The Commodity Adoption Paradox

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The Commodity Adoption Paradox
Dr. Brad Poulson Business Systems Director,
Retail Operations - Store Systems, Boots The
Chemists brad.poulson_at_boots.co.uk
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Agenda

• Introduction
• Share findings from research I did in a major UK
  retailer
• Background to the research
• Findings
• Conclusions

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Introduction

• My background
• Questions and timing

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Background to the research

• Who architects the business?
• If a process is truly a commodity then why dont
  companies just adopt it?
• The research examines the ability (logic) of
  organisations to adopt commodity work business
  processes

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Overview of the cases
Four case studies taken from within one major UK
retailer and contain the call centres business
process as the focus of the research. They were
chosen for their contrasting approaches to the
business problem and diversity of the final
outcomes thus encouraging theoretical
replication. The ventures were approached as
independent activities and were launched during a
thirteen-month period between March 1997 and
April 1998. The four cases are Loyalty scheme
(LS), Mail order (MO), Insurance (INS), Customer
service (CS).
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The context of Boots The Chemists
"Not many companies today can claim that their
core business activity benefits from the
cumulative experience of trading in the 19th,
20th and now 21st centuries."

• Boots have been operating for 132 years
• 1000 stores by 1933
• 1311 stores upon entering computing in 1960
• Over 500 systems keep our business running
• 80,000 employees

Steve Russell, Boots Chief Executive April 2000 -
May 2003
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Historical context...
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Group structure
The UKs leading lifestyle website for women
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Case Study 1 Customer Service (CS)

• The first of these, Customer Service, is a
  redesigned internal venture
• That developed and implemented a new in-house
  call centre capability.

Boots Customer Services

• Launched March 1997
• Effective management of customer complaint
  handling
• Development of a customer relationship strategy
• Centralised facility handling 1,000 calls and 500
  letters, faxes, and emails daily

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Case Study 2 Loyalty Card (LC)
The second case, Loyalty Card, was a completely
new venture that started with an outsourced call
centre, which was later brought in-house.
Boots Advantage Card

• Launched September 1997
• Loyalty card (Smartcard)
• 4 points for every 1 spent
• Lifestyle positioning rather than discount
• 14 million cardholders (93 women)
• 52 of sales linked to card
• First serious step into CRM
• Advantage Credit Card

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Case Study 3 Mail Order (MO)

• The third case, Mail Order, was another new
  venture but with a
• completely outsourced call centre.

Mother Baby Direct

• Home shopping catalogue
• Launched April 1998
• 1500 products
• Home delivery experience
• Outsourced call centre
• Early Internet ordering capability
• Channel learning's

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Case Study 4 Insurance (INS)

• Finally, the Insurance case is a new joint
  venture with the call centre
• operated by the partner organisation.

Boots Health Travel Insurance
Boots Insurance Services (BIS) provides a range
of health and travel insurance products
including Dental Family Health Accident
Insurance (especially for children).
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Research Methodology

• Longitudinal multiple case studies (over 5
  years)
• Interviews, documents, archives, observation
• Involved with the culture
• Three techniques Activity Records (Werner
  Schoepfle 1987) Strategic Choice Analysis
  (Friend Hickling 1987) Actor Network Theory
  (Callon Latour 1992)

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Terminology (i)

• Commodity work business processA process that
  is not specific to any particular business, is
  readily obtained, and is more or less equally
  valuable to any number of businesses
• Leveraged business processA process that, while
  not specific to a particular company, is more
  valuable to it than to others
• Proprietary business processThe
  company-specific processes around which an
  organisation builds a business
• (Based on Thomas Stewart 1997)

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Terminology (ii)

• InscriptionThe notion of inscription refers to
  the way technical artefacts embody patterns of
  use (Hanseth Monteiro 1998)
• TranslationActors within a network will try to
  enrol (manipulate or force) the other actors into
  positions which suit their purposes. When an
  actors strategy is successful and it has
  organised other actors for its own benefit it can
  be said to have translated them (Somerville
  1998).

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Process Inscription/Specialisation Framework
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Findings (i)

• It was concluded that while the core processes
  were the same across the cases (i) the detail
  of the process, (ii) the variation in the
  contexts, (iii) the logic of the decision
  process as they evolved, and (iv) the view of
  the actors involved,combined together to lead to
  quite different approaches in each case.

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Findings (ii)

• Confirmed that no established body of common
  language exists (Keen Knapp 1996)
• A complaint handling process (CS)
• An account servicing process (LC)
• An order taking process (MO INS)

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Findings (iii)

• The research identified that there is a need to
  understand the closely coupled relationship
  between process logic, decision logic, and
  alignment logic.
• Processes are similar in the core but have a
  surround that is specific to a process, in a
  particular situation, at a particular time.

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Findings (iv)

• A commodity process has to be seen to be a
  commodity by the actors in the network.
• The mix and variety of the decisions taken
  compounds the difference between processes.
• Decisions take place at multiple levels within a
  business.

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Findings (v)

• As time progressed and experience was gained and
  the situation evolved, actors changed their views
  (alignment) resulting in changes to the business
  process
• There appeared to be little transfer of knowledge
  across different parts of the organisation

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Movement around the framework
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Findings (vi)

• The three logic's (process, decision, and
  alignment) all have to mutually support a
  commodity approach for it to be successful and
  sustainable

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(No Transcript)
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Conceptual model of commodity business process
adoptionThree central factors (Poulson 2002)
Process Logic Characteristics What the process is
about
Decision Logic Characteristics What how
decisions are made
Alignment Logic Characteristics Alignment of the
actors in the network
Transaction specific investment
Few feasible decision schemes i.e. high number
of option bars
Legacy
Hierarchical governance
Inhibits
Information Intensive
High uncertainty UR
Low Information threshold
Externalities/overflowing
Optimising
Tightly coupled (Integrated)
Deeper Structure
Bespoke
Trials pilots
Appropriation
Intermediate governance
Crossover
Slow/strategic-fast/tactical
Cognitive Dissonance
Innofusion
Path dependency
Transformation
Contracts
Satisficing
Loosely coupled (stand alone)
Articulation
Bounded Rationality
High information threshold
Low uncertainty UR
Facilitates
Vanilla software
Market governance
Black-box
Many feasible decision schemes i.e. low number of
option bars
Commodity components
The different conditions under which decisions
are made environments, focus, criteria,
time, uncertainty.
Different actors, inscriptions, translations
Process differences, focus, areas, sequence.
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So why is this important?

• Why wouldnt broadly similar processes located in
  the same overall business context adopt similar
  solutions in terms of commoditisation,
  governance, and resourcing (architecture)?
• The closely-coupled relationship between BPR and
  Information Technology
• Move away from in-house developments to
  outsourcing

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So why is this important? (ii)

• The increase in use of package software within
  businesses
• The growth in Application Service Providers
  (ASPs)

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Case study key events and timescales
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Any Questions
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