Andrén Jonathan, Sjöberg Daniel
Value co-creation through
interaction
The how’s and why’s of B2B e-commerce
Industrial Management
Degree Project
30hp
Term: Spring 2020Acknowledgements
This master thesis has been written by us as a finishing part of our Master of Science in industrial engineering and management program at Karlstad University. We declare that this thesis has been composed solely by ourselves and that it has not been submitted, in whole or in part, in any previous application for a degree. Except where stated otherwise by reference or acknowledgment, the work presented is entirely our own. The work has been divided equally between us in every way, and both of us have taken the responsibility to read through the thesis multiple times to revise and improve the paper.
There are several people we would like to thank for making this research possible during these difficult times with the ongoing pandemic of Covid-19. First, we would like to send a special thank you to our supervisor Nina Löfberg, for providing us with insightful inputs and comments, and for keeping us motivated. Further, we would like to thank all the firms and interviewees that partook in this study, taking time to answer our questions with patience despite an ongoing pandemic. We would also like to thank all members of our feedback group; Peter Magnusson, Johannes, Emil and Pontus for valuable feedback during the whole process. Thank you for taking the time to read and reflect on our paper.
Thank you all.
Karlstad, June 2020
Abstract
Today, manufacturing firms have started using e-commerce to sell their products and services online. The adoption of e-commerce has made it possible to move the interaction that has traditionally been made between a salesperson and customer through telephone or e-mail, towards making transactions online. However, even though e-commerce can help increase revenue or create competitive advantages, it is important for firms to understand the interaction that occurs when value is co-created in e-commerce. It is evident that there are strong drivers, but also challenges that firms need to be aware of in order to form a successful e-commerce strategy. Since little research exists on the interaction that takes place when value is co-created through e-commerce, the purpose of this study is to describe this interaction along with drivers and challenges that are associated with it. To answer the research questions, a qualitative study was conducted by interviewing managers from B2B manufacturing firms that are using e-commerce. The results show that interaction between provider and customer is improved by e-commerce. Easy access to information and new digital value proposals were found to be central interactions. Traditional dialogue is largely replaced by the ability for self-service, where the customer can themselves access information and manage orders. The main driver for providers to use e-commerce is strategic/competitive advantages with secondary drivers being efficiency/lower internal costs, and increased revenue. There are challenges associated with e-commerce. Primarily system integration and data security. The results from this research suggest that manufacturing firms should consider e-commerce in order to improve interaction with their customers to stay competitive in the future.
Sammanfattning
Idag har tillverkande företag börjat använda e-handel för att sälja sina produkter och tjänster online. Användandet av e-handel har gjort det möjligt att flytta den interaktion som traditionellt har skett mellan en säljare och kund via telefon eller e-post, till att göra transaktioner online. Men även om e-handel kan bidra till att öka intäkter eller skapa konkurrensfördelar, är det viktigt för företag att förstå den interaktion som uppstår när värde samskapas i e-handel. Det är uppenbart att det finns starka drivkrafter, men också utmaningar, som företag måste vara medvetna om för att bilda en framgångsrik e-handelsstrategi.
Eftersom lite forskning finns på interaktionen som sker när värde samskapas genom e-handel är syftet med denna studie att beskriva denna interaktion tillsammans med drivkrafter och utmaningar som är förknippade med interaktionen. För att besvara forskningsfrågorna genomfördes en kvalitativ studie genom att intervjua chefer från B2B-tillverkningsföretag som använder e-handel. Resultaten visar att interaktionen mellan leverantör och kund förbättras genom e-handel. Enkel åtkomst till information och nya digitala värdeförslag befanns vara centrala interaktioner. Den traditionella dialogen har till stor del ersatts av möjligheten till självbetjäning, där kunden själv kan få tillgång till information och hantera order. Den huvudsakliga drivkraften för leverantörer att använda e-handel är strategiska/konkurrensfördelar, där sekundära drivkrafter är effektivitet/lägre interna kostnader och ökade intäkter. Det finns utmaningar i samband med e-handel, primärt systemintegration och datasäkerhet. Resultaten från denna forskning tyder på att tillverkningsföretag bör överväga e-handel för att förbättra interaktionen med sina kunder för att förbli konkurrenskraftiga i framtiden.
Content
1.Introduction 8
1.1 Research problem 9
1.2 Purpose and research questions 10
1.3 Outline of the thesis 11
2. Theoretical framework 12
2.1 From value creation to value co-creation 12
2.2 Value creation spheres 13
2.3 Building blocks of interaction 15
2.3.1 DART-model for value co-creation 15
2.4 E-commerce as an interaction facilitator 16
2.4.1 Interactions in B2B e-commerce 18
2.4.2 Drivers for using e-commerce 19
2.4.3 Technical challenges in e-commerce 20
2.5 Conceptual model 24 3. Method 26 3.1 Research approach 26 3.2 Data collection 27 3.3 Data analysis 30 3.4 Trustworthiness 32 3.4.1 Credibility 32 3.4.2 Transferability 33 3.4.3 Dependability 33 3.4.4 Confirmability 33 3.4.5 Ethics 34 4. Empirical findings 35 4.1 Drivers 35
4.1.1 Efficiency and lower internal costs 35
4.1.2 Strategic/competitive advantage 36 4.1.3 Increased revenue 36 4.2 Interactions 38 4.2.1 Dialogue 38 4.2.2 Access 38 4.2.3 Risk assessment 42 4.2.4 Transparency 42 4.3 Challenges 44
4.3.1 System integration 44
4.3.2 Data integrity and security 44
5. Trial case 46
5.1 Creating e-commerce with the customer in focus 46
5.2 Formulating an e-commerce strategy 49
5.3 Calculating return on investment 50
6. Discussion 52
6.1 Competitive advantage as the main driver 52
6.2 Creating new value proposals 53
6.3 Overcoming technology hurdles 54
6.4 E-commerce improves interaction 54
6.5 Revised conceptual model 56
7. Conclusions 58
7.1 Managerial contributions 59
7.2 Theoretical contributions 60
7.3 Limitations and future research 60
References 61
Appendices 65
Appendix A: provider interview guide 65
Appendix B: interview notes 68
1.Introduction
The marketplace in the town square used to be the epicenter of commerce. Interaction was done face to face, currency was physical and value offerings were generally goods and services of a tangible sort. The 20th century saw the introduction of the telephone, fax machine and eventually the internet make its way into the world of commerce, changing the way that commerce and interaction was done. To stay competitive in this landscape, B2B manufacturing firms have started interacting through electronic commerce (e-commerce), which has made it possible to easier provide customers with new value offerings. However, to remain attractive to customers, firms must understand how they can interact through e-commerce, and therefore the concept of value creation will be further explained.
Earlier in research, companies were the ones that created value for their customers and value was then destroyed in consumption (Vargo & Lusch 2004). However, this logic has been challenged in research and shifted towards an idea that value can only be created by the customer and not by the company (Grönroos & Voima 2012; Prahalad & Ramaswamy 2004b). This way of viewing value creation does not mean that companies are removed from the value creation process, but instead of creating value, they are able to engage in a joint process of value co-creation, where value is created by the customer and aided by the providing firm through continuous interaction (Grönroos 2007; Grönroos & Voima 2012).
By understanding that value co-creation takes place through interactions (Grönroos & Voima 2012), companies need to adopt new ways of interacting with their customers to stay competitive (Cenamor et al. 2017). In a time of technological breakthroughs, such as the internet, new ways of connecting and interacting has been made possible, where companies can increase their reach in a cost-effective way (Payne et al. 2008; Sawhney et al. 2005; Riggins 1999). An example of this is e-commerce. In the early phase of e-commerce, the concept was defined as “The buying and selling of information, products, and services via computer networks” (Kalakota & Whinston 1996, pp.3) but has
through the years developed to include more interactions related to creating and nurturing relationships and exchange of information (Nanehkaran 2013). In 2017, the global e-commerce sales reached approximately $29 trillion, including both the market for consumer (B2C) and business-to-business (B2B) (United Nations 2019). From these, it was estimated that B2B transactions accounted for 88% of the sales in 2017. In Sweden, the number
of B2B companies that have adopted e-commerce varies, and especially between industries. A study from 2018 showed that within the manufacturing industry the number is lower than in, e.g. wholesale (Svensk B2B handel 2018).
With the increase in B2B e-commerce usage in recent years, firms have realized that there are many potential benefits associated with it. Increased operational and organizational efficiency and lower internal costs (Bouwman et al. 2018; Cheah & Wang 2017; Elia et al. 2006; Fraser et al 2000; Laudien et al 2016; Gerpott & May 2016; Sjödin et al. 2018; Riggins 1999), strategic advantages (Kalakota et al. 1999; Riggins 1999) and improved customer interactions (Cenamor et al. 2017; Elia et al. 2006; Riggins 1999) are examples of areas where providing firms can reap the benefits of e-commerce. Even though there are clear drivers for providing firms to use e-commerce, there are also technical challenges (Sengupta et al. 2005). Little knowledge exists regarding how firms can use e-commerce and overcome these challenges to improve interactions with the customer.
1.1 Research problem
In Sweden, more B2B companies are adopting e-commerce to interact with their customers (Svensk B2B handel 2018). Despite this, firms lack knowledge regarding how to interact with their customers through e-commerce in order to be successful (de Reuver et al. 2018; Parida et al. 2019; Rust & Kannan 2003). Companies struggle to understand their customers' needs and fall into a pattern of investing in e-commerce without understanding how it affects the customers and if it will lead to improved interactions (Cenamor et al. 2017; Gerpott & May 2016; Heinonen et al. 2010). There are also new technical challenges that need to be dealt with, such as data security, integration of data systems and authorization (Sengupta et al. 2005). Despite these challenges, research show that firms can benefit from using e-commerce (Cenamor et al. 2017; Elia et al. 2006; Riggins 1999; Kalakota et al. 1999), but lack knowledge of how to use it. Therefore, this paper will contribute with knowledge that can aid companies that want to start using or improve their e-commerce, as well as expand the academic knowledge of how and why interaction is made through e-commerce. To help understand the interaction that takes place through e-commerce, the concept of value co-creation can be applied (Grönroos & Voima 2012). Grönroos and Voima (2012) explains that value is created by the customers independently or together with the firm in a value co-creation process that is based on interaction between customer and provider. Although there exists
research about interactions in e-commerce and benefits from it, little research has been done in describing that interaction from a value co-creation perspective. By adopting the concept of value co-creation, firms can put their customers in focus and better understand how they can aid them in their value creating processes. This will help firms to gain knowledge about how to improve their e-commerce to make it a better interface for interaction, which will also yield benefits for the providing firm.
When diving deeper into the concept of value co-creation and interaction, the DART-model is often used for understanding interaction (Payne et al. 2008). The model states that there are four important building blocks of interaction: dialog, access, risk-assessment and transparency. The DART-model is argued to be the most efficient DART-model of explaining how value co-creation takes place through interaction (Payne et al. 2008; Prahalad & Ramaswamy 2004a; Solakis et al. 2017), but there is a lack of literature applying it in a B2B e-commerce context (Payne et al. 2008; Solakis et al. 2017). By applying this framework in this research, firms will gain deeper knowledge of how to understand the different aspects of interacting with the customer.
There is a lack of knowledge for firms that want to use B2B e-commerce. Little is known about how and why e-commerce is used to interact with customers, and what the challenges are. Therefore, this research will take this lack of knowledge and study providing B2B firms that are using e-commerce.
1.2 Purpose and research questions
The purpose of this study is to describe how interaction takes place when value is co-created in B2B e-commerce. In order to fully understand and to provide knowledge for providing firms on how to use e-commerce; drivers, challenges and what interaction takes place will be studied in a real-world context. By studying what drivers exist, more knowledge will be gained about why firms continue to use or implement e-commerce. This will shed light on different benefits that providing firms might gain from using e-commerce. By studying the different challenges that exist when interacting through e-commerce, new knowledge of how firms should avoid or handle these difficulties will be gained. By understanding the different drivers and challenges that exist, it is possible to better understand how and why provider and customer interact the way that they do. The focus of this study is the customer’s value and how providing firms can aid them in their value creating processes, and how this can in turn lead to benefits for the providing firm.
To illustrate the research problem and drive this research, the following three research questions were formulated:
RQ 1: What drivers for using B2B e-commerce can be found?
RQ 2: How do providing B2B firms interact with their customers through
e-commerce?
RQ 3: What challenges exist when interacting through e-commerce?
By answering the research questions, new knowledge about how to successfully interact with customers through e-commerce will be obtained. This new knowledge, together with previous knowledge found in theory will be used together in a fictional trial case with a made up industrial B2B firm that are in the process of evaluating if and how to implement e-commerce to interact with their customers. By doing this, other firms might follow these guidelines in order to formulate a successful e-commerce strategy.
1.3 Outline of the thesis
The structure of the thesis is structured as follows: First, in chapter 2, the conceptual model is developed by combining relevant research about e-commerce and value co-creation. In chapter 3, the methodology for the study is presented, where information about the data collection, data analysis and trustworthiness are stated. In chapter 4, the results from the data are analyzed and tied to the previously presented theories. Chapter 5 contains a fictional case, where knowledge gained from theory and from the empirical data is put together to aid a fictional firm that wants to implement e-commerce. Chapter 6 is a discussion that interprets the findings and links theory and findings together. Lastly, chapter 7 contains conclusions, managerial and theoretical contributions as well as limitations and suggestions for further research.
2. Theoretical framework
This chapter will present relevant theory that is needed to answer the research questions. In order to understand interactions, a value co-creation perspective is applied (Grönroos & Voima 2012). This explains when and where value is co-created through interactions. The interactions will then be further explained by applying the DART-model (Prahalad & Ramaswamy 2004a). After this, these perspectives will be taken into an e-commerce context where specific e-commerce interactions, drivers, and challenges will be explained. Finally, a conceptual model will be created by compiling the theory.
2.1 From value creation to value co-creation
Traditionally, value creation was a process where the firm sold their product to their customers and received payment. According to Grönroos (2007), value was embedded in the product or service created by the firm and consumed by the customer. By following this logic, the providing firm could be seen as the value creator where the customers were placed outside of the firm and therefore entirely decoupled from the value creation process. Firms were therefore considered to be the ones that decided what products and services to produce, which meant that they were the ones deciding what value was for the customer (Prahalad & Ramaswamy 2004b). By following this traditional approach, customers had little or no role in the value creation process.
However, since then, new ways of explaining value creation has emerged, where products and services are judged by the value that the customer experiences (Grönroos 2007; Vargo & Lusch 2004). Grönroos and Voima
(2012) further developed this idea by explaining that there are different types of values that can be created. Value-in-use, also called real value, is the value that can be created independently by the customer or co-created where the provider aids the customer in their value creating processes. Grönroos (2007) and Grönroos and Voima (2012) further explains that a provider can only act as a value facilitator and create potential value. Thus, real value is created by the customer, and a provider can only create potential value, or act as a co-creator. Supporting the theory that value is created by the customer is that a product or service is useless if it is bought from a provider and never used (Grönroos 2007; Vargo & Lusch 2004). This underlines Grönroos and Voima’s (2012) view that the provider only creates potential value, not real value.
Within the theory of value co-creation, research places interaction at the heart of the process. According to Prahalad and Ramaswamy (2004b) as well as Grönroos and Voima (2012), value co-creation occurs through interactions between provider and customer. By engaging in these interactions, firms and customers can help each other to jointly create more value than what was possible otherwise. Customers can also actively engage in interactions and co-construct products or services to fit each firm's specific requirements (Prahalad & Ramaswamy 2004b). Understanding value co-creation is necessary in order to understand what happens when providers and customers interact with each other. It also helps firms better understand how to satisfy their customers.
2.2 Value creation spheres
To understand the roles of the provider and the customers in the process of creating value, a model containing three spheres presented by Grönroos and Voima (2012) is used. The relationship between the provider and the customer and what value that is being created therefore depends on where in the spheres the process takes place. The model includes the provider sphere, joint sphere, and customer sphere, and is presented in figure 1 below (Grönroos & Voima 2012). The different types of values (potential and real) are also located in the figure.
Figure 1: The value creation sphere developed by Grönroos and Voima (2012).
The provider sphere is where potential value is created by the provider. When
this potential value gets transferred to the customer side, it can transform into value-in-use, which also is called real value (Grönroos & Voima 2012). In this sphere, it is the provider that performs activities related to e.g. manufacturing, design and development which then leads to a production of
output, i.e. potential value. When creating potential value, it is important that the providers understand the customers own value creating processes (Grönroos 2007; Grönroos & Voima 2012; Heinonen et al. 2010).
In the customer sphere the customers produce value for themselves
independently from the provider. In this sphere, the provider is passive in the value creation process and the customer only interacts with the resources acquired and not the providers processes (Grönroos & Voima 2012). It is in this sphere that customers create value-in-use from the potential value that the provider offered.
The joint sphere is where the provider and customer interact. Here, the
provider can help the customer in their value creation process, thus co-creating value. In this sphere, it is still the customer that is the value creator and decides what it is that constitutes value (Grönroos 2007). However, by interacting with the customer in a dialogical process, the provider has the possibility to aid the customer’s value creating processes, thus leading to co-creation of value (Grönroos & Voima 2012). In order for the provider to help the customer to co-create value, the fundamental criteria is that interaction must take place. If there is no interaction between them, it is not possible to co-create value.
When the provider and customer interact in the joint sphere (Grönroos & Voima 2012), they can collaborate in two ways. Either the provider aids the customer in their value creation process, thus becoming value co-creators, or the customer aids the provider in their production process, thus becoming co-producers. However, the question remains regarding where and how this takes place in a physical sense. An interface that can be used to accomplish this is through e-commerce, which will be further developed later. To provide a comprehensive picture of how the joint sphere works, the next sections will examine the building blocks of interaction, as well as the interactions that help the firm and its customer to co-create value. Before the interface for interaction is explained, the interaction itself needs to be understood.
2.3 Building blocks of interaction
Grönroos and Ravald (2011) describes interaction as what happens when customers and providers meet in an interactive dialogical process. According to the distinction made earlier, some form of interaction is needed between provider and customer in order to co-create value (Grönroos & Voima 2012).
2.3.1 DART-model for value co-creation
Value co-creation is based on an individual-centered approach where value is created between firm and provider (Prahalad & Ramaswamy 2004a). In order to explain the process of how value is co-created through interaction, it can be seen from a perspective where interaction consists of four building blocks; dialogue, access, risk assessment and transparency, thus creating what is called the model (Prahalad & Ramaswamy 2004a). The DART-model is argued to be the most used and most efficient DART-model for explaining interaction within the context of value co-creation (Payne et al. 2008; Prahalad & Ramaswamy 2004a; Solakis et al. 2017).
Dialogue
The first building block of the DART-model implies that interactivity, engagement, and a willingness to act for both the provider firm and its customer is an essential process of co-creation (Prahalad & Ramaswamy 2004a). Instead of having a one-way communication, dialogue emphasizes the ongoing communication and shared learning between the involved actors. This is mentioned by Ballantyne (2004) as well, where dialogue can be understood as a process that is interactive in nature and where learning together is the focal point. Because dialogues are influenced by factors such as spontaneity, mutual interest and individual emotions, the result will vary. A strength that emerges from participating in dialogues is therefore the potential of creating new perspectives on problems and opportunities, which is an important step in co-creating value (Ballantyne 2004).
Access
As the second building block of the DART-model, access refers to the access of information and resources for the customer (Prahalad & Ramaswamy 2004). Examples of this might be information about the providers or customers manufacturing and quality processes, documents, drawings, different types of data, or any other type of information or resource.
Risk assessment
According to Prahalad and Ramaswamy (2004), risk can be explained as the probability of harming the customer. By including customers in the process of co-creation, the risk assessment building block focuses on how customers can make better assessments of the risks before adopting the value proposition. Interaction regarding how to assess and handle risks fall within this category, such as insurances or contracts.
Transparency
Transparency is about information sharing and the lack of asymmetric information between firm and customer (Prahalad & Ramaswamy 2004). Earlier, firms benefited from information asymmetry, but due to the increase of accessible information about e.g. products and prices, it becomes more important for customers to be more transparent towards their customers.
2.4 E-commerce as an interaction facilitator
By acknowledging that value is co-created through continuous interactions between provider and customer, and that the interaction consists of the four building blocks in the DART-model, the question remains regarding where the interaction takes place. In a time of technological breakthroughs, new ways of connecting with customers emerge. Where there once was only face to face interaction and later interaction through telephone and e-mail, it is now possible to interact through a myriad of ways made possible by the internet. These new digital ways of interacting leads to new possibilities to co-create new products, services and experiences (Payne et al. 2008). According to Sawhney et al. (2005), the internet has always provided an open and cost-effective way to network that ultimately leads to increased global reach. The internet also offers new possibilities of interacting and lets firms engage in more interactions with customers than they did before (Payne et al. 2008). Prahalad and Ramaswamy (2004b) further argued that technological advances should be used to enhance the customer’s ability to partake in value co-creation interactions. Furthermore, they argued that technology allows for more informed purchasing and more individual value experiences, as well as more intricate long-term relationships between customer and provider. Due to the technological advancements and the rise of the internet, e-commerce has been created as a tool for buying and selling products and services online. During the past years, various definitions of e-commerce have been presented, see table 1. In the early days of e-commerce, scholars defined it as the “buying and selling of information, products, and services
via computer networks” (Kalakota & Whinston 1996, pp.3), as can be seen in table 1. Throughout the years, the concept has been discussed frequently in research and therefore led to a more extensive definition that includes more functions than buying and selling. As can be seen in table 1, Nanehkaran (2013) defines the concept by including activities related to supporting customers and exchanging information.
Table 1: Definitions of e-commerce from scholars.
Author(s) Definition
(Kalakota
&Whinston 1996)
“The buying and selling of information, products, and services via computer networks” (pp.3)
(Fraser et al. 2000) “e-commerce is the secure trading of goods, information or services and, in the main, conducted using Internet technologies”(pp.8)
(Lucking-Reiley & Spulber 2001)
“Business-to-business commerce includes a broad range of intercompany transactions, including wholesale trade as well as company purchases of services, resources, technology, manufactured parts and components, and capital equipment” (pp.55)
(Nanehkaran 2013)
“Electronic commerce is supporting of customers, supplying of services and
commodities, portion of business information, manages business transactions and maintaining of bond between suppliers, customers and vendors by devices of telecommunication networks”(pp.1)
In order to avoid any confusion regarding what B2B e-commerce entails, the following definition is followed in this research: ‘B2B electronic commerce is the integration of a company's processes, activities and resources towards making any type of transaction or interaction with a customer through the internet.’ This is an overarching
definition where all the definitions in table 1 fits.
Since value is co-created when the firm and customer interact in a joint sphere (Grönroos and Voima 2012), B2B e-commerce can be the physical interface or interaction facilitator, where the interaction takes place. To provide
more insight about how e-commerce can be used as an interaction facilitator, it is necessary to understand what interactions that typically occur by examining current literature. The literature mostly describes the interaction as activities; what they are, how they affect provider-customer relationships
and communication, and what implications and benefits that are associated with e-commerce.
2.4.1 Interactions in B2B e-commerce
By understanding what e-commerce is and how it is used, it is possible to develop an idea of why and how it can be used as an interaction facilitator between firms and their customers. To identify different types of interactions and their functions, four categories of activities performed in e-commerce identified by Elia et al. (2006) is used. The categories are product development; procurement/ purchasing; productions/operations; sales, marketing and after sales service; and distribution and logistics.
Product development
In the product development category, interactions such as transfer of documents and technical drawings to both providers and customers are mentioned (Elia et al. 2006; Riggins 1999; Hamill & Gregory 1997; Dutta & Evrard 1999; Poon & Swatman 1999). It is also stated that being able to do collaborative online engineering with both providers and customers are a part of this (Elia et al. 2006). Expected benefits are related to information sharing and being able to do collaborative engineering online, saving both time and money for both parties.
Production/operations
Production/operations is mostly technical in nature and is about incorporating e-commerce into the production and operations of the firm (Elia et al. 2006). This allows for sharing of information such as production data or stock level information, ensuring quality and reliability for the customer as well as allow for better production/operations control for the firm. This information is often gathered with different sensors that keeps the information live updated, removing the need for manual handling of this information (Rymaszewska et al. 2017).
Sales, marketing and after-sales service and support
Sales, marketing and after-sales service and support appear frequently in research (Hamill & Gregory 1997; Webb & Sayer 1998; Dutta & Evrard 1999; Poon & Swatman 1999). As pointed out by Riggings (1999), e-commerce allows firms to better compete over five dimensions of commerce, giving competitive advantages; time, distance, relationship, interaction and product. This means being able to be accessible 24/7 from all reaches of the globe that have access to the internet. Riggins (1999) further states that e-commerce allows for customized value propositions and service offerings that would not be possible without the use of e-commerce. Activities that aid these functions, such as converting information into digital form, advertise, selling products/services, identifying customer needs, receive and manage customer
orders, negotiate contracts, and tailor value proposals are identified by Elia et al. (2006).
Distribution and logistics
Elia et al. (2006) also highlights the advantages for distribution and logistics, by automating returns management, allowing for the customer to track shipping (order tracking) and allow for integration with digital logistics systems. Order tracking works by reporting when what is sent has arrived at different nodes, usually by scanning a barcode. Sometimes tracking information is obtained by using GPS data to track the shipping vessels between nodes. This information is collected and live updated via some computer software and shared with the customer (Elia et al. 2006). Another option that becomes possible through e-commerce is delivery of digital goods and services (Webb & Sayer 1998). These digital goods and services often have an intricate relation with production and process data gathered via sensors, in industrial firms (Rymaszewska et al. 2017). This allows firms to use information about their customers processes and create different value propositions, such as consultation and optimization (Rymaszewska et al. 2017).
2.4.2 Drivers for using e-commerce
After establishing e-commerce as a suitable interaction facilitator and identifying common interactions, there remains a question about why providing firms are adopting and keep using it. The literature describes different drivers for firms to adopt e-commerce, which are frequently described as benefits or potential benefits.
Improved efficiency and lower internal costs
Benefits in improved efficiency and internal costs are internal benefits for the provider and is one of three main drivers found in the literature. These benefits come from being able to execute certain tasks easier and therefore cheaper, such as communication, document and information handling and data analysis and through less need for personnel ( Bouwman et al. 2018; Cheah & Wang 2017; Elia et al. 2006; Fraser et al 2000; Laudien et al 2016; Gerpott & May 2016; Sjödin et al. 2018; Riggins 1999; Iacovou et al. 1995). Internal costs and efficiency gained from e-commerce must always be weighed against a cost for implementation and usage. It is very hard to judge the return on investment (ROI) for e-commerce, because both costs and benefits are hard to quantify (Sengupta et al. 2005). The costs can rapidly change due to changes in technology, and so can the benefits.
Strategic/competitive advantages
The second driver for adopting e-commerce is strategic/competitive advantages. These factors are about have some sort of advantage against competitors. Maintaining and increasing market shares (Elia et al 2006; Fraser et al 2000), ability to generate new value propositions (Cenamor et al 2017; Riggins 1999; Rymaszewska et al. 2017), acquisition of niche markets (De et al. 2001; Riggins 1999), customer loyalty (Elia et al. 2006; Lee 2001; Riggins 1999), improved customer interaction (Cenamor et al. 2017; Elia et al. 2006; Riggins 1999; Iacovou et al. 1995) and other strategic advantages (Kalakota et al. 1999; Krotov 2017; Luz et al. 2018; Riggins 1999; Iacovou et al. 1995) are all placed in this category. This driver is stronger than the first driver, according to Abid et al. (2011). Krotov (2017) and Luz et al. (2018) found that many firms are implementing e-commerce to keep their position in the market, as a response to competitors being successful using e-commerce. Sometimes firms even implement e-commerce with no clear goal or knowledge about how this will affect customer interaction and perceived value by the customer (Gerpott & May 2016).
Increased revenue
The third driver is through increased revenue from higher price margins because of higher perceived value or new pricing models (Laudien et al. 2016). Research show that most benefit is to be had through enhanced revenue due to new pricing models, relating to customers paying for the perceived potential value of an offering, rather than paying for just a particular product or service (Dijkman et al. 2015; Kiel et al. 2017; Kotarba 2018; Iacovou et al. 1995).This also includes opening up new revenue streams such as being able to offer digital goods or services, tailor value proposals and offer value that is not viable without e-commerce (Cenamor et al. 2017, Riggins 1999; Iacovou et al, 1995).
2.4.3 Technical challenges in e-commerce
Even though e-commerce can help facilitate interactions throughout a firm's whole operation and can help lower internal costs, increase revenue or create strategic advantages, there are technical challenges that needs to be managed to be successful. Therefore, it is interesting to further examine these challenges to better understand what firms must consider when implementing their e-commerce.
System integration
One of the challenges in e-commerce is related to the integration of systems (Sengupta et al. 2005). To create an e-commerce website that manages the interactions that were described in previous sections, it is essential for the provider to integrate the website with their own back-end systems. By integrating the systems to a higher extent, it enables items, inventory, orders and other data to be passed between independent systems, which can then communicate with each other (Farzaneh, M. 2014). If this is accomplished, it is possible to reduce the risk of having to update information in more than one place when a change has occurred. If, for instance, a customer is placing an order, the customer should be aware of whether the product is in stock or not. To accomplish this, firms often integrate their e-commerce with their enterprise resource planning (ERP) system (Farzaneh, M. 2014). What the ERP integration allows for is then to directly provide the stock information from the back-end systems, and when the purchase has gone through, the stock level will be updated in both the website and back-end systems (Farzaneh, M. 2014). The means that ERP is the back-end system that contains all the business logic, and the e-commerce interface retrieves the information and presents it in the front-end, i.e. the e-commerce. This is visualized in figure 2, where the customer places an order through the e-commerce, the e-commerce communicates with the back-end system which then sends back the information to the front-end which then gets sent to the customer.
Figure 2: System integration communication paths.
In B2B e-commerce however, it is not only a challenge to integrate with the firm's own back-end systems, but also with the customers systems. Customers can still place and manage their orders through e-commerce if the systems are not integrated, but the drawback is that it does not update their own business systems.
If this is the case, customers might have to place orders twice (once in the providers system and once in their own). Integration between e-commerce and the back-end systems can therefore be beneficial for firms, however, the integration is a process that is complex and often associated with high costs (Warkentin 2002).
Transaction and order management
Making the necessary system integrations towards the selling of products is difficult (Warkentin 2002). This is particularly difficult in a B2B context, because e-commerce will try to manage orders, inventory and cash across firms, like ERP does within a firm, indicating that integration is a difficult process. The reason for integration being difficult is that many systems and business processes must be restructured, both at the provider and the customer side, in order to make transactions online possible (Warkentin 2002). To make it even more challenging, the readiness for e-commerce varies amongst customers. Some might still call the sales department when they want to place new orders, while others are more digital. This means transactions can be made in various ways depending on the situation, and that there is not a single technology that provides a complete solution (Bendoly & Kaefer 2004). As mentioned previously, integrating e-commerce with back-end systems is a complex and costly process, which has made firms try to find other ways of making transactions. A way that has been identified is electronic data interchange (EDI) (Bendoly & Kaefer 2004; Warkentin 2002). EDI is a way of sending data between two computers in a format that is agreed upon by two trading partners (Iacovou et al. 1995). EDI:s work in such a way that each organization or firm has a data system, usually on their own PC based server (Iacovou et al. 1995). Either they are fully compatible from default or need to be adapted in order to be able to communicate with each other, which is done via telecommunication links such as the internet. Either way, the integrity of this data interchange is to be agreed upon by all trading partners interacting in this way (Iacovou et al. 1995), making data security and trust a concern for both parties.
Technology trust
When engaging in e-commerce, there are always challenges that arise regarding trust and data security. Challenges that need to be sorted are; both customer and provider need to be able to verify the identity of the other party (authentication) and the information shared must not be leaked (privacy). Since there is no face-to-face verification in e-commerce, other means of authentication must be in place. The safest way of authenticating is for both customer and provider to agree upon an unforgeable digital certificate provided by a trusted authority (Sengupta et al. 2005). Such an authority demands some sort of real-world proof of identity
before issuing such a certificate. Any outside actor without a certificate will not be able to communicate with the e-commerce server. Figure 3 shows how authentication works with digital certificates. A sender has a certificate. The receiver has a digital list of who has certificates. If the sender is on the list, the sender is authentic. Another way of authenticating is for the provider to hand out passwords that the customer can use to verify their identity (Sengupta et al. 2005). This is however a comparably weak safety measure compared to digital certificates.
Figure 3: Authentication with digital certificates.
Since some of the information that is shared via e-commerce is highly sensitive, it is important to make sure that no outside actor is “listening” to the communication between the customer and provider. This is most often remedied by using encrypted communication (Sengupta et al. 2005). That means that all the data sent between customer and provider using e-commerce is translated into a made-up language that a system needs an encryption key to decipher back into its original form. This is also done by handing out unforgeable digital certificates, which is a key to solving the encryption (Sengupta et al. 2005). This is illustrated in figure 4. When a sender sends data, it is locked with a digital encryption certificate. The data is then unlocked by the receiver who has also has a certificate. Sometimes, a provider wants to share some information only with certain customers, this makes authorization needed. Authorization allows the system to check if the user has access to that specific information. This is achieved in the same way as authentication, with digital certificates that are sent only to those who are supposed to have it, sometimes in combination with a password (Sengupta et al. 2005).
2.5 Conceptual model
As stated in the introduction of this research, a conceptual model of the theoretical framework is constructed to contextualize the theory into an easy to understand model, combining the theory of the value creation spheres, value co-creation through interaction (the DART-model), interactions and drivers of e-commerce.
Figure 5: The conceptual model based on the value creation spheres by Grönroos & Voima (2012) and the DART model by Prahalad & Ramaswamy (2004a).
Figure 5 is an illustration of the conceptual model constructed for explaining interaction through e-commerce. As a basis, the model consists of the three spheres presented by Grönroos and Voima (2012); provider, joint, and customer sphere.
Provider sphere
In this sphere, the provider acts alone and produces potential value. Since the provider is in focus, the three main drivers for using e-commerce are placed here: efficiency and lower internal costs, strategic/competitive advantages and increased revenue. These drivers will be used as categories to understand the reasons as to why firms pursue e-commerce. Depending on the drivers a firm has, they choose to interact with their customers in different ways. In the model, the drivers are visualized as three arrows that point to the e-commerce interface. The reason for this is to illustrate that the drivers influence firms to implement or continue to use e-commerce, and that they influence how interaction takes place in the joint sphere.
Joint sphere
This is the sphere where the provider sphere and the customer sphere intersect. All interaction takes place within the joint sphere (Grönroos & Voima 2012). To facilitate this interaction, e-commerce is used as the interface between provider and customer. Since value co-creation occurs through interactions the joint sphere consists of the four building blocks of the DART-model presented by Prahalad and Ramaswamy (2004a). These building blocks are dialogue, access, risk assessment and transparency. The building blocks are used to categorize the interaction that takes place through e-commerce. A toolbox of e-commerce interactions is placed within the DART-framework. These four categories of interactions in e-commerce described by Elia et al. (2006): Product development, engineering and design; sales, marketing and support; productions/operations; and distribution and logistics are included in order to interpret parts of the collected data. The
data will then be categorized with the DART-model.
Customer sphere
In this sphere, the customer produces value for themselves independently of the provider. Because the focus of this research is value co-creation, this sphere will not be further analyzed.
The line at the bottom of the figure illustrates the three types of value conceptualized by Grönroos (2007) and Grönroos and Voima (2012). Potential value created by the provider, real value that is co-created in the joint sphere via the interface, and value in-use, which is the real value created by the customer alone. The focus of this paper is to understand the interaction that leads to value co-creation, which is real value. Because of this, the joint sphere is the main area of interest in this research.
3. Method
3.1 Research approach
The purpose of this study was to describe how interaction takes place when value is co-created in B2B e-commerce. In order to fully understand and to provide knowledge for providing firms on how to use e-commerce; drivers, challenges and what interaction takes place was studied in a real-world context. This research focuses on describing what is happening when interaction occurs in e-commerce and what drivers’ firms have by using existing theory, therefore the nature of this research is descriptive (Dulock 1993). In order to answer the research questions and drive research forward, a holistic view of why and how e-commerce is being used by B2B companies was needed, and therefore a qualitative method was used (Alvesson & Sköldberg 2009; Gray 2017; Hancock & Algozzine 2006).
To accomplish this, the overlying logic for this work has been abductive. This has meant going back and forth between empirical observations (collected data), theory and analysis to achieve a ‘best guess’ as conclusion to the purpose, following a so-called systematic combining approach (Dubois & Gadde 2002). Since the purpose of this paper lies within uncharted territory, there was a need to understand why empirical observations deviated from the
current theoretical framework and how to correct it in order to better explain the observations (Dubois & Gadde 2002). When unexpected observations occurred, the theory was updated to correspond with the data. The result of this process was, as mentioned, a ‘best guess’ theory to help answer the research questions (Dubois & Gadde 2002).
Figure 6: The course of action during the project seen as an iterative process, based on Dubois and Gadde (2002).
The course of action during the project (figure 6) started with the formulation of a research question. After a first round of literature review, this research question was reformulated several times to be coherent with the existing theory. Later, from the findings of the literature review, a theoretical framework was compiled. This framework founded a basis for the research design process. The choice was an empirical study to collect data, which was done using semi-structured interviews. The data was then analyzed according to a thematic analysis process (Gray 2017), which made it possible to identify patterns that were matching with the theoretical framework, leading to several updates to the framework. After conclusions were drawn from the analysis, the findings were compared with the current knowledge found from the literature review. When needed, theory was added or removed, and the following steps were iterated again. Based on the conclusions and the comparison with the current knowledge, suggestions for further research was presented.
3.2 Data collection
To gain a holistic view, people with deep insight and knowledge were interviewed in a semi-structured way. The underlying reasoning for selecting interviews was to be able to find reasons, causes, trends and motives that could not be found by looking at companies’ e-commerce websites or by respondents filling out forms (Gray 2017). By doing this, the idea was to identify not only what interaction that occurs, but also what interaction that appears important, and what certain drivers or challenges that affect the interactions.
Sampling
Data was collected from conducting interviews with managers at manufacturing B2B firms. The firms needed to fit these criteria to be comparable to each other to find patterns within this context in the collected data. When selecting firms to include in the research, it was important that they were similar enough to be comparable and fit the definition for e-commerce presented in chapter 2.4. That meant being B2B manufacturing firms that use e-commerce. All firms selected are manufacturers of complex and expensive industrial machinery and provide aftermarket sales/services. It was important to find firms with different maturity levels in their e-commerce, to identify if drivers changed because of this. It was also important to be able to detect if different factors, that had to do with the characteristics of the firm or the field, affected the interaction that took place. Because of this, firms from different fields were chosen.
As well as the companies, the interviewees had to fit certain criteria and were therefore selected through a purposive sampling strategy (Gray 2017). They had to be familiar with e-commerce and have knowledge about how their firm interacted with their customers through it. They also had to be aware of why they were using e-commerce and the challenges that their firms face. The reason for this was to ensure that the interviewees had the most information and were able to answer the questions in a representative manner (Gray 2017; Hancock & Algozzine 2006).
To ensure anonymity, all firms that chose to partake in this research have been given pseudonyms instead of their real company name. For the same reason, all information that might reveal their identity has been left out. In table 2, the participating companies are presented, and their field of business is shortly explained. Due to the current Covid-19 pandemic, the number of participating firms was limited to four, since no other firms contacted had the time to partake in a research project during this difficult time.
Table 2: Companies that were included in the research.
Company
name Field of business E-commerce maturity level
Hydro Hydropower
machinery Drives a pilot project with e-commerce Paper Paper machines Has e-commerce
Constructi
on Construction machinery Relies largely on e-commerce Drilling Drilling and mining
equipment Relies largely on e-commerce
Constructing interview guide
After deciding on conducting semi-structured interviews, and before constructing the interview guide, a short list of notes about how to act during the interviews was written down, see appendix C (Gray 2017). When designing the interview guide, the questions were formulated as open-ended, in order to not influence the interviewees’ answers and at the same time help collect as much information as possible, including non-predicted information (Gray 2017; Hancock & Algozzine 2006). The open-ended questions also made it possible to ask follow-up questions such as ‘why’ and ‘how’, to make the interviewees further expand on their answers (Hancock & Algozzine 2006).
The interview guide contained questions about the company, the interviewees role and how a typical cooperation with a customer could look like. The idea behind this was to gather insight about the company’s characteristics and how they were interacting with their customers today. After this, questions related to e-commerce were asked, for instance how they were working with it and how they have benefited from it. By asking this, the idea was to identify the drivers that each firm had for implementing e-commerce. The questions also served the purpose to identify how much they relied on e-commerce and what implications this had on their business.
Contact process
After the interview guide was constructed and the sample of individuals had been selected, the initiating contact took place. At first, an email was sent to the desired interview subjects, which initiated a simple and informal contact. The interviewees received necessary information about the project and were asked if they wanted to participate in the study. If an invitation was accepted, more information was provided about how the interview was going to be conducted. After an active dialog with the interviewee, a date and time was set for an interview.
Interview process
The interviews were conducted and recorded using the online conference software Skype or Microsoft Teams, due to the current situation of Covid-19 and the long distances between the interviewers and the interviewees. In the beginning of each interview, a brief discussion about consent and confidentiality took place. After this, the interviewee received information about the purpose of the study and how the data was handled (Gray 2017; Hancock & Algozzine 2006). The interview was then conducted according to the interview guide (Appendix A) and the interview notes (Appendix B). The interviews were recorded using the built-in software of Skype or Microsoft Teams. The interview guide was used as guidelines, but not followed strictly. In some of the interviews, the interviewee started talking about a question without that question needing to be asked, and some interviews required more active questioning. The interviews were then transcribed before the data was analyzed. The interviewees from each participating company are listed in table 3 with fictional names and firm names. The interviewees are named after the first letter of their firms fictional name.
Table 3: Information about the interviews and interviewees.
Intervi
ewee Company name Position Length (min:sec) Date of interview (dd-mm-yyyy) H Hydro Product manager 43:53 12-03-2020 P Paper Senior Sales Manager 58:38 27-03-2020 C Constructio n Business Line Manager 43:15 30-03-2020 D Drilling Transfor mation manager 50:00 09-04-2020 3.3 Data analysis
To identify themes that were matching with the theoretical framework, thematic analysis was used. This method was also chosen to be able to follow the abductive, iterative process where theory needed to be revised in order to explain the collected data (Dubois & Gadde 2002). How the thematic analysis was done is described below and in figure 7.
Figure 7: Thematic process based on Gray (2017) for analysing the collected data. A seventh step is added to underline the iterative process (Dubois & Gadde 2002).
Step 1 - Overview of the collected data: The first step of the analysis
consisted of reading through the transcribed data to get familiarized with it. This meant that each interview was read thoroughly once or twice, to make sure that the material was relevant and that it was interpreted correctly (Gray 2017).
Step 2 - Initial Coding: In the second step, the initial coding was done by
(Gray 2017). By doing this, it was possible to identify similarities that potentially could be used as themes or be grouped in themes. Here, different characteristics were identified.
Step 3- Find Themes: After identifying codes in step two, the second step
of the process was to create initial themes that the codes could be placed within (Gray 2017).
Step 4 - Review themes: Here, the themes created were once again analyzed
to ensure that the information was sufficient to make it a theme (Gray 2017). In some cases, the themes were so similar that they could be combined into a single theme and sometimes divided into two or more themes.
Step 5 - Define themes: After this, the themes were reviewed to examine if
they provided a good representation of the data and to make sure that no important data was left unexamined (Gray 2017). Several different names were tried for each theme to make sure that the name represented the theme as good as possible. The themes defined can be seen in figure 8 below. The figure shows main themes, sub-themes and the characteristics of each theme. The themes were defined by taking the characteristics and defining a name for the themes. The main themes were defined by grouping sub-themes together.
Step 6 - Analyze: In this step, themes that correspond to the purpose were
extracted and compared with the literature.
Step 7 - Revise theory: The themes from step six were compared with the
conceptual model, and the theoretical framework was revised when needed. This is not part of the thematic analysis described by Gray (2017) but was done to see if the current framework supported the themes, or if the framework needed modification (Dubois & Gadde 2002). When the framework did not fit, steps 2-7 were iterated again.
Figure 8: The themes found during the thematic analysis.
3.4 Trustworthiness
In this research, the four criteria established by Lincoln and Guba (1985) was used to increase trustworthiness; credibility, transferability, dependability and confirmability.
3.4.1 Credibility
Credibility is described as having confidence or trust about the findings (Lincoln & Guba 1985). The credibility in this research was strengthened by collecting information from various firms. To further ensure that the results were credible, the individuals that were selected to participate in the interviews had managerial roles in their respective firms to ensure that they had extensive knowledge about the organization and its processes and strategies (Lincoln & Guba 1985). Unfortunately, an ongoing Covid-19 pandemic limited the number of participating firms and interviewees to four, impacting the credibility in a negative way.
3.4.2 Transferability
Transferability means that the findings are applicable in other contexts (Lincoln & Guba 1985). The transferability is increased by providing thick descriptions, which will make it easier for other researchers to judge whether the results can be applied in other situations. In this research, the transferability was increased by providing extensive information about the method, for instance how data was collected and analyzed (Lincoln & Guba 1985). Since the number of interviews conducted were only four, the transferability is negatively affected, since a low number of interviews makes it harder for other researcher to judge if the results are applicable in other situations or not.
3.4.3 Dependability
Dependability means that the findings are consistent and repeatable (Lincoln & Guba 1985). A way to increase the dependability in research is to use external audits, i.e. a researcher that is not involved in the process, to retrieve information and feedback about whether the findings were logical. In this research, this was done by using supervisors and teachers at the university through meetings and seminars (Lincoln & Guba 1985). The dependability was unfortunately negatively impacted by the low number of interviews conducted, due to the Covid-19 pandemic. This low number of interviews makes it harder to judge if the findings are consistent or not.
3.4.4 Confirmability
Confirmability, as the last criteria of trustworthiness, means that the findings are neutral (Lincoln & Guba 1985). This criterion was strongly connected to the data collection process in this research. To start off, the interviews were constructed by using open-ended questions to reduce the risk of asking questions that were objective. The questions were developed and controlled through discussions with a supervisor at the university to ensure that they were formulated in a non-biased way.
Before conducting the interviews, a list of notes was formulated (appendix C) that acted as a reminder of how to act during the interviews. By having this guide in mind, the interviewers were constantly reminded of being subjective and asking the right questions. The interviews were conducted with two researchers and were recorded, to eliminate the risk of misinterpreting the answers.
The confirmability of this research was also considered in the data analysis phase, where the coding and creation of themes were made. To ensure that the themes matched the theoretical framework and that the conclusions were reasonable, a supervisor was used once again.
3.4.5 Ethics
When conducting qualitative research, where individuals are a part of the data collection, it is important to consider the ethical aspect. When contacting the candidates for the interviews, it was made clear that the participation was voluntary and that the results were going to be anonymous (Gray 2017; Hancock & Algozzine 2006). Before conducting the interviews, a consent form was provided to the participant covering personal information according to University principles and GDPR. This was used to verify that the interviewee understood what was going to happen and that recording of the interview was approved. After transcribing the data collected from the interviews, a final contact with the respondent was made to ensure that the data could be used without causing any harm. The reason for this was to let the respondent withdraw any information that was incorrect or not allowed (Hancock & Algozzine 2006).
4. Empirical findings
Based on the empirical research that has been conducted, the findings are presented in terms of the themes found during the thematic analysis.
4.1 Drivers
Following is the presentation of the drivers for using e-commerce. The findings are presented under three sub-themes; efficiency and lower internal costs; strategic/competitive advantage; and increased revenue.
4.1.1 Efficiency and lower internal costs
All four interviewees mentioned efficiency and lower internal costs as drivers for their firms. Interviewee H states that the main reason why Hydro is driving a pilot project with e-commerce is to lower their internal costs, especially administrative ones. The other three firms that have up and running e-commerce does not point to this as the main driver, but states that it certainly plays a role. Interviewee D mentioned efficiency as the second of two main drivers. It was further explained by Interviewee H that this driver had to do with scale, and the number of customers.
“Today we create invoices which require an administrative department, and there are a number of people working with this. If we have 10.000 customers using our services, these people will not be able to keep up. Then we either need to hire or create some sort of platform for purchasing and handle it that way.” - Interviewee H
Interviewee P and C from Paper and Construction mentioned that they have been offering discounts if the order is placed through e-commerce instead of personal sales or telephone. They both state that receiving and handling orders is time consuming and costly, which is why they offer discounts. By doing this, the goal is to drive their customers to use e-commerce. Another aspect that relates to lower internal costs was mentioned by Interviewee C, that said that managing orders via e-commerce can help reduce the risk for errors.
“As usual, it’s cost reductions. [...] Then there is another part, and that is that you reduce the risk for error. As soon as people are involved, the risk is radically increased, compared to doing it electronically.” - Interviewee C
By being able to find all the information that the customer needs to make a purchase decision and then place an order is, according to Interviewee D, much appreciated. At the same time, Drilling does not have to spend time
aiding the customer in the purchasing process but can instead spend time and resources on activities that need it. Interviewee D also said that for price sensitive customers, it is a win-win situation. The reason being that if they can decrease costs by offering self-service, they can also lower the price for their products and services.
“... moving traditional dialogue between seller/agent and purchaser/technician at the customers’ site to self-service at our customer portal is appreciated by the customer. To be able to access the right information themselves when they need it instead of calling someone at Drilling. This creates space to work with value adding activities with more complex offerings in our sales channels. What I mean is that our salesmen can discuss better and deeper and more complex solutions with the customer. This is why we handle the basic stuff more or less fully automatic via e-commerce.” - Interviewee D
4.1.2 Strategic/competitive advantage
All firms mention strategic/competitive advantage as a driver for using commerce. Interviewee H said that Hydro has some indications that e-commerce will eventually lead to competitive advantages and strengthen their customer relationships, but that they do not know if this corresponds well or not with what their customers think. The interviewees from Construction and Drilling pointed out that their customers expect to be able to use commerce. It was further argued that if a provider does not support e-commerce, then they are not as interesting and competitive as those that do. Interviewee D took this one step further, by explaining that their customers behave more and more like B2C customers, and that they expect that placing a machine order should be as easy as placing an order in an online bookstore. Interviewee D also stated that they were the first in their field to start using e-commerce which has led to competitive advantages.
“.... the customer expects from us as a provider to be able to deliver this way, to have this solution (e-commerce). If you don’t, like some of our competitors didn’t but have now catched up, you are not considered as evolved and cutting edge.” - Interviewee C
4.1.3 Increased revenue
The four firms that have implemented e-commerce are using it to create new value proposals, leading to new revenue streams. Hydro are planning on doing this as part of their long-term business strategy.
“The first and most important part is that it is good for our customers. That is, that it gives our customers more value. That should be prioritized as number one. Number
two is that it leads to an increased and more stable revenue due to more revenue streams. When we speak internally, we speak of two drivers for increased e-commerce; higher market penetration, to be able to reach more customers fast, and sell to more customers.” - Interviewee D
During the interviews, several of the interviewees mentioned that they were using e-commerce to offer new services related to process data. By having access to the customers’ process data, Interviewee D said that their customers can subscribe to ‘health reports’ to better understand how their machines are working, which in the end can lead to higher productivity. Construction and Paper offers similar services, and Paper also uses the data to motivate being more expensive than their competitors. Interviewee C says that e-commerce can be seen as a service, which in itself can motivate higher prices than their competitors, because it increases the customer’s efficiency due to easy access to information and purchasing.
“We don’t have a policy to be cheapest, we want to be the best. So how are we going to motivate being 10% more expensive than our competitors? Well, then we have to show that we are 10% better, at least.” - Interviewee P
Interviewee H says that Hydro is moving more towards a value-based pricing, and that part of this strategy is to move to subscription-based sales. Drilling has also started using subscription or licensing-based sales because of the increased value of their digital services. Interviewee D pointed out that Drilling did not use to charge their customers for the ‘health reports’ but have started doing so thanks to a higher perceived value of their digital services.
“If we talk about this type of health reports, if I can call them that, then that is something that we have rather recently started charging our customers for. Initially, this was a way to build knowledge for both the customer and us, and drive the connection to the Internet of Things (IoT). Today we see that we create enough value so that it is possible to charge for this, and we do that with different subscription solutions.” - Interviewee D
Interviewee D continued by saying that it is an organizational challenge for a firm that historically has delivered physical products and physical services to start selling immaterial, value based digital services.
