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FACILITATORS OF VALUE CO-CREATION IN SERVICE SUPPLY CHAINS
A CASE STUDY OF AN INTERNET AGENCY
By
Jan Malliaros S1832360
Department of Economics and Business
In partial fulfillment of the requirements For the Degree of Master of Science
Rijksuniversiteit Groningen, 2015
Under the supervision of Dr. Carolien de Blok Co-assessor: Dr. Kirstin Scholten
April 13
th, 2015
2 Abstract:
Over the last couple of decades we have witnessed a shift in our economy from being a predominately manufacturing– based society to a service- based society. A service dominated (S-D) logic has been established where an emphasis lies on the role of the customer arguing that value is always defined and co-created by the customer or company. Co-creation can be defined as the exchange of knowledge between different entities in order to increase value to a company. So far, co-creation has been only researched in dyadic (service provider- customer) relationships. This paper goes one step further and takes a triadic perspective including a supplier, thereby creating a service supply chain. The aim is to find out facilitators that have an influence on the service encounter process which is responsible for co-creation to happen.
The results of this research indicate that characteristics which can be found in professional
service supply chains such as high labor intensity and a high level of customization should be
given. In addition, next to trust, interaction and commitment the research shows that long term
relationships, shared decision making and making use of new technologies also facilitates co-
creation in a service supply chain context.
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Table of content
1. Introduction ... 4
2. Theoretical background and research framework ... 5
2.1 Services ... 5
2.2 Customer value ... 6
2.3 Value co-creation ... 6
2.3.1 The customer ... 8
2.3.2 The service provider ... 8
2.3.3 The (service) encounter process ... 9
2.4 Co-creation facilitators ... 10
2.5 Value co-creation in service supply chains (SSCs) ... 11
2.6 Research framework ... 15
3. Methodology ... 16
3.1 Research Design ... 16
3.2 The research context ... 17
3.3 Data collection ... 17
3.4 Data reduction and analysis ... 19
4. Results ... 21
4.1 Introducing the case ... 21
4.2 Service supply chain characteristics ... 21
4.3 Encounter processes in service supply chains ... 22
4.4 Facilitating factors of co-creation in service supply chains ... 24
4.5 Additional identified facilitators... 27
5. Discussion ... 28
6. Conclusion ... 30
6.1 Managerial implications ... 31
6.2 Limitations and future research ... 31
7. References ... 32
8. Appendix ... 37
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1. Introduction
Over the last couple of decades we have witnessed a shift in our economy from being a predominately manufacturing– based society to a service- based society (Fitzsimmons, Fitzsimmons & Bordoloi, 2013). A service dominated (S-D) logic has been established where an emphasis lies on the role of the customer arguing that value is always defined and co- created by the customer (Stenroos & Jaakkola, 2010) or company. Co-creation can be defined as the exchange of knowledge between different entities in order to increase value to a company (or network) (Mele, 2009; Cohen & Levinthal, 1990; Grönross, 2008; Powell, 1988;
Tokman & Beitelspacher, 2011). This implies a dyadic relationship between a service provider and a customer. However, nowadays, services are increasingly created by multiple firms for a single customer, as such creating a supply chain (or network) of organizations (Prahalad & Ramaswamy, 2004). In a service supply chain, direct interactions among various entities in the chain will create value for the end customer (Grönroos, 2011). For value creation, this requires looking at multiple relationships within the supply chain instead of only focusing on the service provider- customer relationship as previous research has primarily focused on (Stenroos & Jaakkola, 2010). However, this view on multiple relationships has been neglected in current research. Therefore, this paper will provide a first step by investigating facilitators to co-creation in a service supply chain.
Literature about supply chain management is rich (Ellram & Cooper, 1993; Mentzer et al., 2001) and lots has been written about co-creation in a dyadic relationship (service provider/supplier – customer) recently (e.g. Stenroos & Jaakkola, 2012; Siguaw et al., 2014;
Grönroos, 2011). Researchers agree that service supply chains differ substantially from
manufacturing supply chains. Service supply chains deal with intangible goods or entities,
such as IT support, whereas manufacturing supply chains deal with tangible goods such as
raw materials and parts (Li & Choi, 2009). Creating a service is difficult since it is intangible
and therefore hard to measure and evaluate. It is especially a challenge when trying to find out
how one process influences another, e.g. if you want to find out how a service provided by
multiple service provider influences a customer. The process of value co-creation is very
important as it increases the customer’s well-being (Vargo et al., 2008, Grönroos, 2008) and
the perceived quality (Stenroos & Jaakkalo, 2010). Take a consultancy firm providing a
service to a customer. A consultancy firm is a service provider which is characterized as
offering complex and highly specialized knowledge. The consultancy firm interacts with the
customer and they both exchange information. Thereby, the customer creates value
(Grönroos, 2011) by using the knowledge and advice provided by the service provider. The
consultancy firm (service provider) on the other hand is not a value creator but rather a value
facilitator (Grönroos, 2011). He can co-create value by making use of interactions with the
customer (Lusch et al., 2008; Vargo & Lusch, 2008; Vargo et al., 2008). But what if the
consultancy firm from the example needs to get some legal advice from another firm in order
to advice the customer in an ethical way? The legal firm might need some information from
the customer and the service provider. A (service) supply chain is established which is defined
by Mentzer et al. (2001, p.4) as ‘’a set of three or more entities (organizations or individuals)
directly involved in the upstream and downstream flows of products, services finances and/or
information from a source to a customer’’. As there is another firm involved in the interaction
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process, value will not only be co-created between the customer and service provider but between all parties within the supply chain (Nätti et al., 2014). Thus a thorough understanding on what facilitates co-creation in such a supply chain is of importance as opportunities on delivering the best service possible might be lost in order to maximize the potential of the (service) supply chain. Recent service literature confirms the fact that a consistent understanding of value and co-creation of value remains missing (Grönroos & Voima, 2012).
Hilton, Hughes & Chalcraft (2014) argue that it is useful to conceptualize service co-creation within the supply chain in order for all entities involved to get a better understanding of the field they are operating in and how to increase value. This research addresses the issue by analyzing the facilitators of co-creation between a customer, a service provider and a supplier who supplies additional services (like in the earlier example) in a service supply chain setting.
Hence, our research question is:
1. What are facilitators to co-creation in a service supply chain?
The main theoretical contribution is to extend our knowledge about co-creation in light of service supply chains. This is made possible by identifying facilitators, demonstrating what affect these have on the service encounter process. The practical contribution is for companies to identify how they can co-create by means of facilitators in a supply chain in order to get a competitive advantage by taking a look at more than one entity.
The remainder of this paper is structured as follows. The next chapter will introduce the theoretical background and research framework. Chapter 3 describes the methodology, including the research design, data selection and data analysis. Chapter 4 will present the results. Chapter 5 provides a discussion, followed by the conclusions and limitations section in chapter 6, including managerial implications, as well as recommendations for future research.
2. Theoretical background and research framework
This section will introduce the relevant concepts and theories of the study. First, we will introduce the main concepts. The second part discusses co-creation in service supply chains, including the facilitators identified in both dyadic and triadic relationships. Finally, the last part provides the research framework.
2.1 Services
There has been a shift in the last couple of decades from industry based production as being
the predominant activity towards a service oriented production in which ‘’services nowadays
account for over 70% of advanced countries’ Gross Domestic Product’’ (Ostrom et al., 2010,
p. 198). The main driver for this growth lies in an increase in business-to-business services
(Ellram et al., 2007; Wölfl, 2005) where the management of service quality is very important
as the steady increase in competition forces organizations to work closer together with
external partners within the supply chain (Seth et al., 2005; Williams et al., 2006).
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Grönroos (1990) describes a service as an activity or a series of activities which are intangible in nature, provided as solutions to problems which customers have. Services are characterized as intangible, perishable, heterogeneous and inseparable (Ellram et al, 2007). One can distinguish between many different types of services, such as business services (consulting and advertising), financial services (insurance and financing) infrastructural services (transportation) personal services (health care and services), governmental services (education, juridical) and distribution services (wholesaling and retailing) (Fitzsimmons, Fitzsimmons, & Bordoloi, 2013). Vargo & Lusch (2004) provide a more precise definition, defining services as “the application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself” (p. 2). This definition captures the fundamental function of all business enterprises.
Looking from a customer’s point of view, service means to use and integrate resources in a way so that customers can create value themselves. The service provider’s resources are integrated with their own resources such as their own skills. Service therefore means to be able to use the resources you have in a value creating way (Grönroos, 2009).
2.2 Customer value
Value creation describes a process through which the user/customer becomes better off in some respect or which increases the customers’ well-being (Grönroos, 2008). The value concept is rather difficult to define as every individual perceives value based on their own expectations and perceptions. For example, for some people driving a certain car may mean value, whereas someone else may find value already by considering to buy a certain car or making the actual purchase (Grönroos, 2011). For the remainder of this paper we will use Stenroos’
’& Jaakkola’ (2010) definition of customer perceived value which sees value as
‘’the trade-off between the benefits and sacrifices perceived by the customer’’ (p.4).
2.3 Value co-creation
At the turn of the millennium, the first companies found out that customers are no longer only satisfied with yes or no decisions based on company offerings (Prahalad & Ramaswamy, 2004). Instead, customers want to give their experience and jointly create the product or service. Therefore, the term co-creation was invented which describes a joint creation of value by both the buyer (in our case the service provider) and the customer where a lot of interaction and collaboration takes place (Prahalad & Ramaswamy, 2004). The process of value co-creation is very important as it increases the customer’s well-being (Vargo et al., 2008, Grönroos, 2008) and the perceived quality (Stenroos & Jaakkalo, 2010).
Several studies have explored value creation since Porter’s (1985) seminal work, in which he
stressed the linearity between the supplier (service provider) and user (customer) where the
customers did not have a particular role in the value creation process. Norman and Ramirez
(1995) were the first who criticized this linear progression and state that the focus should be
changed from a customer playing a passive part to an active role in the service process. S-D
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logic (Vargo & Lusch, 2004, 2006) confirms Normans’s & Ramizes’s work and emphasizes the role of the customer arguing that value is always defined and co-created by the customer (Stenroos & Jaakkola, 2010).
Recent studies by Hibbert, Heidi, & Mohammed (2012) see customers as being so called
`resource integrators`, obtaining value by integrating their own and the service provider’s resources in order to obtain value. Therefore, it is the customer who creates value. This is made possible through direct interactions between the entities involved in the service process.
The service provider can be a value facilitator by providing customers with resources necessary for their own value- generating processes, thereby facilitating the value creation by being directly involved in the customer’s value creation process. In addition, through interactions with the customer, the service provider might have an opportunity to engage in the customer’s value creation process, taking the role of a value co-creator. Co-creation can only take place through direct interactions when two or more entities influence each other and where everyone co-creates value (Grönroos, 2011). Co-creation therefore is reciprocal, meaning that not only one entity can co-create but that through service encounters; at least two entities are needed in order for co-creation to happen. Unilever for example involves customers in the co-creation of its concepts, packaging, advertising and activation (Medeiros
& Needham, 2008). Since value is created in usage, interactions with the customer give the service provider the opportunity to join in the value creation process. As Grönroos (2008) states ‘‘by applying a service logic the firm creates opportunities to develop interactions with its customers during their value generating processes and directly engages itself in value fulfilment for the customers and thus becomes a co-creator of value’’ (p. 307). Lusch et al.
(2008) state, that if you involve a user in the production of a service you can enhance value because the customer has the possibility to tailor the product (service) in his favor. Ballantyne
& Varey (2006) support this and argue that if the customer and service provider trust each other and create a dialog, co-creation might generate higher value by finding new ways of thinking which results in more effective solutions and/ or cost savings.
To go more deeply into how co-creation works, Andreu et al. (2010) proposed a conceptual
framework which integrates processes and responsibilities of the different entities as
presented by Payne et al. (2008) and Grönroos (2008) (figure 1). The framework consists of
three main components: Customer value creation, supplier value creation and encounter
processes. Customer value creating processes on the right side are the processes and practices
that customers use in order to manage their activities and relationships with suppliers (service
provider). This starts for example by comparing different potential service provider. The
supplier (service provider) value creating processes, which can be seen on the left side, are the
processes and practices that the supplier uses to manage its business and relationships with the
customer and other entities such as providing support for the customer in order for them to
create value. Finally, (service) encounter processes in the middle are the processes and
practices of interaction and exchange, such as discussing ideas, which need to be managed as
they take place within customer and supplier relationships with the goal to develop successful
co-creation opportunities. These three components of co-creation will be dealt with in more
detail in the next paragraphs.
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Figure 1: Adapted from Andreu et al. (2010, p. 244)
2.3.1 The customer
The fact that value is collaboratively created in service settings through interactions between the service provider and the customer (Prahalad & Ramaswamy, 2004; Vargo & Lusch, 2004; Grönroos, 2006, 2008) puts the customer from a passive role into an active role (Lovelock & Young, 1979; Vargo & Lusch, 2004; Grönroos, 2006) as mentioned before. Customers create value while using the resources being offered to them. One key determinant in order for the customer to create value is therefore the amount of operant resources available, such as knowledge, capabilities and competences (Normann, 2001; Payne et al., 2008).
Consequently value is produced by the customer themselves; thereby adapting the service offerings to their own unique needs (Nätti et al., 2014).
2.3.2 The service provider
The role of the supplier has changed from a provider of value to a supporter and facilitator of customers’ value creating processes (Grönroos, 2008). Consequently, the primary focus of the service provider should be to identify ways that help their customers in the value creating process (Grönroos & Ravald, 2001; Heinonen et al., 2011).
The service provider assists in the co-creation of value through the design and the delivery of relevant customer experiences (Payne et al., 2008). This involves co-creation opportunities, planning and testing of co-creation opportunities with customers and implementing customer solutions as well as managing customer encounters. In other words, the service provider needs to increase the total pool of resources to the customer or influences the customer’s processes in such a way that makes it possible for the customer to utilize current resources more effectively (Payne et al., 2008). Once value emerges for the customer, it will most likely also emerge for the service provider if the service meets or even exceeds expectations in form of repeat patronage, trust and commitment (Grönroos & Ravald, 2011). By understanding how the customer combines his processes, resources and outcomes in interactions, the service
Value creation process
Supplier/ service provider value creating processes Resources and practices applied to manage its business and relationships
Encounter processes Processes and practices of interaction and exchange that take place within customer and supplier/ service provider relationships
Customer value creating
processes Resources and practices used to manage their activities
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provider can change from a mere facilitator to a co-creator of value (Grönroos & Voima, 2012).
In addition, Bendapudi & Leone (2003) suggest that service providers are able to encourage customers in a way so that they define their needs in such terms that are more concrete and thus can facilitate value co-creation (see also Nätti et al., 2014). This leads to a better perceived quality of the customer, a good experience for the customer (Frow & Payne, 2007) and maximizes the value of the relationship (Payne & Frow, 2005).
2.3.3 The (service) encounter process
The heart of most service experiences is personal interaction between the service provider and the customer (Guiry, 1992). This interaction is done through service encounter processes (figure 3). The arrows in the middle of figure 3 represent the different encounter processes which can occur between the customer and the service provider as a result of a respective value-creating process. The arrows are two- way arrows which stress the interactive nature of encounters. The figure shows that the relationship between the customer and service provider is dynamic and interactive. Payne et al. (2008) and Prahalad & Ramaswamy (2004) both stress the importance of encounters for interaction in order to enable co-creation. The encounter processes are important to guarantee that both the service provider and customer interact as information asymmetry can have a bad impact on the co-creation of both entities (Stenroos & Jaakkola, 2011).
Payne et al. (2008) suggest that three forms of encounter facilitate co-creation:
communication encounters, usage encounters and service encounters. This paper will focus on service encounters which include customer interactions with customer’s supplier service via e.g. a contact center.
In the service encounter process, the customer is simultaneously involved in the production and consumption of the service the moment the exchange starts. Through this exchange value can be co-created. This is in line with the service dominant logic that value is co-created through combined efforts of different entities, thereby exchanging knowledge and skills which is always determined by the beneficiary (in most cases the customer). Co-creation will lead to enhanced value creation if collaboration between the customer and service provider exists (Rasmussen, 2012). From the definition of co-creation, co-creation can only happen in services where there is interaction/ collaboration. Going into a store and buying a pre designed kitchen for example is not considered as co-creation even though the store delivers a service to the customer by already offering a complete kitchen set where the customer does not have to worry about building a kitchen piece by piece. At IKEA, customers can design their own kitchens in interaction with a trained sales representative (Zwick et al., 2008). Here, enhanced interaction leads to co-creation by the sales representative making suggestions and the customer using the service in order to create value. The sales representative has the opportunity to engage in the creation process, gaining valuable insights for future business opportunities.
Both the sales representative and the customer benefit and value can be co-created. We can
see that co-creation of value through services ultimately needs more than one entity and the
integration and application of resources that are made available through an exchange creates
the value. Communication and thereby encounter processes might facilitate co-creation
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among other prerequisites, which we will focus on in the next paragraph. Co-creation therefore is not easily created among different entities but requires all parties to participate in the creation process. Not enough communication, unclear messages or egoistic thinking might lead to failure of co-creation, which in the end affects all entities involved. In order to avoid this, Toyota and Dell for example encourage customers to share ideas via the internet (Siguaw et al., 2014). In that way, co-creation can be seen as joint problem solving (Stenroos &
Jaakkola, 2010) between the customer and service provider as they are trying to increase the quality of the service being delivered by interacting with each other. We conclude that initially value is created by the customer, which is made possible by the service provider providing incentives to the customer. Through collaboration, which is represented by service encounter processes, both entities together can co-create, thereby increasing the value of the product. Figure 2 depicts the value co-creation process in a dyadic relationship.
The next section describes the facilitators to co-creation identified in literature.
Figure 2: Co-creation in a dyadic relationship
2.4 Co-creation facilitators
The driver behind co-creation is facilitation (Humphreys et al., 2009). Literature on co- creation in a dyadic relationship is rich but little is known on what facilitates co-creation.
Since service encounters are the patterns, attitudes and practices in order for co-creation to happen we argue that the there are certain drivers or facilitators that have an influence on these service encounters which are responsible for value co-creation to happen. We still do not know what facilitates/ influences these encounters as current literature does not give us a precise framework of what facilitates co-creation. Nevertheless, several factors have been identified.
First of all, intensive governance is required in relationships that offer unique value co- creation to on the one hand reduce vulnerability and on the other hand to guide value creation.
Therefore, a high level of trust is required (Driggs & Jense, 2014). Trust is fundamental to engagement in business. Customers as well as companies will only collaborate with organizations that they can rely on. The amount of trust differs according to people’s priorities. No matter what an individual preferences, trust underpins engagement since co-
c
Service provider
EncounterCustomer
Value co-creation
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creation requires entities to share information and in order for that to happen, some kind of trust must be in place to put your confidential data into someone else’s hands. In addition many authors (e.g. Inkpen & Tsang, 2005; Villena et al., 2011) argue that trust is an important promoter of continuous interaction.
Second, we have already learned that co-creation can only take place through direct interactions (Grönroos, 2011; Grönroos & Ravald, 2011). Ballantyne & Vary (2006) further argue that interaction becomes a facilitator for co-creation because it is a ``generator of service experience`` (p.336) for the customer. At the same time, the service provider has the opportunity to gather knowledge about customer preferences and behaviors and identify new ways to collaborate. In addition Ballantyne & Vary (2006) say that a dialogue with customers leads to reciprocal learning which means that service provider not only understand customer’s satisfaction measures but also their point of view, their needs and their experiences (Andreu et al., 2010).
Since interaction is the basis for co-creation to happen, Ballantyne & Varey (2006) argue that interaction is based out of three relational elements: relating (relationship development), communicating (informational, communicational and dialogue) and knowing (knowledge renewal). These three ‘exchange enablers’ are processes that enable interaction between different entities. The perceived value will be improved though relating, which provides structural support, useful for sustaining the interaction. The communicative interaction develops the relationships and knowledge is needed in order to improve the customer experience. For companies, it is important to use all three exchange enablers since customers base their evaluation on the entire service experience. Table 1 summarizes the co-creation facilitators so far identified in dyadic (service provider- customer) relationships.
Co-creation facilitators
Trust A combination of benevolence, credibility, and integrity (Read et al., 2014)
Interaction Knowing A process of knowledge renewal through
generation, sharing and application (Ballantyne &
Varey, 2006).
Relating A process of building a relationship, an open-ended process where interactions with customers occur across time and place (Ballantyne & Varey, 2006) Communica
ting
Two-way communication in forms of message making, informing or being informed as well as learning together (Ballantyne & Varey, 2006).
Table 1: Co-creation facilitators in a dyadic relationship
2.5 Value co-creation in service supply chains (SSCs)
Value co-creation in general is so far mainly researched in dyadic relationships (Grönroos,
2011; Eichentopf, Kleinaltenkamp & van Stiphout, 2011), and described as “the raison d'être
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of collaborative customer- supplier relationships” (Anderson, 1995, p. 396). According to Vargo & Lusch (2008), value co-creation does not exclusively exist within a dyadic relationship (Siguaw et al., 2014). As said, services are increasingly created by multiple firms for a single customer, as such creating a supply chain (or network) of organizations (Prahalad
& Ramaswamy, 2004). In the past, entities within supply chains have been viewed as working independently, thereby moving material from suppliers downstream to end-users (La Londe &
Masters, 1994). Nowadays, supply chains are value co-creation networks where service is the fundamental basis of exchange (Vargo & Lusch, 2004). Supply chains therefore do not only consist of buyers and suppliers of goods but of all entities that deliver their skills and knowledge in order to co-create service offerings for and with their end-users (Maas et al., 2014). Many of these entities in the chain perform activities such as information management (Mentzer et al., 2001) or supporting services to service provider and consequently play an important role in the supply chain. However, those entities were neglected in the supply chain in the past and the focus was on the interaction between suppliers (service providers) and buyers (customers) (Stefansson, 2006). According to Mentzer et al., (2001), a supply chain in service settings exists of three or more entities. A simple service supply chain includes a customer, a service provider and a supplier who can be a goods supplier or delivering another type of service.
An architect for example offers a service to a customer while simultaneously working with other entities. He might have to ask a lawyer or the department of housing if his plans are according to law standards. Figure 3 shows a typical service supply chain. The major difference between this service supply chain and a product/manufacturing supply chain can be found in the way value is added. A transformation process occurs different than in manufacturing. Value is added though the ‘’management of information and knowledge flows and during the interaction process with the customer’’ (Giannakis, 2011, p. 1820). Customer relationship management becomes a major issue and the customer a part of the value adding processes within a supply chain.
Figure 3: A usual service supply chain (Giannakis, 2011)
Figure 3 shows us that only direct contact exists between the customer and service provider
and the supplier and service provider. No contact exists between the supplier and the
customer. Even though literature mainly takes this manufacturing-like supply chain (Maas et
al., 2014) as the basis for depicting service supply chains, examples from practice show that
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this might not be the most realistic ground/basic form a service supply chain takes in real life.
Take a web designer who is working together with a supplier for a customer. Both the web designer and supplier need some information from the customer and therefore need to communicate with them. Another example would be a consultancy firm. That company might need some legal advice from a third company. The third company on the other hand needs some more information from the customer in order to help. Larson & Gammelgaard (2001) and Stefansson (2006) already suggested that business relationships in logistics should be viewed as a triadic relationship rather than a dyadic one since all three entities involved are somehow connected to each other.
A service triad (figure 4) depicts a setting, where all entities have direct and frequent contact with each other and where all entities perceive that every other entity is also important for a successful business relationship (Havila, 1996). Since all entities have direct contact, information exchange can occur in every direction between all parties involved. Take a company that has outsourced its maintenance to another service provider. This service provider will directly talk with the customers of the company that has outsourced its maintenance.
Figure 4: A service triad
We know how co-creation takes place in a dyadic relationship but a thorough understanding what facilitates co-creation in a supply chain with at least three entities is still missing.
Ballantyne & Varey (2006) argue that co-creation requires communication which is not a one- directional concept but rather a concept that should include all entities involved in a project in order to enhance value co-creation. An understanding of the goals and meaning of interaction between and from each entity in the project is therefore essential (Nätti et al., 2014). The success of an entity depends on its collaboration with other entities that influence the value creation process (Ballantyne & Varey, 2006).
Since we add another entity into the service creation process –from a dyadic relationship to a
triadic relationship- interaction will increase and the role of the entities change. Sampson
(2000) argues that in a service supply chain customers cannot only be seen as end customers
but as an entity which supplies valuable inputs into the service production process. Therefore,
customers are important entities that need to be integrated into the service supply chain. Since
there is no literature about how co-creation takes place in a supply chain, we do not know
how the tasks are divided. Giannakis (2011) states that entities in a service supply chain are
more or less independent from one another. This implies that entities prefer to work on their
own instead to collaborate. Nevertheless, as complexity in a chain increase, so must
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interaction as all entities are in contact with each other and therefore we expect that all entities actually provide some kind of service or information exchange to another and all entities make use of the product in its creation phase, thereby being value facilitators as well as creators. Co-creation thus must happen between all entities involved as Spohrer & Maglio (2008, p.18) state a service supply chain can be seen as ‘’a value-coproduction network of people (firms), technology, other internal/external service systems and shared information’’.
Since co-creation requires a high level of interaction and collaboration we argue that the characteristics of a professional service supply chain are adequate. These include according to Schmenner (2004) a high level of customization and interaction with the customer and a high labor intensity. The high level of customization and interaction means some uncertainty is present in the supply chain. Therefore, entities need to work close together in order to reduce ambiguity and achieve the customer’s requirements. Due to a high level of customization, standardization is difficult (Kellogg & Nie, 1995) and labor intensity increases (Løwendahl, 2005). Thus, having common goals and flexible processes (Lewis & Brown, 2012) is important. In addition, Giannakis (2011) argues that due to the flexibility in a service supply chain, the complexity of coordination increases and the service provider acts as a mediator for the service provision.
Next to the facilitators we identified in a dyadic relationship, (Havila, Johanson, & Thilenius, 2004) argue that in a triadic relationship social interaction, trust and commitment play an important role for a successful supply chain. According to them, business starts by a customer taking the initiative to do business with a service provider, thereby investing resources in the project. The service provider responds to the request of the customer and interaction evolves sequentially. The entities eventually become more committed to each other if the business between them goes well, meaning that if they successfully work together and co-create value, there are opportunities for future projects. Throughout the process trust is an important factor.
Nätti et al. (2014) argue that trust plays an important role in a service triad in terms of value co-creation. Trust, which is built during a relationship, increases the willingness of the customer to participate in activities that will lead to co-creation with the service provider through close collaboration (Smith & Barclay, 1997; Bettencourt et al., 2002). Thus, trust forms the basis for value creating activities (Ballantyne & Varey, 2006) and leads to commitment from the customer side (Morgan & Hunt, 1994), meaning that good customer relationships help both sides to sustain value creating activities (Ballantyne & Varey, 2006) by combining resources. This can save costs and leads to flexibility. Blau (1964) suggests that there exists a causal circularity between trust and commitment. (Social) interaction plays an important part in establishing trust and commitment. Anderson & Weitz (1992) for example have found out that past communication between entities determines the commitment between them. Therefore, we argue that trust and commitment are facilitators of co-creation (Havila, Johanson, & Thilenius, 2004). This means, that they have an influence on the service encounter process.
So we can conclude that next to interaction and trust identified in a dyadic relationship,
commitment might also facilitate co-creation within a service supply chain context (see table
2).
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Co- creation facilitators
Trust A combination of benevolence, credibility, and integrity (Read et al., 2014)
Interaction Knowing A process of knowledge renewal through generation, sharing and application (Ballantyne
& Varey, 2006).
Relating A process of building a relationship, an open- ended process where interactions with customers occur across time and place (Ballantyne & Varey, 2006)
Communicating Two-way communication in forms of message making, informing or being informed as well as learning together (Ballantyne & Varey, 2006).
Commitment Dedicating towards the service triad and its project with the aim to jointly create value
Table 2: Co-creation facilitators in a service supply chain (triad)
2.6 Research framework
We argue that looking at a triadic approach is suitable for exploring co-creation facilitators in service supply chains, especially, when the service provider and supplier both have a direct relationship with the customer. Looking at the facilitators in a triad will also help us to shed light upon how co-creation actually takes place in a service supply chain as the facilitators are important drivers that make co-creation possible. As there is another entity involved in the value creation process, we expect the issue to become more complex and other variables might be revealed throughout the case study.
This implies that we need to broaden our scope by taking other factors/ concepts into account.
This is already difficult with two entities pursuing different long-term goals but is likely to be even more difficult if there is a third entity involved with yet different goals.
Having identified possible facilitators to co-creation within a service supply chain, the question still is what facilitators are actually important when looking at a service supply chain in form of a triad and if there are other factors that have not been taken into consideration yet.
Therefore, in the remainder of this paper we will answer the research question by 1) finding
out if the facilitators in the literature review are valid in service supply chains and 2) if there
are other factors that might influence the service encounter. The research framework (figure
5) summarizes our main findings so far and what we want to investigate.
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Figure 5: Research framework
The next paragraph introduces the methodology in order to answer the research question.
3. Methodology
This part describes the research design of the paper. First, how the data were collected and generated and second, how the data were analysed.
3.1 Research Design
In order to answer the research question, a single case study will be conducted. A single case study is suitable if you want to explore a phenomenon that has been poorly investigated so far (Yin, 2009). So far we know something about the co-creation concept in a dyadic relationship and service supply chains but very little on what facilitates co-creation in those supply chains.
Our study looks at three different entities and therefore takes a look beyond a single’s company’s border. Literature mentions three advantages of case studies. First, the phenomenon can be studied in its natural setting (McCutcheon & Meredith, 1993). This is important for our case in order to get accurate information. Second, a single case study allows answering questions with a relatively complete understanding of the nature and complexity of the phenomenon. We look at the problem from different perspectives (entities) in order to understand the supply chain and can go more in depth into the problem. Third, the method suits for early research in which the phenomenon is not understood yet (Meredith, 1998). No framework or tool exists so far in literature about the phenomenon under investigation. So, all three advantages are applicable to this research and give the method the ability for new insights (Voss, 2009; Handfield & Melnyk, 1998; Yin, 1994). In addition, a single case study
Value co-creation
Supplier Service
provider Customer
F
F F
Facilitators:
- Interaction (knowing, relating,
communicating) - Trust
- Commitment
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allows for greater depth of the phenomenon. However, generalizations of conclusions are limited and biases may occur more easily (Voss, 2009).
We chose a single case study mainly due to time constrains.
3.2 The research context
We did convenience sampling as the technique allowed us to select our chain because of its convenient accessibility and its proximity to us. We found a chain consisting of a service provider, customer and a supplier. All three entities will be analyzed. The service provider is a small company which is providing programming services to its customers. Such services include for example the creation of a new homepage or the development of new apps or online games. The focus of this paper is in the business customer sector since this is where the company has most of its customers. The company was founded in 1997, has 19 employees and is located in Bremen (Germany). The company does not have a clear mission or vision but wants to be innovative and able to meet the customer’s expectations in any way possible.
Our study analyses this company (the service provider), a customer and a supplier who are jointly working on a project.
The supplier is a developer in online marketing strategies and also located in Bremen (Germany). Further company information will be kept anonym as to not give rival companies insights into their way of working and thinking.
The customer is a business customer, present in online and marketing activities and wants to stay anonym for this research.
We can use figure 4 as depicting the current situation where the buyer is the service provider.
3.3 Data collection
In order to achieve internal triangulation (Voss et al., 2002), we used interviews and an observation. The interviews gave us valuable insights into the topic under investigation while the observation confirmed the interviews and allowed for new insights to be gained. First of all, 3 interviews have been done, one with each entity involved (service provider, supplier and customer) in order to capture qualitative data of the companies, how they work and collaborate and thus co-create. After the first round of interviews, we made a second round about 5 weeks later but only with the service provider and the supplier. The customer denied another interview due to time constrains and internal problems. The additional interviews allowed us to dive a little deeper into the co-creation topic with the knowledge we obtained from the first round of interviews. The complete set of questions that we asked can be found in appendix A
Before the start of the interviews, a first meeting has been conducted with the service provider in order to check whether the company and its chain suit the research that we want to conduct.
It turned out that the company fits to the research since they are providing a service to a
customer and working together with a supplier, thus creating a service supply chain. This does
not mean that co-creation is automatically given but there is a good chance.
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All interviews were semi-structured, lasting for about 45 minutes with the service provider and supplier and about 35 minutes with the customer in the first round and 30 minutes in the second round. An advantage of a semi-structured interview is that it allows for additional questions to be asked, which allows for more depth of information. On the other hand it is difficult to generalize findings. The interviews took place face-to-face with one employee from each entity. All participants voluntarily participated in the interviews. Before the start of the interviews, all participants were informed about the purpose of the interview and that the confidentially of the statements is guaranteed. Therefore we agreed to not record the interviews but stick to notes which was especially a requirement from the supplier side for the interview to take place. Based on the initial literature review, we developed an interview protocol, which provided us structure in the data collection process. The interview questions followed the protocol but have been slightly changed depending on the interviewee and the answers of the respondents. The final set of questions can be found in appendix A. Following the interview protocol, we first asked some general questions (e.g. what is the mission, vision and strategy of your company?). Afterwards, questions were asked about the supply chain (e.g. what are roles, responsibilities and activities of each entity of the supply chain?).
Thereafter, we asked more co-creation related questions (e.g. How do you prefer to exchange information?). Finally, questions about the other two entities separately and together and how they collaborate were asked.
The interviews were all conducted in German and translated into English later. Notes were taken during the interviews and written out at the same day and the day after. The written out interviews have been shown to the interviewees and approved by them before we further used them. An advantage of taken notes and writing them out for approval was that the information was already reduced to the most important messages.
Second, an observation has been done about 2 weeks after the first round of the interviews where all three entities met. The purpose of the meeting was to discuss current progress and to talk about current problems and how to solve them and was therefore a perfect opportunity for our research in order to see how communication takes place and how problems are being solved. An observation helps to understand the behaviour, habits, social relations and needs of the entities within their environment. The main advantage of an observation is that it gives direct access to the phenomenon under investigation and is therefore suitable for our research.
In an interview or a questionnaire for example a respondent does not always provide complete and accurate information or they answer in a way that puts them in a favourable position. A weakness of an observation is that it sensitive to observer bias. This means that the observer might not record what actually happened but they expected and wanted to see or just thought they saw. We tried to overcome this by means of an observation checklist which helps as a guide in taking notes. The complete observation can be found in appendix B.
The observation has been done at the service provider´s building and lasted for about 2 hours.
During the observation we watched and listened to the discussion of the three entities and
took notes. These notes helped us further in answering our research question as it gave us
some practical insights in how the entities deal with each other.
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3.4 Data reduction and analysis
In order to analyse the data we retrieved from the interviews and observation, Miles &
Huberman (1994) suggest to categorize the data with the use of codes. Therefore, a coding tree (table 3) has been created based on our literature review. Once all interviews have been approved, the interviews were encoded, based on the coding tree. In the coding tree each theme got codes (and occasionally sub-codes) which relate to the theme. The data we gathered from the interviews and important elements were marked using Microsoft Word. Through this method we were able to identify multiple codes within a word or sentence and data can be compared within the interviews. Through comparison of the data new dimensions can be added in each category which helps detecting possible relationships and causalities within or between the facilitators of co-creation constructs. We did the same with the observation, inserting the codes into the same coding tree.
Since qualitative research focuses on a smaller number of cases than quantitative research (in this case only one case) generalizations are not always possible. (Payne & Williams, 2005). In addition, being completely objective as an interviewer is not possible, since personal experiences play a part in the interview and in the analysis and interpretation of the gathered data as well. Therefore, we tried to describe the steps we took throughout our research in detail in order to give the reader the chance to evaluate the reliability of the findings.
A single case study has a risk of a low representativeness and generalizability. Therefore, we
showed the results of our data gathering to the interviewees before further using them as
described already. This increases the validity of the data. In addition, we used more than one
data gathering method. In terms of reliability we present an interview protocol in the
appendix.
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Interview
Topic
Interview codes
Interview (sub-) codes
Codes definitions
Service characteristics (Schmenner 1986)
Providing services
Customization Degree of adapting the service to the customer’s wishes
Labor intensity Amount of labor necessary to deliver the service
Co-creation in service supply chains
Service encounter processes
Joint problem solving
Processes of working together on fixing problems
Providing incentives
Providing opportunities for interaction
Inter-
organizational processes
Managing processes between entities
Co-creation facilitators
Trust A combination of benevolence, credibility,
and integrity (Read et al., 2014)
Interaction Knowing A process of knowledge renewal through generation, sharing and application (Ballantyne & Varey, 2006)
Relating A process of building a relationship, an open-ended process where interactions with customers occur across time and place (Ballantyne & Varey, 2006) Communicating Two-way communication in forms of
message making, informing or being informed as well as learning together (Ballantyne & Varey, 2006)
Commitment Dedication towards the service triad and its project with the aim to jointly create value Other
elements for facilitating co-creation
To be identified/
announced by the
Other elements that might facilitate co-
creation
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interviewee
Table 3: Coding tree
4. Results
This section presents the results of the data collection and analysis of co-creation facilitators within the service supply chain. First, we will give a brief introduction into the researched case. Second, we present the influences of service characteristics on co-creation in the supply chain under investigation. Third, the facilitating elements of co-creation are presented as described in the literature review and conceptual model/framework. Finally, we will identify new facilitators of co-creation in a service supply chain.
4.1 Introducing the case
In this section we want to give a brief overview about what the project under investigation is all about.
In this case, the customer wants to update its website while making sure that they are one of the first matches when someone does an online research and wants to find out whom to consult. The task of the service provider now is to create a new website for the customer, which is called on site optimization. This means that the service provider makes sure that the website is technically capable so that platforms such as Google prefer this particular website over others. The supplier is doing off site optimization which means that they are responsible for the content of the website and has been hired because he has been suggested by the service provider since the service provider does not have the know-how to work on the project on their own. The supplier therefore has the task of a supporter of the service provider.
4.2 Service supply chain characteristics
Table 4 shows the first interview topic where the degree of customization and the level of labor intensity have been analyzed.
Service
characteristics
Service Provider Supplier Customer
Customization of service
- Very high
- Service is tailored to customer’s wishes (unique service)
- Flexible in service offerings
- Process with supplier are partly standardized as there is a routine in working together
- Tasks and responsibilities predefine some procedures
- Very high
- Converse customer’s ideas
- Some procedures are standardized which makes working faster
- Very important to get what they asked for
- High expectations - Every entity has its role
(responsibility)
Labour intensity - Very high - Very high - Medium
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- Feels responsible for a successful working together, therefore always reachable
- Amount invested depends of the customer, the amount of problems that occur and the amount of interaction which varies from project to project
- Reputation at stake
- No fixed amount of hours that they need to spend on a project but only a project task that they have to fulfil no matter how much time it involves, depending on the customer this can be very high and mostly is due to changes or problems
- - try to use your labor in a smart way
- Sees the service provider and supplier responsible for delivering the project on a predefined schedule - Spends main time
controlling that everything goes according to their plans and wishes
Table 4: Service characteristics
The level of customization is high in the supply chain. This lies in the nature of the customer requiring a unique service. Processes between the service provider and supplier are partly standardized as there is a routine between them after working together on several projects.
Still, there are always new situations to which both of them have to adapt. The customer sees it as very important to get exactly what they asked for and has high expectations.
Nevertheless, some procedures are standardized based on past experiences which make working faster. A clear division of tasks and responsibilities at the beginning also leads to some kind of standardization. Thus, partly standardized procedures help being more efficient in the supply chain but the focus is on customizing the product to the customer’s requirements.
Labor intensity according to the service provider is always very high because they ‘’feel responsible for a successful working together’’ since they were initially contracted by the customer and their reputation is at stake. Therefore they work until everyone is satisfied and everything runs smooth. This attitude is also shown during the observation where the service provider tries to be in charge of the whole situation. In addition, since the project is very flexible, so is the workload. The amount of actual labor depends on the supply chain working together. The better the collaboration, the less labor is needed. The amount of labor invested by the supplier depends on the project. There are no fixed amounts specified but the supplier has to deliver a certain service, no matter how much labor it takes. Labor intensity from the customer side is perceived as rather medium. The customer sees themselves as having to make sure ‘’to get what we want on time’’ where the service provider and the supplier have to deliver something. The advantage of the supply chain is that it is very flexible in the amount of labor that they need. Nevertheless, the entities try to work efficient and thus try to use as few resources as possible while guaranteeing high quality.
4.3 Encounter processes in service supply chains
Table 5 shows how the service encounter processes take place in form of providing incentives, problem solving and inter-organizational processes.
Co-creation (supply chain characteristics)
Service Provider Supplier Customer
Joint problem - Try to find a solution to the - Exchange information - Through providing accurate
23 solving customer’s wishes in
collaboration with all entities
- If unexpected problems occur solving first on their own, then jointly
- Communicate frequently to avoid problems in the first place
- Detect possible problems as soon as possible (together)
early
- By introducing all entities at the beginning and being transparent - Problems can lead to new
innovative ways of working and thinking
information what needs to be done, leaving space for the other entities to be creative by coming up with innovative new ideas - Preventing problems
through giving feedback - Face to face meetings if
severe problems
Providing incentives (co- creation opportunities)
- Giving feedback - Talk about issues (face to
face)
- Through close collaboration
- Introduce ideas and jointly develop them at the beginning
- Give customer option to intervene
- Provide basic information and give feedback - Answer questions if
necessary
Inter-
organizational processes
- Provides programming services
- Feel responsible for a smooth running in supply chain
- Work independent as much as possible but be in close contact
- Lots of exchange of information between the service provider and supplier
- Experts in developing online marketing strategies
- Responsible for search engine optimization - Incorporate the
customer’s wishes and ideas
- Provides reports mainly to the customer
- Makes sure to get what they asked for on time - Provide inputs and
comments on reports - Reactive part working with
schedules -
Table 5: Co-creation characteristics
