Abstract
POINTS OF DEPARTURE
Services constitute the main part of economic activity in developed
countries around the world, where the service sector accounts for some 70% of
aggregate production and employment in OECD50 economies. More
specifically, finance, insurance and business services account for about 20 to
30 percent of value added in the total economy51.
Consequently, the purchase of business services has become a substantial
element in firms’ total acquisition of external resources. This partly comes
from increased specialisation, growth of the knowledge economy and
outsourcing of service-related activities, which cause the growth in services in
general. Partly, it is due to the growing ‘servitisation’ of goods, which causes
individual organizations to increasingly buy services rather than goods.
Furthermore, business services are increasingly the focal point of attention
for management in many organisations: on the one hand because Non Product
Related items (a large part of which consists of services) are seen an area
where substantial savings can be obtained, on the other hand since
organisations are acknowledging that many of the services they buy (e.g.
consultancy, IT, marketing) are actually quite strongly related to their primary
processes.
The topic of buying business services is however only just emerging as an
area of academic interest. The number of publications in this area is growing,
but has been limited in comparison with literature available on buying
(industrial) goods. Furthermore, one of the main characteristics of (business)
services is the fact that they are produced and consumed in interactive
processes between buyers and sellers. These ongoing interactions, as opposed
to the transactional purchasing process, have largely been neglected in
research on buying business services.
The research that has been dealing extensively with services and the
interactions involved are the services marketing and more recently the services
management disciplines; however, since long time, these disciplines have
focused on consumer services. In light of the increasing importance of
business services, also these disciplines are broadening their scope to include
business services.
The main objective of this research is to build and test theory on the
ongoing interactions between buyers and sellers of various kinds of business
50 OECD is the abbreviation for Organisation for Economic Co-operation and
Development.
51 Business services include amongst others rental of equipment and machinery;
computer related activities and Research and Development.
294
services. As such, this research addresses the gap in purchasing and supply
management literature regarding ongoing buyer-seller interaction. The first
question that arises is to what extent different interfaces and interaction
processes between buyers and suppliers of business services exist. Important
areas of attention are Decision Making Unit (DMU) /Problem Solving Unit
(PSU) structures (including boundary spanning roles), coordination
mechanisms and communication processes (including what important issues
are discussed in the buyer-seller dialogue) and critical supplier and customer
capabilities in managing the interaction. A second research question is
concerned with what interactions are most effective for a specific type of
service. After developing an understanding of the first two research questions
(theory building), the last part of this research aims at validation of these
insights (theory testing).
Theory building occurs through multiple empirical studies, in which the
theory regarding variation in interaction is gradually built and tested. These
empirical studies have been designed in a way that enhances analytical
generalisation beyond specific companies or industries. Both service providers
and manufacturers, with different kinds of production and different kinds of
customers are involved. Furthermore, the studies involve multiple buying
company business representatives, thereby enabling an analysis of the
purchase of business services from an intra-organisational perspective.
THEORETICAL UNDERPINNINGS
First, a literature study was conducted to investigate the extant body of
knowledge in the area of buying business services. This study showed that the
scarce literature that is available focuses mainly on the initial stages of the
transactional purchasing process (i.e. supplier selection): the ongoing
interactions between buyers and sellers have remained largely unaddressed.
Furthermore, these studies have mainly addressed one specific type of
services. This focus on specific kinds of business services rather than on
business services in general hinders the identification of generic patterns of
ongoing interaction across the wide variety of services that organizations buy.
Therefore, the focus for this research was on theories relating to these ongoing
dealings between buyers and sellers, both within specific service encounters
(or exchanges) and across service encounters (the ongoing business
relationship). The Interaction Approach can be used to conceptualise these
interactions. Variation in interaction first of all comes about in the key
objective of interaction. Consequently, this puts requirements on the resources
needed from both buyer and seller, in terms of the functional representatives
involved and of buyer and supplier capabilities. The key objectives, functional
representatives and capabilities are rather structural variables relating to the
buyer-seller interface. Concerning interactive processes, communication is
studied (including the key issues in the dialogue, which is strongly related to
the key objectives and which functional representatives are involved) as well
as adaptations (what kind of relation-specific investments/ changes buyer and
seller make). Services marketing literature furthermore extensively deals with
related topics like quality management and service delivery, which help to
obtain a better understanding of what exactly goes on in service exchange
episodes.
Another area of attention in this research was to identify factors driving
variation in interaction between buyers and sellers of business services. These
driving factors can then be used to identify several groups of services for
which effective interaction is likely to differ. Existing classifications of
business services usually adopt a service provider’s perspective.
Classifications of consumer services are abundant in services marketing
literature; however, consumer goods (and services) are usually differentiated
based on how they are purchased, whereas industrial goods (and business
services) are typically differentiated based on how they are used by the buying
firm. This differentiating factors echoes a driving factor brought forward in
Interaction Approach studies into the ongoing interactions between buyers and
sellers of industrial goods, which is the way in which the buying company uses
the industrial good with respect to its own offerings. Based on this usagedimension,
a classification of business services was developed identifying four
types of services:
?? Component services, which are passed on to customers of the buying firm
unaltered (i.e. luggage handling at the airport for an airline);
?? Semi-manufactured services, which are used by the buying firm as part of
their offering to the buying firm’s customers (i.e. catering on the planes of an
airline);
?? Instrumental services, which are used by the buying firm to change the way
in which their primary processes are carried out (i.e. management
consultancy to professionalise the purchasing department of an airline);
?? Consumption services, which are used in various support processes in the
buying company (i.e. cleaning of the office buildings of an airline).
To emphasise the origin and foundations of this classification, the labels
used largely resemble the labels used in the Interaction Approach studies.
Furthermore, Organizational Buying Behavior literature points out buyerperceived
risk as a main factor driving buying behaviour. The usagedimension
was selected as the main driving factor for the way in which distinct
buyer-seller interfaces and interactive processes were designed (form of
interactions); buyer-perceived risk was included as an analysis control that
could help explain the extent to which distinct buyer-seller interfaces and
interactive processes were designed.
BUILDING A THEORY OF EFFECTIVE BUYER-SELLER INTERACTION
The usage-based classification of business services was used in several
empirical studies into the ongoing interactions between buyers and sellers of
business services. Starting from the classification, the conceptualisation of
interaction and the results of some exploratory studies into the presence of
systematic variation in interaction, a first exploratory study comprised four
services from three classes of the classification and with varying degrees of
buyer-perceived risk at a manufacturing company. A second exploration
comprised nine services from all four classes of the classification at two
service providing buying companies. A third step in theory building involved
the study of a successful and an unsuccessful service purchase for each of the
four service types. Success here relates to the ongoing service exchange and
was operationalised as the buying company’s level of satisfaction with the
interaction process and the interaction outcome (i.e. result of interaction)
relative to their expectations in advance of the purchase decision.
The results suggest that the level of perceived risk influences the extent to
which distinct interfaces and interaction processes are defined and designed.
The level of perceived risk affects the extent to which different patterns of
interaction can be identified: patterns are more clear for services characterised
by high risk. Furthermore, these different theory-building activities have
resulted in the development of effective (‘ideal’) patterns of interaction for
each of the four types of business services52:
?? In the effective pattern for component services, the key objective is to make
sure that the service to be purchased fits with existing service offerings.
People knowledgeable about (end) customer requirements (marketing, or
even from customers themselves) are involved in the ongoing interactions.
The buying company translates these customers’ requirements, and
coordinates and synchronizes the various elements of the service purchased
with their own offerings. The supplier matches capacity with demand and
deals with the buying company’s customers in the way the buying company
wants them to. Communication concerns the requirements of customers, the
fit of the service with the rest of the offering, and the customers’ evaluation
of the service.
?? For semi-manufactured services, the key objective is to make sure that the
service to be purchased becomes an integral part of the buying company’s
offering to its customers. Like with component services, representatives of
these customers are involved. Also production representatives are involved
because the service has to be transformed for and adapted to the buying
company’s processes rather than just its offerings. The buying company
explains its processes and specific requirements to the supplier and
52 Since no systematic variation was found with regard to adaptations, this process is
not included in the descriptions of effective patterns of interaction.
understand the service provider’s offering and how it can be transformed.
The supplier understands how their service is transformed; also, delivery
reliability is highly important. Communication for semi-manufactured
services mostly concerns customer requirements and the fit between the
buyer and the suppliers (service) production processes.
?? For instrumental services, the key objective is to achieve the desired effect/
change in the buying company’s primary processes. Business development
and process representatives are primarily involved in the ongoing
interactions. The buying company is able to specify the desired change to
certain processes; the supplier understands how the service will result in the
desired effect on the buying company’s primary processes. Project
management/ implementation skills are highly important buyer/ supplier
capabilities. Trends and developments inside the buying company and the
supply market are an important topic in the communication, as to align both
parties both in the short and in the long term.
?? Finally, for consumption services, the key objective of interaction is to have
the service fit with various support processes. The buying company is able
to find good representation of the internal customers/ users of the service
(which may be any functional department or all), and to clearly
communicate their requirements. The supplier is able to develop efficient
routines and to adjust its service to the specific situation of the buying
company. Communication mostly concerns the daily activities and
opportunities for improvement.
TESTING A THEORY OF EFFECTIVE BUYER-SELLER INTERACTION
The final round of empirical studies concerned testing the theory
developed by investigating the relationship between the pattern of interaction
and success in the ongoing service exchange. As a first step, a stringent
relationship between interaction and success was opted for, thereby posing the
effective pattern of interaction to be a necessary condition for success. Thus, in
order to be successful in the ongoing service exchange, buying companies
need to have a pattern of interaction that is (highly) similar to the effective
pattern of interaction for that specific service type. This test is performed by
means of case studies, whereby selection took place with regard to a specific
value of the dependent variable (as opposed to sampling for variation in the
dependent variable), i.e. success. Data had been collected on twenty-eight
service purchases (both low and high risk) from nine buying companies,
twenty-five of which were successful. It was then verified whether these
successful cases also had interaction patterns that were highly similar to the
effective patterns. This was the case but for one of the service purchases
studied: for this case, the hypothesis that having a pattern close to the effective
pattern of interaction is necessary for success is not rejected. Further analysis
of this service purchase however led to the conclusion that this outlier could be
accounted for the level of low risk involved: as a result, the service purchase
was sufficiently successful despite the low fit between the observed and the
effective pattern of interaction. In succession, the necessary condition
hypothesis was tested for the individual service types. Non-trivial necessary
conditions were found for component and consumption services. Nontrivialness
of the necessary condition could not be established for instrumental
services. Effective interaction is not a necessary condition for successful
ongoing exchange of semi-manufactured services.
MANAGERIAL RELEVANCE AND RECOMMENDATIONS
The classification of business services in combination with the effective
patterns of interaction for each service make up a typology of effective buyerseller
interaction. This typology can be used by purchasing professionals
(managers and consultants alike) to design new and improve existing
interactions with their providers of business services. In the first situation,
buying companies need to identify how they will use the service in order to
determine appropriate key objectives and accordingly involve the relevant
functional representatives in the ongoing interactions as well as develop the
required capabilities to manage this interaction. Simultaneously, the buying
company should look for appropriate capabilities on the side of the supplier. In
the second situation, the typology can be used to audit and where necessary
improve existing interactions with sellers of business services. Service
providers can equally use this typology to analyse how each individual buying
company applies their service, in order to address the right issues and people
in its marketing, sales and exchange processes with the buying company.
The research has furthermore identified a number of leveraging factors
that help to be successful in the ongoing service exchange. The first of these
factors is drawing up a specification with a sufficient level of detail. What
level is sufficient is hard to say, but identifying all relevant stakeholders results
in a more complete specification and furthermore includes how buyer and
supplier will deal with each other during the contract period, both with regard
to service delivery and the surrounding management processes. The second
facilitating factor is active involvement from the side of the buying company
in the start-up phase of the contract. Rather than leaving the supplier to
perform their job, the service exchange is more successful if the buying
company in the beginning actively monitors the daily dealings, so that any
disturbances that occur can be eliminated and buyer and supplier remain
aligned. A third facilitating factor is active contract management throughout
the contract period: after the intensive start-up, the buying company should
continue to monitor the contract. Finally, related to specifications, mutual and
mutually agreed Key Performance Indicators and targets should be developed,
which will be evaluated jointly at predetermined moments. It should be noted
that some of these factors are strongly related to the initial stages of purchase
process (i.e. specification and contracting). The extent to which these
facilitating factors can be leveraged was found to strongly depend on the
service-specific dimension of who to involve in the ongoing interactions.
Finally, the rich descriptions of the large number of cases studied
furthermore provides a variety of insights regarding difficulties associated with
the transactional purchasing process for business services, as well as a range of
best practices on how to cope with those difficulties. Examples are difficulties
in specifying services (specifically professional services), performance
measurement in services, and buying services through European Tendering.
With regard to specifying services, four alternative specification methods
could be identified in extant literature: specifying the input, the throughput
(process), the output (technical performance) and the outcome (financial
performance) specifications. The latter two are the most innovativ, yet also the
most common. The empirical studies contain a variety of examples of buying
companies using output and sometimes even outcome specifications. This has
various advantages, among which making the supplier directly responsible for
a certain result and only having to monitor this result (as opposed to the whole
process)53. Related to this is the identification of innovative indicators to
measure the performance of suppliers. Finally, although the European
Tendering procedure is usually viewed as highly complex and tedious,
especially for services, the results of the empirical studies in this dissertation
show that buying companies that do most of the work upfront (before making
a purchase decision) have less problems during the contract period. This is
explained from the fact that these companies have thought about how they will
deal with the supplier during the contract period, what problems may occur,
how these problems should be solved, et cetera. The European Tender
procedure, though not simple, obliges companies to perform a lot of such
preparatory work. One of the companies, EIA, is obliged by law to use
European Tendering for its sourcing activities: at the same time, this company
is considered among the most successful in the sample. As such, the findings
of this dissertation can be used for reflecting on one’s own business processes
and making improvements.
53 Disadvantages relate to decreased transparency and uncertainty on whether the
supplier is able to handle such specifications.
SCIENTIFIC RELEVANCE AND AREAS FOR FURTHER RESEARCH
This research has addressed three gaps in extant purchasing and supply
management literature:
1) The research focuses on business services as opposed to consumer
services, which have been and continue to be dealt with extensively in
services marketing and service management research;
2) The research develops the notion of ongoing interactions between buyers
and sellers of business services, which has been hardly addressed in
purchasing and supply management research;
3) The research focuses on generic similarities and differences across various
services rather than on specific services.
Despite these merits of the research, a few critical comments need to be
raised as well. An important criticism concerns data collection: while some
buying companies were rather interested in involving their suppliers in this
study, others were quite reluctant to approach suppliers. Consequently, data
was collected at buying companies only, which has resulted in a one-sided
view of patterns of interaction. The suppliers involved were not asked how
they view the interaction with their customers. Including the supplier in future
data collection efforts substantiates the findings regarding patterns of
interaction and may furthermore result in additional insights regarding the
buyer’s behaviour as well.
Another limitation arises with regard to one of the data collection methods
(self-administered questionnaire). Not all questionnaires were returned, as a
result of which the data obtained through this method is not complete. A final
limitation is related to the fact that our sample of cases is not equally
distributed across all classes of the classification. Although the initial objective
was to have a component, a semi-manufactured, an instrumental and a
consumption service at each of the ten participating buying companies, it
turned out to be difficult to for example identify component services at
manufacturing companies. Thus, for some of the service types, the findings are
based on a limited number of observations.
Based on the results of this research, several areas for future research can
be identified. First, continuing along the lines of research employed in this
dissertation, future research could be aimed at obtaining a more detailed
understanding of the mechanisms underlying how a more effective pattern of
interaction results in success. Among the successful cases, quite some
differences arose with regard to the degree of similarity between the observed
and the effective patterns and success. An example of this is the case in which
a relatively low degree of fit results in a relatively high degree of success. By
investigating in more detail what goes on in the ‘similarity, success’ quadrant,
it may be possible to uncover for example which of the underlying dimensions
of the patterns of interaction drives success most strongly.
Two other areas in which the typology may be of use is the area of new
(business) service development and supply chain management in business
services. The first has received rather little attention in comparison to new
product development, despite the fact that the specific characteristics of
services warrant specific research in this area. Also the phasing and activities
that constitute the service development process and the actors involved in this
process have not been investigated in large detail. The importance of buyersupplier
interaction in the development of new and/ or improved business
services comes from the fact that the service customer acts as a co-producer in
the service delivery process. Consequently, the customer can play a valuable
role in new service development by contributing to the creation of the right
generic prerequisites for the service: the service system, the service process
and specifically the service concept (think of the concept of ‘lead user’
involvement in product development). One way in which the typology could
be of help is in obtaining a better understanding of which actors (i.e. end
customers versus internal users) to involve in the new service development
process. A second way could be using the typology as a framework for
designing the service process in relation to the service concept, and
subsequently putting an appropriate system in place.
The second area in which the typology can be used is the area of Supply
Chain Management, which is specifically relevant for the two service types
that are being passed on to the buying company’s customers. The typology
could be used to identify common problems and solutions for services
belonging to these two classes of the classification rather than applying
concepts of goods supply chains to the area of services.
Original language | English |
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Qualification | Doctor of Philosophy |
Awarding Institution |
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Supervisors/Advisors |
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Award date | 20 Dec 2007 |
Place of Publication | Rotterdam |
Publisher | |
Print ISBNs | 978-90-5892-146-8 |
Publication status | Published - 2007 |