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The use of information technology for competitive advantage in Canada Reich, Blaize Horner 1988

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THE USE OF INFORMATION TECHNOLOGY ADVANTAGE  FOR COMPETITIVE  IN CANADA  by BLAIZE HORNER REICH  A THESIS S U B M I T T E D I N P A R T I A L F U L F I L M E N T O F THE REQUIREMENTS FOR T H E DEGREE OF M A S T E R O F S C I E N C E - B U S . ADMINISTRATION  in T H E F A C U L T Y O F G R A D U A T E STUDIES Commerce  and Business Administration  We accept this thesis as conforming to the required standard  THE UNIVERSITY  O F BRITISH  COLUMBIA  21 April 1988  ® Blaize Horner Reich, 1988  39  In presenting this thesis in partial fulfilment of the requirements for an advanced degree at The University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the Head of my Department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission.  Commerce and  Business  Administration  The University of British Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 Date: 21 April  1988  ABSTRACT This thesis reports the findings from systems built by Canadian  an  empirical study of eleven information  companies and  installed in their customers' premises.  It examines the factors which enable or inhibit the success of these strategic information systems. Specifically, it investigated factors which enable a company to: 1.  Create a customer-oriented strategic system  2.  Achieve a high level of adoption of the COSS by the customers.  3.  Achieve competitive advantage from the COSS.  Also  examined  were the effects that the  (COSS) before its competitors.  COSS  had  on  the company  originated it.  The findings are as follows: 1.  2.  3.  Factors which were associated with "first-movers" are: a.  A corporate sense of urgency.  b.  Management support (the chief executive or a champion).  c.  A competent, proactive IS department.  Factors which are associated with high early adoption are: a.  A well-identified need recognized by the customer.  b.  A low price charged for the use of the COSS by customers.  c.  A  COSS that matches the desired company-customer relationship.  Factors that are associated with low early adoption are: a.  Absence of a recognized need by the customer.  b.  A high price charged for the use of the COSS.  c.  A  sales team with low competence at selling the COSS.  n  which  4.  Factors associated with high late adoption and high competitive advantage: a.  5.  Many enhancements made to the COSS over the years.  Factors associated with low late adoption and low competitive advantage:  6.  a.  A system that is perceived to be of poor quality.  b.  A lack of continuity of the champion.  c.  A system that has had few enhancements.  The main effects that a COSS had on the originating companies were: a.  The  IS  operations  staff  needed  to change  their  service  levels,  procedures and attitudes. b.  The product upgrade  sales  their  people  skills  who  to • become  had to sell comfortable  the COSS selling  needed to  an information  technology system.  In  summary, the findings showed that the competitive advantage which accrues  from  an information system  imperative  that  companies  can take  wishing  many  years  to create such  develop a customer-oriented strategy, to develop prepare for several years of enhancements.  iii  to become reality. It systems  take  is  the time to  a good quality system  and to  TABLE OF CONTENTS Abstract  ii  Table of Contents  iv  List of Figures  vi  Acknowledgement  vii  Chapter 1. INTRODUCTION 1 1.1. Objectives 1 1.2. Background 2 1.2.1. Linking Information System Plans to Business Plans 2 1.2.2. Emergence of Strategic Systems 2 1.2.3. Development of Frameworks 3 1.3. Definition of a Customer-Oriented Strategic System (COSS) 5 1.4. Thesis Outline 7 Chapter 2. PREVIOUS EMPIRICAL RESEARCH 2.1. Descriptions 2.2. Surveys 2.2.1. Vitale et al., 1986 2.2.2. King et al., 1986 2.3. Field Studies 2.3.1. Runge, 1985  8 8 9 9 10 11 11  Chapter 3. THEORY AND FRAMEWORKS 3.1. Overall COSS Success 3.2. The COSS Development Project 3.3. Adoption of the COSS by Customers 3.4. COSS Impact on Competitive Position 3.5. Second-Order Effects  15 15 19 21 24 27  Chapter 4. RESEARCH DESIGN 4.1. Research Questions 4.2. Research Methodology 4.2.1. Sample 4.2.2. Interview Guide Contents 4.2.3. Interviews 4.2.4. Data Analysis 4.3. Measurement Issues 4.3.1. Reliability 4.3.2. Construct Validity  28 28 28 30 31 33 33 35 35 39  Chapter 5. A DESCRIPTION OF  46  THE  SYSTEMS  Chapter 6. FINDINGS 6.1. Introduction  52 52 iv  6.2. The Innovation Question 53 6.2.1. Industry 53 6.2.2. Corporate Level 54 6.2.3. IS Function 55 6.2.4. COSS Project 57 6.2.5. Summary 58 6.3. The Adoption Question 61 6.3.1. Adoption Rate Measured After One Year 62 6.3.2. Adoption Penetration Measured after Several Years . 65 6.3.3. Summary 68 6.4. The Competitive Advantage Question 70 6.4.1. The Winners 71 6.4.2. The Losers 73 6.4.3. Summary - The Winners vs. The Losers 75 6.4.4. The Hopefuls 76 6.4.5. Summary - the Hopefuls 80 6.5. Second-Order Effects 81 6.5.1. The IS Operations Staff 81 6.5.2. The Sales People 81 Chapter 7. SUMMARY 7.1. Recommendations 7.1.1. COSS Innovation 7.1.2. Early Adoption Phase 7.1.3. Later Adoption Stage 7.2. Areas for Further Research  84 85 85 87 88 90  Bibliography  93  Appendix A - DESCRIPTION OF MODEL VARIABLES 1. Factors Potentially Influencing COSS Development 2. Factors Potentially Influencing COSS Adoption 3. Factors Potentially Influencing Competitive Advantage Appendix B - INTERVIEW GUIDE 1. Demographic Data 2. The System and its Features 3. System Discovery 4. System Development and Installation 5. IS Planning and Business Planning 6. Results 7. Summary Appendix C - SOURCE DATA  97 97 103 108 110 110 Ill 113 116 120 123 129 131  v  LIST  OF  FIGURES  Figure 1. A Taxonomy of Potential TBIS Enabling Factors (Runge, 1985)  13  Figure 2. A Conceptual Model of an Industry with COSSs  16  Figure 3. Potential Factors Influencing COSS Success  18  Figure 4. Potential Factors Influencing COSS Development  22  Figure 5. Potential Factors Influencing COSS Adoption  25  Figure 6. Potential Factors Influencing Competitive Advantage  26  Figure 7. Findings - Factors Enabling Companies to be First-Movers in Developing a COSS  58  Figure 8. Findings - Factors Enabling or Inhibiting Adoption of the COSS by the Customer  69  Figure 9. Summary of Findings - Inhibitors and Enablers of COSS Success .... 86  vi  ACKNOWLEDGEMENT The  author  would like to thank two very important  supporters of this thesis.  Without their help, the study could not have been accomplished.  DMR  Group Inc., a Canadian-based international information systems consulting  company, provided the funding which was necessary to make the project national in scope. It also assisted significantly in the identification of the companies which are represented in the study.  My husband, Allan Richard Reich, provided the support and encouragement which made this first research project a pleasurable experience.  To both of these parties, I extend my sincere gratitude.  vii  CHAPTER 1. INTRODUCTION  1.1.  OBJECTIVES  In 1982, when periodicals such as Business Week reported on American Airline's Sabre  system  and The Wall  Street  Journal  described  Merrill  Lynch's  Cash  Management System, it became obvious to industry observers that companies had found  a new  weapon  to use against  their  rivals. Information  systems were  emerging from a supporting role to make major contributions to the future of many  companies.  interested  Since  then, academics  in the potential  of this  new  and practitioners  have  been  phenomenon, the strategic  highly use  of  information systems. Many questions, both theoretical and practical, were asked: How does one find opportunities for strategic systems? What kind of companies/industries can be affected by the use of strategic systems? What can strategic systems contribute?  The  overall  objective of this  research  project was to address some of these  questions by examining a set of systems which had been developed in Canadian companies. More specifically, the project set out to develop  ideas  about the  factors which might make such systems "successful" in the business sense in  other words, systems that would strengthen the competitive position of  the companies which built them.  1  INTRODUCTION / 2 1.2.  BACKGROUND  1.2.1. Linking Information System Plans to Business Plans  Since  the early  1970's, practitioners  and academics  have  creating planning methodologies which link the Information  been  interested in  System (IS) plans to  the strategic plans of the business. IBM pioneered this practice with its Business Systems Planning  methodology. This  previous attempts because it focused  approach  was significant^  different from  on identification of corporate needs rather  than the needs of a particular manager or function.  In  the next  developed  few years,  several  information  by major consultants (e.g., Nolan &  Holland), and academics (Rockart,  system  planning  methods  were  Norton, James Martin, and Bob  1979). There was considerable emphasis on  linking an organization's strategy set to its IS strategy set (King, 1978).  1.2.2. Emergence of Strategic Systems  In  the early 1980's, two important  First, examples of information  and independent developments took place.  systems which  shaped,  rather than  supported  strategic business plans emerged in the popular literature (e.g., the Merrill Lynch cash management system and the American Hospital Supply on-line order entry system). Second, Porter (1980) published his theories concerning strategies which an organization can adopt to counter its  particular  industry. Subsequently, based  the competitive  the competitive forces in  on Porter's  models, IS academics  INTRODUCTION / 3 began  to  describe  information and  the  strategic  potential  information technology  of  IS  and  the  probable  would have on the competitive  effects  stance of  an organization (Parsons, 1983; McFarlan, 1984).  Two  things  were  clear. First,  these  strategic  systems  could  not  identified with traditional IS planning methods. The planners, who  have been  were examining  the internal operations of the companj' to find automation opportunities, were not looking in the right place. These new found by and  strategic systems would most likely  examining the linkages between an  organization, its  stakeholders,  its environment.  Second, Porter's frameworks provided a concise, understandable way the  be  influences of information  technology.  By  using  of analyzing  his framework, it became  obvious, in retrospect, that the only strategic value most of the current systems had  was  improving  cost-effectiveness. While an attention to cost is always wise,  Porter made it quite clear that support of other competitive strategies, such as differentiation, required other types of IS support.  1.2.3. Development of Frameworks  During  the  next few  years, much activity  was  undertaken by  academics  and  practitioners to understand this new  phenomena. The  were a several frameworks designed  to help a company identify opportunities  for the new  type of system:  1.  (1980) proposed  Porter  a  model  of the  five  first results of this work  competitive  forces  (buyers,  INTRODUCTION / 4 suppliers, industry rivals, new an organization. He  entrants, and  substitute products) influencing  claimed that, by examining each competitive force, ideas  for information systems which would strengthen  the company's competitive  position could be found. Porter (1985) introduced  the concept of the "value  chain", which included  activities such as inbound and outbound logistics, operations, marketing/sales, and  servicing. To gain competitive advantage a company could identify  information  technology  lower cost or in a  would assist it in performing way  these  how  activities at a  that leads to better differentiation  (e.g. better  service). Wiseman (1985) proposed a search three  technique  "targets" (Customers, Competitors  thrusts"  (Differentiation,  Cost,  examining all positions on  and  Innovation,  using a matrix  consisting of  Suppliers) by  Five "strategic  Growth  Alliance).  and  By  this grid, opportunities for strategic information  systems would be discovered. He  suggested a further two  questions to tie  the results to policy formulation : should the resulting opportunities be used in an offensive or defensive way,  and will the system be used internally or  provided to the targets. Ives  and  framework  Learmonth to  (1984) developed  identify  areas  where  the a  Customer  company  Resource Life  could  use  Cycle  information  technology to provide better service to its customers. Synott (1987) proposed an "Information  Weapon" model outlining alternative  strategies (leader, follower), foci (external, internal) and information advantage.  and  innovation)  for  companies  wishing  levels (productivity, to  gain  competitive  INTRODUCTION / 5 1.3.  DEFINITION  OF  A  CUSTOMER-ORIENTED  STRATEGIC  SYSTEM  (COSS)  The  frameworks addressed  only one  phenomenon - namely, how  piece of the puzzle of the strategic system  to identify areas of opportunity for these systems.  Little else was  known about the next steps in the process how  a system, how  to implement and  support it, and  how  to develop such  to measure its success.  These were the questions which the current research set out to investigate. First, the unit of analysis had to be defined.  For  the  purposes  of this  information system was "...  a  project, Wiseman's  adopted. He  computerized  organization's  (1984) definition  of a  strategic  defined a strategic system as:  information  strategy, its strategy  system  used  for gaming  to  support  advantage  an  over its  competitors." This simple definition captured the entire essence of the word "strategic", without limiting  it to  a  certain  time  frame  (e.g.  was  the  competitive  sustainable over several years), or a certain method (e.g. was costs, raise revenue or ward off competition). It also met for a definition which could encompass successful and  advantage  the result to lower  the need of the project  unsuccessful systems and  systems which were built with different motivations.  Although  there  are  many  types  of systems which  can  improve  a  company's  competitive position, the project has investigated one specific category of strategic information systems - those  which  link  a  company  to its customers. This  INTRODUCTION / 6 particular type of system was found  that  customer  service  chosen based on  systems  had  been  a study (King, 1986) which implemented  by  70%  of the  respondents to his survey. These findings indicated that customer-oriented systems were important to companies and also were prevalent enough that a sample of them would exist in Canada. To distinguish these systems in name from other types  of  strategic  systems,  we  called  them  Customer-Oriented  Strategic  Systems (COSS).  The  idea  of "linkage  to customers" was  operationalized  which the customer operated from his/her own that the customer explicitly  by  selecting  systems  premises. The definition required  accept the system at the site and learn how  to  operate it.  The project labelled such systems "strategic", because of the researcher's strong belief  that  strengthen  a  profit-oriented  linkages with  company's  motivation  customers is always  for building  a  system to  undertaken for the purposes of  gaining some type of competitive advantage. This belief was  subsequently borne  out in the systems that were studied.  The selection criteria for the sample were: 1.  The  system  particular potential buying  was  developed by  a  profit-oriented  product or line of products. It was customers  of the product. The  the product and  Accepting the system was  they had  company marketed  customers  had  to support  a  to current and a  choice about  a choice about accepting the system.  not mandatory  after they decided to buy the  INTRODUCTION / 7 product. 2.  Customers  who  premises. The  accepted  the  system  would  operate  it from  their  own  company supplying the COSS would provide systems support  and maintenance. 3.  The  system had  to have been installed for at least one year prior to the  beginning of the research project. This condition was  included to enable the  project to discuss the effects of the system. 4.  The  system should have been a "first-mover" in the relevant industry and  market (first-mover is defined in Chapter 4).  1.4.  THESIS  The  thesis is organized as follows:  1.  OUTLINE  Chapter 2 contains a review of the empirical work which has been done on the subject of strategic information systems. Particular attention is paid to the doctoral thesis of Runge (1985), who  pioneered  a systematic approach  to studying this topic. 2.  Chapter 3 describes the theoretical frameworks used in the research.  3.  Chapter 4 and  describes the  research  methodology. Also discussed  design, including the are the  research  questions  measurement issues which were  addressed in the research. 4.  Chapter 5 briefly describes each system that was investigated.  5.  Chapter 6 discusses the findings specific to each research question.  6.  Chapter 7 draws general conclusions and outlines areas for future research.  CHAPTER 2. PREVIOUS EMPIRICAL RESEARCH  2.1.  DESCRIPTIONS  Many  examples  of information technology  (IT) used  for competitive advantage  have been described in periodicals (e.g. The New York Times, The Wall Street Journal, exact  Business  references,  Week, Computerworld see  Wiseman,  and Information Systems  1985).  Some  of  the  most  News  widely  - for  referenced  COSSs from this source are: 1.  American  Airlines  and United  Airlines  computerized reservation  Sabre and Apollo, respectively. This linkage between travel  agents  has  earned the  companies  very large  systems,  the airlines and the market shares and  threatened the existence of their competitors. 2.  The various systems developed by Banc One, including a 1970 installation of One  automated teller machine equipment. These systems have assisted Banc in its change from being a small, local bank in 1967 to ranking in  the top 10 U.S. banks by 1984. 3.  CosMcK, a system developed by McKesson Corporation, which helps retailers stock, rotate and display merchandise based on system-generated marketing reports.  The former president,  Thomas Drohan,  emphasized  the  strategic  nature of IT by saying: "Perhaps  the  single  greatest  advantage  that  the  McKesson  distribution companies enjoy has been - and will continue to be in computer technology..."  8  PREVIOUS EMPIRICAL RESEARCH / 9 Although the periodical articles do not present a complete picture of the processes by  which these companies conceived and  implemented strategic systems, several  authors (Ives and Learmonth, 1984; Wiseman, 1985; Synott, 1987) have compiled more comprehensive descriptions of the companies and and  their systems to explain  support their frameworks. In addition, several important systems have been  described in detail in case write-ups. The Harvard Business School has published cases involving U.S.  companies (e.g., American Hospital Supply, Otis Elevators,  Pacific Pride, American Airlines) and The University of Western Ontario has done the same for Canadian companies (e.g. D.H. Howden).  To  date  the  focus  investigating why,  has  been  on  describing  how,  rather than  systematically  information systems led to competitive advantage. While these  efforts have been valuable in identifying the type of competitive systems  and  detailing their possible effects, academics have called for "a research agenda to develop and  test explanatory models of IT and  competitive advantage"  (Treacy,  1985).  2.2.  SURVEYS  2.2.1. V i t a l e  et al.,  1986  In one of the few empirical studies on this topic, Vitale, Ives and Beath (1986) surveyed  24  senior  IS  managers  to  test  the  relationship  between  two  organizational factors (environmental turbulence, knowledge about information assets and  opportunities) and  a company's satisfaction with their process of identifying  PREVIOUS EMPIRICAL RESEARCH / 10 strategic uses of IT. They found factors and  a very high correlation between both of the  the dependent variable, and concluded  that companies should use  an  "adaptive" or "opportunistic" model rather than the less flexible "top-down" model of strategic IS planning. They also suggested  that companies build an appropriate  structure conducive to the identification of strategic applications instead of relying on  a planning process  to create new  ideas for competitive  findings were tested in the current research by  uses of IT. These  investigating the structure and  planning processes used by the sample companies.  2.2.2. King et al.,  1986  In a mail survey of 51 IS executives, King et al. (1986) investigated the use of strategic information systems using a number of frameworks. He five competitive most important  forces model  (Porter, 1980), that customer  area of strategic applications for 57%  next most important highest by  14%  facilitators  (using  area was  of the  linkages were the  of the respondents.  Product/Service Differentiation, which was  respondents.  statistical  found, using the  rank) of  The a  following were company's  effort  most  important  to  create  strategic  Technical support within the firm Existing IT leadership position Pressure from Competition Similarly, the factors reported to be the strongest inhibitors were:  Difficulty in assessing tangible contribution  ranked  the  systems:  Importance of other priorities  The  PREVIOUS EMPIRICAL RESEARCH  / 11  Lack of appropriate planning Lack of top management support He  also  proposed  a  theoretical  separation  the use of information  between  technology, and the use of information, as means by which companies can use information resources for strategic purposes.  In  this research project, data was  organizational facilitators  gathered  and inhibitors. No  which  attempt  tested was  King's  findings on  made to differentiate  between the use of information and information technology. Results are discussed in Chapter 6.  2.3.  FIELD  STUDIES  2.3.1. Runge, 1985  In  his doctoral  systematically  dissertation,  analyze strategic  Runge systems.  (1985) He  made  studied  the  first  35 systems  attempt  to  in depth to  determine: How  companies  recognize the opportunity to use telecommunications for  competitive advantage, and What structures or processes enabled companies to exploit the opportunities.  Runge used a multiple case study approach interviews.  His  sample  consisted  and gathered data using structured  entirely  of  telecommunications to link a company to its customers.  systems  which  used  PREVIOUS EMPIRICAL RESEARCH / 12 Runge did not  use  his empirical data  directly  to answer  his first  research  question. Instead, he used descriptions of the systems to test the robustness of the customer resource  life cycle (Ives and  Learmonth, 1984). His  him  modifications  life  to  make  minor  to  the  cycle model  dimension labelled as the "degree of impact". This was  and  findings led add  a  new  the degree to which the  system created switching costs on the part of the customer. Therefore, the first result of his empirical study identify ideas for competitive not  find  any  significant  was  another  systems. We  similarities  prescriptive framework  designed  to  infer from his actions that he could  between  the  methods  used  to  recognize  opportunities for competitive systems (or, alternatively, that he could not discern any  "methods" at all). King  et al. (1986), similarly  could  not  identify  any  common methods.  To answer the second research question, Runge held an average of five in-depth interviews regarding  each  system. His  questions  were based on  a  taxonomical  framework which had been developed by Clemons et al. (1984) and modified extended  by  Runge. This  factors"  for  telecommunication  Opportunities, General  framework  consisted  based  of four categories of "enabling  information  Policies, Operational and  and  systems  (TBIS):  Application  Design Constraints, and  Network  Design Variables. Runge's model is represented in Figure 1.  In all, Runge's taxonomy identified about 35 research. The by  dependent variable examined was  the customers. It was  measured by  variables to be investigated in the the rate of adoption of the TBIS  asking the interviewees to classify the  rate of customer acceptance of the TBIS as slow, moderate or rapid.  PREVIOUS EMPIRICAL RESEARCH / 13  TBIS ADOPTION  APPLICATION OPPORTUNITIES  —  GENERAL POUCY  Competitive Environment  Risk  — Adoption  Rate  OPERATIONAL AND DESIGN CONSTRAINTS  NETWORK DESIGN VARIABLES  Availability of T e c h n o l o g y  Capability  T  Planning — Customer Interactions  Adaptability Regulation  Organisational Authority  — Characteristics of C u s t o m e r s — Product/Service Characteristics  Flexibility Industry Practices  Quality of Service  Control Network Policies  Organisational Capability  Desigr  Figure 1. A Taxonomy of Potential TBIS Enabling Factors (Runge, 1985)  Runge used two criteria to determine the key enabling factors: 1.  those factors which were consistently the successful  2.  those  factors  implementation of the systems studied, and/or which  correlated  Spearman Correlation Coefficients  He  mentioned as contributing towards  significantly (SCC).  found five factors that qualified as key enablers:  with  adoption  rate,  using  PREVIOUS EMPIRICAL RESEARCH / 14 1.  The  presence  of a  product  champion  (83% of sample,  no  significant  correlation). 2.  A  high level of customer  reported, SCC 3.  = .712, significant at the 1% level).  existing system  An  involvement in the development process (% not  to base the TBIS on (77% of sample, SCC  =  .330,  significant at the 10% level). 4.  A  high degree of attention to marketing the TBIS  (78% of sample, no  significant correlation). 5.  The  circumvention  of  existing  procedures (80% of sample, SCC  IS  planning  and  not reported). The TBIS  project  selection  had been built  earlier than it would have been if the normal IS priority-setting procedures had been followed.  CHAPTER 3. THEORY AND  FRAMEWORKS  Runge's project provided a solid methodological foundation upon which to base research on customer-oriented strategic systems. It was  decided to replicate his  work by identifying examples of the use of IT for competitive advantage in Canadian companies  and to investigate whether his findings were applicable in  Canada. Before proceeding, however, several changes were made to clarify and enhance the research framework.  3.1.  OVERALL  COSS  SUCCESS  One concern was to ensure that the framework used was based on a theoretical foundation and could be shown to be exhaustive. Towards this end, a model was created (Figure 2) which represented an existing industry in which one or more COSSs had been introduced. It was  reasoned that, if the diagram could be  shown to contain all the relevant types of data about a COSS, then any factors influencing COSS success should be attributes of the entities depicted in the diagram.  To use the American Hospital Supply COSS as an example, the Company would be American Hospital Supply (AHS) and the Customer hospital or a  hospital buying group. The  Company  would be an individual has  a  line  of medical  Products for sale to potential Customers. The Company and the Customer have a relationship defined by the type and quantity of AHS sold to the hospital. Aggregated  products which were/are  information about Companies, 15  Customers  and  THEORY AND FRAMEWORKS / 16  I N D U S T R Y Product —based  Relationship  CUSTOMER  COSS —based  Relationship  Figure 2. A Conceptual Model of an Industry with COSSs  Products represents an Industry.  When a company creates a COSS to support the sale of its products and/or services, a new relationship is added, emanating from the sale (or acceptance, if the customer does not pay for the COSS) of the COSS to the customer.  This way of looking at the environment of a COSS demonstrates  that two  events are important in discussing COSSs. The first is the production of the COSS, the second is the sale of the COSS. What this diagram cannot show is the effect that these two events have on the rest of the entities (e.g. the change in the product-based relationship between the company and the customer, the changes at the industry level). This research project investigated the factors that influence these changes as well as the factors that enabled the first two  THEORY AND  FRAMEWORKS / 17  events - the production of the COSS and the sale of it.  By visualizing the information in the COSS environment as a set of entities, the data gathering typology could be structured with a known degree of completeness. The project, therefore, was  structured to gather information about the five entities  (Company, Customer, Industry, Product  and  COSS). This approach, rather than  Runge's strategic network design taxonomy, seemed to produce a good fit with the  five  competitive  forces  identified  by  customer, competitor" dimension proposed by  Porter  (1980),  and  the "supplier,  Wiseman (1985). Runge's questions  fit well within this framework as he had investigated aspects of all of the major entities.  Using Runge's question set as a guide, the COSS entity and the Company entity were broken into sub-entities. The COSS  COSS became three separate sub-entities - the  Development Project (the successful completion  of which  results in the  COSS), the Functions and Features of the COSS, and the Support and programmes designed was  to boost  divided into a Corporate  whole) and  the  success  of the COSS. The  Level (containing data  Marketing  Company entity  about the company as a  an IS Function (containing information such as the structure, status,  and existing technological infrastructure of the IS function in the company). The general model which resulted from our taxonomical  changes is depicted in Figure  3.  In this general model, COSS "success" is the overall dependent variable, defined in three ways:  THEORY AND  FRAMEWORKS / 18  Figure 3. Potential Factors Influencing COSS Success  A timely development of the COSS, A successful adoption by the customers (Runge's dependent variable), and An At  increase in the competitive position of the company.  this level of analysis, attributes of all of the  entities (Company, Customer,  Industry, Product, COSS), have the potential to impact the success of the COSS.  Runge's taxonomy (Figure  1) did not distinguish between the first two  measures  THEORY of  success - the development  This may  of the C O S S  AND  and i t s  F R A M E W O R K S / 19  adoption b y the customers.  e x p l a i n w h y several of his factors satisfied only one of the criteria for  inclusion. F o r example,  factors such as the presence of a product champion, a n d  the avoidance of I S p l a n n i n g guidelines, were well represented had  no significant correlation w i t h  other  hand,  the  level  of  i n h i s dataset b u t  adoption rate, the dependent  customer  involvement  in  the  variable. O n the  COSS  development  correlated v e r y highly w i t h the adoption rate. These  findings m a k e intuitive sense  because  during  COSS to  the first  two factors  would  be  influential  a n d the customer involvement would  adopt  systems  the C O S S . which  Runge,  h a d been  correlations between  T h i s realization  however,  first-movers  be  d i d not distinguish  or followers  between  a n d so he could  strategic  not test for  entry position and a n y of h i s factors.  led to a separation  influenced  development  of the  be influential i n p e r s u a d i n g customers  of Runge's model  the hypothesis t h a t the success of a C O S S might  the creation  by  different  into two parts - reflecting  has many  factors.  The  of the C O S S , the second related  first  facets a n d that each one model  related  to the  to the a d o p t i o n of the C O S S b y  customers.  3.2.  THE  Several  COSS  methods  DEVELOPMENT  were  used  PROJECT  to  develop  a  model  containing  factors  which  potentially influence the speed w i t h w h i c h a company develops a C O S S .  Three  of Runge's  findings  (a product champion,  avoidance of I S planning and a n  THEORY existing  system  to build  upon)  represented  AND  factors  F R A M E W O R K S / 20  which  would  influence  a  company's ability to "readily respond to the opportunities seen" (Runge,p 26). T h e factors  from  capability,  his taxonomy  planning,  adaptability)  placed as factors under  In  addition  innovation a  test,  the new  a n d life-cycle  there  a r e differences  the fate  customers, be  that these are generic  of the model.  on new  development  of opportunity (Urban  steps w h i c h  distinguish  development development  project effort,  a n d high need  were  and  process. Because  a  might  COSS  will  identification, design,  et al., 1987) A l t h o u g h one  from  treatment. T h e major  of the C O S S  with  They  product development  relate an  to a n y I S project,  internal  difference  other  COSSs.  would such  take  as  One on  might the  use of leading-edge  for t e a m  and  f r o m the  - consisting of The C O S S  expect, therefore,  characteristics  system  stems  be decided b y the m a r k e t  competitors, products a n d other e n v i r o n m e n t a l forces.  competing  speed  which  phases  management  i t for special theoretical  that  (e.g. organizational  as its target, i t c a n be thought of as a product, m o v i n g  product development  argue  findings  the basis  added to our understanding of the C O S S  might  fact  formed  to these  to Runge's findings, the literature  introduction  qualify  related  the Corporate a n d I S F u n c t i o n entities.  C O S S h a s customers  through  which  of" a  that  a  will COSS  new  product  technology, creativity,  secrecy,  productivity. Therefore, factors w h i c h described the  C O S S Development Project a n d the I S F u n c t i o n were added to the model.  A the a  COSS  c a n be conceptualized  as a n innovation, both from  company developing i t a n d from  the point of view of  the point of view of the customer. There i s  rich body of literature w h i c h has investigated the factors enabling companies to  THEORY AND  FRAMEWORKS / 21  develop innovations. Factors such as structure (Burns and Stalker, 1981, Kanter, 1982), size (Kanter, 1982), and competition (Drucker, 1985), have been shown to correlate  with  innovative  behavior.  These  findings were  incorporated  into the  model under the Corporate Level, IS Function and Industry entities.  Factors  from  the Vitale  et al. (1986) study  awareness were added to the Corporate  on  planning  and  Level entity. The resulting  technology model is  shown in Figure 4. In this model, the dependent variable is the time or order of COSS introduction into the market. It distinguishes between first-movers and followers. A detailed description and justification of the independent variables is included in Appendix A.  3.3. ADOPTION  As  OF THE COSS BY  CUSTOMERS  Kimberley (1986) stated, "how an innovation fares in the marketplace is a  function of numerous factors - its performance, how effectively it is marketed, and  its comparative advantage, to name just a few." To create a model which  contained such factors, several sources were used.  The first factors to be added were Runge's two remaining  enabling factors - a  marketing programme and customer involvement in the COSS design. They were added under the Support and Marketing and COSS Development Project entities.  As mentioned previously, a COSS viewed from the customer's perspective can be conceptualized as an innovation, defined by Rogers (1983) as "an idea, practise  THEORY AND FRAMEWORKS / 22  coss  \  DEVELOPMENT  I  (First  Mover/Follower)  I  IS FUNCTION  CORPORATE LEVEL  J  I —  Proactive/Reoctive Stance  Proactive/Reactive Stance  — Level of  Rivalry  — T h r e a t of Structure  — Awareness  Market  Position  Strotegic  Plon  — Customer Power  Risk  — Size  Structure  — Business Awareness  Champion  — Financial  Substitutes  — T h r e a t of New Technology  COSS DEVELOPMENT PROJECT  INDUSTRY  COMPANY  Entrants  — Pilot —  Bargaining  Test  Priority  — Resources  —  Status  —-  Competence  —  — Planning — Existing  Constraining Regulations  Policies System  — Existing T e c h n o l o g y — Other  Existing  COSSs  Figure 4. Potential Factors Influencing COSS Development  or object that is perceived  as new by an individual or other unit of adoption".  The unit of adoption in our model is the customer's organization. No single paradigm  exists  organizational  to  level.  explain The  the factors  earliest  and  best  which  influence  accepted  adoption  model  (Rogers,  at an 1962)  characterizes adoption as a two-step process: the early adopters make decisions based  on the qualities  of the innovation,  the late  adopters  experiences of the early adopters. This finding was incorporated  focus  on the  into the model  THEORY AND FRAMEWORKS / 23 as two attributes of the COSS (features and adoption rate). Also included in the model were Roger's (1983) factors that relate to adoption by individuals. They are: 1.  Relative Advantage - the perception  of how much better the innovation is  than existing methods. 2.  Compatibility - how compatible the innovation  is with existing values and  needs. 3.  Complexity - how complex the innovation is perceived to be.  4.  Trialability - the degree to which the innovation can be tried before it is adopted.  5.  Observability  - the degree to which  the benefits  of the innovation are  observable by others. The first three factors have be shown to be superior predictors (Tornatzky and Klein,  1982) and they  were  included  in the model  as descriptors  of the  Customer. The latter two were not tested.  Rogers also outlined six generic steps that an organization goes through en route to incorporating an innovation into its operations. They are: 1.  Agenda Setting - identifying a problem and seeking solutions.  2.  Matching - matching the problem with the innovation to establish how well they are likely to fit.  3.  Adoption/Rejection  Decision  4.  Redefining/Restructuring  - changing the innovation tofitthe organization or  visa versa. 5.  Clarifying - moving the innovation into the organization.  THEORY AND 6.  FRAMEWORKS / 24  Routinizing - incorporating the innovation into regular activities.  The project incorporated  ideas from this literature into the COSS and  Customer  entities in the model.  The  Management  contains  Information  several frameworks  opportunities. Two  Systems  (MIS)  which are claimed  literature  on  strategic systems  to be useful in predicting COSS  of these (Ives and Learmonth, 1984; Porter, 1980) were tested  for predictive power as attributes of the COSS. The resulting model is shown in Figure 5.  In this model, adoption of the COSS by the customer is the dependent variable, measured  in terms of rate, penetration  and  usage. A  detailed description and  justification for the individual factors is contained in Appendix A.  3.4.  COSS IMPACT  ON  COMPETITIVE  Although a COSS may  be constructed  POSITION  in a timely  manner and enjoy a high  adoption rate, it will not necessarily improve the company's competitive position. Furthermore, a change to the current position may model  (Figure  6) portra3 s ?  the factors which  sustainability of the competitive a  COSS. The  Porter's  are based  on  several  hypotheses from  literature, including:  (1985) claim  competitive  affect the amount and the  advantage that a company might receive from  factors in the model  business policy and MIS  may  not be sustainable. The third  that  technological  change  will  lead  to sustainable  advantage only if it lowers cost or enhances differentiation and  THEORY AND  COSS ADOPTION  FRAMEWORKS / 25  Rate of A d o p t i o n Penetration  1 COSS  —  Pilot  SUPPORT and MARKETING  FUNCTIONS and FEATURES  DEVELOPMENT PROJECT  Test  Customer Involvement  CUSTOMER  INDUSTRY  Features  Customer  Education  CRLC  Customer  Support  Marketing  Program  Position  Value Chain Position  COSS  Technological Trends • Lead Time Next C O S S  —  Technology  Awareness  —  Effort Required to A d o p t  —  Perception of COSS Complexity  to  t  PHce  Flexibility — Awareness  of  Need  Performance — Enhancements  Satisfaction of Other Customers  Figure 5. Potential Factors Influencing COSS Adoption  the technological lead is sustainable. Keen's  (1985) notion  of gaining  advantage  through  added-value  features  which result in high customer dependence on the COSS.  The dependent variable in this model is the competitive advantage that is gained through  the customer  profitability  adoption  of the COSS.  (e.g. measurable gains  It is divided  into  gains in  in sales, decreases in costs) and gains in  THEORY AND  C O MV PA EN TT IA TG IE VE A D  I  COSS  COMPANY  FUNCTIONS and FEATURES  ro on du EPc oc mtics Features DPir fo fedruecnt tiation Enhancements  Profitability Competitive  PRODUCT  FRAMEWORKS / 26  Strength  INDUSTRY  CUSTOMER  SUPPORT and MARKETING  - COSS Price—InDfio fr fm eraetnitoination Conte nt  CRoengsutl ra at ii no in ng s — COSS Adoption L e a d T i m e Next COSS to Rate —toEffA ordtoptRequired —CO D e p SSendence on  Figure 6. Potential Factors Influencing Competitive Advantage  competitive strength (e.g. raised barriers to entry, increases in customer loyalty, increases in switching costs). Justification for the individual factors are contained in Appendix A.  THEORY AND FRAMEWORKS / 27 3.5. SECOND-ORDER  EFFECTS  One of the questions about a COSS that had never been investigated empirically was the extent and the nature of the changes that a COSS might bring to the company  which developed  it. If this system  represents  a new way that the  company  wishes to deal with its customers, then it is quite conceivable  that  certain functions and procedures in the company will be affected. The project did not  specify any hypotheses about the nature of the changes to be expected.  Rather, it used the hierarchical framework (called the "7-S framework" by its authors) developed by Athos and Pascale  (1981). They claim that changes can  occur on many levels in a company, and use the following descriptors to describe the levels: Superordinate goals- the mission and long-term goals Strategy - the strategies put in place to support the goals Structure - the formal organizational structure Style - the culture of the organization Staffing - the level of staff - ' Systems - the operational or control systems Skills - the skills required to do various jobs The  project investigated whether the COSS affected one or more of these areas  in the originating companies.  C H A P T E R 4. R E S E A R C H DESIGN  4.1.  RESEARCH  QUESTIONS  The project's research questions are as follows: 1.  The  Innovation  Question  - What  factors  enable  a company  to be a  "first-mover" in creating a COSS? 2.  The Adoption Question - What factors influence the adoption rate of a COSS by its customers?  3.  The Competition Question - What factors affect the size and sustainability of the competitive advantage achieved by a company?  4.  The Second-Order Effect Question - In what ways does a COSS typically affect the originating company?  4.2.  RESEARCH  METHODOLOGY  There seemed to be two ways to structure a project to investigate the research questions. The first was  a case approach, largely descriptive and exploratory in  nature. The data for analysis would be a combination of the perceptions of the subjects and the interpretation of these perceptions by the researcher. The second was  a  field  study  approach,  with  a  large  sample  and  an  emphasis on  quantitative results. In this approach, data for analysis would consist only of the perceptions of the respondents.  Bonoma  (1985) opined  that  case  research  28  methods  were  "useful  when  a  RESEARCH DESIGN / 29 phenomenon  is broad  and  complex, where  insufficient to permit the posing  the existing body  of knowledge is  of causal questions and when a phenomenon  cannot be studied outside the context in which it occurs." The first and last qualifications are true for the COSS phenomenon, the second one depended on the  current  empirical  inventory  work  of empirical  has been  done  literature.  As  previously discussed, little  to discover the processes  by  which  strategic  systems are built or the factors which influence their success. Runge's research used  a multiple case  approach to study  the factors which influenced adoption  rate. King (1986) used a mail survey technique to classify strategic systems and to investigate the facilitators and inhibitors of COSS development. This research project creates new  frameworks based on Runge's study and other literature on  adoption, competitive forces and innovation. With the exception of Runge's five factors, the contents theory  has  not been  of the frameworks developed  have  not been  for the major  tested. Measurement  constructs in the framework,  making it difficult to use survey techniques with any assurance that the results have validity.  The stage of development of the research into the COSS phenomena (using the Bonoma(1985) continuum of "drift", "design", "prediction" and "disconfirmation"), seemed  to be  somewhere just  beyond  the drift  stage. As  he  states, "drift  becomes design with the development of a tentative explanation of the divergent observations." In the design  stage,  "cases  might be  collected... to provide  a  sufficient (not statistically so) body of observations with which to "flesh out" the model and permit  the development of some generalizations to account  divergences in observation." Since the project's models were very  for the  tentative and  RESEARCH  DESIGN / 30  potentially incomplete, it was decided to employ a case research strategy to firm up their shape and contents.  Choosing the case approach meant that the study could be treated as essentially a replication of the Runge project. There were only a few decisions to make in its execution. The participation of companies with COSSs had to be solicited, the Runge interview guide had to be altered and the interviews conducted. The plan was to interview two types of people about each system - the IS manager and the executive who same  was responsible for the system. They would be asked the  questions, thus improving  comparative  the validity  of the findings. However, in any  analysis, the values for many of the factors would ultimately be  interpreted and determined by the researcher.  4.2.1. S a m p l e  The  population of COSSs in Canada is unknown and discovering it was beyond  the  resources  of the project. It was  decided  to use a  convenience  sample  generated from colleagues. The criteria for including a COSS in the study was: 1.  The company had to be profit-oriented.  2.  The COSS had to be operated at the customer's place of business, either through a remote terminal or a personal computer with a modem.  3.  The customer had to be able to refuse the COSS while still purchasing the product.  4.  The COSS had to have been available in the marketplace year.  for at least a  R E S E A R C H D E S I G N / 31 Once a company was referred to the project as being a candidate, the researcher approached either the line executive who had responsibility for the COSS or the IS manager. In all cases that fit the criteria for inclusion, the executives agreed to participate in a two-hour  interview.  The  resulting sample consisted of 11 systems located in nine Canadian companies  (see  Chapter 5 for the descriptions) - four banks, an oil company, an insurance  company,  a  hardware  wholesaler,  a  paper  manufacturer  and  a  computer  manufacturer (Descriptions of the systems appear in Chapter 5). Although several of  these  companies were  wholly  owned  subsidiaries of international  firms,  the  Canadian management had acted autonomously in deciding to create a COSS.  Ten  of  decision  the  systems  was made  were to  "first-movers"  select  a  in  the  preponderance  relevant  of  first  market  movers  area. The in  order  to  investigate the structures and processes which are associated with companies who were  first.  4.2.2. Interview Guide Contents Although Runge's interview framework, newly  guide was created using a strategic network  design  it contained questions which pertained to most of the factors in the  developed  models.  Additions  and  alterations  were  made  as  follows  (Appendix B contains the full text of the resulting interview guide): 1.  Questions were rearranged into a format patterned after  the life-cycle (i.e.  idea formation, development, marketing, support) of the system. 2.  Additions were made to investigate the dependent variables (entry position,  RESEARCH DESIGN / 32 adoption  rate, competitive  advantage,  second-order  effects).  For  example,  questions were added to probe for quantitative measures of adoption rate such as actual number of customers over time, number of target customers, and  usage rates by  (see  section  6  customers. Questions regarding  of the  interview  guide  in Appendix  competitive B),  were  advantage added  to  investigate the impact of the COSS on: a.  The  company's profitability (such as sales, price, costs).  b.  Other measures of competitive  strength (such as image, entry barriers,  customer loyalty, industry-level changes). c.  Internal changes in the  company  (such as  strategy,  skills  required,  structure).  Limitations  Although research  the  theoretical frameworks  design limited the  had  been  to  be  complete,  the  project's ability to fully test each framework. For  example, since customers were not interviewed, their perception  designed  of the complexity of the  it was  not possible to measure  COSS, or their level of satisfaction.  Another variable of interest which could not be  measured was  the increase or  decrease in transaction cost experienced by customers. Similarly, since the written material taken from each company was  limited to a description of the COSS, the  following variables were not operationalized: Corporate structure IS structure Market Position  RESEARCH DESIGN / 33 COSS performance  4.2.3. Interviews The  interviews were held at the interviewee's place of business and  lasted from  1 1/2 to 2 1/2 hours. For 8 of the 11 systems, the researcher was successful in  gaining  access  responsible  for the  researcher  took  development and  to  both  COSS.  the The  additional notes  executive  and  interviews  were  during  the  IS  manager  all tape  them. Written  the marketing of the system was  who  recorded  were  and  the  material describing the  obtained whenever possible.  After the interview, the researcher made notes on the major points made by the interviewee.  4.2.4. Data Analysis There were several steps taken in the analysis of the raw  data.  Assimilation- organizing and condensing the data Worksheets were made up, entitled Company, Customer, Industry, Product, COSS these  and  Results. The  topics were  worksheets was  interview  transferred onto  created for each  interview notes and  questions the  which  sheets. A  COSS. The  pertained copy  researcher  to each of  of each  of the  then, using the  the tape recordings, filled out the worksheets for each  system. If different answers to the same question were given by different interviewees, the researcher used her knowledge of their position and their proximity to the COSS to decide on a single answer. Interpretation - summarizing the data onto high level frameworks The  researcher  made up  3  high  level frameworks - one  page each for  RESEARCH DESIGN / 34 COSS development, adoption and competitive advantage. Using the entities as headings, she summarized, the  interviewees  from the worksheets, the information which  had particularly  noted  concerning the three  dependent  variables. This was done to prepare a concise overview of each system which stressed the most important facilitators and enablers of each outcome. Ranking - ordering the systems based on dependent variable values The  researcher then ranked  the eleven strategic  information  systems on  each of five dependent variables (See section 4.3.2 for a discussion of the measurement of each). a.  Entry Position - was the COSS a first-mover or a follower?  b.  Adoption Rate for the first year - was the COSS  adopted slowly,  moderately or quickly by customers? c.  Adoption measured four or five years later .- what is the penetration (in percentage) that the system has achieved compared with targets?  d.  Competitive Advantage  measured quantitatively - what gains has the  company made in increasing sales, adding customers, raising product prices, or lowering costs as a result of the COSS? e.  Competitive Advantage  measured qualitatively - what has the COSS  contributed to the company in terms such as raising entry barriers, raising switching costs, improving image and supporting strategy?  Comparison  - Determining which  independent variables showed support for  the hypotheses. Using  a computer-based  spreadsheet package,  the researcher  then  coded  results from each independent variable in the model (each one became a  RESEARCH DESIGN / 35 row in the spreadsheet) for each COSS (each one became a column in the spreadsheet). Five subsets of the spreadsheet were created, each containing the  variables which were expected to affect one of the dependent variables.  The COSSs were ordered by their ranking on the dependent allowed  a visual interpretation  variable. This  of the results and highlighted trends and  commonalities.  To analyze the data, the systems were categorized into two or three groups for each dependent adoption  rate,  variable (i.e. first/late  high/low  competitive advantage groupings, a professor dependent  penetration  entrants, slow/moderate/fast early  percentage,  winners/hopefuls/losers on  measures). To test the reliability of the researcher's also  ranked  and grouped  the COSSs  variables, using the procedures described  on . all five  above. Although there  was some variation in the rankings, no systems changed from one group to another in this procedure.  4.3. MEASUREMENT  ISSUES  4.3.1. Reliability  Reliability is a concern in any empirical work. If one cannot show that the data being manipulated has some stability, then any findings drawn from the data are cast into doubt. In this research project, the data was largely taken from long (1 1/2 to 3 hours) interviews in which participants in a process (the development and management  of a COSS) were asked post-hoc questions about it. This data  RESEARCH DESIGN / 36 collection method posed problems such as: Did the interviewees remember accurately (i.e. factually and  completely)?  Did they shade the truth to make themselves look better? Were  their  answers influenced by  the  outcome  (i.e. the  success  of the  system)? Did the interviewer record the answers correctly? Was  the coding of the answers done impartially?  Were conflicting answers given by  various respondents resolved correctly?  These problems were alleviated in several ways: By gathering archival and anecdotal information about the COSS. By using the interviewer's information systems experience in the interview. By using multiple ways of asking the same question. By  interviewing  multiple  people  in  the  company.  To  aid  in resolving  conflicting answers, a history of each person's involvement with the COSS was  taken.  By recording the interviews. By  having a colleague code a sample of the data.  Each of these techniques for increasing the reliability of the data is discussed in the following paragraphs.  Before the interviews, the researcher discussed the system with other participants in  the  IS  development  industry - to get objective, albeit and  the  outcome  of  the  COSS.  second-hand, opinions This  information  about the  allowed  the  researcher to create the impression that she had other sources of data and that answers which were less than truthful could be challenged in the interview. This  RESEARCH DESIGN / 37 implicit threat was  actually carried out in several interviews when it seemed that  the interviewee was  placing too favourable a light on the data. Another source  of a-priori information newspapers, annual  was  the archival data  reports  and  in the  printed about the system in the  company's  marketing  literature. This  information allowed the interviewer to spot unusual features or objectives and to question the interviewee about them.  The interviewer has many years of experience as a practitioner and consultant in the information systems field. This experience gave her a body of empirical data to take into the interview against which to test the interview data for significant deviation. systems  This  background  managers  and  personalized  gave  the  the  interviews  interviewer  the  with  credibility  the needed  information to probe  beneath surface realities.  The  interview guide (see Appendix B) was  designed  to ask  for information in  several ways. Each construct (i.e. customer involvement in design), was  introduced  by first asking an open question about the topic. Based on the answer, another set of questions was  asked to probe for quantification or further explanation of  the answer. Then a final question was  asked to assess the factor's importance to  the success of the COSS. In this way,  the interviewee was  first by general discussion and  closed questions. He/she was  opportunity method concept.  to re-evaluate  of questioning  was  then by  led into a subject, given the  a hasty first answer as more detail emerged. This developed  based  on  Bouchard's  (1976) "funnelling"  RESEARCH DESIGN / 38 In  all cases, the  particular  interviewer attempted  COSS. The  objective was  product-related functional area and this  attempt  failed  manager who cases, from  was 2  and  the  to speak to multiple people  to  question  about  researcher  a  In  in both  the  only  interviewee  was  the  information  systems  in charge of the development of the system. In the other  to 6  people  answering  were interviewed  were  about each  COSS. One  that questions which one  addressed  by  other  interviewees,  of the  person felt giving  more complete set of data. Another, more problematic  multiple interviews, was questions.  makers  the information systems area. In three cases,  positive results of multiple interviews was unsure  policy  about a  this  result of  that conflicting answers were given to a few  case,  the  interviewer  either  clarified  the  the  conflict  of the in  the  interview or applied information about each individual's proximity to the system to make the judgement about the final answer.  Before could  the interview commenced, each interviewee be  although  recorded. the  Confidentiality  of the  name of the company  and  asked if the interview  individual COSS the COSS was  interviewees agreed to have the proceedings the freedom to listen and  was  data to be  was  promised,  published. All  recorded. This gave the interviewer  respond to what the interviewee was  saying and to  write only the essentials of the comments on the interview guide. The recordings proved invaluable during the data analysis to clarify points in the notes and to examine the way  an answer was structured.  In order to check on the objectivity of the researcher's coding of the a  professor  was  given  the  interview  notes  and  was  asked  to  responses, check  her  RESEARCH DESIGN / 39 interpretation of the data. This procedure resulted in a few data was  changes in how  the  coded but did not alter the data content.  4.3.2. Construct Validity Measuring  the "First Mover" Construct  The First research question investigated the factors which enabled companies to be "first-movers" in developing a COSS. First-mover was first  to introduce a  COSS  company's market was  in  the  relevant  Quebec, it had  to be  previously defined as being  market  area.  the first  Therefore, if a  industry competitor to  introduce the particular COSS in Quebec. Whether or not it had been introduced in the U.S. or in Western Canada was judged to be irrelevant.  During the pre-study activities, it became obvious that being "first" is a relative term. Several interpretations are possible, all based on the systems' life-cycle. For example, one first  could choose the company which was  to pilot  distinctions  test, or  first  were unimportant  to install the  COSS. In  since there was  several years in which the COSS was  first to start development, many  industries, these  a period of several months or  the only one available in a given market  area. In the financial industry, however, every competitor will have a version of a mainline COSS within the space of 2 years and  so the distinction between  first-mover and follower is more difficult. In the case of the banks, a period of 2 to 4 months was "first".  For  allowed within which the participants were considered to be  example, both  considered to be  the  Bank  of Montreal  and  the Royal  first movers since their respective cash  Bank were  management systems  RESEARCH DESIGN / 40 were delivered offering was  Choosing  within  two  months of each  other and  of Montreal  the first in Canada.  the date  of commencement  of development  companies often have several projects in development ever be  the Bank  released. The  is not which  appropriate since may  date of the announcement of the COSS  or may (which  not often  coincides with the industry's annual conference) can be a good date to choose if specific details of the system  (e.g. functions, cost, pilot results) are available.  Without these details, one can surmise that the announcement has been made as a marketing ploy or as motivation for the company's developers. In the absence of these details, the pilot test date or the  first installation date can be used.  In the interview, several questions were asked to probe the first-mover construct. They include: 1.  Did you copy this system from another competitor or another industry?  2.  Were you first into the market with this kind of system?  3.  How  These was  and when did the competitors react?  questions' provided enough data to determine whether or not the system  a first-mover.  Measuring "Adoption Rate'"  Runge's study used a single question to probe for adoption rate. This study tried to understand the complete adoption construct by using questions such as: 1.  What was  the target number of customers for the COSS?  2.  How  signed up during the first year, second year etc?  may  RESEARCH DESIGN / 41 3.  Would you say this was  slow, moderate or fast adoption?  4.  How  5.  What factors influenced this adoption rate?  6.  What is your current target?  The  result of this line of questioning was  many customers do you have now?  a set of data which was  difficult to  force into a single dependent variable construct such as adoption rate. To solve this  problem,  the  project  adoption rate in perceived by  the  created  two  dependent  first year which was  variables, the  the  the  end  the interviewee. This variable was  of 4-5  years. This was  target population  that had  success  of  the  accepted  COSS.  as  chosen so that the findings of second was  the adoption  measured by calculating the percentage of the  researcher felt that eventual penetration was adoption  called  based on the rate of adoption  the study would be comparable to those of Runge. The at  first  The  COSS  (i.e. the  penetration).  The  a more meaningful measure of the  companies  were  then  ranked  on  both  dependent variables and the researcher examined the data to see if the enabling factors were the same for both. Measuring "Competitive  In MIS  Advantage"  literature, little success has been achieved in the attempt to define the  bottom line effects of an strategic  systems  are  information system. It seemed, however, that because  built  expressly  strength of a product line, and  to  contribute  towards  the  competitive  because factors other than adoption  rate might  prove important in this endeavor, another attempt should be made.  Such  a  measure would  enable the  research  project to test for factors which  RESEARCH DESIGN / 42 separated  companies  receiving little.  receiving a  Accordingly,  this  significant  competitive  project attempted  advantage  from  to measure the  those  competitive  advantage construct.  Underlying  any  notion of success  in a business  context  is always the idea of  contribution to the bottom line. This contribution, however, is often indirect (e.g. the system locks the customers into the company and switch suppliers) and hard to measure. The  they are less likely to  perception of the  respondents  may  be the most important measurement rather than numbers in a ledger.  The  interview was  structured to gather a comprehensive set of data about the  effects of the system. The the benefits that the  respondent was  COSS had  first asked an  brought to the  open question about  company. This question  followed by a set of closed questions designed to quantify any to identify benefits in areas not mentioned. The yes/no  question  about the  success  of the  stated benefit and  interview was  COSS  and  an  was  concluded with a  open-ended  question  asking the respondent to comment on the reasons for this level of success.  Before  the  competitive  interviews  commenced,  advantage construct as  the  researcher  had  expected  to  code  the  a composite of actual results to date plus  anticipated future results as measured against objectives set for the system. After the first interviews, ideas about comparing objectives to results were discarded. Two  classes of objectives were mentioned by interviewees: Written objectives in the business plan. Unstated objectives in the originator's mind.  RESEARCH DESIGN / 43 Although these two sets of objectives could have been the same, they often were not because: The  business  plan  objectives  were  created  to gain  approval  and were  structured to conform to the company's cost/benefit measurement methods. The  originator's  objectives  were  often  strategic  in  nature  and  not  quantitatively specified or they were confidential (e.g. downsizing the sales force, manipulating the customer's behaviour). Because many of the interviewees measuring  competitive  advantage  alluded to the presence of unwritten objectives, against  the  operationalize the benefits that the company  written . objectives  was  anticipating. Gaining  access to the unwritten objectives after the fact seemed highly  Therefore,  the competitive  advantage  construct  would  became  not  reliable  problematic.  a composite of actual  quantifiable results plus anticipated future results. The future results had to be based on identified qualitative changes which had the potential to be realized quantitatively industry  (e.g. when  the customers  structure changed). Quantifiable  included: New  customers  Increases in sales. Reductions in costs. Increases in product price. Qualitative results mentioned included: Increases in image in the industry. Increases in customer satisfaction.  renewed their  contract  results mentioned  or when the  by the  interviewees  RESEARCH DESIGN / 44 Higher entry barriers. Higher switching costs. Lower customer bargaining power. Broader customer contact.  According  to Porter (1985), "there are two basic types of competitive  advantage  that a firm can possess: low cost or differentiation". He discusses how being a low  cost producer can result in sustained  produces high can  above-average performance because it  margins. Similarly, differentiation which justifies a premium price  produce above-average margins. Using  Porter's ideas, we  can partition the  benefits mentioned by the respondents into either a differentiation or a low-cost outcome. Although margins, they  the qualitative benefits may  differentiate  the product  not have resulted  in higher  and have the potential to support  a  premium price.  The  project  data,  therefore,  contained  two  sets  of benefits  identified  by  respondents : one containing items that could be traced to increases in current profitability and one with items that had the future potential to produce higher profitability.  Although  companies  are  interested  in  sustainable  competitive  advantage, the research project had no way of assessing the sustainability of current increases in profitability. Likewise, it had no way to assess the probability  or  the  size  of  the  competitive  advantage  which  realized from the potential sources. Therefore, the competitive a  COSS  produced  for a company  had to include  might  be  advantage that  all items from  either list.  Because the items in both lists were not independent and therefore, were not  RESEARCH additive, procedures which  involved weighting  and rating  appropriate. The resolution of this quandary lay in having  DESIGN / 45  the items  were not  the researcher, and  independent colleagues, rank the COSSs based on the raw data.  In summary, this attempt, like others which preceded it, provided only an ordinal way to assess the "success" of an information system.  C H A P T E R 5. A In this section, each described.  Because  competitive  DESCRIPTION OF  THE  SYSTEMS  of the systems involved in the research will be briefly  an  assurance  results of individual  was  given  to  systems would  the  not be  respondents divulged, no  that  the  data  on  adoption rates or benefits are provided. This section is included to give the reader an idea of the type of systems and companies which formed the sample.  Most of the companies in this sample are very large. In this study, however, our concern has not been with overall size, but with the company's competitive position with respect to a  specific product. For  investigated its sales of petroleum Imperial Bank of Commerce, we In only one The  case, IBM  example, at Imperial Oil, we  products to commercial  truckers. At  Canadian  investigated its securities management offering.  Canada, did the COSS support the entire product line.  smallest company in the sample was  D.H.  Howden, with annual sales of  approximately $120 million.  In 1981, the Bank of Montreal, a national bank with $ 85 billion in assets, became the first Canadian system. It was who  had  bank to produce  a terminal-based cash management  designed to assist the treasurers of Canada's largest corporations  deposit accounts with the Bank. This system  enabled them to make  decisions about allocation of funds based on more current information and to see the  results  of  their  BANKING, (DLB) controlled  and  all updates  customers who  decisions immediately.  used  was to  the  an the  Direct  It  was  called  DIRECT  extension of the central MECH online database Line Banking  46  system  of current accounts. system  In  LINE which fact,  were given a terminal  A DESCRIPTION OF THE SYSTEMS / 47 which could execute the same transactions that the tellers used in the retail branches. Because of the Bank's need for data security, the DLB terminal had an  attachment (called the "blue box"), which performed  the necessary security  routines.  Two months later, the Royal Bank of Canada, North America's sixth largest bank, announced was  their cash management system, called C A S H  COMMAND. It  built at the same time as the Bank of Montreal's system  and directly  competed for the same type of customers. The system used existing databases (day-old  copies  of the master  databases)  software. The system has been enhanced  and new  user-oriented  transaction  continually over the years and is now  offered on an IBM-PC. Customers receive up-to-date information on bank accounts maintained anywhere in Canada, and can move money between various current accounts and short-term investments.  In  1972, D.H. Howden,  a  medium-sized  Ontario-based hardware wholesaler,  introduced a very simple system to the dependent and independent hardware and lumberyard  retailers. It was called  terminal and modem programmes  MSI, and consisted  of a hand-held  MSI  at the retail location and a receiver and data collection  at Howden  headquarters. When  the retailer  wished  to place an  order, he/she would enter a header code and the stock numbers and quantities. When the order was complete, the handset would be placed in the modem and the order would be transmitted to Howden. No information was received back by the retailer. This system replaced the former order-entry method of long distance phone  calls  and supported  Howden's  strategy  of expanding  nationally  while  A DESCRIPTION OF  THE  SYSTEMS / 48  maintaining only one warehouse, in London, Ontario.  In 1983, Howden offered their dealers a system called DISPLAYPHONE, named after the type of terminal on which it ran. This system allowed dealers to enter into  2-way  communication  unstructured  with  messages. Within  Howden, to update an  hour  of placing an  system, a dealer could check its status and were out-of-stock. A  order  or  using  to send the  MSI  for those which  later enhancement of the system allowed  them to reserve  of the average of 10%  Howden's belief that dealers could replace up to half  out-of-stock items by substitution and this would increase  the sales of both the dealer and won  orders  substitute items  stock in their name. It was  and  their  Howden one  of the  of Howden. This system was  four industry awards given  very innovative  annually  to North  American hardware wholesalers.  In  1984,  Laurentien  General  Insurance  Company  Inc., the  insurer in Quebec, offered independent insurance brokers 2000. This was  leading general  a system called INFO  a system which automated the back office of the broker, with  modules which kept ledger. It supported  information on  clients, policies, premiums and  the general  all insurance policies, including those that were written by  Laurentian. Several similar personal computer based systems were announced by competitors in the next few  months, but the Info 2000 system is still the only  one based on a Local Area Network architecture. The continually automate  since the  1984.  Laurentian's  product-related  assessment, and policy issue).  latest  functions  system has been updated  enhancement  (such  as  to  premium  INFO  2000  calculation,  will risk  A DESCRIPTION OF National Bank, a large, Quebec-based bank, bought and software package in 1985  later,  the  SYSTEMS / 49  modified a  commercial  which would allow retailers to obtain instant credit  authorization and capture the drafts from months  THE  system  was  retailers did not want two  their Mastercard transactions. Several  upgraded  terminals on  to  handle  VISA  transactions since  their premises. The  benefits of this  system for the retailers included earlier payment and less paperwork. -  In 1982, Imperial Oil commercial  Ltd.  announced the C A R D L O C K  system, which allowed  truckers to use a credit card to obtain fuel from unattended sites in  Western Canada, Ontario and  the Maritimes. Although  the hardware was  new,  the central software which processed the data sent from the sites had been in place for a number of years. This software processed the transactions and issued invoices to the trucking companies.  In  1985,  IBM  Canada announced IBM  designed to replace all non Canada employees had INFO  was  experienced and  mail  designed  4300  line  to give their customers the same benefits that they an  system  avoidance was  the  culmination  of  with its customers - begun in the mid  of computers  with  a  communication  of all sizes, from  messages to any  IBM  IBM had  of the frustration of telephone-tag  MVS  personal computer dealers with a modem and send  system  been using electronic mail for several years and  delays. This  Facility. Customers  now  electronic messaging  face-to-face communication with customers. All IBM  internally, namely  connecting IBM  INFO, an  long  process  of  1970's to support the  offering  users  a  with  called  Direct  PROFS  Support  software, to  a communications package, could  employee. The  IBM  INFO  software is being  A DESCRIPTION OF THE  SYSTEMS / 50  evolved from this very general beginning into a set of structured application-like offerings supporting customer-initiated functions such as placing orders, tracking invoices and solving system problems.  One  of the COSSs which Canadian Imperial Bank of Commerce offers to its COMMSTAR.  clients is called internal  operation  of their  It grew out of CIBC's  securities  management  move to automate  service.  This  service  the is a  combination of activities such as safekeeping of stock certificates, delivering and receiving  them  from  traders  and  crediting/debiting the accounts of the clients  when the securities are bought and sold. The  system on the client's premises  enables them to order the trades and to track the results of the trades on a daily  basis.  It notifies  them  about  failed  transactions,  thus  saving  them  considerable annoyance and expense.  In 1985, the Bank of Montreal had started work with a commercial software vendor to customize and install the vendor's offering of an internal system to automate the creation of documentary  letters of credit. These letters constitute a  promise by the bank to provide a line of credit for a particular shipment of imported  goods. This  was  a  complex  software system  which  integrated  large  amounts of text and data. After this was installed, they began work on IMPAC, which consisted of the customer interface and the reporting modules designed to allow customers to electronically initiate and receive documentary letters of credit. The  first  customer for IMPAC  received  the system  in the fourth  quarter of  1986. This system significantly shortened the time it took the importer to receive a letter of credit.  A DESCRIPTION OF THE SYSTEMS / 51 In  1985, Abitibi Price, the world's largest supplier of newsprint, announced a  COSS  called  ABITROL.  This  newpaper's production facilities, management.  A  subsequent  system,  which  performed  release  runs  on  the function  of the system  a PC  installed  in a  of newsprint inventory  tracked the use of the  newsprint through the various presses and reported on paper utilization by press and by manufacturer. The system  supports all makes of newsprint and it has  been sold to newspaper publishers who Abitibi Price.  do not currently  buy newsprint from  CHAPTER  6.  FINDINGS  6.1. INTRODUCTION  In the following four sections, results for each of the research questions will be presented. Individual factors which were found, either by statistical or qualitative methods, to be significant in each model will be presented. Then the model as a whole will be evaluated to determine  if there is evidence that it is useful in  describing the COSS phenomenon. Each of the factors which Runge (1985) found to  be  important  will be  discussed under the appropriate model (Innovation or  Adoption).  Four spreadsheets of source data are presented in Appendix C. Each shows the factors relating to a specific dependent variable, which are: 1.  COSS entry position.  2.  Adoption rate after 1 year.  3.  Adoption penetration after 4 or 5 years.  4.  Overall competitive advantage - both quantitative and qualitative.  In each spreadsheet, the companies are ordered with respect to their ranking on the  dependent  variable  in  question. Because  we  wished  to  preserve  their  anonymity, systems have been identified with a letter rather than a name. These letters are not consistent across the spreadsheets (i.e. COSS "B" on spreadsheet 1 is not the same system as COSS "B" on spreadsheet 4).  52  FINDINGS / 53 6.2.  THE  INNOVATION  The  research project set out to find the factors which enabled  first-movers in  QUESTION  building and implementing  a COSS. This  companies to be  was  a criterion for  inclusion into the study sample and ten of the eleven systems met this criterion (the researcher discovered that the eleventh system was  a follower during the  interview). Of the ten systems which were first entrants, many have similar characteristics. The spreadsheet  data  to support  these  findings is presented  on the first  in Appendix C.  6.2.1. Industry  When asked to rank the strength of various competitive factors in their industry, most  (80%) of the interviewees  competitors  was  very  high.  reported This  rivalry  product-oriented rivalry and a COSS-inspired being motivated  that  the rivalry took  two  among forms:  rivalry. Many interviewees  by perceptions that rivals were developing  existing a  direct reported  COSSs at the same  time as they were. They also reported perceiving a strong threat from entrants 55%  new  (70%), especially in the financial industry (whose members constituted  of the sample), where deregulation had spawned new  competitors.  As might be expected, many of the interviewees mentioned customer bargaining power to be one of the strongest motivators for building a COSS (60% reported high bargaining  power, 30% reported  moderate). In several instances, a small  number of large customers represented a significant portion of the revenue. Many of the COSSs were built in the hope that electronic linkages would increase the  F I N D I N G S / 54 quality of relationships, raise switching costs and/or reduce the price sensitivity of these  large customers. A n y of these  outcomes would constitute a lowering  of the  b a r g a i n i n g power of the customer.  6.2.2. C o r p o r a t e  Several  of  unequivocal  Level  the companies champion  w i t h i n the company Runge's  study.  Comptroller,  (60%) reported  In  one  ordering  Manager  to support  travelled  across  presence  i n customer  a  company, strategic  mechanisms.  He  the champion, vision  financial  person  important  convinced  the idea, bargained  Canada  educating  sites  was  reported  the C O S S institution,  by  50%  w a s the  role i n acceptance  the  and  proof  through  President  installing  p a r t o f their future  to be  improved and  Sales  prices, a n d  and  to the  together.  very  of the Chief Executive full-page  be the  the system. H i s  to h i s company  respondents  w a s the s u p p o r t  sales  to  vendors over h a r d w a r e  customers visible  happened  the company  with  of  who  of increasing  customers t h a t this C O S S w a s a n important  developing  specific  and i n its actual development. This finding i s consistent w i t h  developed  factor  a  of the C O S S , p l a y i n g a v e r y  customer  Another  that  important  in  O f f i c e r . I n one  Vice-Chairman  ran  a  advertisement  national newspaper announcing the C O S S  while  i t was still i n v e r y  in a  early  stages  of development. H e then took the unprecedented step of holding m o n t h l y  meetings  with  the V i c e  progress.  The  functional Vice  a  conversation  President of Information President  i n which  S y s t e m s to discuss the system's  also was motivated  the V i c e - C h a i r m a n  b y this  warned  "support".  "If they  He  reported  (the competitors)  FINDINGS / 55 deliver before we  do, your life will be most difficult. Do I make myself clear? ".  When discussing their corporate style, 90%  of the companies mentioned a strong  drive to be number one,  either in all parts of their business or in the specific  product  the  line  affected  by  COSS. They  had  developed  strategies for success and everyone in the company had  clearly  articulated  a role to play in their  execution.  6.2.3. IS  Function  Building systems to link to customers is a normal way many of the companies in the sample, as 80%  of doing business for  of them reported previous COSS  experience.  Runge's study  found  that  75%  of the  systems in his sample  existence before plans were made to link the company and  and  60%  been in  its customers. The  percentages were not as high in the Canadian sample, with 40% being totally new,  had  of the COSSs  being built on top of internal systems or internal  databases.  In most organizations (70%), the  IS  function was  very proactive, continually  seeking innovative ways to support their organizations through  technology. They  had developed high levels of competence and were well equipped to participate in the design and delivery of the COSS. In one company, the IS manager and his senior technologist travelled twice yearly to the United States to search for new  FINDINGS / 56 approaches  in  his  industry. They  American companies and  were  not  perceived  as  a  threat  could learn first-hand about the successes  and  to  the  failures  in a more sophisticated market. Although this level of proactive IS behavior is not unusual today, the actions described here took place in the late 1970s. The IS  management  conceptualization requirements.  team  then  of the  This  produced  company's  plan  was  a  strategic  IS  future  direction  and  prepared  almost  two  plan,  years  based  information before  the  on  their  processing company  produced its first strategic business plan.  One  of Runge's strongest findings was  80%  of his sample. In other words, 80%  follow the  rules (often a  of the systems in his sample did not  payback guideline or a return on  rate) which  determine  sample, the  same trend was  60%  the avoidance of IS planning guidelines in  which  systems  are  to be  investment hurdle  developed. In  the  Canadian  observed, albeit at a lower level. Although only  of the companies reported avoiding IS Planning guidelines, a further 20%  reported that the planning guidelines were structured to support strategic systems which are difficult to justify quantitatively. A  further 10%  reported no  planning  guidelines in place. Only one company followed a rigid set of guidelines, and interviewee observed "we  an  are a very conservative company, no exceptions to the  guidelines are permitted". The  reason that companies circumvented the rules was  to save time in the development process. With competitors and customers putting pressure  on them, spending time in the IS backlog queue was  one Vice President remarked, "The  turn  the  system  on.'." The  As  normal planning process would have taken us  9 months to get a preliminary project proposal. We to  unthinkable.  IS  executive  said 'You've got 9 months  acknowledged  that  his  planning  FINDINGS / 57 process had been avoided, saying "This was the only system ever developed in under one year". At another company, they described the system as "the fastest rollout the vendors had ever done world-wide".  6.2.4. COSS Project  Most (80%) of the systems took on a very high profile within the company while they  were being developed. They  were accorded  high priority,  and an  abundance of resources. A few project teams used tactics designed to speed up the development effort. In one company, the project work area was guarded and separated  from  the rest of the IS employees. The team  was split into four  groups (design, coding, testing, documentation) who worked as much as possible in parallel with each other. The first release was ready  in four months. At  another company the line manager, who was identified as the product champion, built a complete prototype of the system in order to bypass the specifications phase of the systems development life cycle. Previously, the manager had not been closely involved with a systems development effort and was not considered to be a technological leader.  One  might suspect that the high-pressure environment surrounding a COSS would  result in short-cuts being  taken  sample, the reverse was true. A  in the testing phase of development. In the total of 70% reported comprehensive  pilot  tests, and one company in a very competitive situation followed the pilot with a complete rewrite. One explanation of this finding might be that the companies saw  the pilot as an important marketing technique (i.e. as the beginning of the  FINDINGS / 58 adoption process) rather than as the final stage of the development life cycle.  6.2.5. S u m m a r y  A  pictorial representation of the factors which were common among the first  movers in the sample is presented -in Figure 7.  C O S S DEVE L O P MENT  (First  INDUSTRY  COMPANY  I  COR RL ATE LP EO VE  PROACTIVE STANCE CEO SUPPORT CHAMPION STRATEGIC PLAN  Figure  7. Findings  Mover)  CO SS DEV PE RL OO JP EM CE TNT  IS FUNCTION  • PROACTIVE STANCE ST SENT •P HR IE GV HI L Y C OC MO PE E X P E RO IU ES NC E  - Factors  Enabling  HIGH LEVEL OF RIVALRY • H H I G HL PE RV IE OL RITY I G H OF T H R E A T O F N E W E N T R A N T S R E S O U R C E S H I G H C U S T O M E R BARGAINING POWER UA L L PD ILOT TEST •F V O I D E PL A N N I N G IS  Companies  to be  First-Movers in  Developing a COSS In this sample, there was considerable support for the innovation model as it  FINDINGS / 59 applies to the COSS development effort. Companies the environment, champions  were under pressure  from  arose to implement their visions, organizational  operating procedures were bypassed, and development teams worked faster than ever before. This is a very different scenario from the traditional systems development  model,  which  is characterized by  internal pressure, use of standard  long  waits  in the IS  project management techniques  queue,  and multiple  checkpoints and signoffs.  If we compare the findings against existing theory and other empirical work, we find: 1.  Two  of the three factors which Runge found to be important are supported.  a.  All  but  one  procedures 1985 the  UK  of the  companies with inflexible IS  bypassed study  Canadian  them.  An  and our 1987 companies  have  interesting  priority-setting  difference between  Canadian study  was  priority-setting  this  that several of  mechanisms  which  recognize, either explicity or implicitly, that return on investment is not always an adequate or appropriate measure of the payback which can accrue from an IS system. b.  Most  companies  reported  the  presence  of  a  champion.  Again,  however, it seemed that a degree of maturity was present in some of the Canadian companies Several companies their  business  had  which was  not present in the UK  which had implemented a  technological and  sample.  COSSs in other parts of organizational infrastructure  which supported the COSS concept. The existence of a champion not required to implement another COSS.  was  FINDINGS / 60 c.  Only weak support (50%) existed for Runge's finding that most (77% in his sample) COSSs are built on existing systems.  2.  With respect to Porter's five forces model, most of the companies were in situations characterized by high customer bargaining power, a high level of rivalry and a threat of new  entrants.  An Exception  There is one COSS worthy of extra discussion since it did not fit the pattern developed thus far. This company claimed to have developed the COSS without CEO  support  popular  thing  and  without  to do. We  a  champion  don't  ("being  promote  a  champion  champions.").  The  is not the most firm  followed the  normal, rigid IS planning process, and characterized the IS function as reactive and having a low awareness of the business. In this company, being in the IS function is considered a type of "purgatory" for a rising manager, since it is physically  and, seemingly, psychologically, separated from  In addition, the COSS was  developed  company headquarters.  using traditional methodologies  and  was  undistinguishable from other application projects in the priority it was accorded.  The  explanation for this anomaly lies in the corporate history and  culture, as  well as in the environmental factors. The company had only recently developed a sense  of urgency  and  combativeness.  This  new  direction  had  not  yet been  transmitted to the IS function. They were a competent, but reactive participant in the process of building a COSS. The company was this product line  and  when  the  functional  manager  the acknowledged leader in expressed  an  interest in  FINDINGS / 61 streamlining  internal  justify  project. While  the  manager conceived thereby  operations, he this  of adding  addressing  recent  could point to significant  internal  an  efficiency  project  interface to it and  customer  complaints.  cost savings to  was  underway, the  linking to the customer,  They  had  the  framework in place which linked other COSSs to customers and  technology  this new  one  could be added without significant redesign. In addition, the headquarters group which was proven  responsible for marketing  other technology  products, had  developed  techniques which could be applied in this case. Thus, they were able to  enter the market first with a COSS, drawing on these internal strengths and newly-developed  sense of corporate aggressiveness.  6.3.  THE  ADOPTION  QUESTION  The  second question the project attempted  a COSS which has been developed customers'  adoption rate and  Identifying these factors was the  influence  hypothesized  of  strategic  to be  an  to answer was  "given the existence of  in a timely manner, what factors influence  the eventual penetration of the COSS market?". of prime importance systems,  important  factor  since  to a deeper understanding of  acceptance  influencing  by  customers  competitive  was  advantage. In  addition, rate of adoption had been Runge's sole dependent variable.  The  data used to answer this question included all eleven systems since it was  felt that the one  system excluded from  the previous analysis was  developed in  sufficient time for it to be competitive with the existing COSSs in the market.  FINDINGS / 62 In  this discussion of adoption, the first section reports the findings which relate  to  adoption rate during the first year, the second  penetration measured at the end of 4-5 the adoption rate measure was with  Runge's. The  years. As  section reports the adoption mentioned in Section 4.3.2,  used to create findings which could be compared  adoption penetration variable was  used  to create a more  meaningful representation of the long-term success of the COSS. The third section will integrate these findings and  draw conclusions. The  data to support these  findings is presented on the second and third spreadsheets in Appendix C.  6.3.1. Adoption Rate Measured After One  Six  Year  of the eleven systems were reported, by  the interviewees, to have had  a  fast adoption by customers during the first year of their introduction. Four were rated as having had  slow adoption and  findings, therefore, consisted of an variables  which  would  clearly  one  as moderate. Our  examination  separate  the  of the  data  fast-adopted  analysis of the to identify  systems  from  the the  slow-adopted ones.  The  variable which most clearly separated the two  "Need  Expressed".  This  variable  known dissatisfaction among the ever, asked did,  for an  represented  about  the  presence  customer population.  information system  however, complain  the  groups was  absence)  of  Customers rarely, if  to solve their perceived problems. They  lack  availability. Seven of the COSSs had  (or  the one called  of information quality, timeliness, and  been built in reaction to needs expressed  by the customer. Six of these had experienced moderate or rapid adoption of the  FINDINGS / 63 system.  Four  systems  had been  built  in the absence  of a  felt  need  from  customers. Three of these systems experienced slow adoption.  Another  distinguishing  fast-adopted  COSSs  variable  had  chosen  was  the price  to offer  of  the  the system  COSS. at a  Four  nominal  of the cost to  subscribers. In one case, the decision was made to price the system such that the adopter would be "cost neutral" to it (i.e. the cost of the system was the same as the customer's cost of doing business in the traditional manner). Three of  the  slowly-adopted  customers) considered  COSSs to be  had  which  "high". In one  $15,000 plus an annual maintenance customer  prices  their  originators  case, the COSS  was  (and the priced at  fee. This price caused the decision by a  to be placed into the capital budgeting process and resulted in very  long decision times. Another COSS was priced at $2000 per month in order to recover all the development  and operating costs of the system. Customers,  who  had previously received inferior information at no cost to them, had difficulty in identifying  the  savings  which  would  justify  such  a  purchase.  They  were  unfamiliar (as many companies are) with the process of attaching value to more timely or more complete information.  Runge  found  a  significant  correlation  between  customer  involvement  in  system design and adoption rate. In this study, only 3 COSSs had been built using customer input. A l l three, however, had reported rapid adoption in the first year.  One of the variables which was consistent (four out of four respondents reported  FINDINGS / 64 it) among the COSSs which reported low adoption was low competence of the sales people who sold the COSS. This item was added as a variable because, during the interviews, many respondents asked  about  had mentioned  the sales force when  the extent and effectiveness of the marketing  companies had created an appropriate marketing programme  programme. Most for the COSS (six  reported marketing programmes which were superior in nature) and did not feel that the marketing  effort had given them  an advantage in securing adoption.  Five companies, however, expressed dissatisfaction with the way the sales force had performed. All of these  companies reported  slow or  moderate  adoption rates in the first year. Most of the other companies did not mention the sales force as an important factor.  This finding is not hard to explain, but these companies had clearly not expected its occurrence. Sales people have been trained to sell a certain product line. Now they were being asked to sell an information system. They, as well as many of the  customers,  were  unfamiliar  with  electronic  technology.  This  unfamiliarity  resulted in a reluctance and, in one case (in which the sales people perceived that their role was  being decreased  in importance), a resistance to the new  assignment. Companies which did not report problems with the sales force had, for the most part, opted to sell the system using headquarters staff rather than through the existing product sales force. In summary, although this study found no correlation between Runge's marketing programme  factor and adoption rate, it  did find a strong negative relationship between sales force competence and adoption rate measured after one year.  FINDINGS / 65 A factor which was  added to the study while the data was being analyzed  the degree to which the  COSS matched the  was  company-customer relationship.  There were differences among the systems which  prompted  the researcher to  create a variable measuring the degree to which the COSS conformed to the customer's desired maintained  relationship. For  at least two  example,  if the customer  had  historically  supplier sources for each major product it purchased,  then a system which supported this reality was likely to be better accepted than one which did not. Three companies in the sample recognized this fact and built COSSs which tracked the customer's inventory of all products, including those of their competitors. Four more COSSs had been built to support a single product line since the companies had recognized that the customer wanted relationship  with  one  a long-term  supplier. Of these seven COSSs, five of them reported  moderate to high adoption within the first year.  6.3.2. Adoption Penetration Measured after Several Years  The  sample  contained six COSSs which had  been  available for four or more  years. They had achieved market penetrations (measured against original targets) between  30%  and  100%.  One  company  signed  up  more  than  10  times the  number of customers it had targeted for. The researcher divided the six systems into  "winners"  (defined  as  COSSs  which  had  attained  100%  adoption) and  "losers" (defined as COSSs which had attained between 30% and 50% of original target).  All of the  systems fit into  one  category  or the  other. We  were  interested in seeing if the variables which had separated high and low adopted systems at the one-year mark would differentiate these two groups.  FINDINGS / 66 Three of the variables which had differentiated  the slow adopters from the  fast adopters in the previous analysis, continued to discriminate  between  these winners and losers: 1.  COSS Price  2.  Need Expressed by the Customer  3.  Competence of the Sales Force  As  mentioned  in the innovation  findings,  many  COSSs  were  subjected to  full-scale pilot tests. When the COSSs are sorted by adoption penetration, we find that half of the "losers" ran only short, quick-and-dirty pilots. They were very anxious to announce a system  ahead of the competition  and released a  COSS which suffered from a paucity of features and/or technical deficiencies. The winners had run long pilots with many customers, solving problems and gauging customer response before the COSS was released. They treated the pilot as a "market test" rather than as the last stage in development. This finding supports the Rogers (1962) contention that late adopters examine the results generated by early adopters when making the adoption decision (this behaviour relates to the observability  factor  mentioned  in Rogers,  1983). Customers who  were  early  adopters and struggled with deficient systems sent a powerful message to those who followed.  Another variable which discriminated between winners and losers is the degree of management continuity. This factor is not mentioned in the models but was added to the study since several interviewees attributed their success, or lack of it, to the continuity of the vision and leadership of the champion. Two  of the  FINDINGS / 67 losers in the sample expressed the view that their poor penetration was  a direct  result of the champion being transferred to other duties after the introduction of the  system. In one  place  who  was  instance, the  present during  company did not have a single manager in  the  idea formation or the  COSS! Organizational memory is considered culture. The  long-term strategies. As  one  can  in vision. A  dilute the  manager who  COSS ruefully remarked, "In 1981 sagged  to be an important part of corporate  transfer of many managers into and  building of such a memory and  and  development of the  had  out of a function disrupts the function's  ability to implement  been transferred away from the  '82, I lost control of the system and  product champion  must  do  some stringent  we  handovers to  successors.".  A  variable which did. not strongly discriminate the winners from the losers but  was being  mentioned by a  the lowest-adopted system and  determining  enhancements  made  organizational and  influence to  the  on  the  COSS.  adoption One  rate  was  respondent  the  remarked  number  of  that,  for  technical reasons, they were unable to make the changes that  the early adopters desired. This caused low contributed to a low had  the highest-adopted system as  overall penetration  undergone enhancements continuously  customer satisfaction and, ultimately,  rate. The  winner noted that its system  since it was  introduced.  In this  way,  they were able to turn an initially low adoption rate into a very fast one after several years of responding to customers' requests for change.  FINDINGS / 68 6.3.3. S u m m a r y  A pictorial representation of the factors which influenced the customer adoption of the COSSs in the sample is shown in Figure 8. Factors are of three types: 1.  Enablers. These are factors which, when present, are associated with high  adoption  rate. In the diagram these factors are followed by a plus sign ( + ). For example,  all systems  which  involved  customers  in the design  achieved fast adoption. COSSs with no customer involvement results:  some  fast,  some  slow.  Therefore,  Customer  process  showed mixed  Involvement  was  considered to be an enabler. 2.  Inhibitors. These are the factors which, when absent, are associated with low adoption rate. In the diagram, these factors are follwed by a minus (-) sign. An example is the factor called Low Sales Competence. It was mentioned by respondents  as  a  factor  which  inhibited  their  adoption  rate  but no  respondent mentioned its importance in enabling adoption. It was, therefore, considered to be an inhibiter. 3.  Inhibiter/Enabler These are factors which seem to affect the adoption rate in either direction. For example, a high COSS price was associated with low adoption; a low COSS price was associated with high adoption. COSS Price was considered to be an inhibiter/enabler.  These findings show only partial support for the adoption models as defined by  F I N D I N G S / 69  COSS ADOPTION  I  — Rate of A d o p t i o n — Penetration  DEVELOPMENT PROJECT  CUSTOMER INVOLVEMENT (+) SHORT PILOT TEST (-)  CUSTOMER  COMPANY  COSS  SUPPORT ond MARKETINO  FUNCTIONS and FEATURES  . ENHANCEMENTS (+/-) • MATCHES COMPANYCUSTOMER RELATIONSHIP (+)  • LOW SALES COMPETENCE (-) • COSS PRICE (+/-)  AWARENESS OF NEED (+/-)  CHAMPION CONTINUITY (+/-)  Figure 8. Findings - Factors Enabling or Inhibiting Adoption of the COSS by the Customer Rogers (1983). The concepts  of Agenda  Setting  (expressed  need) and Matching  (COSS matches the desired relationship structure) are supported, but others could not be validated. There are two potential reasons: This study did not gather data from customers and could not analyze their decision processes. The  adoption model  is not as useful to explain  COSS  adoption  since a  COSS is a system which supports a product or product-line, not a product  FINDINGS / 70 in its own right.  There is partial support for Runge's factors in the sample data. Systems which were built with  customer involvement  were all adopted  rapidly  in the first  year. The quality of the marketing programme (Runge's factor) was not found to differentiate between fast and slow-adopted systems, but low competence of the sales force was identified as a very significant inhibiter of adoption.  6.4.  THE  COMPETITIVE  As  mentioned  ADVANTAGE  in section  4.3  QUESTION  (Measurement Issues), it was  not possible to  measure the competitive advantage derived from any of the COSSs as objectively as the other dependent variables had been measured. All respondents answered affirmatively when asked if they considered the COSS to be a success. Their description of the results the COSS had brought to their companies, however, did enable us to separate them into three groups: the "winners", the "losers" and the "hopefuls".  Definitions  Both the winners and losers have had their COSS available for more than five years. benefits  The  winners  had  reaped  significant  based on high adoption penetration.  quantitative Their  and  sales were  qualitative up,  their  costs were down and they had attained strategic goals for their products. The losers had failed to differentiate  their products or to lower their costs  substantially; they had a small number of COSS customers and were now  FINDINGS / 71 trying to develop a more appropriate offering. The hopefuls had, for the most part, entered their COSS into the market within the last four years. They had created the  potential  for significant gains by raising switching  costs or erecting entry barriers. Their efforts, however, had not yet been realized on the company's income statement.  The  following  sections will  describe systems in each  of these  categories and  summarize the findings. The source data for each of these systems is presented on the last spreadsheet in Appendix C.  6.4.1. The Winners Winner #1  This  COSS  was  envisaged  as a service  customers of the company. Although  to be used  it was  designed  by  a few, very large,  and built under intense  competitive pressure, a full pilot test followed by complete  rewrite ensured that  the quality of the system was high from the beginning. Customers were slow to adopt since they were used to personalized service and had no experience with computer  technology.  This  system  delivered  significant  benefits  in information  timeliness, however, and the first customers were well rewarded for their efforts in mastering this new another  offering. During the next two years, the champion was  transferred  to  division  and  the  significantly  enhanced. Its future direction  system was  was  maintained  but not  unclear but current customers  continued to use it because of its quality and because of their investment in its operation.  FINDINGS / 72 When the champion was  transferred back to the product area, several significant  changes were made to the marketing and  the features of the COSS. Instead of  continuing to use headquarters staff to market the system, all account managers were trained in its operation and made responsible for sales. This created several thousand salespeople  instead of a dozen and  reduced the elitism that had  crept  into the product's reputation in the company.  Delivering information  electronically instead of manually had  the  company's transaction costs and  The  product was  medium  sized  information before and product was information  funded further development of the  and  customers.  the target customer set was  These  customers  had  never  delivered. These charges, multiplied by  produced significant new  enlarged received  to this  were not averse to paying for it. Thus the price of the  changed to include a variable component based on a high  the amount of  number of adopters,  revenue for the company. Current COSS adoption is ten  to twenty times what was COSS is now  COSS.  enhanced to use the latest technological advances, thus reducing  its price. Adoption rate increased include  significantly reduced  projected and  the company's target market for the  three orders of magnitude larger than was  originally conceived.  Winner #2  This  COSS  national electronic  was  motivated  operation. links  to  implement such an  The  by  the  comptroller  facilitate  ordering  company's strategic decision to become of and  the  company  began  had  looking  read  for the  about  a  using  hardware to  idea. After striking a deal with a hardware vendor for a  FINDINGS / 73 loan of 10 units for the pilot test, he oversaw the small amount of software development that was necessary and began travelling with the sales manager to demonstrate and install the units in customer sites. The system was subsidized and  the resulting monthly fee closely approximated the long distance charges that  the customer would have expended without it.  After a six month pilot, the communication problems were fixed and the system was turned over to the product salespeople to sell. Although the sales force had problems in selling this system, the customers adopted simplicity headquarters  and  cost-effectiveness.  staff,  and enabled  The  system  the salespeople  it rapidly due to  displaced to shift  value-added services. In the five year period which followed  several their  its  internal  emphasis to  the introduction of  the system, the productivity of the sales force increased by 50% to the number one  position in the industry. The company's national strategy was implemented  and  it survived an industry shake-out which eliminated many of its higher-cost  competitors.  6.4.2. The Losers Loser #1  This COSS was developed in a very competitive various regions  environment. Large customers in  of Canada were pressing for changes in the way the product  was distributed. The company quickly responded with a system to support the required changes. Because the system utilized an existing base of software and data,  it was built  and installed  rapidly. Its minimal cost coupled  with  high  FINDINGS / 74 customer need and a strong marketing program ensured rapid initial adoption.  The  management's focus switched to other endeavors and the system was only  marginally  enhanced during the next five years. Competitors  had built rival  COSSs and potential COSS customers had many choices. They made decisions based on benefits accruing from the system, with the result that adoption rate slowed considerably in this period. When the company's management (including the  regional manager  opportunity to support  who  was the COSS  champion) was centralized, the  this regional initiative  was lost. The company is now  attempting to restructure the system, focussing on benefits to be gained for the customer  and for itself  which  are based  on information  rather  than on  technology.  Loser #2  The  rivalry in this industry was very fierce and it was well-known that several  competitors  were  simultaneously  management supported  developing  the view that technology  a  COSS.  The  company's top  was the key to future success  and the system had both line management and IS champions.  The  system was priced to cover all costs, resulting in a high monthly fee. The  salespeople, as well as the customers, were not familiar with technology. Their learning curve, coupled with the system's high cost, led to a slow early adoption rate. Managers were transferred to other parts of the business, the initial vision of the system was lost, and it languished with few enhancements. There was  FINDINGS / 75 always  a tension between the rigid IS procedures which surrounded the system,  and the need to quickly respond to customer requests for changes.  Because of  the slow early adoption of the system, the company was discouraged and did not address  customer  COSSs  to  functions.  requests  choose  from  with  and  A lowering of the  high  were  priority.  not  Potential  attracted  cost and, therefore,  to the  customers  one  which  had  other  had limited  price of the  COSS  has  enabled the company to protect its initial adoptees until a re-engineering of the system is completed.  6.4.3. Summary - The Winners vs. The Losers The two winners and two losers described above provide interesting, albeit very speculative,  analytical  opportunities.  In  each  category  there  is  one  information-intensive product and one commodity product.  The similarities and differences between the COSSs developed by the winner and loser in the commodity product case were: Both resulted in high early adoption rates. Both had champions backing them. The  winner  used  the  early  gains  to  deliver  more  service  with  the  salespeople; the loser saw the early adoption rate and thought the system could be put into maintenance mode. The  winner  provide  always  tried to  information-based  understand  service;  the  the  loser  customer's focused  on  environment and technology-driven  solutions. The champion is still overseeing the winning COSS; the loser's champion is  FINDINGS / 76 now overseeing other areas of the business. The winner had a long term strategy which the COSS supported; the loser was using the COSS to defend against imminent loss of market share.  The  similarities  and  differences  between  the  companies  in  the  information-intensive industry are as follows: Both were sophisticated technologically. Both had top management support. The  winner built the customer interface and subjected it to a complete  rewrite. The loser took an existing system and extended it to the customer with little pilot testing. Although the product champion was transferred away in both cases, the winner's champion regained control and re-instituted the original strategy for the system. The winner's system had many enhancements to bring it to full-feature status; the loser's system had fewer enhancements and has only partial features now.  6.4.4. The Hopefuls In the following few pages, a description of three of the COSS "hopefuls" has been  provided.  interviewees  These  systems  were  described as  but their bottom-line results have yet  being  successful  by the  to be realized. If their  potential becomes a reality, there is every possibility that they will become "winners". If it does not, their respective companies will need to decide whether to maintain, replace, or withdraw the COSS.  FINDINGS / 77 Hopeful #1  This COSS marks the culmination of a multi-year undertaking by manager, first to automate his internal operation and  then  the product  to offer electronic  links to the customer to improve the quality and timeliness of the data. It was a technologically sophisticated system support was  and  very expensive to build. No executive  forthcoming and this system was  championed at the middle manager  level. Pressure had been brought to bear on the company's leadership position by American  rivals  and  by  customers who  wanted better service. Because of the  company's haste to get the system  to market, it was  not fully tested before its  release. It was  national  plan  introduced by  a  marketing  and  was  nominally  priced to attract customers.  Adoption during the first year has been limited to a few, large, customers. They received significant benefits from the system communications  problems and  system  and were willing to bear with the  bugs. The  system  has  re-established the  company's pre-eminence in this product line and has stopped any attrition of its customers. The  product manager is still involved with enhancements and is now  using the system  to woo  suppliers  long time, but  produce  takes  a  customers from  rivals. Getting customers to switch  additional  customers  have  the  potential to  the economies of scale necessary to significantly lower the cost of the  product. Since the competitive offerings do not match the system's quality, there is  every  reason  impressive results.  to  believe  that  their  new  competitive  weapon  will  deliver  FINDINGS / 78 Hopeful #2  This system was built to support the company's strategy of providing value-added services to its customers. If is was successful, the strategy would have lowered the customer bargaining power and differentiated the product. Another reason for building the system was to turn a threat of legislated electronic data standards into an opportunity  interchange  by taking a leadership position. Customers had a  policy of dealing with multiple vendors and the system was designed to track the inventory  of all vendor's  products.  Adoption  rate  was  slow  because  of the  system's high price (it was priced to cover costs), the difficulty that sales people had  in selling it, and the low priority that the customer placed on improvements  in inventory information. Nevertheless, and  the system is well known in the industry  its quality and good support programme have precluded  any competitor from  copying it.  Two years after it was introduced, the system was enhanced to become a part of  the customer's  quality  control  and  waste  management  operation.  Pushing  farther into the customer's business resulted in two benefits for the company. First,  their  organization,  salesmen  now  resulting in a  talked  to many  change  of relationship  "efficiency consultant". Secondly, information the  company's products because  products. resulted  more  it reported  from  people from  in the customer's "supplier"  towards  the system could differentiate  on the usability  of all vendor's  Since the company's products were of good quality, this differentiation in increased  customer satisfaction with the company. The company is  investing in a concerted  marketing effort to improve the adoption rate of the  FINDINGS / 79 COSS based on the new  No is  enhancements.  significant financial benefits have accrued to the company yet. The industry very  profitable  now  and  it is a  seller's market. It remains  whether the system can break the stranglehold that price and the  buyer's  decision  process  and  successfully  component. If this can be done, and  introduce a  to be  seen  quality have on  service  and  loyalty  if they can improve the system's adoption  penetration before the next business cycle, there is a high probability that their strategy will pay off.  Hopeful #3  This system  was  built in an  intensely  competitive environment. At  least  two  rivals were known to be working on similar offerings. The company had a stated policy of being management  "a fast second"  team  had  taken  technology in the business and  in the introduction of new  a had  proactive stance  about  the  ideas but the IS strategic  use  of  pushed the company towards adopting their  view of the world. The IS manager, whose high status enabled him to champion this system, formed a team imbued with a "combat zone" mentality. Traditional system development methods were ignored as they raced toward The strategic outlook was  not abandoned, however, and they took steps to ensure  that the technology used was the project. The  priority  implementation.  and  appropriate to the task, although doing so delayed pressure paid off as  within a few weeks of its competitors.  the  S3'stem  was  delivered  FINDINGS / 80 Adoption  rates  were  high since  the customers  could  achieve  significant cost  savings and justify the system's high price. The competitors' systems, which were cheaper  and less  technologically sophisticated,  were  adopted  by the smaller  customers. The company has continued to enhance the system, making it clearly superior to its rivals and even more useful to its customers. They expect to significantly increase their adoption penetration because of these changes.  Few  identifiable  monetary  gains  have  accrued  as yet from  the COSS. The  company's largest rival (the market leader), having failed in an attempt to copy the  COSS,  has announced  a new marketing  strategy  for the product. The  company is well positioned to fight this initiative, since the new release of the COSS will allow it to reduce the product costs by ten percent and nullify the rival's advantage. This fight is the. opening volley in a major industry battle and the  COSS will  play a crucial role in assisting the company in its bid for  survival.  6.4.5. Summary - the Hopefuls  As one can see from the descriptions of some of the COSS "hopefuls" in the sample, they are a very diverse group. They support a range of strategic goals and a wide variety of product types. Their champions came from many levels and  functions  within  the companies.  What  they  all share,  however,  is the  potential to significantly assist in shaping the future for their companies.  One of the important findings in the hopefuls group is that the quantitative benefits can be very slow in appearing. Developing and implementing a COSS  FINDINGS / 81 is very much an act of faith - one requires a strong belief in  its  strategic  potential. Only then can the players bring a constant source of enthusiasm and fresh ideas to the table.  6.5. SECOND-ORDER There are two asked  EFFECTS  internal changes that the respondents repeatedly mentioned when  to discuss ways in which  the COSS development  affected their companies. Both changes relate to a new that an organizational group was  and  support activities  set of skills and attitudes  asked to assume. The two organizational groups  in question are the IS operations people and the product sales people.  6.5.1. The IS Operations Staff Many of the interviewees in companies which had not connected their important customers  to themselves  electronically  before, remarked  that  the IS operations  group did not have the correct internal procedures or attitudes to support such a venture. Many  such groups  were used to solving problems  rather than political priorities. The  based  on technical,  management needed to upgrade the IS skill  levels, rewrite their operating procedures and  influence their attitudes to reflect  the importance of having customers as users of the information system.  6.5.2. The Sales People The  other, more significant requirement that emerged was  the urgent need to  teach product sales people to sell an information system. In most of the cases where a company chose reported problems  to use existing sales people to sell the COSS, they  with the sales effort, regardless of the emphasis they  had  FINDINGS / 82 placed  on  the marketing  programme.  These  problems  were  potentially  very  detrimental as they affected the early adoption rate.  The sales people's inability to sell the COSS stemmed from several sources: 1.  Different Focus Required The  sales people who supported commodity products were very comfortable  stressing qualities such as product price, quality and availability. Their main contacts at the customer site were in the raw materials purchasing group. To  sell the COSS required that they sell the customer on the value of  information.  They  had to give  demonstrations  to people  such  as the  warehouse manager or the accountant. This proved difficult. 2.  Need for Education Sales  people  are  communicators, good  not, in  general,  at intuitive  technically  rather than  oriented.  invest  time  and energy  to master  are  systematic thinking. Asking  them to become familiar with a complex information system they  They  requires that  this task. The COSSs  sample were often introduced into a very competitive environment learning process was short-circuited. This lowered  in the and the  the effectiveness of the  sales people. 3.  Fear of Job Loss If the COSS performs  a function (such as order taking) that is currently  being done by the sales people, they may perceive it to be a threat to their job security. A  company must use all the managerial  tools it can  muster to overcome this impression and motivate the sales people. To do otherwise is to have people with mixed loyalties responsible for the success  FINDINGS / 83 of the COSS.  C H A P T E R 7. SUMMARY  In  this  final  chapter  of  the  thesis,  recommendations for companies who  the  findings will  be  summarized  and  wish to develop COSSs will be presented. In  addition, areas for future research will be  suggested.  Recommendations based on small sample research, such as this project represents, are made on some underlying assumptions: 1.  The  sample is representative of some population of COSSs and findings can  be generalized to that population. 2.  Factors which were found to be associated with certain conditions in  1987  will have some stability over time. 3.  Factors which were found  to be associated with certain conditions actually  played a causal role in enabling or inhibiting these conditions. 4.  The steps taken to increase the reliability of the data were adequate.  These assumptions cannot be  verified  warned that any or all of them may  While research advancing  by  this project and  not be true.  advances slowly, the reality  rapidly. The  the reader must be  is that the  COSS phenomenon is  researcher felt, therefore, that recommendations based on  the type of qualitative observations developed purpose for guiding others towards success competitive advantage.  84  in this project may in developing  serve a useful  COSSs and  achieving  SUMMARY / 85 7.1.  RECOMMENDATIONS  When  discussing factors  strategic system  which  influence the  (COSS), it is important  success  of  a  customer-oriented  to connect the findings of this study  and take a life-cycle view of the system. Success at any one stage will strongly influence but turned  into  not ensure  success  success. Unrelated  at the  next. Failure  can  be  overcome  and  changes in the economy, the industry, or the  regulatory system can influence one's destiny.  In order to view the entire process from COSS development to realizable results, the  major  Inhibitors  findings to  success  have at  been a  summarized  particular  and  stage  are  are  presented  shown  above  in Figure the  9.  mid-point;  enablers are shown below it.  7.1.1. COSS Innovation In order to be first. in developing a COSS, the company and the IS management must be aware that this system development project should be handled differently from  internal projects. They may  intense  competitive  rivalry  already have a sense of urgency, created by  and  high  customer  bargaining  management support, consisting of either a committed CEO important backlog  power.  Top  or a champion, is  at this stage to provide the organizational power to bypass the IS queue  and  put  together  a  well-resourced  Companies with experienced, proactive IS  development  project  team.  personnel will have an advantage  since much of the technology necessary for the project will already have been researched.  S U M M A R Y / 86  SHORT PILOT TEST CHAMPION TRANSFERRED FEW E N H A N C E M E N T S TO C O S S  CUSTOMER NEEDS UNIDENTIFIED HIGH C O S S PRICE LOW S A L E S COMPETENCE  EARLY ADOPTION  coss i /OEA ieiiBin DEVELOPMENT lllilllll PROCESS  EATABLES  *  (YEAR  S T R O N G INDUSTRY RIVALRY HIGH L E V E L O F C U S T O M E R POWER CEO S U P P O R T A N D / O R CHAMPION IS S U P P O R T  *  *  LATER ADOPTION  muni  1)  (YEARS  2-5)  CUSTOMER * MANY E N H A N C E M E N T S RECOGNIZES NEED TO C O S S LOW C O S S PRICE C O S S MATCHES RELATIONSHIP CUSTOMER INVOLVEMENT IN DESIGN  Figure 9. Summary of Findings - Inhibitors and Enablers of COSS Success  The recommendations 1.  Infuse  the  potential  which emerge from our analysis are as follows:  organizational  competitive  technology. Encourage  uses  management for  with  information  an  appreciation  systems  and  of  the  information  functional managers to examine their operations for  opportunities. 2.  Develop a clear strategy for the target  and the ways  i n which  COSS.  Define the competitive  the COSS  will  assist  advantage  i n reaching i t .  SUMMARY / 87 Understand  the changes in customer attitudes  desirable  (e.g. changes  in  purchasing  frequency  or volume, willingness  and  criteria,  to consult  behaviours  increase  before  that are  in purchasing  purchase).  Create  a  staged approach if complex changes are envisioned. 3.  Provide the IS people with some slack in the budget,  and encourage  them to innovate with technology in advance of identified requirements. IS teams need financial and organizational support to play  a proactive role  within the company. 4.  Involve the customers in the design if at all possible. This will provide early  feedback  on  the practicality  of your  plan  and  provide  reference  accounts for the marketing programme.  7.1.2. Early Adoption Phase After the COSS has been developed, it is released to the sales people and the potential customers. The early adoption will be influenced most heavily by the customer recognition that this system addresses known needs. If the system was built in response to these needs, it will be easy to find pilot testing sites and  early adopters. The COSS  quickly  price  adopt the COSS, especially  will affect the customer's willingness to  if the price pushes the decision into the  capital budgeting process or if it is perceived to outweigh the benefits. At this point, sales  people  with  low  COSS  competence  can negatively  affect the  adoption process, especially if competitive COSSs have been developed by rivals. If the COSS has been designed such that it meets customer needs, either by involving customers in the design process, or by designing a system which matches the desired relationship structure, it will be much easier to sell.  SUMMARY / 88 Recommendations for companies which are introducing COSSs into the market are as follows: 1.  Price  it  carefully.  Covering costs may  not be important if competitive  advantage is the ultimate goal. This system may have to be considered a "loss leader" However,  it  such  that  should be  the  product itself  priced high enough  can  achieve  to ensure  higher margins.  that  the  customer  values it and expends the effort to use it. 2.  If the customer has not previously mentioned system  is a  solution,  prepare  for  a  long  a need for which this selling  cycle.  Marketing  programmes should stress benefits; education and support programmes should be of superior quality. 3.  Test  the system  with the customers  in a thorough  pilot.  Use  the  process to discover weaknesses in the strategy as well as in the technical system. 4.  Plan the sales effort thoroughly. Anticipate resistance from product sales people and create tactics to overcome it, such as using headquarters  staff,  teaming headquarters staff with field sales people for initial sales calls or installations,  involving  sales  people  in  design,  or  implementing thorough  training for all sales people.  7.1.3. Later Adoption Stage After  the first year, the industry has shown its initial reaction to the COSS,  whether it is  an eager  reversed by actions  acceptance  or a stifled  taken (or not taken)  Companies with high powers  of endurance  yawn. Both situations  during the  next  can solidify  two  early  can be  to five years. success or turn  S U M M A R Y / 89 around a poor response to gain quantifiable  Factors  which  influenced  early  benefits.  adoption,  such  as  COSS  price,  sales  staff  competence,  and customer recognition of needs, continue to exert influence on this  stage.  controllable  All  important however, the  industry  stage  negative  should  have  been  and economy.  Companies who continuity  achieve  of the  high  penetration  to  fit  customer  enhancements  More  requirements.  Companies  during  system champions. Winners  moved into high gear, adding many enhancements to the it  corrected.  are actions taken by the company and random occurrences in  ensured the  have  elements  which  are  system  reluctant  this have  and tailoring to  invest  in  to systems which encountered slow adoption increase the probability  of eventual failure.  Recommendations released are as 1.  for  entering  the  second  year  after  the  system  is  follows:  Keep the system  companies  was  faith.  If there  was  a  well-planned  strategy  in place  developed, keep focused on it. Examine poor response  when  the  rates for  factors which can be corrected. 2.  If early the  adoption has  system  for  ways  been of  brisk,  resist  expanding  the  further  temptation into  the  to  relax. Examine  customer's  operation.  Enhance the system regularly to keep ahead of competitors. 3.  Don't "reward" the champion with a transfer unless an understudy fully understands and is committed to the vision that created the initial offering.  In summary, building a C O S S to support a product involves good strategy,  SUMMARY / 90 adequate  resources,  perseverance  and  good  luck.  Tangible  often tied to a long-term change in customer behaviour,  rewards  industry  are  structure,  or the economy. The long-term nature of the payoff must be matched by a long-term attitude on the part of all participants in the  7.2. AREAS FOR This  research  FURTHER  company.  RESEARCH  project set out to replicate  a British  study  (Runge, 1985) in  identifying factors which might influence the development, adoption and competitive advantage derived from a customer-oriented been accomplished  strategic system (COSS). What has  is a partial fulfillment of these  goals. Factors which were  associated with successful COSS development have been identified. Factors which characterize systems with both high and low adoption rates have been identified. Profiles  of systems  which  have  succeeded  and  failed  in achieving tangible  measures of competitive advantage have been prepared.  There are several important  topics which have not been addressed by this study  and which could form the basis for further research. They include question such as: 1.  Why  do some companies not build COSSs when their rivals have done so?  What is the result of not building a system? 2.  What are the factors which characterize late entrants?  3.  What is the difference in adoption and competitive advantage between late entrants vs. first movers?  4.  How  do  customers make  adoption  decisions with  respect  to information  systems offered by their suppliers? Answering this question by talking to  SUMMARY / 91 customers would provide a better test of the adoption model than could be provided in this study.  This  study  lacks  true generalizability  because of the preponderance could be  shown to be  because  of the  small sample  size  and  of financial institutions in it. A larger study which  representative of some population of COSS developers  would provide data which could be statistical^' manipulated. Such a study could test the findings of the current study.  As more companies build COSSs, and more customers adopt them, other avenues of exploration emerge, such as: 1.  Do  principles of transaction cost theory (Williamson, 1975) affect the model  and the reality of competitive advantage? 2.  How  are customers reacting to the plethora of COSS offerings? How  are  they protecting themselves against loss of bargaining power? 3.  What product spinoffs and alliances have been formed based on a successful COSS? Have they achieved success?  Using Bonoma's (1985) terms, this project attempted forward  inside  the  "design" stage by  fleshing  out  to move COSS research the  generalizations. Measurement issues were addressed, new inventory, new  factors were identified. We  more complex level by examining  model and  developing  cases were added to the  have begun to explore COSSs at a  companies' actions over time. Perhaps a next  step would be to expand the research temporally to examine not only companj^ actions but also reactions by rivals, legislators, and  customers.  SUMMARY / 92 Inter-organizational systems, in general, and customer-oriented in  particular, will  systems.  They  become permanent members  will  transform  strategic systems,  of the typology  the relationships between  buyers  of information and  sellers,  between competitors, and between industries. As a field of study, the circle of investigation continues to enlarge. The only inhibiters to successful investigation of the phenomena are the resources and the resourcefulness of MIS researchers.  BIBLIOGRAPHY Athos, A. and Pascale, R.J., The  Art of Japanese  Management, Warner Books,  1981. Bakos,  J.Yannis  Strategy:  and  A  Treacy,  Research  M.E.,  "Information  Perspective", MIS  Technology  Quarterly  and  , June  Corporate 1986,  pp.  107-119. Bonoma, Thomas V. "Case Research in Marketing: Opportunities, Problems, and a Process",  Journal  of  Marketing  Research,  Vol. XXII,  May  1985,  pp.  199-208. Bouchard,  Thomas J. Handbook of Industrial and  Organizational Psychology. Ch  9. Rand McNally, College Publishing Company, 1976. Burns,  T.  and  Stalker,  G.M.,  The  Management  of  Innovation, Tavistock  Publications, London, 1961. Cash,  James  I., Jr. and  Konsynski,  Benn  R.,  "IS  Redraws  Competitive  Boundaries", Harvard Business Review , March-April 1985, pp. 134-142. Cash, James I., Jr., McFarlan, F. Warren, McKenney, James L., Vitale, Michael R.  Corporate  Information Systems  Management, 2nd  edition, Richard  D.  Irwin, Illinois, 1988. Clemons  E.K.,  Business  P.G.W. Keen, Strategy:  Telecommunications Norton &  for  and  The  S.O.  Kimbrough,  Basic  Design  Strategic  Advantage  in  "Telecommunications Variables", Europe,  Company, 1984, unpublished multi-company study.  93  &  Managing  London,  Nolan,  / 94 Davis, Donald D. "Integrating Technological, Manufacturing, Marketing and Human Resource Strategies", Managing Technological Innovation, editted by D.  Davis  Ch.  Donald  and  Associates, California, Jossey-Bass  Inc., 1986,  11, pp.  "The  Discipline of Innovation", Harvard  Business Review, Volume  256-290. Drucker, P.F.  63, Number 3, May-June 1985, pp. 67-72. IBM  Corporation, Business Systems Planning:Information Systems Planning Guide, GE20-0527-4, IBM  Ives, Blake  and  Corporation, Armonk, N.Y.  Learmonth, G.P.,  "The  July  Information  Weapon", Communications of the ACM  1984.  System  , vol 27, no  as  a  Competitive  12, December  1984,  pp. 1193-1201. Kanter, Rosabeth Moss, "The  Middle Manager as Innovator", Harvard  Business  Review , Volume 60, Number 4, July-August 1982, pp. 95-105. Keen, Peter  G.W.  Business  Without  Bounds: Telecommunication  and  Business  Strategy (Unpublished, 1985). Kimberley,  John  Technological  R.  "The  Organizational  Innovation,  editted  by  Context Donald  of D.  Chapter 2, pp. 23-43, Jossey-Bass Inc., California, King, William, "Strategic Planning for MIS",  MIS  Innovation", Davis  and  Managing Associates,  1986.  Quarterly , Vol 2, No.  1,  March 1978, pp. 27-37. King,  William, Strategies",  "Seeking New  Competitive  York  Advantage  University  Information Technology Proceedings, May  Using  Symposium 1986,  on  1-27.  Information-Intensive Strategic  Uses  of  / 95 McFarlan, ' F. Warren and  McKenney, James L. Corporate Information Systems  Management, Richard D. Irwin, Illinois, McFarlan,  F.W.,  "Information  Technology  1983. Changes  the  Way  You  Compete",  Harvard Business Review , May-June 1984, pp. 98-103. Parsons,  G.L.,  "Information  Technology:  A  New  Competitive  Weapon", Sloan  Management Review , Fall, 1983, pp. 3-14. Porter, M.,  Competitive Strategy , Free Press, New  York, 1980.  Porter, Michael, Competitive Advantage , Free Press, New Rockart, J.F., "Chief Executive Define Their Own  York, 1985.  Data Needs", Harvard Business  Review , March 1979, pp. 81-93. Rogers, Everett M., Diffusion of Innovations, Free Press, New  York, 1962.  Rogers, Everett M., Diffusion of Innovations, 3rd Edition, Free Press, New  York,  1983. Runge, D.A.,  "Using Telecommunications  for Competitive Advantage", Unpublished  doctoral dissertation, University of Oxford,  1985.  Science Policy Research Unit, Success and Failure in Industrial Innovation, Centre for the Study of Industrial Innovation, University of Sussex, 1972. Sullivan, Jr. C,  "Systems Planning in the Information Age",  Review, Winter 1985, pp. Synott, W.R.,  Sloan Management  3-12.  The Information Weapon, John Wiley and Sons, New  York  1987.  / 96 Tornatzky,  L.G.  and  Klein,  Adoption-Implementation:  K.J. "Innovation A  Meta-Analysis  Characteristics  and  Innovation  of Findings", IEEE Transactions  on Engineering Management, 1982, EM-29(1), pp 28-45. Treacy, Michael E., "Toward a Cumulative Technology  Tradition of Research  on Information  as a Strategic Business Factor", Center for Information Systems  Research, Sloan School of Management, MIT, April 1985. Urban, Glen  L., John  R. Hauser  and Nikhilesh Dholakia, Essentials  Product Marketing, Prentice Hall Inc., New Vitale, Michael Technology Annual  R., Ives, Blake, and Beath, and  Conference  Corporate  Strategy:  on Information  of New  Jersey, 1987. Cynthia M.,  An  "Linking Information  Organizational View",  Seventh  Systems, December, 1986, San  Diego,  California. Williamson, O.E. Markets and Hierarchies: Analysis and Antitrust Implications, The Free Press, New  York, 1975.  Wiseman, Charles, and MacMillan,  Ian, "Creating Competitive  Weapons  From  Information Systems", Journal of Business Strategy, Fall, 1984. Wiseman, Charles, "Securing Competitive Advantage Through Strategic Alliances", Strategic Management Planning, April 1984. Wiseman, Charles, Strategy and Computers; Information Systems as Competitive Weapons, , Dow Jones Irwin Illinois, 1985 Wyman, John, "Technological Myopia - The Need to Think  Strategically About  Technology", Sloan Managmeent Review , Vol 26, Summer 1985, pp. 59-64.  APPENDIX A - DESCRIPTION OF MODEL VARIABLES This appendix contains a description and, where possible, a theoretical justification of the factor  variables included was  in the  operationalized  in  models. In  the  addition, the  research  project  is  way  in which each  discussed.  If  procedures for operationalization are not mentioned, then the factor was of one  or more direct questions  during  the  interview. It should  be  specific  the topic noted that  several of the factors are included in the models for completeness but were not tested in the perceptions  project. This  is particularly  of customers. Any  true  of the  testing of these  interpreting comments made by  the  factors relating  factors was  interviewees,  who  only  to the  possible  by  were employees of the  company supplying the COSS, not customers.  1. FACTORS 1.  POTENTIALLY  INFLUENCING  COSS  DEVELOPMENT  Corporate Level a.  Proactive/Reactive Stance As  Runge stated, "a company's implicit or explicit position regarding  the organizational, management and  financial risks that it is willing to  assume, potentially enables, or constrains the development of specific applications." By COSS, we  hoped  companies  in new  gathering to  data concerning  test the  Urban  the perceived  et  al. (1987) concepts  product development make explicit  their stance (i.e. they choose to be  risks of the  choices  proactive or reactive) and  that about that  this choice would influence their COSS entry position. b.  Structure Burns and  Stalker  (1961) identified  97  the  importance of a company's  / 98 structure on its ability to produce innovations. Kanter (1982) supported this  view  and demonstrated  that  decentralization  enables  The  research project did not operationalize this variable.  innovation.  Technology Awareness Vitale  et al. (1986) suggested  unsatisfactory  methods  in their study  of identifying  that  strategic  companies had  information  system  because the strategists were not informed about IS technology. Because all  companies  in the sample  had developed  strategic  systems, the  project investigated each firm's level of technology awareness. Champion One  of Runge's findings was the presence, in 80% of his systems, of  a "product champion" defined as "Any  individual who  innovation progress  by  made  actively  through  a decisive  contribution  and enthusiastically  critical  stages"  (Science  to the  promoting its  Policy  Research  Unit, 1971). The  project investigated  the presence of a champion  and the roles  that were played by him/her throughout the COSS life cycle. Market Position The  size  correlate  of a company with  innovation.  was  found  The  project  (Kanter,  1982) to positively  did not operationalize  this  variable. Strategic Plan Another of the factors which Vitale et al. (1986) found to contribute  / 99 to an unsatisfactory environment for identifying strategic information systems was investigated  the lack of an the  relationship  overall business strategy. The between  COSS  development  project  and  the  presence of a strategic business plan. Function Proactive/Reactive Stance Because the IS function is often a partner in conceptualizing a COSS, and takes a lead role in its development, the adoption of a proactive or reactive stance by the IS organization  could  potentially influence  the entry position of the COSS. Structure Although the literature on IS organization generally confines itself to prescribing IS structures which enable development of internal systems, the  project  hypothesized  that  a  centralized structure  would  enable  systems which were tied to corporate strategy. This variable, however, was not operationalized. Business Awareness The  project tested the relationship between  a high level of business  awareness in the IS function and the entry position of the COSS. Status If information then  the  IS  technology manager  is strategically important to the company, should  have  high  status  (McFarlan  and  McKenney, 1983). The project hypothesized that IS managers, as well as  the entire IS function  autonomous  roles  in the sample  (as opposed  companies, would  to roles which  were  occupy  subordinate to  / 100 another functional area, such as Finance) within the company. e.  Competence It was hypothesized that companies  with COSSs would have highly  competent internal IS functions, or alternatively, that the IS group would not play a role in the COSS development effort. The test for this' hypothesis was developed through indirect questions which probed for key enablers of COSS development. f.  Planning Policies One of Runge's findings was that 80% of the systems he investigated had  been  developed  in an  environment  where  the IS  planning  guidelines were intentionally bypassed. The project tested this finding and also probed for measures of the flexibility of current IS planning methodologies  and  their  linkage  with  the strategic  plans  of the  75% of the sample  systems  business. g.  Existing Systems Another of Runge's findings was that  existed, in whole or in part, in the internal systems inventory of the company before they had been extended to the customer. h.  Existing Technology Runge  suggested  that  "the degree  to which  the qualities  of a  company's technical infrastructure mirror the needs of the business can strongly  influence  competitive  the company's  weapon".  ability  Questions concerning  to use technology the availability  as a of the  technology in advance of the COSS development project were developed to test Runge's hypothesis.  /  i.  101  Other Existing COSSs This factor was COSS  included to test whether previous experience  made it more likely that a  developing  the  next  COSS. Of  whether companies which had necessary  to  have  a  company would be  interest many  product  also was  with a  proactive in  the  question  of  COSSs in place would find it  champion  to  implement  subsequent  COSSs. 3.  Industry a.  Customer Bargaining Power An  element in Porter's (1980) model of competition is the bargaining  power of customers. One  of the possible outcomes of a COSS can be  to increase customer loyalty, thereby reducing bargaining power. One  increasing switching costs  of the hypotheses to be  tested  and was  that high customer bargaining power would be an enabling factor in the company's decision to develop a COSS. b.  Level of Rivalry Another of Porter's five competitive forces is the nature of the rivalry within an industry. In some industries, an unwritten agreement exists allowing different participants to operate in their own competition market  from others. In other industries, each percentage point of  share  operationalized nature  is the  subject concept  of competition  company's  niches with little  perceptions  to  fierce  of rivalry  in the of the  industry  competition. by and  The  investigating also by  the  general  gathering  actions of its competitors,  competitors preparing a similar COSS).  project  the  (e.g. were  / 102 c.  Threat of Substitutes If an industry is threatened as  by products which the customer perceives  substitutes, a COSS may be one of the ways a company can  differentiate its product. Thus, the threat of substitutes may  be a  factor which enables COSS development. d.  Threat of New McFarlan  Entrants  (1984) outlined  how  information  systems can be used to  raise entry barriers against new entrants. Similarly, Williamson (1981) has  suggested  that  lowering  the customer's  transaction  costs  may  encourage a move toward the use of network relationships rather than market  transactions,  investigated  thereby  the strength  raising  of this  entry  factor  barriers.  The  as an enabler  project  of COSS  development. e.  Constraining The  Regulations  project investigated the impact of industry-specific regulations on  the process of COSS development. 4.  COSS Development Project a.  Risk and Size Cash et al. (1988, Ch. 8) has shown that factors of a development project  such  as size,  structure  and technology  will  influence the  difficulty of the project management process and, ultimately, will affect the  probability that  it will be completed  successfully. Our research  project investigated the strength of these factors by assessing financial risk, project size, and technological risk (using the Existing Technology factor). The structure component of McFarlan's model is encompassed  / 103  in the "Existing System" factor. b.  Pilot Test This factor was added to determine  if a COSS was developed using  the traditional testing concepts or whether the presence of a customer as  the user would  change the way  this development  activity was  enacted. c.  Priority and Resources These factors were added to investigate whether the profile of COSS projects was higher than that of projects developed for internal users and what effect this had on its entry position.  FACTORS  POTENTIALLY  INFLUENCING  COSS  ADOPTION  Development Project a.  Customer Involvement Runge found this factor to be highly correlated with adoption rate.  b.  Pilot Test Because a pilot test is one of the bridging mechanisms between a development project and user adoption, it was hypothesized  that its  quality (i.e. a full-length pilot with several customers vs a short one with one or two customers) would  impact  both  measures of COSS  success. What might enable a timely development (i.e. a short pilot) might negatively impact rate, of the COSS. Function and Features a.  Features  the quality, and subsequently  the adoption  / 104 Based  on Keen's  advantage hierarchy  (1985) evolutionary  through  linkages  of information  steps  for gaining  to the customer,  systems  Runge  for competitive  competitive developed  advantage  a  which  moved from internal to customer links to added-value information services. The project used the description of the COSS functions to determine  if it served  the customer  in a primarily  product-related  manner or if it assisted the customer with functions that were not directly  related  to its use of the product  (i.e. added  value).  This  assessment enabled an investigation of the impact of different types of services on the customer adoption rate.  In addition, the breadth and depth of the product-related features were added  as a variable  to investigate  the Rogers  (1962) finding that  early adopters are influenced by the qualities of the innovation. Customer Resource Life Cycle Position Each COSS was classified according Learmonth  to its position in the Ives and  (1984) Customer Resource Life  Cycle  to test whether a  particular position on the life cycle influenced the adoption rate. Value Chain Position Each COSS was classified according  to its position in the value chain  (Porter, 1985) of the company to test whether a particular position influenced adoption rate. Flexibility Flexibility, defined  as the ability of the COSS to be customized to  meet the needs of an individual customer, is an asset of any system,  / 105 when viewed from a customer's perspective. Its value as an enabling factor has two theoretical bases: 1)  It captures the meaning of Roger's (1983) "compatibility" factor.  2)  It has the potential  to raise  differentiation) of the COSS  the asset  specificity  (i.e.  the  (Williamson, 1981), thereby making  it more resistant to threats from substitutes. e.  Performance Clemons et al (1984), in discussing the influence that the performance of an information system has on a user, hypothesized "extremely  dependent  on  the  nature  of  the  that it was  applications  being  supported". The research project did not operationalize this variable. f.  Enhancements This  variable  system  measures  the number  after it is introduced. It was  enhancements customers'  would  needs  produce  and  a  therefore  of functional  releases of the  felt that a high number of  system would  that result  closely in  matched the high  adoption.  Customers would perceive a high level of compatibility (Rogers, 1983). 3.  Support and Marketing a.  Customer Education and Customer Support A company which provides superior education and support of its COSS has  the potential to influence the Redefining/Restructuring process in  Roger's (1983) process model and hence to influence the adoption rate. b.  Marketing Programme The  COSS  Matching  marketing  programme  has the potential  to affect the  stage of the Rogers model of adoption. In addition, Runge  / 106 found that a superior marketing programme characterized systems  although  the size of the programme  many of his  was not significantly  correlated with adoption rate, c.  Price of the COSS As  Davis (1986) says, "positive attitudes toward the new technology  are insufficient to ensure adoption. Adoption may be denied because it is  difficult  to justify  costs,  despite  benefits." The project operationalized the  managers  awareness  of the  the COSS price factor by asking  respondents whether they felt the price was high or low. Their  answer was based on a number of factors, including the absolute cost of the system and its cost relative to other, rival COSSs. 4.  Customer As  mentioned  above,  the  factors  relating  to  the  customer  were  operationalized by using information gleaned from companies. Therefore, it is their  perception of the customer's attitudes  that  were measured  in this  project. a.  Effort Required to Adopt This  factor is included  to reflect  the customer's perception  of the  compatibility (Rogers, 1983) of the COSS with existing values. It was operationalized  by asking questions about the effect the COSS had on  customers and by examining the descriptions  of how each COSS is  used by customers. b.  Technology Awareness Since a COSS requires the  a certain level of technical proficiency from  user, this factor is another way to operationalize  Rogers' (1983)  / 107  compatibility factor. Perception of COSS Complexity This factor reflects the customer's perception of the complexity of the COSS. Perception of complexity negatively  correlate  with  has been shown  adoption  rate.  (Rogers,  This  1983)  variable  to  was not  operationalized. Satisfaction of other Customers Rogers made  (1962) found based  that  adoption  on the experiences  customer satisfaction by early  decisions of late  of early  adopters were  adopters. Therefore, high  adopters may  be useful in predicting  late adoption rates. The project did not operationalize this factor. Awareness of Need This  factor  hypothesized  reflects  Rogers'  concept  that customers who  of agenda  had expressed  setting.  a need  It was  which was  subsequently met by the COSS would be more likely to adopt than would customers who had not expressed such needs. This factor was explored by investigating the company's motivation for developing the COSS. If companies mentioned customer complaints or suggestions as motivators, the systems were rated positively on this factor. Satisfaction of other Customers Rogers (1962) predicted that late adopters would make decisions based on  the  experiences  of  early  adopters.  The  project,  therefore,  hypotheisized that satisfaction of customers would be a factor which fluenced late adoption rate. This factor was not operationalized in this study.  / 108 5.  Industry a.  Technology If an  Trends  industry has  established  standards  for communication between  constituents, these standards will be an important enabling factor for inter-organizational systems (Cash and Konsynski, 1985). b.  Lead Time to Next COSS When a potential customer is comparing the relative advantage of a COSS over other alternative ways of solving a problem, the existence of  rival  COSSs  hypothesized  will  that  influence  companies  the  with  adoption  long lead  decision.  times  over  It  was  competitors  would enjoy higher initial adoption rates.  3. FACTORS 1.  POTENTIALLY  INFLUENCING  COMPETITIVE  ADVANTAGE  Company - Product Economics and Differentiation Porter  (1985) claimed  that  technological  change  will  lead  to sustainable  competitive advantage if it lowers cost or enhances differentiation and the technological lead is sustainable. The effect  a  COSS  might  have  on  the  Product Economics factor includes the cost of producing  or  distributing  a  product or on the price that a product can command. 2.  COSS a.  Features and Enhancements These  factors  features system  will  test  whether  provide  more  a  competitive  which has been improved  has not.  COSS  which  provided  advantage  and  added  value  whether  a  continually will outperform one that  / 109 b.  COSS Price If  a  COSS  has enough  revenues may  adopters  in itself be a source  and a high  enough  price, its  of increased profitability for a  company. Product - Differentiation and Information Content These factors are included to test whether the competitive advantage of a company  which  produces  commodity  products  and/or  products  with low  information intensity can be influenced by the presence of a COSS. Industry a.  Regulations This factor explores the presence of constraining regulations and their effect on competitive advantage.  b.  Lead Time to next COSS This  factor  investigates the idea  (Porter,  1985) that first-mover  advantages can provide sustained competitive advantage. Customer a.  COSS Adoption Rate The  project investigated the relationship between high adoption rate by  the customers and competitive advantage. b.  Effort Required to Adopt and Customer Dependence on the COSS These  factors  investment upon  test  whether  the  which  requires  a  high  (in time and/or money) from the customer and the COSS  which  the customer  depends  produce more significant competitive not.  COSS  heavily, have advantage than  the potential to those  which do  APPENDIX B - INTERVIEW GUIDE  1. DEMOGRAPHIC  How  DATA  many people does the company employ?  What are total annual revenues?  What customers was  What product was What  is the  the system designed to support?  relevant  geographical area, who  How  the system designed to support?  market  in  which  the  system  resides  ?  (i.e. what  are customers).  would you describe the current state of this market's growth?  Which competitive forces operate most strongly in your industry: 1.  buyers  2.  rivals  3.  suppliers  4.  new entrants  5.  substitutes  What other information systems currently in use directly link your company with  110  its customers ?  2. THE SYSTEM AND ITS  FEATURES  What is the common name and/or acronym for the system ?  Briefly describe the current system.  What was your involvement with the system?  Was it an internal system before extending it to customers?  When was it implemented with the customers?  What has been the schedule and content of the major releases it has  Is it still considered to be "in development"?  How does the customer use the system in connection with the product:  1.  To obtain information about the product.  2.  To establish the amount of product/service needed.  3.  To specify the required attributes of the product.  4.  To choose a supplier for the product/service.  5.  To order the product/service.  / 112 6.  To authorize and pay for the product/service.  7.  To acquire the product/service.  8.  To test and accept the product/service.  9.  To integrate the product into existing inventory.  10.  To monitor access to and use of the product.  11.  To upgrade the product.  12.  To maintain the product.  13.  To transfer or dispose of the product.  14.  To account for purchases of the product/service.  Does the  system  offer the  customer additional non-product capabilities? If so,  describe them. 1.  word processing  2.  inventory control  3.  accounting  4.  messaging  5.  sales history/forecasting  Were these non-product offerings: 1.  Offered before the product-related parts  2.  Offered as part of the original system  3.  Envisioned but not offered with the original system  4.  Developed and  added after the  system  was  installed  in several customer  / 113 sites  Which capabilities (the product-related ones or the customer-related  ones) do you  feel the CUSTOMER perceives to be the most valuable?  What customer set did you target for this system?  What percentage of the targetted customers use the system ?  Are you still trying to achieve a higher level of penetration ?  What is the future direction for the system ?  What department or individual is directing the future of the system?  3. SYSTEM  DISCOVERY  How was the idea of the system generated? Was a particular individual or group given credit for the idea? What was the original motivation for developing the sj'stem? 1.  increasing revenue  2.  decreasing cost  3.  holding market share/profitability position  / 114 4.  other  How  was it envisaged that the system would support these goals ?  1.  hold or increase sales from existing customers  2.  attract new customers  3.  raise entry barriers  4.  create new products  5.  lower sales costs  6.  lower distribution costs  7.  lower service costs  8.  decrease customer's price sensitivity  9.  decrease customer's bargaining power  10.  other  Rank the factors in order of importance. 1.  Customer bargaining power  2.  Growth potential of the market  3.  Cost of servicing the product  Was  the system developed in light of what other competitors were already doing  or intending to do in the same area ?  / 115 Was the system copied from one used in another market or industry?  Did a particular individual play a critical role in the inception or development of the system?  If the answer is yes :  1.  Who  was the individual  2.  What department was this individual a member of:  3.  Describe his/her attributes (high,medium,low) :  a.  Status (informal)  b.  Level of authority (formal)  c.  Level of awareness of information technology  d.  Diversity of work experience  What specific roles did the influential individual play ?  1.  idea creation  2.  creating the strategy for development and implementation  3.  researching the idea with customers  4.  technical work on the implementation  5.  getting the idea accepted  6.  guiding the implementation past "rough spots"  and funded within the company  / 116 7.  general education of other management  8.  other... please specify  Do  you think the system would have been implemented without the presence of  this individual?  4. Was  SYSTEM  DEVELOPMENT  AND  INSTALLATION  the system already written in part or totalty before the decision was  made  to let the customers access it?  How  much change was  needed in the existing technical infrastructure to offer the  service.  1.  none  2.  slight  3.  moderate  4.  significant  What new  technologies or capabilities were introduced:  1.  new  hardware (processor)  2.  new  telecommunication  3.  buying new  4.  new  lines  terminal types  operating software  5.  new programming languages  6.  other...  Were potential customers involved in development at any stage?  1.  Not at all  2.  A little  3.  A lot  What was the nature of their involvement (stage and activity): 1.  requirements generation  2.  checking requirements  3.  prototyping  4.  other....  Was the overall development of this system unique in any way  1.  Yes  2.  No  In what ways was it unique?  / 118 How  did you go about implementing the system with your customers?  1.  pilot program  2.  training  3.  onsite support  Was this a different procedure than for internal systems?  How  much attention was given to publicity, advertising or promotion ?  1.  None  2.  A little  3.  A lot  What types of publicity,advertising or promotion were used? (f5) 1.  personal visits by salesman  2.  letters  3.  demonstrations  To what extent were publicity,advertising or promotion important to the success of the system?  1.  Not important  2.  To some extent  / 119 3.  To a great extent  Did you charge the customers for the system? 1.  Yes  2.  No  If yes, did the charge cover the costs of the system? 1.  all costs  2.  hardware costs  3.  development costs only  4.  ongoing support costs only  5.  nominal costs  At what rate has the system been accepted by your customers ? 1.  Not at all  2.  Slowly  3.  Moderately  4.  Rapidly  Can  you quantify this rate?  (DV)  W h a t factors do y o u feel contributed  5.  IS  PLANNING  AND  BUSINESS  to this rate of adoption?  PLANNING  At  w h a t level w a s the I S m a n a g e r w h e n the s y s t e m w a s implemented.  To  whom  Has  that  d i d he/she  report?  changed?  W h a t percentage of revenue does the company spend on I S ?  Is this above or below the i n d u s t r y 1.  don't know  2.  above  3.  below  norm?  Is this a deliberate policy?  Describe the company's I S prioritization process:  / Do  you  On (rank  have a  what  basis  flowchart  are  or description that I could take  information  the factors i n order  systems  Reduce costs i n  2.  Improve m a n a g e r i a l productivity  3.  Improve staff productivity  4.  To  develop new  5.  To  improve delivery of  6.  To  improve customer service  1.  we  do  2.  CSF  3.  BSP  production  use  any  4.  P o r t e r - competitive  5.  P o r t e r - added value  6.  other  - please  selected  products/services  you  not use  away?  of relevance):  1.  W h a t methods do  normally  products/services  to scan for new  systematic  IS  opportunities?  methods  forces chain  specify  Does your company prepare business  plans r e g u l a r l y ?  121  for  implementation  Does your  In  company  prepare  I S plans regularly?  w h a t order are the plans  prepared?  1.  Business p l a n first (top down)  2.  I S p l a n f i r s t (bottom  3.  concurrently  up)  To w h a t degree is there alignment between I S a n d business pi:  1.  none (only b y chance)  2.  p a r t i a l (for some areas of the business)  3.  total (all systems are to the business  How  do y o u achieve this  plan)  alignment?  e.g. 1.  cross t r a i n i n g  2.  rotating people  of IS/business into  people  I S f r o m line business  / 123  6. RESULTS On what basis was this system justified?  Did  this system go through the normal IS planning process to get approval for  development?  If not, why not?  What is your estimate of the cost of this system e.g. 1.  man hours  2.  computer chargeouts  What benefits, measurable or otherwise, have resulted from the system?  Did the benefits last for: 1.  Less than 6 months  2.  More than 6 months but less than 2 years  3.  More than two years  What has been the impact of the system quantify)  on the company's ability to: (please  / 124 (none / moderate / significant)  1.  hold market share  2.  increase market share  3.  decrease costs  4.  increase sales from existing  5.  capture new  6.  increase customer satisfaction  7.  stay competitive  customers  customers  Do you have a post-implementation review I could take away?  I want to discuss other types of changes this system caused... In what way did the system internally affect the company? 1.  Superordinate goals  2.  Strategy  3.  Style (culture)  4.  Structure  5.  Systems (processes)  / 125 a.  different things are done  b.  Improved the productivity of some activities (value chain)  6.  Staff (numbers, power)  7.  Skills  Overall, what amount of change was necessary to implement the system:  (none / moderate / a lot )  1.  structural  2.  culture  3.  staff levels  4.  operational  5.  financial  In what ways do you think the system changed the CUSTOMER?  e.g. 1.  decreased / increased price sensitivity.  2.  decreased / increased bargaining power.  3.  changed its perception of the company (partner vs supplier).  4.  changed its business  5.  other  processes.  In what ways did the COMPETITORS react to the system?  1.  don't know  2.  ignored  3.  they are preparing to retaliate  4.  copied it  5.  leapfrogged it (copy and enhance)  6.  retaliated in different ways  7.  other  When did these actions take place?  In what ways did the system affect the INDUSTRY ?  1.  changed the nature / level of rivalry  2.  changed the structure  3.  increased / decreased transaction costs  4.  increased entry barriers  / 127 5.  increased / decreased the market size  6.  introduced new products  7.  other  Does the system have a ROI comparable with your other IS investments? 1.  greater  2.  same  3.  less  4.  not calculated  What level of risk was involved in implementing this system:  1.  extreme (corporate viability)  2.  high (business unit viability)  3.  moderate (product viability)  4.  low (strengthening a strong position)  5.  none  What level of risk do you now perceive to be involved in NOT this system:  1.  extreme (corporate viability)  implementing  2.  high (business unit viability)  3.  moderate (product viability)  4.  low (strengthening a strong position)  5.  none  Overall, were the results different from what was expected? 1.  yes, we were pleasantly surprised  2.  yes, unpleasantly surprised  3.  no, we predicted well  4.  no, we did not predict at all  Do Y O U consider this system to be a success? (new DV)  1.  Yes  2.  Partial  3.  No  In hindsight, would you do it again?  Would you do it differently?  / 129  7. SUMMARY What do you  feel are the most important  enabling factors for using information  systems for competitive advantage, e.g. 1.  respected IS department  2.  strong line management with vision  3.  competitive pressure  4.  strong ties with customers  5.  good marketing  What do  you  feel are the most inhibiting  factors holding your company back  from more success using information technology, e.g. 1.  financial constraints  2.  human constraints  3.  technology constraints  4.  regulatory constraints  5.  industry constraints  6.  other....  What do you  feel are the most inhibiting factors which hold any  company back  from achieving full potential with competitive systems?  APPENDIX  C - SOURCE  DATA  This appendix contains four spreadsheets of data, each one containing data which pertains  to a  contains data  specific on  dependent  variable.  a specific system. The  Each  column  on  the  systems are named  spreadsheets  A,B,C, etc. To  preserve the companies anonymity, system A on the first spreadsheet is not the same  system  as  system  A  on  the  other  spreadsheets contains a factor which was variable. At  the bottom  (under  spreadsheets.  Each  row  on  the  hypothesized to influence the dependent  the "Added" heading) are factors which were  added after the interviews were completed. For an explanation of the factors, see Appendix A. Several of the data values in the spreadsheets are followed by an asterisk notations  (*) or an indicating  asterisk with that  the  a minus sign  respondent  placed  (*-). These particular  are  the  emphasis  author's on  this  variable as being an important enabler or inhibiter of the system's success.  The first spreadsheet is entitled "Factors Influencing Entry Position". Since ten of the eleven systems were first entrants, there is little ordering of these systems. The one which was  not a first entrant is shown at the right and was  not used  to create the findings.  The  second  spreadsheet, entitled "Factors Influencing Customer Adoption", shows  the eleven systems ranked on the rate of adoption they achieved in the year  after  reported  fast  introduction.  Four  reported slow, one  adoption. Systems in the  reported moderate and six  "slow" group were contrasted against  systems in the "fast" group to create the findings.  131  first  / 132 The  third  spreadsheet,  also  called  Factors  Influencing Customer  Adoption",  contains data on six companies because only six had been available for more than four years. These six are ordered by the penetration they achieved by the end of the fourth or fifth year. They range from 30% to 100% and for the purposes of analysis, were grouped into "50% and under" vs "100%".  The  last  spreadsheet  contains  data  on  the competitive  advantage  that  was  attributed to each of the systems. The benefits are listed on the spreadsheet and grouped based  under "quantitative" or "qualitative" headings. The systems were ordered on  their  reported  quantitative  experienced by the companies). between  two  systems,  results  (i.e. the bottom-line  changes  When the quantitative results were comparable  the qualitative  results  were  used  to rank  them. The  "winners" are at the left end, the "hopefuls" are in the middle, and the "losers" are at the right end of the spreadsheet.  TABLE 1  133  FIRST  FACTORS INFLUENCING ENTRY POSITION T>" •c* FIRST FIRST  FIRST  PROACTIVE  PROACTIVE  PROACTIVE  PROACTIVE •  TECH. ARARENESS LOW  HIGH  LOW  MODERATE  HIGH •  CHNfMON  PRODT / ECH  NONE  NONE  YES •  i  "A" ENTRY POSITION FIRST  •B*  1  •E*  CORPORATE LEVEL REP / ROACTIVE  PROACTIVE NONE - TEAM  CEO SUPPORT  LOR  HIGH •  IS FUNCTION N/A  LOR  REACTIVE LOR  HIGH  LOR  MODERATE  N/A  HIGH  LOR  N/A  LOR  HIGH LOR  NOT USED INTERNAL ONLY  USED PARTIAL NONE YES  NONE YES  HIGH  LOW  SMALL FULL NORMAL MANY  LOR NOT MUCH CODE YES HIGH MANY  REP / ROACTIVE BUS. AIARENESS  VERY PROACTIVE • PROACTIVE •  REACTIVE  HIGH  STATUS  MODERATE  COMPETENCE  HIGH  PLANNINGF /LEX IB'Y HIGH PLANNINGU / SED NOT USED EXISTING SYSTEM NONE-  NOT USED  EXISTING TECH. EXISTING COSS COSS PROJECT TECH. RISK  FULL YES  PARTIAL YES  PARTIAL  LOR  FINANCIAL RISK SIZE PILOT TEST PRIORITY  LOR LOR  LOR LOR SMALL PARTIAL HIGH  HIGH VERY HIGH LARGE PARTIAL (1 OUST)  RESOURCES INDUSTRY  FULL  FULL  NORMAL NORMAL  BARGAINING POWER HIGH • LEVEL OF RIVALRY HIGH THREAT/SUBST. LCfl THREAT/NEI EXT. LCfl REGUUTIONS YES •  YES  HIGH MANY  -  _  N/A NOT USED ~_ _ PARTIAL •  -  -  HIGH HIGH LCfl LCfl YES  R/A  HIGH HIGH HIGH NO"  •  HIGH NOT A FACTOR LCfl  HIGH HIGH •  YES POSSIBLE .  HIGH • -  I3h "F"  •6*  "H"  •1"  "J"  "K" FOLLOWER  FIRST  FIRST -  FIRST  FIRST  FIRST  PROACTIVE  PROACTIVE LOW  PROACTIVE HIGH  REACTIVE LOW  REACTIVE •LOW  EXECUTIVE • HIGH •  EXECUTIVE • HIGH •  TECHNOLOGICAL • LOW  PROACTIVE • HIGH (SIG.) • NONE HIGH  PROACTIVE MODERATE MODERATE  PROACTIVE HIGH  PROACTIVE HIGH HIGH •  PROACTIVE HIGH HIGH  PROACTIVE • HIGH HIGH  HIGH • HIGH  HIGH (SIG.) • LOW  NOT USED NONE NONE NONE  NOT USED PARTIAL NONE YES  HIGH • NO PLANS NOT USED NONE NONE •YES  HIGH  HIGH HIGH LARGE FULL (SIG.) HIGH FEW  HIGH HIGH MEDIUM FULL HIGH MANY  MODERATE HIGH • LOW HIGH  HIGH HIGH • SOME HIGH  MOO EXECUTIVE • HIGH • PROACTIVE HIGH MODERATE HIGH • HIGH USED MOT INFLEXIBLE NONE NONE YES HIGH  HIGH HIGH NO PLANNING IN PLACE NONE NONE  »  MODERATE HIGH HIGH USED (FLEXIBLE) PARTIAL • - PARTIAL •YES  HIGH MEDIUM FULL HIGH FEW  LOW LOW SMALL FULL HIGH FEW  LOW LOW LARGE FULL HIGH MANY  MODERATE  MODERATE  HIGH LOW HIGH NO  MODERATE LOW LOW NO  LGE ONES -HIGH • LOW HIGH HIGH • LOW LOW HIGH HIGtT  MEDIUM PARTIAL HIGH MANY  NO  -  TECHNOLOGICAL HIGH(SIG.) •  I3i FACTORS INFLUENCING CUSTOMER ADOPTION _  TABLE 2 i  •A"  1 ADOPTION - 1 YR. j SLOR  V  •••  SORTED BY 1 YEAR ADOPTION "D-  V  SLOR  SLOR  SLOR  *E' MODERATE  COSS  -  PILOT TEST  FULL  PARTIAL  FULL (SIG.)  FULL  PARTIAL (1 CUST)  CUSTOMER INVENT  NONE  NONE  NONE  NONE  NONE  FUTURES/AT FIRST  ENTRY  ENTRY  COMPLETE •  ENTRY  COMPLETE  TYPE/AT FIRST  PRODUCT  PRODUCT  BOTH  PRODUCT  PRODUCT  MESSAGING  CRLC POSITION  ••• THIS DATA RAS REMOVED FOR PUBLICATION  VALUE CHAIN POS.  M S -  FLEXIBILITY  LOR  LOR • -  HIGH  HIGH  LOR  CUSTOMIZATION  LOR  LOR  MODERATE  LOR  LOR  ENHANCEMENTS  MANY  FEW  MANY •  FER BUT  MANY  CUSTOMER EDUC.  FULL  FULL  FULL  CUSTOO SUPPORT  SUPERIOR  SUPERIOR  SUPERIOR  MARKETING PROG.  SUPERIOR  COSS PRICE  HIGH  TECH. ARARENESS  • -  SUPERIOR -  SUPERIOR  NORMAL  SUPERIOR  HIGH  HIGH  MODERATE  NOMINAL  LOR  LOR  LOR  LOR (SIG.)  LOR  EFFORT TO ADOPT  MOD  HIGH  HIGH • -  MODERATE  HIGH  NEED EXPRESSED  NO  NO  PARTIAL  NO  YES  LOR  HDD  HIGH  LOR  LOR  SHORT  SHORT  LONG  LONG  CUSTOMER  • -  INDUSTRY TECH. ARARENESS  TIME TO NEXT COSS LONG ADDED SALES COMPETENCE  -  -  LOR  COSS MATCHES REL. YES  LOR  PROBLEMS AT FIRST  LOR • -  LOR  ND  NO  YES  YES  FULL HIGH COMPLETE PRODUCT  sac  FULL NONE ENTRY PRODUCT  NONE  LOW LOW FEW NOT REQUIRED SUPERIOR NONE  MODERATE  NOMINAL  LOW  LOW  HIGH YES  MODERATE YES  LOW  LOW  LOW OWE SINCE 1988 CUSTOMER SUPERIOR  LONG . HQ FUNCTION YES  - SHORT MODERATE YES  FULL LOW ENTRY PRODUCT  HIGH LOW MANY (SIG.) FULL SUPERIOR NORMAL NOMINAL  PARTIAL  sac ENTRY ADDED VALUE  FULL NONE ENTRY PRODUCT  YES NONE ENTRY PRODUCT  HIGH LOW MANY FULL SUPERIOR SUPERIOR HIGH  LOW LOW MANY  LOW LOW TEW FULL FULL  SUPERIOR NOMINAL  SUPERIOR NOMINAL  MODERATE-HIGH MODERATE YES  LOW  LOW  HIGH NO  MODERATE YES  LOW LOW YES  HIGH LONG  LOW SHORT  INCREASING SHORT  MOD SHORT  YES  YES  HIGH NO  —  YES  •  131  TABLE 3 FACTORS INFLUENCING CUSTOMER ADOPTION ' SORTED BY PENETRATION MEASURED AFTER 4 OR 5 YEARS *E* "0* DEPENDENT VAR. "B" v SLOW FAST MODERATE ADOPTION - 5 YEARSLOW SLOW 50 100 40 35 PENETRATION (J) . 80S COSS PILOT TEST PARTIAL CUSTOMER INVM ' ENT NONE FEATURES/NOf PARTIAL TYPEN / OW PRODUCT CRLC POSITION VALUE CHAIN POS. FLEXIBILITY CUSTOMIZATION  LOW LOW ENHANCEMENTS FEW • CUSTOMER EDUC. FULL CUSTOMER SUPPORT SUPERIOR UCTING PROG/SIZE COSS PRICE HIGH CUSTOMER TECH. AWARENESS LOW EFFORT TO ADOPT HIGH NEED EXPRESSED NO INDUSTRY TECH. AWARENESS MOD HORT TIME TO NEXT COSSS ADDED SALES COMPETENCE LOW MGMT CONTINUITY LOW •COSS MATCHES REL.NO  YES FULL NONE NONE COMPLETE PARTIAL PRODUCT PRODUCT MESSAGING «• THIS DATA REMOVED FOR PUBLICATION *  PARTIAL SOME COMPLETE BOTH  HIGH LOW MANY FULL SUPERIOR ~ SUPERIOR HIGH  HIGH LOW FEW BUT SIG. _ CUSTOMER SUPERIOR NORMAL MODERATE  FULL NONE ENTRY PRCOXT  SUPERIOR " SUPERIOR NOMINAL  LOW LOW FEW NOT REQUIRED SUPERIOR NONE NOMINAL  LOW LOW FEW  LOW HIGH NO  LOW (SIG.) MODERATE NO • -  LOW LOW YES  LOW MODERATE YES  LOW SHORT  LOW LONG  MOD SHORT. -  LOW SHORT  HIGH YES  LOW • HIGH YES  LOW •YES  MODERATE HIGH YES _  /38.  •r  VERY FAST 100  FLU (SIG.) NONE COMPLETE BOTH  HIGH MODERATE MANY • FULL FULL SUPERIOR • HIGH LOW HIGH • PARTIAL HIGH SHORT PROBLEMS AT FIRST VERY GOOD LATER HIGH NOW LOST IT EARLIER MO  139. TABLE 4 DEP. VARIABLE QUANTIFIABLE QUALITATIVE  FACTORS INFLUENCING COMPETITIVE ADVANTAGE "A" "D* *E* NEW CUSTOMERS NEW CUST (SIG.) INCR SALES NEW CUST. (MOO) LOWER COSTS (MOD) INCR. SALES (SIG) INCRP .ROD PRICE(S GWER TRAN. COST HELD OLD CUST. NEW CUST (MOD) )L .IO DECR COST (MOO.) HELD OLD CUST. LOR TRANS COST (SIG) LONER TRANS. COST CUSTOMER SAT. RAISED BARRIERS RAISED BARRIERS IMAGE IN IND. INDUSTRY IMAGE IMAGE INCREASE DECR. CUST. POWER IMAGE INCREASE(SIG) CUSTOMER SAT. CUSTOMER SAT.  COMPANY PRfJCUCTE /CCMOMICS NOT AFFECTED PRODUCT/DIFF. AFFECTED COSS  AFFECTED AFFECTED  AFFECTED  NOT AFFECTED  NOT AFFECTED  NOT AFFECTED  AFFECTED  AFFECTED  FEATURESN / OR  COMPLETE MANY •  COMPLETE FEW B UT SIG. MODERATE  COMPLETE ONE SINCE 1988  COMPLETE MANY  MODERATE  NOMINAL ~  -  ENTRY  ENHANCEMENTS FER COSS PRICE NOMINAL CUSTOMER ADOPTION - 1 YR"FAST . ADOPTION - 5 YR. FAST EFFORT TO ADOPT MODERATE NEED EXPRESSED YES DEP. ON COSS MODERATE INDUSTRY REGULATIONS NO TIME TO NEXT COSH SORT PRODUCT DIFFERENT IABLE NO INFO. CONTENT LOR ADDED SALES COMPETENCE MODERATE MGMT CONTINUITY HIGH CEO SUPPORT HIGH •  HIGH  -  SLOR VERY FAST HIGH PARTIAL HIGH  FAST  SLOW  _ MODERATE  MODERATE MODERATE NO • MODERATE  HIGH YES HIGH  HIGH YES HIGH  SHORT  NO LONG  POSSIBLE LONG  NO LONG  YES HIGH  NO LOW  YES HIGH  YES HIGH  HQ FUNCTION LOW  LOR HIGH •  PROBLEMS AT FIRST LOW • VERY GOOD NOR HIGH HIGH N O W HIGH(SIG-) • -HIGH •  -  -  -  —  RANKED BY QUANTIFIABLE ADVANTAGE •F"  "I" . RANS COST (MOO) HELD CUSTOMERS DECT HOLD MARKET SHARE  LOWER TRAN COST INCREASED SALES(MOD) INCR SALES(MOD) (MOD) NEWCUST (MOD.) BROADEN CONTACT CUSTOMER SAT. BROADEN CONTACT IMAGE IN INDUSTRY OUST. SAT. (SIG) IMAGE IN IND. OUST. SAT. (SIG) DECR OUST. POWER IMAGE IKSS . WITCHING COSTS INDUSTRY IMAGE NOT AFFECTED AFFECTED  NOT AFFECTED AFFECTED  NOT AFFECTED  NOT AFFECTED  DONT ' KNOW YET  PARTIAL_ MANY (SIG.) NOMINAL  COMPLETE MANY HIGH  FAST  LOWERED IMAGE IN LONG RUN  NOT AFFECTED  NOT AFFECTED NOT AFFECTED  HOT AFFECTED NOT AFFECTED  PARTIAL MANY HIGH  COMPLETE MANY NOMINAL  PARTIAL FEW NOMINAL  PARTIAL FEW • HIGH •  SLOW  FAST  MODERATE YES HIGH  FAST SLOW HIGH NO HIGH  MOD NO MOO  MODERATE YES HIGH  FAST SLOW LOW YES LOW  SLOW SLOW HIGH NO HIGH  LONG  NO SHORT  YES - •" LONG  SHORT  SHORT  YES SHORT  YES HIGH  YES HIGH  NO LOW  YES HIGH  NO LOW  YES HIGH  LOW • LOW  LOW LOW * HIGH •  HIGH VERY HIGH • HIGH •  HIGH LOW  LOW HIGH  HIGH HIGH  


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