Service value to networks

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Service value to networks

A network analysis in the northern Netherlands

conducted for PNO Consultants

Master thesis

Rijksuniversiteit Groningen

Faculty Economics and Business

MSc. Technology Management

Author: J.M.A. Sijtsma

Faculty supervision: 1. Dr. Ir. N. Faber 2. Dr. J.L. Miedema Organization of study: PNO Consultants

Department Groningen Drs. B. Lutz

Date: October 2008

Location: Groningen

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Abstract

In this Master thesis a research is conducted on the possibilities for a service provider when delivering value to networks of customers. In this research a framework is developed in which the most

important aspects of service delivery towards networks are handled. With this framework a case study and market research is conducted for PNO Consultants. The combination of the framework and the market research leads to a number of recommendations for PNO Consultants. These recommendations can be used to optimize future value and stay ahead of the competition.

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Preface

The final part of my study Technology management has arrived. I looked for a good thesis project and after some discussion I could start my thesis at PNO Consultants in Groningen. I wanted to do something within the consultancy business so this was a perfect start to get to know the business a little bit more. In the beginning I was searched for the right angle to tackle the problem; a way to get a complete overview on the available networks in the northern Netherlands.

Finally I could combine the market research information with the literature from service and network development which has resulted in a model and more importantly some elements which could improve the delivery of the service by PNO.

I would like to thank my supervisor at PNO consultant; Drs Barbara Lutz for sharing lots of internal information and judging my report critically. I also want to thank my other supervisor at the University Dr. Ir. Faber, for giving me feedback and comments on my progress. I would also give some credits to Mrs. E. Wegen, for reading this paper and give comments on grammar and style. Finally I want to say thanks to all employees of PNO and those people involved in platforms for sharing there knowledge with me.

A part of this research is confidential, information can be acquired at PNO consultants: Contact Barbara Lutz for more information: www.pnoconsultants.nl, 050-5225822

Enjoy reading this report,

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Chapter 1: Research subject

1.1 Background/ reason

This research was initiated by PNO Consultants (from now on PNO) who face a challenge due to opportunities from the changing European grants landscape. Therefore PNO has to rethink its business model. In the past, grants were applicable to a single firm or project. Recently, European, national and regional governments subsidize companies who are collaborating in networks with other (knowledge) organisations and mid sized companies in order to find new commercial applications for new (scientific) knowledge. This change of regulation causes a change in the service of PNO because the current service is mainly focused on assisting existing projects, leading to low customer contact and no influence in thinking about future grant possibilities. Another reason for changing its services is the increased competition which has more access on board level to discuss about grants. For these reasons information is needed about the existing networks in the northern Netherlands. With this information recommendations will be made to increase the value of serving these sectors.

1.2 Company Description

Twenty-five years ago PNO invented grants consultancy in the Netherlands. It is now active all over Europe via its own offices as well as a network of specialised local partners. Nowadays the company consists of over 400 employees with 35 offices in 15 countries and it is still growing. This European dimension is extremely important for many companies and institutions.

PNO Consultants came into existence in 1984 when three students identified a gap in the market. They discovered that companies and institutions did not take adequate advantage of grant schemes which the government had set up specifically for them. They offered to write grant applications for companies and other organisations on the basis of 'No win, no fee'. This provided the clients with easy access to attractive grants and other support from the government. Based on this concept, PNO grew from being a market pioneer into the foremost grant consultancy in the Netherlands in a short time.

PNO works for companies of all sizes, universities, research institutes and government organisations (from the regional to the European level). The key is to be resourceful and result-oriented. The services centre on four core qualities: knowledge, creativity, pro-active approach en partnership. These qualities give substance to the company philosophy, expressed in the motto - Dedicated to Success. 1 The way of working from PNO will be elaborated on in chapter 3.

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1.3 Problem Definition

As stated in section 1.1 there are significant changes in the European grants system. These changes are the result of the Gothenburg and Lisbon agenda. In this agenda the European government committed itself to change the European Union into the most vital and durable economy in the world. This results in grants to enhance regional forces. Companies who are first in their sector will be stimulated to cooperate with knowledge institutions and mid sized companies to create optimal knowledge valorisation.2

In the past, grants were assigned to single companies who lagged behind. However, in the last years this changed. In order to make full use of the opportunities the new grant landscape offers, companies need to work in a network with other firms and knowledge institutions to receive certain grants3. This gives opportunities to PNO, but because of the fact that PNO has less experience with developing networks and does not have a clear view on the existing networks, this opportunity is not fully exploited. Therefore it is important for PNO to get a clear view on the networks available in the northern Netherlands. With this information it is possible to approach the market in a better way.

To stay ahead of the competition it is important that PNO grows with its market. PNO still has unique qualities in grants, but the competition is closing in. Big accountancy companies like PWC and Deloitte, but also ‘newcomers’ in the grants market, usually have good presence in strategic networks and perform their services on board level. Therefore it is important to evaluate the current service and see what the possibilities are to increase the service value when working with networks.

1.3.1 Conceptual Model

The conceptual model shows a method from A to C through B (fig 1). A is the starting position. In this starting position the environment changes which requires the organisation the change with it. To come to the value required in step C, a new business model needs to be investigated and new networks need to be developed.

Several authors developed material on the successful development of a new product or service. This research is called New Service Development. In chapter two of this report a theoretical analysis is made which discusses the whole service process through the service profit chain of Heskett et al (1999). Customer wishes form an important element in the literature research and are tested in a market research to discover the expected service for PNO.

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The development steps which occur in new service developments are also discussed. This is done with the model of Johnson et al (2000). Final elements that influence the service development are the current strategy and customer wishes. The new service development has to fit within the strategy and customer wishes.

A second important aspect is the development of a network by PNO. To remain a market leader in the grant consultancy market, the right network is of vital importance. This network could increase the value to the customer and PNO. The research on network development is twofold; first there are the current networks in which PNO wants to participate and second there is the possibility to develop new platforms. Both developments lead to an increase of PNO’s network. In chapter two the literature about network development is discussed and the most important elements are highlighted, the book of Ford et al (2003) is used as a guideline. In the final section of chapter two a combination is made between the two previous parts. The final section will be used to develop a conceptual framework of the service development process towards networks. The model of Basole and Rouse (2008) will be used in the development of this framework.

After the theoretical side has been dealt with the case of PNO will be discussed in chapter three and four. Chapter three will be used to outline the current situation and strategy of PNO. The current way of service offering and service functions are presented. In the next chapter, the results from the literature will be applied to the case of PNO. The whole process is outlined in figure 1; the conceptual model.

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This research will be limited by several aspects.

1. The first aspect is the geographical limitation. The network investigation is done only for the northern Netherlands. Recommendations that will be made will be limited by this fact.

2. A second aspect is the competition, this will not be elaborated extensively. Only available information within PNO will be used.

3. The customer satisfaction with the service will not be measured. Customer wishes are measured, not the satisfaction.

4. The forth limitation are the grants. These grants will be used to indicate the market segments.

1.4 Research objective

The main objective of the research is:

Defining the elements needed to optimize the value of the service from PNO to current or developing networks of customers in the northern Netherlands.

Deliverables within this context are:

• An overview on the literature on service development and network development.

• The development of a conceptual framework concerning the service development towards networks.

• A clear overview of the current platforms and possibilities in the northern Netherlands.

• Value propositions to gain competitive advantage.

1.5 Research question

The above objective can be translated into the following research question:

Which recommendations can be made to optimize the service value of PNO Consultants towards current or developing networks in the northern Netherlands?

This question can be divided into several sub questions:

1. What aspects are important in developing a new service and the service profit chain? 2. How to form networks and what are the possible positions within a network?

3. Which networks are available in the northern Netherlands?

4. Which networks offer high value to PNO?

5. In which sectors should PNO develop a new network?

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1.6 Research methodology

This report can be seen as an explorative research; there is some theory about similar topics but there is less information about the topic discussed in this research. This research is aimed at the development of a conceptual framework and at a small explorative market research to test the influence of the different elements resulting from the theory. Besides testing the theory there is also a descriptive market research conducted to search for the best networks in the northern Netherlands. The research is divided into several steps. An orientation phase, a research phase and a development phase in which new possibilities for PNO are presented and a value proposition and recommendations are made. The research phase can be divided into: Market research (current networks), theoretical analysis and an analysis of the current situation. (see fig 1.2).

Figure 1.2: research model

1. In the first phase a thorough orientation of the problem is needed. What are the important grant rules and what is the position of PNO in the market? In this phase an orientation of the market and the current service is made. Questions that need to be solved are: Which grant sectors are important in the northern Netherlands and what is the position of PNO in the market? Who are the most important competitors in the market? And, what are the criteria for PNO to collaborate with a company? This information will be acquired through the supervisor at PNO, expert interviews (within PNO) and information available on the internet, but it will not be elaborated on in this report because the information is intertwined with the information in the next phase.

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most important. The element of what they expect from the service of a grants consultant also needs to be clear at the end of this phase. The market research will be based on the steps from in the books of Zwart (1989) and Lehmann et.al. (1998)

Besides the market analysis literature a theoretical analysis will be made. This analysis will form the basis of a conceptual framework of service development towards networks. Because of a change in the market the current service needs to be updated or changed. Topics are: service development/enlargement, network formation and value creation for customer networks. The literature can be found in chapter 2.

3. The literature and the information about PNO and the market analysis will be combined to develop certain changes in the current service. These changes need to optimize the service which is offered to a changed market, which is more network based. This is elaborated on in the development phase, in which possibilities and recommendations for PNO are also made. These recommendations will be twofold, first there are the market possibilities and second there are the improvements of the existing service. Both increase the service value of PNO.

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Chapter 2: Theoretical Analysis

In the last few years’ globalisation and internationalisation increased the competition among service organisations. These trends place service development at the top of the agenda. Another aspect of increasing importance to organisations is the formation of a network. Without a network of customers, suppliers and other partners an organisation cannot increase the value of its service. In the theoretical overview in this chapter these two elements are compared and aligned into a model. The chapter starts with the service profit chain. This model will be used to explain the full service process and the role of service value in the whole service process. The theory about networks and network development is discussed in the second part of this chapter. Eventually these two concepts are aligned leading to a value framework. The central question in this chapter will be: How can a service provider use service and network development to increase its value to customers?

2.1 Service

There are many different interpretations of a service. Lovelock (2004) defines a service as an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is transitory, often intangible in nature and does not normally result in ownership of any of the factors of production (Lovelock, 2004, Pag 9).

The definition of Lovelock can be subdivided into four distinct characteristics of a service (de Vries et. al. 2001, page 25, Basole and Rouse, 2008, Biemans 2004, page 179):

1. Intangibility: no physical product is handed over to the customer during the service delivery, the service is a process or act and there are no inventories of the service.

2. Inseparability: simultaneous interaction between customer and provider, the service is produced and consumed simultaneously.

3. Perishability: services cannot be produced at one time and then be kept in stock.

4. Heterogeneity : services can be different depending on numerous sources such as: the service provider, the customer and the surroundings (Brackel, 2006).

Biemans (2004, pag 179) also adds that services are made to measure, have a technological focus and are often produced at the customer.

2.2 The service profit chain

To explain the whole service concept a model developed by Heskett et. Al (1997) will be used (see fig 2.1). The service process in this model consists of three important aspects. The internal environment, the service concept and the external environment.

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service offering (tangibles and intangibles) and infrastructure (external organisation, technology, and internal organisation) (Bitran, 1998, page. 178).

The service profit chain (fig 2.1) was developed by Heskett in the mid-1980. Heskett states that the service-profit chain establishes relationships between profitability, customer loyalty, value creation and employees. The links in the chain (which should be regarded as propositions) are as follows: Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers. (Heskett et.al. 2008). Several elements (internal, external and service concept) are further elaborated on in the next section.

Figure 2.1 service profit chain; Heskett 1997

2.2.1 Internal environment & service value

Because of the intangibility of a service, the employees are very important. Edvardsson and Olsson (1996) states that staff is usually seen as the service key resource….we could consider staff as more than a resource, we could see them as part of the service. They further state that: To do a good job, the staff, in the company and the company's partners, must be knowledgeable, motivated and committed. (Edvardsson and Olsson, 1996)

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be defined as a matter of satisfying the needs and meeting the expectations of three main groups: customers, staff and owners. (Edvardsson et.al.1996)

Productivity and quality are directly related to the concept that stand central in this model; service value. Biemans (2004 pag 40) defines value as: The difference between supplier specific advantages

and the costs incurred for a customer when purchasing a certain service. This definition is

formulated into an equation by Heskett et.al. (1998) stating: customer value= Results+ process quality/ Price+ customer access costs. The value concept is further defined by Biemans stating that it consists out of a basic value, customer wishes and unexpected extras. (Biemans, 2004, Page 147).

The expectations of the customer are very important for the customers’ value, Edvardsson states that controlling these customer’s expectations is often forgotten. Giving the right promises should be an integral part of service development (Edvardsson, 1996). Grönroos states that besides perceived and expected service the company’s image also plays an important role. This image is built upon technical quality and more important functional quality (Grönroos, 2001). Furthermore, the quality of a service can be measured by five dimensions:

1. Dependability (did the service provider do what was promised) 2. Responsiveness (was the service provided on time)

3. Authority ( was the customer confident about the service provider during the process) 4. Empathy (was the service provider able to take the customers point of view)

5. Tangible evidence (is there any evidence that the service is indeed performed) (Heskett, 1997, Page 41)

The concept of value to the customer needs to be developed with tangible and intangible methods (Bitran, 1998 pag 184). These methods need to be included in a service concept. This concept and the art of new service development are discussed in the next section.

2.2.2 Service concept & new service development

Service delivery is more and more under pressure from competition; therefore it is important to keep developing new services.Johne (1996) defines new service development (NSD) as: the development of service products which are new to the supplier.

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Within the NSD cycle the first two stages, design and analysis, represent the planning phase. The final two stages, development and launch, represent the execution phase (Fitzsimmons et. al. 1999, pag 18). As an organisation innovates, the process cycle is facilitated by enablers who have an impact on the process. These enablers need to be designed to match customer needs. Edvardsson adds the external environment to the enablers, as a very important element to develop a service. The external environments are the customers and the target market (Edvardsson and Olsson, 1996), the subject discussed in the next paragraph. As seen in Fig 2.2 the four main steps can be divided into 16 steps, the complete service development process.

2.2.3 Target market and customers

One of the differentiating characteristics of services is the extent to which customers participate in the process of service creation and delivery (lovelock, 2004, pag 30). Think of inseparability and heterogeneity from paragraph 2.1. Several authors state that customers are therefore very important within the service sector. (Jayasimha et al. (2007), Alam and Perry (2002), Bitran and Pedrosa (1998)). Edvardsson and Olsson (1996) define the customer as the person or organisation receiving the outcome of the operation. It is appropriate and often necessary to involve customers in the process of developing new services. (Edvardsson, 1996)

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and treat them as partners. This likely leads to higher service quality and enhanced customer satisfaction (Alam and Perry (2002)).

Customers are very important; therefore it is essential to identify the gaps between customers and the organisation. A model which can be very useful in identifying the possible gaps in the service offering process is the Gap analysis model of Parasuraman et.al. (1985) (fig 2.3).

The most important aspect towards the quality of the service is the communication towards the customers. When the expected service matches with the delivered service due to a good communication the service quality and customer satisfaction are optimized.

Figure 2.3 service quality model; Parasuraman et al (1985)

To outline the previous section: the most important aspects of service delivery process are the internal organisation which develops a certain service and the service development process which leads to service quality. Finally there is also the external environment and the perception of the customers. The perception and the quality of the service will lead to value for the organisation. These elements are intertwined and influence each other.

2.3 Networks

Networks have recently received a great deal of attention from academics (Hakansson 2002). The motivation behind network formation is primarily to gain a competitive advantage in the marketplace (Mohr and Spekman, 1994). Therefore it is good to look at networks and the service delivery towards them. The central questions are: How can one develop a network and what are the positions in a network? Both these themes are important for most organisations because an organisation is always busy developing new networks and maintaining their position in current networks.

2.3.1 Network definition

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structure, furthermore the network content is differentiated by four resources; information, goods and services, emotional support and political influence. (Steier and Greenwood, 1999)

The components of a network have been articulated as actors, resources and activities, also referred to as an ARA framework. Actors are seen as those individuals, groups and organisations involved within the network. Resources comprise the physical and intangible, financial and human assets that actors have access to. Activities take place when one or more actors develop, exchange or create resources by utilising other resources (Syson and Perks (2004), McLoughlin (2000)). The network definition is further specified by Håkansson and Ford when they state that a business network is a network where the nodes are business units and the relationships between them are the threads. (Håkansson and Ford, 2002)

2.3.2 Network development

Before we look at the composition of networks we will take a look at the development of a network.

Steier and Greenwood (1999) indicate and illustrate four steps in the network development process: stage one is the initial navigation: To develop a service the organisation needs resources. In this stage it is important to make sense of possible contracts and approach current strong and weak ties. New contacts are also made.

The second stage is the consolidation phase. In this stage the organisation creates a (financial) network by strengthening existing ties and building new ties. The third step is the enrichment of the network relations and optimization of the resources within the network. This includes the creation of more and other resources from the same ties.

During stage three, the process begun in stage two is accentuated through a broadening of transactional content.

Figure 2.4: network development (Steier and Greenwood, 1999)

The final stage is reconfiguration. In this stage existing exchange relationships are revisited and the existing circle of relationships is further expanded, usually through referrals from existing networks and planned or chance encounters. Thus it becomes important to identify the links of less significance and to manage them more efficiently.

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A business relation can be described in four stages; 1) the pre relationship stage, in this stage there is no bond between the actors. There is a low level of commitment, but there should be some trust. In the second phase, 2) the exploratory stage the companies should reduce the distance between them. This needs an investment of time. Each party has to convince the other that they are seriously interested and have something to offer. 3) In the Developing stage, the trust between the actors is building and they are adapting to each other. 4) The mature stage is the final stage where the companies have reached certain stability in their learning about each other and in their investment and commitment to the relationship. (Ford et.al. 2003, page 51)

The development of a network and the success of a business relation depend on several factors. These factors that lead to a success of partnership are put into a model by Mohr and Spekman (1994). They divide the success in three parts; attributes, communication behaviour and conflict resolution techniques.

Attributes of partnership: The first

important aspects before starting a partnership are already mentioned in the previous section by Ford: commitment and trust. (Rese, 2006; Mohr and Spekman 1994, Ford et.al. 2003)).

Networks can only be mutually

successful when there is certain

interdependency between all parties; this is the third attribute (Rese 2006, Anderson and Naurus (1990)). This interdependency within a network is multi dimensional. Ford et.al. (2003) mentions three different dimensions; the link between the activities, the ties between the resources (joint investment) and the bonds between the individual actors.

Figure 2.5: partnership success; Mohr and Spekman (1994)

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Communication behavior: Coordination is very closely related with the second important aspect;

communication. The importance of right communication is stated by Mohr and Spekman (1994) because it underlies most aspects of organizational functioning. To gain the benefits of collaboration, effective communication is essential. Anderson and Naurus (1990), describe communication as being the formal and informal sharing of meaningful and timely information. Mohr and Spekman (1994) divide communication in quality, information sharing and participation.

Conflict resolution techniques: Due to the fact that organizations have different goals when joining a

network it is obvious that problems could arise. So it is important how to handle these kind of problems. All firms in a network are interdependent and are therefore motivated to solve the problems. Examples of these resolution techniques are smoothing and arbitration. (Mohr et.al. 1994)

Håkansson adds that the development of a relationship will depend on a number of factors: what has happened in the past. What has each of the parties learned in other relationships? What has currently happened between the companies in other relationships in which they are involved? And finally what the expectations are. No relationship can be understood without reference to the network. (Håkansson et.al. 2002) So the individual relationships and the network are strongly intertwined.

2.3.3 Position in the network

Besides the building of a network and the relationships between network actors the final important element is the position of an organisation in a network. This position is relevant when a network is formed but also when a firms offers its service to a settled network.

There is no single objective network and everyone within the network has a different picture on the extent, content and characteristics of the network (Ford et.al. (2003) page 176). This illustrates the importance of examining the network pictures of others, especially when joining a network. Ford underlines the importance of the emphasis that there are no absolute or objective network types, and all networks have different elements, characteristics and possibilities. (Ford et.al. page 177) When joining a network it is therefore important to know the actors and the different scopes of the network. With this information it is possible to choose a position and contacts within the network.

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provides, the market segment it sells to and the degree to which it is isolated from direct competition. (Ford et.al. 2003, page 7)

The more dependent organizations are on a firm, the more control this firm has. The position in the network thus often determines the level of influence on other network actors. (Basole en Rouse, 2008)

Besides the position in current networks, McLoughlin and Horan (2000) state that it is often the case that a firm desires a position in another network. To achieve this it may use existing relationships with firms who have a position in the target network to develop new relationships or access the resources in the distant network. Alternatively it may seek to develop resource interdependency between itself and actors in the desired network. (McLoughlin and Horan, 2000) To become an important member of a platform, Cova and Salle (2008) developed several steps. To summarize the results, it is important to search for the most important actors within the targeted network. Subsequently a value proposition should be presented (what are the stakes of an actor and how could we offer value) to the important actors using a direct or indirect (third) party.

The position differs because there are different groups of organisations, Ford names three different roles; customers, suppliers and the competition. They all have there own role and the role in the network differs with the scope. (A supplier can be a customer from another point of view.) Basole and Rouse (2008) extends the number of roles with complementors.The total picture of different actors and relations are combined in the service value network by Basole and Rouse (fig 2.6). The distributing firm or service provider has an important role in this model. Many developers (enablers) of a product have hardly any contact with the end user of their offerings, but maintain relationships with distributor companies. A distributor plays an important role in both supplier and customer networks (Ford et.al. 2003, pag 120).

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Basole and Rouse (2008) argue that value in a service value network is created through a complex set of B2B, B2C, and C2C relationships, and influenced by the social, technological, economic and political context in which it is embedded. This value creation towards customers and especially networks of customers is the subject of the next section.

2.4 Service value to networks

From the service profit chain it is clear that the value concept is very important. In chapter 2.1 the concept of value is already explained as: the difference between supplier specific advantages and the costs incurred for a customer when purchasing a certain service. (Biemans, 2004, page 40) Further the concept consists out of a basic value, customer wishes and unexpected extras. (Biemans, 2004, page 147).

Implicit to the notion of a value network is the proposition that all activities are initiated from the point where value is ‘realized’ or ‘consumed’: At the customer. Service providers will only receive any benefit when consumers are satisfied and delighted enough. (Basole and Rouse, 2008). Ford describes the value for a customer as the promise of a suppliers offering. It also depends on the suppliers’ ability to fulfill that promise. Fulfillment means that the offering actually solves the customers problem on time, consistently and to the extent that was promised. (Ford et. al., page 81)

In this chapter the concept of value is combined with the network concept. The service value network model from Basole and Rouse (2008) will be very useful in this case. The network concept can be divided into two aspects: The service delivery towards current networks and the development of a new network. The combination of these aspects should lead to an optimal service value to networks.

It has been shown that consumers are not only value receivers, but also co-producers, or ‘‘prosumers,’’ of value. We take this idea one step further and argue that consumers not only contribute to the value creation process, but in fact drive and determine all activities in the value network. Indeed, if there were no consumers, no product or service would be consumed and the existence and necessity of actors and value network activities would probably be irrelevant. (Basole and Rouse 2008) Therefore it is important for a service deliverer to consult with the customers about new ideas. With a network of customers there are more opinions so it is more important to discuss the ideas early in the development process.

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developed by Heskett: Customer value= Results produced + process quality/ Price+ Costs of

acquiring the service.

Besides these elements of added value there are some elements which are specific for a network/ platform of customers. The service deliverer must understand who the actors are and have an understanding of the types and extent of relationships involved. Relationships may be formed with any actors in a value network (Basole en Rouse 2008). Besides this, the acquiring costs can be lowered for network members because the acquisition costs are shared.

Within new networks the concept of value delivery is broader. In these kinds of networks the network development plays a large role. The service value can in these cases be extended by assembling several parties. This factor can be added to the equation of Heskett. The offering of lower costs, (because they are shared costs) also belong to the extra service value possibilities.

2.5 Service value to networks model

In the final model, several elements from the previous literature study are combined. The central element in the model is the service value to customers. These customers are networks. The service value needs to be realized through the service provider. There is a certain interaction between the service provider and the customer. In the first place there is the service value from the service provider and second there is the feedback from the customer resulting in a certain relation.

The total service value is realized through three main aspects; the core service, the service extra’s and the relation between the customer and the supplier. These three main elements each depend on several aspects, but before these aspects will be discussed there is an external influence which plays a large role in the service value delivery. This element is the enabler. Basole and Rouse (2008) and Ford et al. (2003) state that it is important to maintain close relations with the enabler because they make it possible for the service provider to offer its service. To become an important link between customers and enablers the service provider should maintain strong relationships with both. This brings us to the first service value element; the relation.

Relations

Relations between service provider, enablers and customers are an important factor influencing the service value. From the model of Mohr and Spekman(1994) several elements arise influencing or enhancing the relation between customer and service provider. By enhancing the relation, the service value also rises.

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customers and the enablers want and combining this information leads to value for both the enablers and the customer networks. These relations are strengthened by the following elements:

Commitment: this is the willingness of partners to put effort in the relationship. The effort can be in the form of people, money or goods. The commitment between both parties should be equal. The creation of commitment should grow along the relationship process. When the commitment between actors is equal the relation between them increases.

Problem solving: the last elements of the partnership theory of Mohr are the conflict resolution techniques. Especially for a firm who wants to develop networks, these techniques need to be well developed. When problems are solved adequately it makes the other actors more dependent of the service provider which leads to a stronger relation and a better position within the network.

Interdependence: the next element mentioned by several authors is interdependence (Rese (2006), Anderson and Naurus (1990), Ford (2004). This element exists of a relationship in which both firms perceive mutual benefits from interacting. They acknowledge that each is dependent on the other. This also increases the relation and the trust between them. Within a network there is a more complex structure of interdependency because there are more actors involved. The consequence is that a service provider should be aware of the different links between different actors.

Communication/customer involvement: the next element which is important in developing a firm relation with networks is communication. Mohr et al. (1994) state that to achieve the benefits of collaboration, effective communication is essential. Because a network consist of more than one party the communication is even more important. An aspect of the communication is the involvement of the customer in the process of service development and delivery. Communication has a close relation with empathy.

Empathy contains of the service provider’s ability to take the customers point of view. To give (customer) networks the feeling that they are valuable, it is important to take a customers view. Customer wishes could be included in this section. Empathy towards the customer leads to an increase of trust.

Trust: Trust is the belief that a party’s word is reliable and that a party will fulfill its obligations. This element is also closely related to the core service but also influences the image of the organization. Image: Image is built on technical quality and more importantly on functional quality (the core service) in the past. A positive image leads to more trust and lower acquiring costs.

Core service

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model, employees should be satisfied, capable and committed to deliver maximum value toward the customers.

Process quality/ authority: Was the customer confident in the service provider during the process? This element offers service value during the process, where most other value elements can be calculated at the end of the process.

Responsiveness: Another element of the core service is the timely service provision in order to build trust and increase of the service value. Timely service is of vital importance.(Heskett 1997)

Results/ dependability: as stated by Heskett, the customers buy results, not services; this is one of the key elements of the customer value concept. Results are closely linked to dependability in whether the service provider did what it promised; whether it fulfilled the needs of the customer.

Service extra’s

The final elements are the extras to the service. These extra elements increase the service value and differentiate the service provider from the competition. Elements influencing these extra’s are:

Tangible evidence: The core service is intangible. Therefore there must be some evidence that the service is indeed performed. This concept is also closely related to getting the right results.

Service development: The development of services is vital to market leaders staying ahead of competition. The development is mentioned in chapter 2.2.2 and states that to keep up with customer needs, service development is necessary.

Lower acquiring costs: the final extra value realized by offering the services to networks are the lower acquiring costs resulting from the cooperation between firms when searching for a service provider. When one of the firms found the service provider, all other firms can profit from it.

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Chapter 3: The current situation at PNO Consultants.

Before the theory can be applied to the case of PNO it is important to analyse the current strategy and service delivery process of PNO. The chapter starts with an overview on the strategy. The second part is the way in which the service is delivered and how PNO is organized internally.

3.1 Overall strategy

Tracy and Wiersema (1995) mention three basic strategies, also known as value disciplines: Operational excellence, product leadership and customer relations. (Biemans, 2004, page 46).

PNO’s strategy consists of several elements. These elements are confidential

3.2 Steps within business delivery

To realize the strategic goals, PNO developed a model for its services. In this model (fig 3.1), the steps in the grant acquisition are elaborated. Customers have several options: they use PNO for the whole process or choose to do several stages themselves. The initiation phase is the start where the

possible grant options are

identified. With this

information an application can be formed and finally PNO offers its services in the compliance of the projects, especially on the administrative

and financial project

management.

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3.3 Business Lines

This information is confidential.

3.4 Service functions

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Chapter 4: Market analysis.

From chapter one it is clear that the market of grants is changing. PNO does not want tot stay behind and therefore initiated a market research. With this market research an insight in the possible networks in the northern Netherlands should be created. In this chapter an overview is given on the market analysis that is conducted and the results from this are discussed.

The networks in the northern Netherlands can be seen as a new market and possibility to PNO. Because the network possibilities are not clear to PNO, a market analysis should be conducted. Zwart (1989) defines market research as the collection and analysis of information on topics relevant for identifying and solving a marketing problem (pag 4). Zwart (1989) and Lehmann (1998) define several steps in developing a market research process:

1. Problem definition

2. Determining information needs

3. Setting research objectives 4. Selecting type of research 5. Design of data collection

6. Development of a plan of analysis 7. Data collection

8. Analysis

9.

Drawing conclusions

10. Reporting

Lehmann (pag 59) states that the first six steps are also known as research design and the last four represent the execution of the design. In the forthcoming section the different research steps will be elaborated on. Before the different process steps will be elaborated on, the method used in conducting this market analysis will be presented: Analytic Hierarchy Process (AHP). It is a structured technique for helping with complex decisions. Rather than prescribing a "correct" decision, the AHP helps people to determine one, based on mathematics and human psychology. AHP can be divided into three steps:

1. State the objective or goal, (e.g., select best vendor for contract award).

2. Define the selection criteria, which can be qualitative or quantitative, (e.g., cost, personnel, past performance, and technical approach).

3. Pick alternatives for each criterion, (e.g., vendors A, B, C, and D).

The objective or goal can be seen as the problem definition of Zwart, and will be elaborated on in the next section. 4

1. Problem definition

The problem definition is the start of the market research. It is important that the definition of the problem is addressed carefully (Lehmann 1998). In this case the problem definition is: “Which

4

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platforms, in the renewed market, are the most valuable platforms to PNO Consultants and what are their demands towards the service of a grant consultant?”

2. Information needs

The next step, after having defined a problem, is to determine is to determine what types of information are most useful for resolving the problem. The researcher develops a list of needed information which becomes the starting point for the specific research objectives. (Lehmann, 1998, pag 62) He then searches for secondary information and if necessary additional information will be collected. (Zwart, 1989, pag 23)

The required information to solve this problem is:

• Information about the available platforms in the market (desk research, internet)

• Information about the importance of the platforms (through measuring several network aspects).

• Information about the most important persons within the platform (through interviews)

• Information about the demands of a platform towards a grant consultant. (through 20 statements)

3. Research objectives

In contrast to information needs, the research objectives should be both specific and limited. In this research the objectives are:

• What are the most important platforms?

• Who are the leading members of a platform?

• The impact from these platforms on the governmental policy.

• Description how PNO can contact the most important platforms.

• Describe how PNO should change its service to deliver value to the available networks.

4. Type of research

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5. Data collection methods

There are several options when new data is required. Zwart (1989) defines two groups; observation and communication. In this research communication is the most relevant. Zwart defines three groups of communication: personal, telephone and mail. First there will be a questionnaire by mail; this will be followed up by a short telephone call with some extra questions. This is done to acquire as much information as possible.

The questionnaire is divided in 17 questions, subdivided into multiple statements, most of them are ordinal. Finally there will be five verbal questions. The elements that will be questioned are:

• Importance of the platform to PNO/ impact on governmental policy (question 3-14)

• Most important elements of a grant consultant, from the function analysis. (question 15, 16)

• Most important themes, organisations and persons within the platform. (verbal questions 1-5) The questionnaires and the telephonic interview are described in appendix 1 and 2

6. Analysis plan

An analysis plan should be developed before extra data is collected. All relevant analysis should be specified. This allows you to check if the collected data is adequate for the form of analysis planned (Lehmann 1998, page 68). The information collected from the several questionnaires will be encoded. See the codebook for the different questions, their code and the different variables used in SPSS (appendix 3). The questions 3 and 8-14, which are divided into 23 elements, will be used to come up with a score to denominate the most important platforms. These 23 elements can be seen as the sub criteria mentioned in the AHP process and are subdivided into 5 main criteria (see appendix 10 for the complete description of the AHP procedure). In this report the criteria are: quantity of the platform, the internal contact, the possibilities to enter, the contact with the government, the activity with grants and the size of the networks. The criteria and sub criteria all get a certain weight factor according the AHP method. These weight factors needed to come up with the final results are defined by PNO (appendix 4 mentions the weight factor for each element). By asking consultants about their opinion regarding the most important factors to PNO the weight factors were developed. The weight factor is a score from one to three The whole AHP analysis is done with ahpproject.com5. This program converts the scores from 1-3 into scores between 0-1. These scores will then be compared with the different alternatives (step three of the AHP process) and result in a final score. The different criteria will be added up leading to a final score and a top 10 of the most important networks (see appendix 10 for a complete overview of the AHP process used in this research).

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Finally an analysis will be made based on the answers of the last two questions (15, 16). These questions contain 20 hypotheses which align with the different functions of a grant consultant. The questionnaires will be compared on the hypotheses and and the mean will be calculated from the most important functions. These results will be translated into an importance score from 1-10. The results are also used to make a comparison with the literature research previously in this report. The information will be used in chapter five to advise PNO about their service.

7. Data collection

The networks will be divided into 12 sectors. These sectors arise from different governmental grant plans. The governments of Groningen, Friesland and Drenthe developed 10 important points which will be stimulated in the coming years.6 These points are combined with some elements which are marketed as important by PNO7 form the 12 sectors in which the networks are sought.

In this step the previous planned steps are used to collect data from the market. The networks are divided into 12 sectors. These sectors are:

• Energy • Agribusiness • Ship building/ metal

• Water • Chemistry • Tourism

• Multi sensor techn. • Health care • Innovation

• Life sciences • ICT • Other

Within these sectors several networks were found through desk research. A telephone interview is also conducted with the provinces of Groningen, Friesland and Drenthe to further complete the total list of platforms. Results of these interviews are intertwined with the recommendations. A questionnaire is sent to all the known networks in the sector, followed by a telephone interview. One of the questions asked to the members of the known networks was to complete the list with networks, with there own knowledge on northern Netherlands networks. The list of platforms/networks can be found in appendix 5 (the description of the platforms is in Dutch). The data from the questionnaire can be found in appendix 6. The results on the interviews are used in the recommendations and can also be found in appendix 9.

8. Analysis

In this step the material that is collected in the previous step will be reported and standardized. The total list with names of networks and a short description of those networks can be found in appendix 5. With this list, a figure can be made to illustrate the relation between the different networks. The conclusion of these results will be made in chapter 5. The figure can also be found in chapter five. (see figure 5.4)

6

http://www.provinciegroningen.nl/werken/economie/speerpunten

7

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Chapter 5: PNO & service development towards networks.

In the previous chapter a market analysis was conducted for PNO Consultants. The objective was to define the most important networks in the northern Netherlands. In this chapter the results of the market research will be combined with the literature and the current strategy of PNO. This leads to advises on how to increase the value of PNO within several market sectors (The grant sectors defined in chapter 4). This chapter consists of three paragraphs. In the first paragraph an overview on the situation of PNO is given. This overview is an abstract picture of the current and ideal situation in the northern Netherlands. From this overview three

strategies can be derived. PNO must deploy different strategies per sector and business line, dependent on the number and influence of the existing networks. One of the strategies is the involvement of PNO within important networks. From the conducted market research a top 10 is presented. These networks are influential and valuable to PNO. The final aspect of this chapter is an overview on the internal and external changes. These changes are needed by PNO to realize the ideal situation mentioned in chapter 5.1. The market research and the literature will be used in making these recommendations. An overview of the chapter can be

seen in figure 5.1 Figure 5.1: overview chapter 5

5.1 Analysis and ideal perspective

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Figure 5.2 illustrates the ideal situation

Figure 5.3: future (ideal) situation

To summarize the above, there are three different strategies possible.

These three strategies are different for each existing sector in the northern Netherlands and are classified. In the next section the different strategies will be elaborated on for every sector.

5.2 Increasing PNOs influence per sector

This section is classified and can be requested at PNO Consultants: Contact Barbara Lutz for more information:

PNO Consultants BV

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5.3 Recommendations &changes

This section is classified and can be requested at PNO Consultants: Contact Barbara Lutz for more information:

PNO Consultants BV

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Conclusion:

As a result of a change in government policy, grants are applied to those companies who are first in their sector and are willing to cooperate with knowledge institutions and mid sized companies to create optimal knowledge valorisation. Together with increased competition, PNO is obliged to reorientate on the possibilities and its service value towards the market. Therefore the following research question emerged:

Which recommendations can be made to optimize the service value of PNO Consultants towards current or developing networks in the northern Netherlands?

To come up with an answer to this question a market research is conducted to find the possible networks in the northern Netherlands. A literature study is also carried out. The combination of these two elements leads to several recommendations to offer value to different grant sectors in the northern Netherlands.

In the literature several topics are discussed. The first topic covers the service process. The most important aspects of service delivery process are: the internal organisation which develops a certain service and the service development process which leads to service quality. Finally there is also the external environment and the perception of the customers. The perception and the quality of the service will lead to higher value for the organisation. These elements are linked and influence each other.

Besides the service aspect, the concept of networks and network development is also discussed. First the process of starting a network and new networks is discussed. There are several elements which make it possible to make a partnership work. These elements are used in the final model of delivering service value to networks. Besides the development of a new network the position within a network also is discussed. The most important network position in this research is the service provider. Many

developers (enablers) of a product have hardly any contact with the end user of their offerings, but maintain relationships through service providers. (Ford et. al.2000). This fits with the position of PNO

within the market.

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Together with the literature study a market (analytical hierarchy process) analysis was conducted to find out what the current networks are in the northern Netherlands. The functions of a service provider are also tested in the questionnaire.

These results lead to some recommendations to PNO. For every one of the 12 sectors defined in the market research there are three strategies possible. Together with this advice there are some other recommendations that should lead to more value for the customers of PNO and eventually this value should be cashed by PNO. These recommendations are split into internal (core service) elements and external (relational) elements.

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