any number of businesses Leveraged business process A process that, while not specific to a particular company, is more valuable to it than to others Proprietary business process The company-specific processes around which an organisation builds a business (Based on Thomas Stewart 1997)

15 Terminology (ii) Inscription The notion of inscription refers to the way technical artefacts embody patterns of use (Hanseth & Monteiro 1998) Translation Actors within a network will try to enrol (manipulate or force) the other actors into positions which suit their purposes. When an actors strategy is successful and it has organised other actors for its own benefit it can be said to have translated them (Somerville 1998).

16 Process Inscription/Specialisation Framework Degree of Inscription (What & How) Non-aligned Aligned Black-Box Degree of specialisation (What & How) ProprietaryCommodity Legacy Bespoke Transformation (Low)(High) (Low) (High)

17 Findings (i) It was concluded that while the core processes were the same across the cases: (i) the detail of the process, (ii) the variation in the contexts, (iii) the logic of the decision process as they evolved, and (iv) the view of the actors involved, combined together to lead to quite different approaches in each case.

18 Findings (ii) Confirmed that no established body of common language exists (Keen & Knapp 1996) –A complaint handling process (CS) –An account servicing process (LC) –An order taking process (MO & INS)

19 Findings (iii) The research identified that there is a need to understand the closely coupled relationship between process logic, decision logic, and alignment logic. Processes are similar in the core but have a surround that is specific to a process, in a particular situation, at a particular time.

20 Findings (iv) A commodity process has to be seen to be a commodity by the actors in the network. The mix and variety of the decisions taken compounds the difference between processes. Decisions take place at multiple levels within a business.

21 Findings (v) As time progressed and experience was gained and the situation evolved, actors changed their views (alignment) resulting in changes to the business process There appeared to be little transfer of knowledge across different parts of the organisation

22 Movement around the framework (c) Telephony (d) Accommodation Non-aligned Aligned Black-Box ProprietaryCommodity Legacy Bespoke Transformation LC CS MO INS Non-aligned Aligned Black-Box Proprietary Commodity Legacy Bespoke Transformation CSLC MO INS (e) Miscellaneous Non-aligned Aligned Black-Box ProprietaryCommodity Legacy Bespoke Transformation MO (a) Software(b) People INS CS MO LC Key: Customer Service Loyalty Card Mail Order Insurance Movement (with direction) Redundant component Non-aligned Aligned Black-Box ProprietaryCommodity Legacy Bespoke Transformation CS LC MO INS X Non-aligned Aligned Black-Box Proprietary Commodity Legacy Bespoke Transformation CS LC MO INS LC X X

23 Findings (vi) The three logic's (process, decision, and alignment) all have to mutually support a commodity approach for it to be successful and sustainable

24 Alignment Logic Characteristics Alignment of the actors in the network Black-box Transformation Legacy Bespoke Intermediate governance Market governance Hierarchical governance Different actors, inscriptions, translations Contracts Innofusion Articulation Externalities/overflowing Deeper Structure Decision Logic Characteristics What & how decisions are made Low uncertainty UR Many feasible decision schemes i.e. low number of option bars Many feasible decision schemes i.e. low number of option bars Satisficing Slow/strategic-fast/tactical High uncertainty UR Optimising Bounded Rationality Trials & pilots Few feasible decision schemes i.e. high number of option bars Few feasible decision schemes i.e. high number of option bars The different conditions under which decisions are made: environments, focus, criteria, time, uncertainty. Facilitates Inhibits Process Logic Characteristics What the process is about Transaction specific investment Transaction specific investment Low Information threshold High information threshold Commodity components Vanilla software Process differences, focus, areas, sequence. Cognitive Dissonance Crossover Information Intensive Appropriation Tightly coupled (Integrated) Tightly coupled (Integrated) Loosely coupled (stand alone) Loosely coupled (stand alone)

25 Facilitates Inhibits Process Logic Characteristics What the process is about Decision Logic Characteristics What & how decisions are made Alignment Logic Characteristics Alignment of the actors in the network Black-box Transformation Legacy Bespoke Transaction specific investment Transaction specific investment Low Information threshold High information threshold Commodity components Low uncertainty UR Many feasible decision schemes i.e. low number of option bars Many feasible decision schemes i.e. low number of option bars Satisficing Slow/strategic-fast/tactical High uncertainty UR Optimising Few feasible decision schemes i.e. high number of option bars Few feasible decision schemes i.e. high number of option bars Intermediate governance Market governance Hierarchical governance Vanilla software The different conditions under which decisions are made: environments, focus, criteria, time, uncertainty. Different actors, inscriptions, translations Process differences, focus, areas, sequence. Bounded Rationality Cognitive Dissonance Crossover Information Intensive Appropriation Tightly coupled (Integrated) Tightly coupled (Integrated) Path dependency Loosely coupled (stand alone) Loosely coupled (stand alone) Contracts Innofusion Articulation Externalities/overflowing Deeper Structure Trials & pilots Conceptual model of commodity business process adoption:Three central factors (Poulson 2002)

26 So why is this important? Why wouldnt broadly similar processes located in the same overall business context adopt similar solutions in terms of commoditisation, governance, and resourcing (architecture)? The closely-coupled relationship between BPR and Information Technology Move away from in-house developments to outsourcing

27 So why is this important? (ii) The increase in use of package software within businesses The growth in Application Service Providers (ASPs)

28 Case study key events and timescales

29 Any Questions

30 e-think (0) Improving capability through research; consultancy; coaching, and personal development


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