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Robbins Mass Cusotmization in b2 b information services-2011

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presentation on similarities and differences in business and operating model between customized information services for consumer or individual preferences, and those for firm or organizational needs.

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Robbins Mass Cusotmization in b2 b information services-2011

  1. 1. Is Mass Customization and Personalization in Business-to- Business Services Different? Lessons and Implications from the Evolution of the Information Services Industry Jane Robbins, PhD McGuire Center for Entrepreneurship/Eller College of Management
  2. 2. From a mass customization and personalization standpoint, are business- to-business services different from those aimed at the retail or individual market? • Value proposition? • Value creation model? • Operating model? • Potential to expand in scale or scope? McGuire Center for Entrepreneurship/Eller College of Management
  3. 3. Using the case of information to examine differentiation questions • Whether serving strategic business objectives is operationally different from serving individual user preferences • Whether high-value-added business-to-business services implies a more nuanced view of what it means to mass-customize, personalize, and engage in open innovation to co-create value – And what the risks are to those who seek to bridge both worlds
  4. 4. Information as the ultimate user- customized product • Consider the Sunday paper – Various concepts of use value – Early electronic versions sought to maintain this flexibility in preferences • Allows us to unpack variables that characterize most service-embedded products that lend themselves to mass customization and personalization for individuals • These variables in turn allow distinction between – true co-creation of value and user-generated value from modification or participation, or: co-production v. co- creation (Vargo and Lusch 2008) McGuire Center for Entrepreneurship/Eller College of Management
  5. 5. Analysis of information services industry from early days of knowledge economy suggests that: • Products and services mass-customized and personalized for businesses and individuals share some characteristics, but not others, particularly in value creation process. • Firms seeking to develop and provide sustainable services for business should be cautious about emulating firms providing direct-to-consumer services. McGuire Center for Entrepreneurship/Eller College of Management
  6. 6. Third-party revenue generation (advertisers, data buyers) Product/Service • News, data • Social media • Downloads • Customized design I N T E R M E D I A R Y Users: linked or not • Store • Broker • Distributor • Internet platform/ interface Business to Consumer: “Retail” or Individual -Primary transaction relationship -Knowledge source/flow (indirect) -Secondary/potential transaction relationship
  7. 7. Key related factors in MCPC of Individual-user Services Factor Description Mediation Potential to distribute through many, and competing channels, inc. secondary links. Potentially diluting. The platform is the product. Inputs and outputs fixed, often technological. User may be indifferent/loosely coupled to provider. Loyalty may be low. All value is present/short- term value. No or minimal investment value for the future (Shapiro and Hahn). Preferences change. Applies to advertisers as well users Competition Entry and branding costs low, particularly in services built around “community” (Mangelsdorf 2009); maintaining users could be costly. Ownership and control Provider ownership and/or control of value; content loses value quickly; public
  8. 8. Do each of these variables apply when users are the collective of a business rather than an individual? Are there others that apply only to business services? • Content • Bundling/unbundling • Modularity • Individual preference or taste • Externality • Simple exchange relationship (inc. through intermediaries) • Single-consumer marketing/distribution—the universal “one” McGuire Center for Entrepreneurship/Eller College of Management
  9. 9. Case study of the electronic information services industry, 1970-2005, with focus on financial and energy market information • Transitioned from – technology-driven to content-driven and technology-enabled – provider-focused to user-focused; function- specific to strategic – Time charges to service charges (including value pricing) – commodity product to high-value-added product, including customized and custom McGuire Center for Entrepreneurship/Eller College of Management
  10. 10. Less valuable More valuable Decision/ Action Time, Sophistication, Critical Need © Jane Robbins Raw Data (prices, news, public statistics, facts) “Analytical Facts” (distributions, comparisons, trends/ changes) Interpretation (of prior categories) Projection (forecasts, diagnosis, prediction Context-sensitive/ dynamic projection; Customized analytics Strategy formulation/ Simulation/evaluation Market, Public, Discrete, Environment Custom, Proprietary, Integrated Positioning, Targets, Portfolio definition, Tactical: “tools” Continuum of Information Value
  11. 11. Less valuable More valuable Decision/ Action © Jane Robbins Raw Data (prices, news, public statistics, facts) “Analytical Facts” (distributions, comparisons, trends/ changes) Interpretation (of prior categories); Private data Projection (forecasts, diagnosis, prediction Context-sensitive/ dynamic projection; Analytics customization Strategy formulation/ Simulation/evaluation Positioning, Targets, Portfolio definition, Tactical; “tools” Technology enabled the shift from a focus on delivery vehicle to dynamic content value (and eliminated many players) 1960s-1970s 1980s 1990s PC FAX WWW Dial-up (Time- sharing); Ticker/Telex; Mail Hard-wired dumb terminals, radio, satellite, (subscriptions)
  12. 12. ` Company A Assets of A Company B Assets of C Company C Assets of C Custom Product/ service A.B New Asset Custom Product/ service A,C New Asset Business-to-Business: “Commercial”/Organizational Co-creation of Value Value/wealthcreation Value/wealthcreation Value/wealthcreation Environment of Trust Environment of Trust Primary transaction/trust relation Knowledge source/flow © 𝐽𝑎𝑛𝑒 𝑅𝑜𝑏𝑏𝑖𝑛𝑠
  13. 13. Company A Company D Company GCompany F Company E Company CCompany B Company H Company I Expanded Network View of Company A’s Market for Customization and Co-creation Based on a Platform © Jane Robbins
  14. 14. Key related factors in MCPC of Business-to- Business Services Factor Description Direct/ unmediated Computer-to-computer; principal to principal Inputs and outputs are cognitive Expert knowledge on both sides, merged to achieve a vision (usually of provider for client market) for improved decisions or solutions The platform is the foundation of a relationship. Expertise of “provider” is matched to firm need and firm expertise. Conversion process is shared, but managed primarily by provider. All value is shared and cumulative . Investment by both parties into their futures, creating bilateral wealth (increased performance): profits, learning, competitive advantage for both Competition limited by reputation/skills Entry and branding costs high; loyalty high and switching costs high. Ownership and control Each maintains ownership of own contributions. Exclusive, perfect confidentiality.
  15. 15. Differences in inputs, conversion process, and outputs Business-to-Business • High level of trust • complex info-sharing for true co- creation • Based on need/problem: performance improvement • Content expertise from both parties—extended complementarity of assets • Non-mediated distribution • Security, privacy • True custom possible • Wealth creation for both parties; cumulative • Loyalty; high switching costs Business-to-Consumer/individual • Unimportant or negative trust • information flow uni-directional • Based on preferences/want • Content expertise on one, usually distribution side • Mediated distribution • Public • Customization within mediation framework • Wealth creation for mediating party; speculative for advertisers; loses value quickly • Fickleness; switching costs may be low McGuire Center for Entrepreneurship/Eller College of Management
  16. 16. © Jane Robbins Business-to-Business services are inherently: • Mutually educational, knowledge-creating • Mutually and equitably value-creating; services are value- priced • Aimed at a specific “problem” of achieving superior performance and competitive advantage • Customer-responsive, not just customer-centric • Market-, environment-, or context-responsive; dynamic • Continuously advanced in value and “need to know” or “need to have” for decision making • Represent a bridging of competences, often between operating and theoretical/technical; noncompetitive; transforms operations of clients/co-creation becomes source of innovation McGuire Center for Entrepreneurship/Eller College of Management
  17. 17. A Virtuous Value Cycle Trust/ relationship Shared expertise Co-creation Learning, Improved Performance Innovation in Partner operations McGuire Center for Entrepreneurship/Eller College of Management
  18. 18. Opportunities in Professional and Intangible Services • Professional services and software, esp. in specialized legal, financial, and consulting practice areas – Product development; compliance; performance optimization – Dynamic analysis of client operations/cases • Medicine and Science – Product and solution development (without mergers). Trust issues. – Closer organized patient involvement in research and practice • Higher education – co-creation of custom curriculum and/or individualized curriculum within universities; instructional technologies, learning systems. Very large opportunity here if trust issues can be overcome. McGuire Center for Entrepreneurship/Eller College of Management
  19. 19. Cautions to firms that seek to provide business- to-business information services • Brand or reputation in a technological or data area alone no substitute for domain-specific expertise in client’s market; expertise is a high barrier to entry that $ can’t overcome • Initial growth takes time, but word-of-mouth spurs scaling when reputation established – Trust, mutual respect – Educational sale • Niche; acquisitions and scope expansion to reach large size. Offset by highly profitable, recession-proof. • Ethics/reputation capital essential; cannot deviate from mission McGuire Center for Entrepreneurship/Eller College of Management
  20. 20. Questions for the future • Are business-to-consumer markets beginning to experience pressure from third parties for more biz-to-biz characteristics, creating strategic tension, business model risk, and increased costs? • Will we see acquisitions by owners of information platforms of professional service firms in order to gain expertise? Mergers? • In what other sectors might the business-to- business service model be applicable? McGuire Center for Entrepreneurship/Eller College of Management

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