Best practices for high-tech spin-off SME's to increase the knowledge management performance of their distributors: a case study at M2M

Best practices for high-tech spin-off SME's to increase the

knowledge management performance of their distributors: a case

study at M2M

MsC BA - BD master thesis

University of Groningen

Faculty of Economics and Business

M2M Non Destructive Testing Les Ulis, France

Student: Diederick Broekema

Student number: 1839527

Date: 6th of December 2010

1st university supervisor: Dr. Ir. M.W. Hillen 2nd university supervisor: Dr. J.D. van der Bij

II With this master thesis, I finish my master degree in business administration. In this chapter, I would like to thank everybody who made this possible.

First, I would like to thank Patrick Pichard for giving me the opportunity to combine this research with a five month stay in one of the greatest cities in the world; Paris. Not only did I learn a lot in doing scientific research, I also developed a lot as a person.

Being responsible for the supervision within the company, I would like to thank Laurent Le Ber for all his feedback. In sometimes a busy schedule, he still managed to make some time to discuss the topics I was working on; without this, this thesis would not have been possible. I would also like to thank the rest of M2M‟s employees, for introducing, showing and explaining the French culture; the totally new environment made my stay in France very interesting; I learned a lot outside my research as well.

Last but not least, I would like to thank my supervisors from within the University of

Groningen; Michiel Hillen and Hans van der Bij. Their constructive feedback throughout this project enabled this thesis to be of the highest quality possible.

III This paper evolved around the question what high-tech spin-off SME‟s could do to increase the knowledge management performance of their distributors. This question arose because the management of M2M felt that some of their international distributors did not know a lot about their advanced technological systems. In coining the problem it was found that the distributors agreed that a person with a good understanding of the technology he represents, is better able to sell systems and to create customer satisfaction by providing support on sight. Overall, they also agreed on the fact that their knowledge management could be improved when they would have a better relationship with M2M.

In a literature study, relational factors were found that could influence the distributor‟s commitment to the relationship and it was hypothesized that an increase in commitment would induce the distributors to learn more about the systems of M2M. In a questionnaire that was sent to eleven distributors, these relational factors were measured using statements that proved themselves valid in previous scientific research. Seven of these questionnaires were returned, and to analyze the results a division was made between four proficient (good) distributors and three deficient (poor) distributors.

In comparing the averages for the proficient distributors with those of the deficient distributors, it was found that commitment does not seem to play a role, but that some relational factors do appear to affect the knowledge management performance of the distributors either directly or indirectly. The five factors that influence the knowledge management performance of the distributors were found to be; „investments from supplier‟, „product salability‟, „supplier strengths‟ and less significant the two factors „anticipation of trust‟ and „effective communication‟.

Investing more time in the distributor relationships was found to be the activity which would improve the five factors most, and it is recommended for M2M to dedicate an employee full-time on giving training to distributors, answering their questions, informing them about developments, extracting and using market information and developing open and trusted relationships.

Investing time in the distributor relationships (for instance by answering questions) should not be regarded as a drainage of costs, it should be seen as an opportunity to increase sales. When their questions are very simple, it should be seen as a sign that big increases in sales can be achieved with providing more and better training.

This exploratory research also adds a new perspective to the channel relationship literature, and some interesting areas for future research are provided. Most importantly, the link between relational factors and the distributor‟s performance of knowledge management should be investigated more thoroughly to get a better understanding of how they are related.

IV 1. Introduction ... 5 1.1 Context ... 5 1.2 Problem statement ... 7 1.3 Research question ... 9 2. Literature framework ... 10 2.1 Social side ... 10 2.2 Economic side ... 16 2.3 Conceptual model ... 17 3. Research design ... 19

4. Results and discussion ... 22

4.1 Distributor ranking ... 22

4.2 Results part I ... 23

4.3 Results part II ... 24

4.4 Results part III ... 27

4.5 Solution design ... 32

5. Conclusion and recommendations ... 34

5.1 Conclusions ... 34

5.2 Recommendations to M2M ... 35

5.3 Reflection ... 36

6. References ... 37

Appendix I: Cause and effect diagram ... 39

Appendix II: Questionnaire problem quantification ... 40

Appendix III: Results problem quantification ... 41

Appendix IV: Questionnaire for distributors ... 42

Appendix V: Reasoning behind statements of part III ... 53

Appendix VI: Questionnaire for M2M managers ... 57

Appendix VII: Results part I ... 61

Appendix VIII: Results part II ... 68

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1. Introduction

As all small companies, M2M faces a lot of challenges while steadily growing. From all these challenges one is to successfully distribute their specialized products all around the world. M2M is a spin-off company and it develops high-tech products which are relatively new to the market. As a result, a big part of the sales effort is actually teaching the customer about the products and assessing the feasibility of projects. Operating world-wide in a niche market, M2M uses distributors as representatives in foreign countries. For these distributors to

successfully sell products, they have to acquire understanding of M2M‟s products. In this paper, the term knowledge management is defined as how good the distributors acquire this understanding.

While some of the distributors perform an excellent task in terms of knowledge management, unfortunately others are not very flourishing in this respect. The most evident sign of this is that M2M gets a lot of relative simple questions redirected from their distributors. From the experience of the M2M sales force, it is concluded that persons (no exception for distributors) who have a good understanding of the technology and products of M2M, can perform a better task in selling systems as well as in after sales.

After trying different strategies for inducing distributors to learn about their technology, M2M would like to know what the best practices are for making this happen. Just as M2M, it is expected that a lot of high-tech spin-off companies encounter this issue; making it an interesting topic of research. Despite this fact, this issue is not yet investigated from this perspective and therefore this research will also be a contribution to the channel relationship literature.

Before presenting and defining the problem, first some background about M2M and their technology will be given. When these issues are made clear, the introduction will conclude with the research question that will be investigated in this research.

1.1 Context

1.1.1 Technology

To understand the current situation of M2M, a little knowledge about the basics of the technology they use in their products should be known.

Non destructive testing (NDT) is the field of inspecting materials without breaking them. The technology which is used the most for this is ultrasonic testing (UT); this is sending sound waves in a material and measure how long it takes until these waves echo back. This means that it can be used to measure the thickness of a material because the distance can be measured when the speed of sound in the material is known, and it can be used to detect cracks in the material, since the sound waves will reflect on them as well.

In conventional UT (which still accounts for 95% of all UT) there is only one sound wave which is sent into a material. However, a new field of technology is emerging, called phased array ultrasonic testing (PAUT). With this method, there is not one sound wave, but there are several sound waves (up to 256) next to each other, which are sent into the material one after

-6- another. With the ability to send sound waves into the material in different patterns, the

materials can be inspected faster and in greater detail, but this comes with high costs. When a problem is encountered which can be solved with conventional UT, people do not need a PAUT system. Only when the problems become more complex, PAUT becomes an option. Because of this M2M clearly serves a niche market with a very specialized

technology.

1.1.2 M2M organization

To give an idea of how specialized the systems are, M2M has sold about 200 systems since their existence in 2003. Growing steadily, M2M now has 28 employees; most of them engineers.

M2M is the result of a spin-off project of the French Atomic Energy Commission (CEA), who decided -after having developed a PAUT system in their laboratory- to commercialize this technology without strengthening the monopoly of the one other company who provided PAUT at this time. Now, M2M has two main competitors; General Electric and Olympus. M2M differentiates from them mainly by providing very flexible systems which can handle the most complex measurement challenges. M2M is able to do this because they closely collaborate with the CEA, who continually develops very powerful software which has a lot of options. This results in the fact that M2M is only in the line market' and not in the 'in-field market'. In-line means that the systems are used within a continuous manufacturing process to ensure the quality of the produced product, and with in-field a portable system is used which can be moved easily. The latter one can be sold to customers relatively easy because the sold products will be all the same. An in-line solution on the other hand, is always custom designed for the customer. This means every situation is a different one, and the selling of a product should be accompanied by a lot of service. Because every system is tailor made, the chance of having some minor technical trouble after the sale is high, requiring a specialist to guarantee good service.

The technology is very specialized and the market is quite small, so M2M has to sell systems to customers all around the world. Knowing that it requires a specialist to guarantee good service, the best thing would be to have M2M offices in every country where M2M could train their own personnel, but this would require a huge capital investment. Because they are small but still need to cover the whole world, M2M has contracts with distributors and integrators. Integrators differ from distributors in the fact that they have the mechanical capabilities to build a total solution for the measurement of in-line products (such as a

complete installation which checks a just manufactured pipe for flaws). These distributors and integrators most often offer a total range of NDT solutions, and 95% of the UT technologies they provide is conventional UT. Although there are differences between distributors and integrators, for the sake of simplicity 'distributors and integrators' will just be called 'distributors' in this report.

The act of calling the distributors and the integrators just „distributors‟ may give rise to the question if this is allowed or not. The most important difference when selling a system through a distributor or an integrator is where the responsibilities lie. When a distributor sells an M2M system, it is still an M2M system so it is M2M‟s name that is at stake. With an integrator, he more or less buys an M2M system, integrates it and offers a total solution to his

-7- customer. In that case, it is the integrator‟s name at stake and it is more obvious that he will invest in getting to know the technology that he uses. Another thing is that for successfully integrating a PAUT system in an overall solution, a person has to know about the technology already a lot more than distributors who basically link M2M to customers.

This may seem like a fundamental difference in using the systems, but this does not mean that the problem cannot be approached in the same way for distributors and integrators. The same issues were reported for integrators as well as for distributors, but on average the integrators are expected to have more knowledge of the systems, so probably the problem will exist more for distributors. However, the approach of the problem is applicable for both distributors and integrators. This can be illustrated with an example: when M2M delivers a system to a distributor, they expect the distributor to know the system and be able to teach the customer about it and solve minor problems that occur. When M2M delivers a system to an integrator, the same expectations hold. For both integrators and distributors the number of sales will be influenced by their knowledge of the system.

1.1.3 Distributor relationship

Most of the distributors have a contract with M2M which states clear rules and guidelines, but some distributors do not have a contract because they do not wish to have one. This may be a sign indicating that they have a low commitment to the relationship between them and M2M, but even when a contract is present the knowledge management is not optimal in some cases. The contract clearly states training and technical assistance as a part of the mission of the distributor, but this does not mean that they actually put in a lot of effort to perform this task as good as possible. It is difficult for M2M to hold their distributors accountable for this without using coercive power, and it is preferred to avoid these practices. M2M indicates that they feel some relations are sensitive, and this points to the trust not being very high in some relationships. It is very likely that this hinders the relationship from being successful. It is not expected from the distributors to know the technology and products of M2M fully; this would be an impossible task because of the great complexity of the products and

technology. M2M itself provides the initial three-day training when a customer buys a system, also when this happens through a distributor. M2M also provides a helpdesk function, for when customers have very advanced questions that cannot be answered by a distributor.

1.2 Problem statement

When it comes to selling M2M products, which are high-tech and very specialized, a big part consists of considering how and if M2M products can cope with a measurement challenge presented by a potential customer. This is why it is very important for people who are selling the equipment to have a good understanding of the technology and capabilities of the products of M2M. It is also argued that customers value the fact that there is customer support

available in their own country. These facts imply that it is important for distributors to know the products and the technology, but in practice this is not always the case.

For understanding the problem better and for preliminary exploring possible solution

directions, two interviews have been done. With the results of these interviews as well as with continuous discussion within M2M, a cause and effect diagram is drawn (see appendix I) to get a better view on the 'problem mess' (Aken et.al., 2007). Because the two interviews were

-8- done with a distributor and integrator who both do a good job in knowledge management, there may be some limitations for this cause and effect diagram. This should be taken into account when using this cause and effect diagram, and preferably it should be verified by other distributors with which M2M does not have a great relationship.

Especially the first interviewee does not agree with the link between the commitment of the distributors and their knowledge management performance. He takes a strong stand in the fact that the only reason why distributors have poor knowledge management is because they are not specialized in UT. In the cause and effect diagram, as much opinions and viewpoints as possible were included, and the fact that this interviewee did not agree with this link was not enough to exclude it from the cause and effect diagram. The differing opinions on this point make it an interesting issue to take a look at.

„No local troubleshooting‟ and „no local service‟ are expected to lead to lower sales because when a potential customer sees that the distributor does not understand the technology fully, he may turn to another supplier who is more specialized. He would also have a reason to doubt the service after he has bought a system, because he will not have a specialist in his own country to help him when problems occur.

From the cause and effect diagram, it can be seen that „no local service‟ and „no local

troubleshooting‟ are not the only effects of poor knowledge management from distributors. A lot of prospects are sent to M2M which have no relevance to M2M products and a lot of questions are asked which consume time. These last two implications of distributors with poor knowledge management are seen most prominently at M2M and can be quantified more easily than the first two. With some bold estimations, the cost of the time spent at M2M answering simple customer questions is quantified. By measuring the time that is spent answering different types of questions, and by comparing the amount of questions answered by distributors to the amount of questions expected to be answered by distributors, the

estimated financial implications are 17.000 euro every year (see appendix II for the time-spent questionnaires and appendix III for the results). The amount of questions the distributors are expected to answer, is based on the existing margin they already get over the sales. Although there exists a contract in most cases, this factor is difficult to measure and as said before, it may be difficult to hold the distributors responsible for it.

However, this time spent on customer questions is only a small part of the consequences of poor knowledge management of distributors. The expected wins by increased sales are much higher; when one considers that an average M2M system costs 100.000 euro, only a few more sales per year are necessary to make the financial wins significant. This part of the problem is difficult to quantify, because it is difficult to say how much more systems a distributor will sell when he has an increased understanding of M2M systems. However, with plain logic it is reasonable to assume that when a customer is about to spend 100.000 euro on a measurement system, he will be more likely to buy it when he is talking to a distributor who knows what he is talking about. Also, when a distributor knows M2M‟s systems, he understands better if an M2M system can solve a problem presented by a potential customer.

As also seen in the cause and effect diagram, the presented problem is expected to have more than one cause, of which not all are easily influenced. Things like M2M products being only a fraction of the total turnover of the distributor, the products being high-tech, distributors not specialized in UT and distributors not having a technical background, will be difficult to influence directly. On the basis of this fact it is chosen to focus on the margin and relationship part, thereby also limiting the scope of the research so it will not be too broad. Focusing the

-9- research on these two factors will result in the literature framework being build around these factors, but the other factors will not be neglected. It could turn out that in some cases the margin and relationship are not a problem at all, but because of all the other factors the knowledge management cannot keep up. When this would be the case, it may be wise to replace the distributor in question for another one. Finding out how M2M can improve the relationships with their distributors will also be useful in all future distributor relationships.

1.3 Research question

This research will look into ways of increasing a distributor's knowledge management. Based on the problem M2M encounters a main research question is formulated in the following. Where the normal procedure would be to formulate some sub-questions, the author feels that it is more useful to first provide a literature framework before breaking up the question in smaller pieces.

The research question for this research is:

“What can high-tech spin-off SME’s do to increase the knowledge management performance of their distributors?”

In the cause and effect diagram in appendix I, two factors are indicated which are regarded to be easily influenced directly and might lead to distributors improving their knowledge

management; increased distributor margin and an improved relationship. From earlier

experiences at M2M, it is learned that just increasing the distributor's margin does not always give the desired result; distributors may even take advantage of this. A strong relationship is seen as a fundamental prerequisite for inducing distributors to gain good understanding of the products and to provide good customer support.

The relationship between a supplier and a distributor is very complex, and it will be valuable to know not only if this will help to increase the distributor's commitment and knowledge management, but also what the most important aspects of the relationship are for this cause. With this knowledge, the supplier knows where to focus on. Next to the relational factors, financial incentives such as increasing the distributor margin will be addressed as well. The literature presented in chapter two will give a better understanding of the problem and this will be presented in a conceptual model. In chapter three, the research design, it will be explained what will be measured and how the data will be acquired. After presenting and discussing the results in chapter four, conclusions and recommendations will be given in chapter five, where the research question will be answered. This report will view the presented problem from a unique angle, thereby contributing to the channel relationship literature in an exploratory fashion.

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2. Literature framework

Channel relationships are both social as well as economic according to Stern and Brown (1969), and it is interesting to notice that these two sides of channel relationships are found also in the cause and effect diagram in appendix I, as the two factors that M2M can directly influence to decrease the presented problem. There may be a slight focus on the social aspect, because increasing the distributor margin to increase the technical support of a distributor was already tried one time. This did not give the desired results and even when every issue is agreed upon in a formal contract, there is no guarantee that the desired result is achieved. Although there is reason to believe that the social factors may be more crucial, the economic side will also be covered with literature.

The main goal of this chapter is to provide a framework describing in which context this business problem will be considered, and to do some preliminary research to influencing factors in the management problem of M2M. In the sources of literature, depending on the perspective, different terms were sometimes used for the same things. In an international context, the two parties of a relationship were sometimes referred to as exporter-importer and in some other studies as the manufacturer-integrator, but to avoid confusion, in this research there will always be spoken about the relation between the supplier and distributor.

First, the social side of the channel relationship will be elaborated and after that the economic side will be given some attention. In the third part of this chapter, the two sides of the channel relationships are integrated and presented in a holistic conceptual model.

2.1 Social side

There are three main bodies of literature that will be discussed in this part about the social side of the relationships. In a sense, they will sequentially zoom in on the topic of interest. First, literature about how a distributor can provide value is discussed, then literature about ways in which a company can strengthen the relationships with its distributors and finally literature about distributor commitment will be discussed.

2.1.1 Distributor value

Traditionally, distributors are defined as “firms that resell products and provide attendant services to other firms for use in the production of those firms‟ goods and/or services” (Anderson and Narus, 1984). The role of distributors has changed in the past decades from only improving the operational efficiency of suppliers because of the rise of the internet (Mudambi and Aggarwal, 2003); in their article, they provide a model in which they divide the value distributors can add in three categories for as well the suppliers as for the customer. These three sources of value are given below, with –because this view is the most relevant in this research- a description of added value to the supplier:

1) Customer relationship management; This is the value a distributor adds because the supplier does not have to manage all the contacts with the customers. A distributor can

-11- also build strong relationships with the customers, and build a big customer base which enables future growth. Although this form of value adding should not be neglected, for M2M, this is not the most urgent form of value at this moment. M2M does not have a lot of customers in number; about two hundred in total. With the biggest customers in Europe, M2M manages the relation themselves.

2) Production and operation management; This is the value added through order processing, in activities such as; order taking, order fulfillment and managing logistics. This is not most relevant for M2M either, because of the specialized products with a low number of sales. When there are a lot of customers and a lot of sales, this issue will become more complex, but for the moment distributors can add more value by focusing on the third part:

3) Knowledge management; This part is split up in three ways of adding value. First,

technical product knowledge includes understanding of the physical capabilities of the

product, the relative advantage of one choice over another, and relevant technical choice criteria. Second, they can add value with technical process knowledge which includes technical support and troubleshooting when something goes wrong. Third and last, a value adding source is market knowledge, and this is the communication of the market needs and trends to the supplier. Knowledge management is reported to be a difficult way for distributors to add value, because distributors encounter difficulties in protecting their value-added investment and to ask money for it; this translates the great challenge faced in this research.

It should be noted that in this paper, knowledge management is defined as the

technical product knowledge and technical process knowledge, and that it does not

include market knowledge. This decision is made because the problem statement evolved around the first two parts, and it is not about market knowledge. In this paper,

knowledge management is seen as the most relevant way for distributors to add value

for M2M.

Although every source of value is important, in the light of M2M‟s management problem, the focus will be on technical product knowledge and technical process knowledge and how these can be stimulated. Because the article of Mudambi and Aggarwal (2003) investigates if and how distributors can survive in the new economy, it takes a strong distributor perspective. They emphasize on the importance of trust and communication and state that the perceived trustworthiness of the distributor and ongoing communications about its value adding sources are preconditions for the actual value-adding.

In the next section, we will zoom in on the relation between the distributor and the supplier, because this is where M2M can make changes and influence the behavior of the distributors; the key of increasing the value adding behavior of distributors from the supplier‟s perspective could lie in this area.

2.1.2 Distributor relationship quality

There is a good consensus in the literature that the quality of a relationship constitutes of more than one interrelated factors, but what these factors are remains discussable. In their research to factors determining relationship quality, Skarmeas et al. (2008) use trust, commitment and satisfaction as the three factors where a quality relationship is made of.

-12- These three cornerstones of a quality relationship are likely to occur sequentially, that is; without trust, commitment is unlikely to occur (Morgan and Hunt, 1994) and without trust and commitment, satisfaction is unlikely to occur (Geyskens et al., 1999).

Skarmeas et al. (2008) investigate specifically international distributor-supplier relationships, and find that psychic distance has a negative influence on relationship quality, and it could be reasoned that this is partly if not mostly because of communication difficulties. In their article they also find a positive relation between two exporter characteristics -role performance and

transaction specific investments- and the relationship quality.

The first one, role performance, is about how well the supplier performs its role in

comparison with the industry average. Good performance induces trust because the distributor will realize that the supplier is reliable, continuous and consistent. It will induce commitment because it shows that the supplier is working hard

and finally it will induce satisfaction because the supplier helps the distributor achieving its goals. Transaction specific investments (i.e. investments specific to the relationship, where the supplier cannot retrieve its investment in the case of relation termination) such as providing training to the distributors, induces trust because it shows a willingness to share risks. Because such

investments show commitment from the supplier side, it induces commitment at the distributor side and more satisfaction is created because

transaction specific investments are likely to add value for both partners.

The conceptual model used by Skarmeas et al. (2008) is given in figure 1. The environmental uncertainty was not found to be related to the relationship quality.

Siguaw et al. (1998) test the influence of a supplier‟s market orientation on relational factors in a supplier-distributor setting. They include one more factor determining relationship quality than Skarmeas et al. (2008), namely distributor cooperative norms. This is achieved when the distributor feels that he is working together with the supplier towards the same goal, and it is put between trust and commitment in the sequential steps of a quality relationship.

They found that the supplier‟s market orientation is directly positively related to distributor commitment because market oriented suppliers are perceived to be very devoted from the distributor perspective.

Of all determents of a quality relationship, commitment is regarded to be the most relevant for this research. This is because with commitment, the distributor has the desire to develop a stable relationship and a willingness to make short-term sacrifices to maintain the relationship (Anderson and Weitz, 1992). It is argued that in such a state willingness to invest in

knowledge about the M2M systems is likely, and that is why we will zoom in on distributor commitment in the next section.

Figure 1: Conceptual model of Skarmeas et al. (2008)

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2.1.3 Distributor commitment

Commitment is often regarded as a single variable, but Kim and Frazier (1997) divide commitment in three components; continuance, behavioral and affective commitment.

Continuance commitment is the desire and need of the distributor to continue the relationship in the future, behavioral commitment is the amount of help a distributor offers in times when this is needed and affective commitment is the personal bond that is felt and the feeling of working together to the same goal. This last component seems to be equal to the extra component of quality relationships that Siguaw et al. (1998) propose in their research (distributor cooperative norms); next to commitment instead of as a part of commitment. Anyhow, for the purpose of this research, we adapt a slightly different view on commitment. Kumar, Scheer and Steenkamp (1995) also identify three components; affective commitment,

expectation of continuity and willingness to invest. The first two are similar to the continuance

and affective commitment of Kim and Frazier (1997), but willingness to invest is not the same as behavioral commitment to the opinion of the author. Because this willingness to invest is just what we are looking for in this research, we will adapt the three-component definition of Kumar, Scheer and Steenkamp (1995).

Kim (2001) investigates on distributor commitment ánd supplier commitment, with taking into account not only factors in the relationship between the two, but also environmental conditions at the customer base. Because suppliers tend to regard distributors and customers in one as their downstream channel, environmental conditions at the customer base play a major role for supplier commitment. Distributors on the other hand tend to treat the customers as their downstream channel and their suppliers as their upstream channel, and that is why distributor commitment is not affected by these environmental conditions. An overview adapted from Kim (2001) of these different viewpoints is given in figure 2. The fact that distributor commitment is thus a function of primarily the relationship factors, is important because this emphasizes on the importance of suppliers to focus on relationship factors. The most important factors influencing distributor commitment found by Kim (2001) are trustworthiness of the supplier, dependence of the distributor on the supplier and in a lesser fashion transaction specific investments of the supplier (not to be confused with the transaction specific

investments we desire from distributors in this research).

Figure 2: Two different views on commitment (adapted from Kim, 2001)

-14- Goodman and Dion (2001) investigate a lot more factors and because of its explorative nature it is an interesting article to look at for this research. Although they find differences in amount of impact, they do not discriminate between this in their final model. They find a total of seven influencing factors which will be described below:

1) Anticipation of trust; one of the factors influencing a distributors commitment is to which extend the distributor perceives the supplier to be trustworthy; i.e. that the supplier has the ability to provide expertise, direction and that they can be depended on (Moorman et al., 1993).

Trust is probably the most mentioned term in literature about distributor commitment and relationship quality. Skarmeas et al. (2008) use it as a measure of relationship quality and Siguaw et al. (1998) find that trust increases distributor commitment indirectly; by increasing the feeling of working towards the same goal (distributor cooperative norms). As mentioned before, we assume this to be equal to affective commitment which we regard not as a determent but as a component of commitment. From this viewpoint, it does directly affect commitment. The relation between trust and commitment is strengthened even more by Mudambi and Aggarwal (2003) and Kim (2001) who see trust as one out of two/three determinants of relationship quality/commitment.

2) Effective communication; three aspects of communication that make for a quality relationship were identified by Mohr and Spekman (1996); setting goals and perform market planning together, high quality communication and the extent of sharing information in the partnership.

Mudambi and Aggarwal (2003) mention communication as the other variable for quality relationships next to trust, and it is argued that the negative relation between physic distance and relationship quality found by Skarmeas et al. (2008) is caused mostly because the aforementioned aspects of good communication are simply more difficult when the physic distance increases.

3) Idiosyncratic investments; also being called transaction specific investments, these are type of investments which are dedicated to a particular relationship and cannot be easily used in other relationships (Williamson, 1985).

In their chapter of literature, Goodman and Dion (2001) first write about investments made by distributors, and after that they write about investments made by suppliers; both in the light of influencing distributor commitment. Unfortunately and

surprisingly, they do not give any references in the first part about distributors making transaction specific investments influencing their own commitment, and in their research they only measure the influence of suppliers making transaction specific investments on distributor commitment. This is a pity, because one could argue that when a distributor makes an investment specifically for one relationship, they will be more committed to stay in that relationship. In fact, Heide and John (1988) find that transaction specific investments made by the distributor serve as a barrier to exit and Bendapudi and Berry (1997) confirm that these investments increase the dependence of the distributor on the supplier and this is mentioned as a source of commitment later on in this paper. Other sources that prove transaction specific investments have a positive impact on distributor commitment (Kim, 2001 and Skarmeas et al., 2008) are not consistent in their use of this term. Skarmeas et al. (2008) very clearly take into consideration only the investments made by the supplier, and Kim (2001) takes into

-15- consideration both investments made by the supplier and investments made by the distributor himself.

In this research, the goal is to increase the commitment of the distributors, so they will make a bigger investment in their knowledge management performance. Because an investment of the distributor could be seen as the end goal of this research, it makes sense to just look at the investments made by the supplier when we speak about transaction specific investments for increasing distributor commitment. It is worth noting that when the distributor will make investments in the relationship, he is also likely to get more committed to the relationship.

4) Manufacturer’s strengths; this is defined as how well the supplier carries out its role in comparison to other suppliers in the industry (Kim, 2000).

Skarmeas et al. (2008) prove that role performance of the supplier has a significant positive impact on distributor commitment. It is however argued that this positive impact may be indirect, because when a supplier stands out because of its good performance it will increase the dependence of the distributor on the supplier (Frazier et al., 1989). Siguaw et al. (1998) explain that the market orientation of the supplier has a positive impact on the commitment of the distributor because they see that the supplier spends considerable resources on satisfying customer needs. Although also strong linkage with transaction specific investments, this is regarded to be extra evidence for manufacturers strength increasing distributor commitment.

5) Dependence & power; these two factors were taken together in one, because they are highly interrelated. Dependence is how much trouble is encountered when the

distributor does not have access to the products of the supplier; when this is very high, the distributor is dependent on the supplier, and the supplier has relative power. French and Raven (1959) identified five kinds of power: expert power, reference power, legitimate power, reward power and coercive power. Because with this view the social and economic view are starting to blend, it will be discussed in more detail in the chapter on the economic view. Although not mentioned by Goodman and Dion (2001), it is argued that the legitimate power is the only form of power that is induced by dependence.

Kim (2001) also finds proof that dependence of a distributor on the supplier increases his commitment, confirming this relationship.

6) Product salability; this is defined as the distributor perceiving the products of the supplier as having value, being useful, of good quality and coming with good service. It is argued that because the relationship is centered around the products of the

supplier, that this has a great impact on the distributor commitment.

7) Ease of sale; while having some overlap with product salability, this is not so much about the product being valuable and of high quality, but more about how much effort the distributor has to put in to sell a product of the supplier. M2M‟s products are very difficult to sell, and this was already noted earlier when constructing the cause and effect diagram. With the term “lot of after sales” already being part of the cause and effect diagram, this factor is regarded to already being covered.

-16-

2.2 Economic side

Mortanges and Vossen (1999) have an interesting view on the economic and social side of a channel relationship. They distinguish between three methods of controlling foreign

distributors:

1) Outcome-based control; where the supplier assumes that the distributor knows best how to achieve goals. There are no standard operational procedures but rather goals which are measured periodically (Snell, 1992). When the goals are met, the distributor gets the appropriate financial award.

2) Behavior-based control; with this method there are standard operational procedures, and the distributors get financial awards not by measuring the achievement of goals, but for conducting certain behavior. For this control mechanism, the supplier should know exactly what he wants the distributor to do.

3) Relational approach to control; this control mechanism refers to the fact that there is a form of trust in every relationship and that it is assumed that the distributor will do what is best for the relationship, without frequent monitoring (Merchant, 1985). This approach relies on norms that exist in the relationship and trust from both sides. The first two control mechanisms can be seen as the economic side of the relationship, and the last one can be seen as the social side of the relationship. In the article, it is stated that these three approaches to control are not mutually exclusive, the challenge is to find a good combination of performance measurement and socialization (Ouchi, 1979). Further, they mention that when designing a control system, the relational approach is at least as effective in improving performance as is setting behavior- and outcome-based standards (Mortanges and Vossen, 1999). Although relevant enough to be mentioned, in this research this view will not be adopted, because previously we hypothesized that the „relational approach to control‟ is not something separate but rather a prerequisite for the „performance measurement

approach‟ to be effective.

French and Raven (1959) identify five forms of power, and in this framework financial incentives can be seen as a form of power. The five forms are explained below:

1) Expert power; This is the power that is present because the supplier has more

knowledge than the distributor. When the supplier's representatives are regarded to be professionals in the field, power is generated when the distributor becomes reliant on this.

2) Referent power; This kind of power is generated at the emotional level in the supplier-distributor relationship. When the supplier-distributor admires the supplier's representative on a personal level, this creates power for the supplier. It is tempting to see this form of power as what is created by increased distributor commitment, but this is not exactly the same. For example; when an employee looks up to his manager, or even when a fan looks up to a celebrity, he will be inclined to do what this person asks from him; this is referent power. The supplier's representative can increase this by being very charismatic, but the distributor's commitment is regarded to have a broader scope than only the interpersonal relationship between representatives.

3) Legitimate power; This was mentioned before when discussing the dependence part of commitment enhancing factors, because it is the natural power that exists because of

-17- the position of the supplier relative to the distributor. This power depends on the dependence of the distributor on the supplier.

4) Reward power; This refers to the power that exists because of the ability of the supplier to reward the distributor with any kind of advantage, including financial. 5) Coercive power; To put it simply, this is the application of negative influences to

reach a goal. For example, a supplier can threaten to terminate a relationship with a distributor, exerting power over the distributor.

Reward power is one form of power in this framework, and in that sense financial incentives can be seen as a form of power. From this classic categorization of French and Raven (1959) some other classifications are made throughout the years. Etgar (1978) defined the first three types of power as non-economic and the last two types of power as being economic. Kasulis et al. (1979) classified the first three as indirect power and the last two as direct power. Johnson et al. (1993) grouped reference, legitimate and coercive power together as

authoritative power and expert and reward power as nurturing power. This is just to indicate

that a lot of different classifications are made during the years, but a well spread and widely used classification is made by Molm (1997) who kept the term coercive power and named the other four types of power non-coercive power. This will be the basis of our use of the term power as well, but there will be made a distinction between using financial incentives or not when non-coercive power will be put in the conceptual model.

While some articles emphasize on the danger of using coercive power whereas it may cause retaliation and in turn low channel performance (Rokkan and Haugland, 2002), Yeung et al. (2009) find that when trust exists between the two parties, coercive power has a positive effect on channel performance. Because trust is an important part of commitment, this relation is expected to hold for commitment as well.

Non-coercive power is still seen as more desirable, because it is found that the utilization of less coercive power brings a greater sense of satisfaction for the distributor (Lawler and Yoon, 1993). Moreover, Weitz and Jap (1995) found that most of the effectiveness of the use of power comes from non-coercive forms of power.

The use of financial incentives to promote the distributor learning about the technology is seen as a form of non-coercive power. Other forms of non-coercive power in this case are simply asking them to increase their knowledge and informing them about the positive effects it may have for them if they know more about the technology. For all these forms of non-coercive power (reaching from offering financial incentives to asking a favor), the same thing as with coercive power is hypothesized; it will not be effective if the distributor's commitment is low.

2.3 Conceptual model

Following the literature, the factors influencing the distributor commitment are drawn in a conceptual model as well as the way that distributor commitment is hypothesized to influence the distributor's investment in knowledge management (see figure 3).

-18- Distributor commitment Distributor investment in knowledge management Anticipation of trust Effective communication Investments from supplier Supplier strengths

Product salability Use of coercive

power by supplier Use of referent power by supplier Use of reward power by supplier Distributor dependence

Figure 3: Conceptual model

It can be seen that the factors that will be investigated as influencing distributor commitment only differ slightly from the ones proposed by Goodman and Dion (2001), because this is found to be the most elaborate research on this topic. Because power is covered in the right part of the model, “dependence & power” is turned into only “dependence”. It can be noticed that “ease of sale” is left out completely; this is done because this is regarded as something that cannot be influenced easily and moreover, the factor “lot of after-sales” from the cause and effect diagram seems to cover this factor. In this way, it falls outside of the relationship factor influencing distributor commitment.

Because a part of distributor commitment is willingness to invest (Kumar, Scheer and Steenkamp, 1995) it is argued that with higher distributor commitment they will be more likely to invest in knowledge management (one of the three forms of value a distributor can add according to Mudambi and Aggarwal, 2003). It is not certain if an increase in

commitment will increase the knowledge management of distributors in itself, or that it will make the use of power more effective, and that is why all these links are drawn in the conceptual model.

When referent, reward and coercive power are included into the model, it may seem like expert and legitimate power (the other two forms of power from French and Raven, 1959) are neglected. However, these two forms of power are covered in the “distributor dependence” factor, which is hypothesized to influence the commitment of the distributors. They were not included as forms of power which could be utilized, because practically, they are not really forms of power which can be used, but rather it are forms of power which make the use of power in general more effective.

Sheu and Hu (2009) find that the use of coercive power is negatively related to distributor commitment, and that the use of non-coercive power is positively related to the distributor commitment. This would imply that there could be a positive vicious circle when using non-coercive power, in contrast to using non-coercive power. While these relationships are outside the scope of this research, the advantages of the use of non-coercive power over coercive power should be kept in mind.

-19-

3. Research design

M2M has six distributors and five integrators (hereafter called simply „distributors‟ again), of which with two distributors already an interview was conducted to get a good view on the problem. These interviews were possible because of the good relationship that exists between M2M and those distributors. M2M managers indicated that with other distributors an

interview will be more difficult because of the distance and language or because of a sensitive relationship, which may be pointing to a communication barrier or a lack of trust in the

relationship. However, it is possible to send a structured questionnaire to all distributors. In this way, the M2M managers can check if the questionnaire is appropriate or not.

Because there are only eleven distributors to whom there can be sent a questionnaire,

statistical techniques and quantitative analysis are not appropriate. Sending the questionnaire to more respondents within the distributors does not make sense, because there is one contact person at every distributor who is in contact with M2M. Because the results should be

analyzed qualitative, it is very important to stimulate the respondents to comment at the questions. Also, the questions will not only be based on the conceptual model which was created after the literature study, but questions will be constructed to further deepen the understanding of the problem as well.

The goals of the questionnaire can be divided in three parts. The first part is to validate the cause and effect diagram; to see if the distributors agree with the links drawn in this diagram, or if their perspective on the problem is totally different. This is important, because the interviews on which the cause and effect diagram was partly based, were done with

distributors with a good relationship with M2M. To overcome this limitation and get a better understanding of the problem it may be wise to find out if there are links in the cause and effect diagram which are not supported by most distributors.

The second part is to find out if they feel the different issues from the cause and effect

diagram apply to the relationship between them and M2M. In this part, there will be included some statements about how they feel they perform knowledge management and some solution oriented statements.

Finally, in the third part the factors of the conceptual model will be measured and from this, exploratory conclusions will be drawn. Unfortunately, there will not be enough data to statistically prove or reject the different parts of the model. To measure the right part of the model (i.e. the knowledge management performance of the distributor and the effectiveness of the use of power by the supplier), a questionnaire will be made for the three managers of M2M, who know and deal with the distributors. This will give the most reliable outcome possible. It will also be interesting to compare the rating M2M managers will give to the knowledge management performance of the distributors, and the rating they give their selves for knowledge management.

The questionnaire as it was sent to the distributors can be found in appendix IV; it is divided in the three parts described above. The questionnaires were adapted slightly for integrators, for example terms like margin are not totally applicable for integrators. The meaning of the question was always kept the same. One factor which could influence the outcome of the questionnaire is who fills in the questionnaire at the distributor. When this is somebody with a wide span of view who knows about the competitors products as well, the answers could be

-20- different than somebody with a lower function in the company. This is not expected to be a big issue because the contact persons M2M has with the distributors are always either the general manager or the manager of a measurement system department, but just to be sure some general questions are asked before the actual questionnaire, such as the amount of employees of their company, the amount of measurement equipment suppliers and their function in the company. The questions are discussed more per part in the following.

Part I:

As said before, the goal of this part is to verify the cause and effect diagram in a general fashion. For every link in the cause and effect diagram where it was possible to formulate a statement, one was created. This resulted in a total of ten statements to measure how much the distributors agree with the cause and effect diagram without taking into account whether or not they felt the problem existed between them and M2M. For example, the statement for the link between a supplier‟s products being only a small percentage of a distributor‟s assortment of products and their commitment to that supplier is:

If suppliers supply a big part of our assortment of products, we are more committed to having a good knowledge of the products of that supplier

Part II:

The main goal of this part is to see if the distributors feel the links of the cause and effect diagram are problematic in their collaboration with M2M. Because this was difficult for the right part of the cause and effect diagram, it resulted in six statements derived directly from the cause and effect diagram (statement 5 – 10). To illustrate the difference with part I, an example statement is given for the same link as the example in part I (The products being only a small percentage of their total assortment influencing their commitment):

Because M2M’s products are only a small portion of all our products, we cannot know everything about their systems

Statement 1-4 were formulated to find out what the distributor‟s perception is of his own performance regarding knowledge management. It was asked how much they felt familiar with the basic capabilities, the advanced functions, the underlying technology and if they answered most of the customer questions about M2M‟s systems.

Statement 11-14 were formulated to find out if they felt the knowledge management could be better with a better relationship, with more training, or with an increased margin. Part II concluded with an open question to see if the distributors had some suggestions or remarks about improving their knowledge management performance.

Part III:

The goal of part III is to measure the factors from the left part of the conceptual model as reliable as possible. When the factors are known, this could indicate if the proposed connections are likely to be valid or not. Also, the averages of some distributors who do a good job in knowledge management can be compared to the averages of some distributors who do a poor job in knowledge management. This can serve as a good indication of what factors are most important for improving the knowledge management of the distributors. The

-21- statements used to measure the factors of the model should be as reliable as possible, because this will determine how much there can be concluded from the results. The more a

measurement scale has proven itself in literature, the more can be said about the results. An elaborate motivation for why the statements were selected is given in appendix V. The result is three or four statements per factor (trust, communication, investments, strengths,

dependence, salability and commitment) with a total of 24 statements. When averaged, these will be reliable measures for the factors.

Most commonly, responses were measured on 7-point Likert scales in literature, and this method is adapted in this research. A measurement scale with an even number of points (to make a choice necessary) is not necessary for the statements used in this questionnaire, because the expected „easy answers‟ are not around the middle, but rather on one end or the other.

To measure the right part of the conceptual model, it was chosen to design a questionnaire for the three managers of M2M, which can be found in appendix VII. The managers of M2M can best judge how well the distributors perform knowledge management, and how effective the different forms of power are on the distributors. The first question of the questionnaire is how familiar the different managers are with the distributors, so the final average scores of the distributors can be calculated fairly.

For the convenience of the respondents, the questionnaire was digitalized using the forms function of Google Docs. This meant that the respondents could fill in the questionnaire online, making it less time consuming. This is expected to increase the number of people who will actually finish the questionnaire.

In some cases, the results will almost inevitably be biased, for instance when measuring the commitment of the distributor. This should be taken into consideration when analyzing the results.

-22-

4. Results and discussion

4.1 Distributor ranking

The first interesting thing is to rank the different distributors with respect to their knowledge management performance. For who filled in the questionnaire, it is interesting to see what they think of themselves with regard to knowledge management performance as well. Throughout this chapter, results will be clarified by identifying them with color codes. This will create a clarifying overview for the reader. The color codes will be applied to a seven point scale. The color code in this paper will be used as indicated in figure 4.

Figure 4: Color code used in this paper

When this color code will be used on averages, where round numbers are not likely, the number will be rounded off to select a color.

Because the rating of the managers was measured on a five point scale, it was converted to a seven point scale to be able to compare it with the distributors their own perception of how they perform in knowledge management.

The results of the ranking based on the questionnaire for M2M managers and the results of the respondents‟ perception of their own knowledge management performance is given in figure 5. The „own perception‟ is calculated by taking the average of statement 1-4 of part II of the questionnaire (that is; familiarity with basic capabilities, advanced functions, underlying technology and if they answer most of the questions of their customers).

Figure 5: Manager rating and own perception of knowledge management performance

The first thing to see is that a total of seven people responded to the questionnaire, from the total of eleven that were sent. Fortunately, the people who did fill it in are quite equally divided over the chart, which enables the division between two categories of distributors. The

-23- upper four distributors (distributor A, B, E and G) will be grouped together as proficient distributors, and the lowest three distributors (H, I and K) are grouped together as deficient distributors. The knowledge management performance of the distributors was measured by giving the managers five rating options. The proficient distributors are defined as the

distributors who score “Deep understanding of underlying technology” or “Good knowledge”. The deficient distributors are the ones that score “Sufficient knowledge” and lower.

As can be seen, the proficient distributors‟ own rating is either quite accurate or it is slightly below the rating of the M2M managers. Distributor H, actually the only integrator who responded to the questionnaire, underestimates himself when it comes to their knowledge management performance. Actually, the CEO of Distributor H who filled in the questionnaire has a PhD in phased array ultrasonic testing, but the problem is that his entire team is used to using conventional ultrasonic testing. This makes it difficult for him to promote M2M systems for integration by his engineers.

The bottom two distributors overestimate themselves a lot when it comes to knowledge management. This may be because of the fact that they are not engineers but business people, who are less doubtful about their own knowledge. This is an important issue, because if they do not realize that they actually do not know a lot about the systems, they will not be inclined to learn more about the systems.

4.2 Results part I

Because every question from part I of the questionnaire represents a link from the cause and effect diagram, it makes sense to analyze the results using the cause and effect diagram as well. The cause and effect diagrams with the opinions of the distributors are shown in appendix VII. The order of distributors is determined by the ranking of chapter 4.1, with the best distributor first.

The results are not averaged right away, because important results could be leveled out by this. When there would have been more respondents, this would not have been a big issue, but because of the limited amount of data it is wise to first look at them individually. The first thing that can be seen is that Distributor A agrees on all links except for one: a lot of after sales influencing the distributor‟s commitment. It makes sense that Distributor A agrees on most of the links, because the cause and effect diagram was constructed partly based on the interview that was done with Distributor A. When there was a certain link found to be strangely deviating from the others and the respondent happened to give a comment on that question, the comment was included in the cause and effect diagram. For example, Distributor E indicated that he agrees with the „lot of after sales‟ influencing his commitment. With this statement he commented that the customer expects the equipment to run without trouble, and that he wants to provide this. Distributor G says the same thing at this link, but most people agree with Distributor H that all NDT products have a lot of after sales tied to it. This can be seen in the cause and effect diagram with averaged values of part I in figure 6.

-24- Poor distributor commitment

Lot of time spent at M2M answering simple customer

questions

Poor distributor knowledge management

No filter of prospects, lot of irrelevant prospects sent to M2M

Low sales Low customer satisfaction

Low distributor margin High-tech, specialized products

(niche market) Distributor not specialized in UT M2M products only small

percentage of distributor turnover

Weak relationship Distributor without background _{in technology}

No local service coverage after sale

No local trouble shooting when problem is presented by potential

customer Lot of after-sales

Figure 6 : Average part I; color code from figure 4 was used.

(Green = distributors agree with the link, red = distributors disagree with the link)

Fortunately, there is a good consensus about the positive effects that a good knowledge about the systems will have on the sales and customer satisfaction of the customers, as well as the performance of distributors in answering customer questions and filtering prospects (as can be seen in the right part of the diagram). In the left part, only the „lot of after-sales‟ leading to poor distributor commitment is mostly not agreed upon, the distributors agree mostly on the remaining five factors. Most of the times for these factors, there are one or two distributors who partly or mostly disagree with the link.

When the cause and effect diagram should have been drawn again, „lot of after-sales‟ would be left out.

4.3 Results part II

In this part, the distributors were asked if they found the different presented issues to be a problem in their relationship with M2M. Because there is a clear difference between something being problematic or something where improvements could be made, some questions were asked about if the knowledge management could be improved under certain circumstances as well (more training, bigger margin or better relationship).

Because when distributors agreed with an issue being a problem would yield a green color, this would give a counterintuitive overview of the results. Because the color code was meant to clarify the results and not to confuse the reader, the links were given the opposite score in this paragraph. This means that the „problematic‟ links will be colored red.

The results per distributor are given in appendix VIII, and they will be discussed below. 1) Distributor A, as the first one in line, indicates that his knowledge management

performance cannot be improved by more training, a bigger margin nor by a better relationship. This is because he finds that he knows the systems of M2M (and the M2M managers agree with this) so there is nothing to improve. He does indicate that with a higher margin, he would have more possibilities for developing and growing his activities.

-25- 2) Distributor B points out that their commitment is independent from the margin they

get, and this could be explained by the fact that they are Japanese. In the Japanese culture, people have a sense of collective identity more than in the western culture (Hofstede, 1980). Because of this group orientation, Japanese managers have a high priority on developing strong partnerships with other firms (Lohtia et.al., 2005). 3) Distributor E and H are the only two who indicate that the fact that M2M generates

only a small percentage of their turnover influences their commitment to learning about technology of M2M. Probably not totally accidentally, these two companies are the two with the most employees from all the respondents. It is logical that it is more difficult to learn everything about M2M‟s systems, when they only represent a small portion of all the products that are offered. Further, Distributor E indicates as an overall comment that it may be valuable to keep them informed about all new developments and that it may be an idea to provide distributors with a good offer to buy or rent a system for self training.

4) Distributor G emphasizes on the fact that a bigger margin would not have a big impact, but that it is rather on-time support that counts for him to be committed in the collaboration. He also mentions that he thinks a good relationship is what enables knowledge to move, so improvements in relationship will always lead to better knowledge management.

5) Distributor H indicated that a lot of the presented issues play some role in their performance of knowledge management. As was mentioned before, the link they find the most problematic in their situation is the fact that M2M‟s products generate only a small fraction of their turnover. The rest of the factors they indicate to play a role as well, with the least problematic being the margin they get over the systems.

6) Distributor I sees no problem at all, except for the margin they get. They do indicate that their knowledge management could be improved with more training and a better relationship as well. They are the second one to mention that more communication about new systems and applications could increase the knowledge management performance.

7) Distributor K feels that there is no problem at any link. It should however be noted that he does not or only partly agrees with the four links most left of the cause and effect diagram, as was found in part I. The managers of M2M often indicated that they felt Distributor K was only interested in money, and nothing more. That is why it is quite surprisingly to see that he indicated that his knowledge management would not improve with a higher margin, but it could be better with more training and a better relationship.

To see which issues play the biggest role for the distributors, all values were averaged and this was put in the cause and effect diagram as shown in figure 7. The averaged values of the solution oriented statements are shown in figure 8.

-26- Poor distributor commitment

Lot of time spent at M2M answering simple customer

questions

Poor distributor knowledge management

No filter of prospects, lot of irrelevant prospects sent to M2M

Low sales Low customer satisfaction

Low distributor margin High-tech, specialized products

(niche market) Distributor not specialized in UT M2M products only small

percentage of distributor turnover

Weak relationship Distributor without background _{in technology}

No local service coverage after sale

No local trouble shooting when problem is presented by potential

customer Lot of after-sales

Figure 7 : Average part II; see color code from figure 4 was used.

(Green = distributors don’t find the link problematic, red = distributors do find the link problematic)

With more training, KM could be better With a bigger margin, KM could be better With a better relationship, KM could be better

Figure 8: Average solution oriented statements; color code from figure 4 was used.

(Green = distributors agree with the statement, red = distributors disagree with the statements)

When looking at the cause and effect diagram with the averaged results of part II in figure 7, the first thing that draws the attention is the link between the distributor margin and the commitment of the distributors. According to this picture, this link is seen as the most problematic by the distributors. It is tempting to rush in the conclusion that the distributors just want more money, but this does not rhyme with the outcomes shown in figure 8. Here, more training and -even more clearly- a better relationship score higher than a bigger margin as ways to increase knowledge management. When further investigating this issue, it was found that these differences may be explained by how the statements from the questionnaire were formulated. Below, the statements are given which were used to get the opinions of the distributors for the margin and relationship in the cause and effect diagram (9 and 10) and for the solution oriented part (13 and 14).

9) If we would get a higher margin, we would be more committed to learning about the systems of M2M

10) Because our relationship with M2M is not really strong, we feel less committed to learning about the systems of M2M

13) When M2M would increase our margin on the products, we would be better able to perform knowledge management

14) When we would have a stronger relationship with M2M, we would be better able to perform knowledge management