Robbins Mass Cusotmization in b2 b information services-2011

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

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?


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

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)


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.


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

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

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”


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


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

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)

`

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/wealth creation Value/wealth creation Value/wealth creation

Environment of Trust Environment of Trust

Primary transaction/trust relation Knowledge source/flow © 𝐽𝑎𝑛𝑒 𝑅𝑜𝑏𝑏𝑖𝑛𝑠

Company A

Company D

Company G Company F

Company E

Company C Company B

Company H Company I

Expanded Network View of Company A’s Market for Customization and Co-creation Based on a Platform © Jane Robbins

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.

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


© 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


A Virtuous Value Cycle

Trust/

relationship

Shared

expertise

Co-creation

Learning,

Improved Performance

Innovation in

Partner operations


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.


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


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?


Robbins Mass Cusotmization in b2 b information services-2011

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