How Cisco creates new value via global customer service

In Bust the Silos: Opening Your Organization for Growth, Hunter Hastings and Jeff Saperstein offer a new concept for business growth in today's global economy. It is called “demand creation”: the design of new organizational structures and processes to make managing the demand for a product or service a process‐based, predictable, and repeatable science. The challenge is how to harness the capabilities of new productivity tools with new business processes for success. Hastings and Saperstein argue that forward‐thinking organizations must work differently: in roles, not just jobs; in new forms of multifunctional teams, not just departments; in networks, not just rigid structures; and in listening to escalate responsiveness, not just communicating to get the message across. We all now operate in a highly connected, rapidly evolving, customer‐centric, and knowledge‐driven environment. Yet, most of our current management practices, organizational models, and job functions are not effective in serving our customers. Value is created through relationships with customers. Companies must adopt principles and practices that encourage every individual in the diverse groups of employees to have a shared sense of purpose to engage in more effective ways of working together to build customer intimacy and loyalty. This article profiles the Cisco Customer Interaction Network and the transformation of its global operations from call centers to customer‐relationship builders. It addresses the following questions:

• Why is being adaptive necessary for organizational survival?
• How does one design a customer support system that listens and teaches rather than just fixes problems?
• How does one take full advantage of the Web for customer support?
• How does one give front‐line professionals the training and tools to be consultants rather than mechanistic problem solvers?
• How can evolving metrics be a game changer?

The article is adapted from Bust the Silos: Opening Your Organization for Growth by Hunter Hastings and Jeff Saperstein (BookSurge, 2009). © 2010 Wiley Periodicals, Inc.     

Seven challenges to combining human and automated service

We introduce this special issue by addressing seven key challenges associated with managing hybrid human-automated service systems. These consist of the following:

• 1 What strategic and tactical issues arise when managing hybrid service systems?
• 2 How should the core “value proposition” be set?
• 3 What special considerations arise in the design and implementation phases?
• 4 How can service delivery be managed to identify systemic problems and to address service breakdowns?
• 5 How can communications with clients improve the functioning of service systems?
• 6 What performance measures should be used to monitor process, outputs, client perceptions, and financial outcomes?
• 7 How can we coordinate the various interdisciplinary activities needed to address the previous six issues?

We consider these challenges after first characterizing the historical evolution of service delivery, reviewing some of the literature in the administrative sciences, and proposing a conceptual framework. Copyright © 2009 ASAC. Published by John Wiley & Sons, Ltd.     

General managers control new and existing products differently

This article presents some initial findings from an ongoing research project on the way that divisional general managers of targe organizational units control new product innovations. (Control, in this instance, refers to the set of procedures, systems, and actions that general managers use to monitor, evaluate, influence, or define what subordinates are doing.) The research presented here focuses on three broad questions:

• 1.1. Do divisional general managers of large organizational units control their new product activities differently from their more established operations?
• 2.2. Is a new product's innovation strategy related to the nature and degree of divisional general manager control—and, if so, in what way?
• 3.3. Is a divisional general manager's choice of control methods related to his/her unit's new product output?

The results were based on in-depth interviews with the general managers of 26 large Canadian-based divisions in 12 firms. All the firms were significant competitors in the North American market and all were actively engaged in new product activities. Firm size ranged from $210 million to $5 billion in sales. The following is a summary of the study's principal findings and conclusions:

• 1.1. Control varies among dimensions. The study measured the degree of control exercised by divisional general managers over new and established products on 14 control variables. It was found that none of the new products (relative to established brands) was controlled in the same fashion by the managers. Instead, new products were always managed through a variety of “loose” and “tight” controls. In so doing, it appeared that the divisional general managers were trying to balance the control and freedom required by subordinates with new products.
• 2.2. Control varies with strategy. Both theory and empirical research generally support the notion of linkage between a unit's strategy and its organizational (eg, design, reward, placement, information, etc.) practices. The results of this study strengthen this line of thinking. The data show that both the nature and degree of divisional general manager control vary with three dimensions of product strategy (i.e., familiarity, uniqueness, and advancement).
• 3.3. Control varies with output. The analysis highlighted the pivotal relationship between divisional general manager control and new product output. Both the nature and degree of control were found to be associated with new product output in each strategic category. Although there does not appear to be one best way to control all types of new products, some divisional general management approaches to control were more preferred than others.
• 4.4. Loose formal/tight informal. The general managers' control patterns showed that formal control dimensions were usually managed more loosely than informal ones; that tighter informal controls were used to off-set (or “balance” ) the more relaxed formal dimensions; and that the observed reduction in formal control should not be interpreted to mean either the absence of bureaucracy or the absence of formal control. Indeed, some formal bureaucratic control was always found in the “high output” strategic categories. Thus, rather than being considered or labeled as typically “bad”, bureaucracy may in fact be “beautiful”—provided, of course, that it is appropriately used.

The article concludes by arguing that a divisional general manager's approach to controlling new products seems to make a difference in terms of performance. As such, the control approach chosen should not be made haphazardly or with abandon.     

Towards a theory of entrepreneurship

Over 200 years of the study of entrepreneurship have provided many definitions of the word “entrepreneur”. However, no theory of entrepreneurship has been developed that would explain or predict when an entrepreneur, by any of the definitions, might appear or engage in entrepreneurship. Indeed, the search for a best definition may have impeded the development of theory.The Schumpeter economic outcome-based concept that an entrepreneur creates value by carrying out new combinations causing discontinuity is embodied in many of the definitions offered within the last 50 years. We strongly recommend the adoption of Schumpeter's definition for academic and policy-making purposes.We offer the following tentative entrepreneurship theory, extracted from anecdotal observations and extant literature, in the hope that it will better explain and begin to predict the phenomenon of entrepreneurship:“A person will carry out a new combination, causing discontinuity, under conditions of:

• 1.1. Task-related motivation,
• 2.2. Expertise,
• 3.3. Expectation of personal gain, and
• 4.4. A supportive environment.

”Several relevant research questions are posed in the hope that they will encourage discontinuity in further development of theory.     

Environment,corporate entrepreneurship,and financial performance: A taxonomic approach

This study examined the association between a firm's external environment, corporate entrepreneurship, and financial performance. The study emphasized three propositions: (1) perceived—rather than objective-characteristics of the environment significantly influenced entrepreneurship activities; (2) a multidimensional definition of a firm's environment was essential to unravel the interplay between the environment, orporate entrepreneurship activities, and financial performance; and (3) a taxonomic approach had the advantage of accounting for the interrelationships among the dimensions of the environment in classifying firms.Using data from 102 companies in six4-digit industrial classification codes (SIC),cluster analysis was used to distinguish four environmental settings: “dynamic growth,” “hostile and rivalrous but technologically rich,” “hospitable, product-driven growth,” and “static and impoverished” environments. These four environments varied in their characteristics.The four empirically derived environment clusters were then used to examine variations in corporate entrepreneurship—operationalized as corporate innovation and venturing, and corporate renewal activities. The first dimension—corporate innovation and venturing—had four components: new business creation, new product introduction, percent of revenue from new products, and technological entrepreneurship. The renewal dimension had three components: mission reformulation, reorganization, and system-wide change. The data were used to test six hypotheses:

• 1.H1: In dynamic or growth environments, companies will emphasize new business creation and innovation.
• 2.H2: Environmental hostility is positively associated with the redefinition of business through venturing activities.
• 3.H3: Hospitable business environments are positively associated with business venturing and renewal activities.
• 4.H4: Static environments are inversely associated with corporate venturing and renewal activities.
• 5.H5: Corporate entrepreneurship activities are positively associated with company financial performance.
• 6.H6: Corporate entrepreneurship activities emphasised in HI through H4 will be significantly and positively associated with company financial performance in their respective environmental clusters.

The results provided general support for the six hypotheses. They showed that: (1) each environmental cluster had a distinct combination of activities relating to corporate innovation and venturing, and renewal; (2) corporate entrepreneurship activities varied in their associations with measures of company growth and profitability; and (3) the associations between corporate entrepreneurship and company financial performance varied among the four environment clusters. The results from this study can help executives in selecting specific entrepreneurial activities that match the demands of success in their business environment to improve their company's performance.     

Individual knowledge sharing behavior in dynamic virtual communities: the perspectives of network effects and status competition

Purpose

While most literature concerning knowledge sharing examines it as an organizational method for innovation and value creation, this paper considers online knowledge sharing as an individual behavior decision embedded in a virtual community. We attempt to explore which sharing behavior can help individual participants gain a better position in an online community, improving social status, reputation, and other social networking interests.

Design/methodology/approach

We collected and measured the knowledge sharing activities and discussion from a Chinese online expertise knowledge network in Business Management Consulting. We tested the mediating effects of the sharing behavior of the major members of the online knowledge network on members’ status (network centrality) in different time units (days).

Findings

In a dynamic virtual community, the direct result of knowledge sharing behavior is reflected in the individual status position (the degree of node centrality). At the same time, individual knowledge sharing behavior has an “inertia effect”: individual prior status (the degree of node centrality) affects current knowledge sharing behavior, while current knowledge sharing behavior affects current status in the knowledge network, forming an inertial circuit between personal behavior and network status.

Originality/value

We expound the theory of individual knowledge sharing in the context of an inter-person dynamic virtual community; we provide action “strategies” for individual knowledge sharing behavior choice, for better understanding the nature of individual knowledge behavior, and we also propose and test the “inertia effect” of knowledge sharing behavior and the knowledge network, and demonstrate the theory of network effects from an individual perspective.

     

Strategy constraints of Polish foreign-trade organizations

This paper presents reflections on the survey of the general managers of Polish foreign-trade organizations (FTOs). The study focuses on business deals with Western partners and the associated problems. The relative inefficiency of Polish FTOs is due to:

• 1.1. Poor working relations between the FTOs and the Polish manufacturing sector;
• 2.2. Inadequate knowledge of modern marketing techniques;
• 3.3. The lack of clear-cut strategies regarding how to develop foreign markets; and
• 4.4. Rigidity of national planning and management systems in Poland.

As far as organizational solutions to correct the deficiencies are concerned, the experience of foreign branches of FTOs and the modifications of their cooperative links with the Polish manufacturing sector appear to be the most promising.     

Prices of high-tech products,mismeasurement, and the pace of innovation

Introduction

Two recent papers have made compelling cases that mismeasurement of prices of high-tech products cannot explain the slow pace of labor productivity growth that has prevailed since the mid-2000s. Does that result indicate that mismeasurement of high-tech products has limited implications for patterns of economic growth? The answer in this paper is “no.”.

Results

We demonstrate that the understatement of price declines for high-tech products in official measures has a dramatic effect on the pattern of multifactor productivity (MFP) growth across sectors. In particular, we show that correcting this mismeasurement implies faster MFP growth in high-tech sectors and slower MFP advance outside the high-tech sector. If MFP growth is taken as a rough proxy for the pace of innovation, our results suggest that innovation in the tech sector has been more rapid than the rate that would be inferred from official statistics (and less rapid outside high-tech).

Conclusion

These results deepen the productivity puzzle. If the pace of innovation in high-tech sectors has been more rapid than indicated by official statistics, then it is perhaps even more puzzling that overall labor productivity growth has been so sluggish in recent years.

     

A Research Model for Consumers' Intention of Buying Private Label Frozen Vegetables

This article aims at identifying the factors that affect consumers' intentions of buying private label frozen vegetables, developing a related research model, and testing this model using quantitative data from a consumers' sample in Greece.

The field research was carried out in Athens and the sample comprised 282 consumers. Data analysis was performed using Structural Equation Modeling. The results confirmed that:

• Consumers' intention of buying private-label frozen vegetables is directly affected by consumers' attitudes toward this type of products.

• Consumers' attitudes toward private-label frozen vegetables are directly affected by the perceived benefits and indirectly affected by consumer trust and perceived economic situation.

     

Contours of development

New ventures seem to suffer more difficulties and business failures than do established firms. Also, there is a pattern to the mortality, with most newly founded businesses lasting only a few years.Explanations of high failure rates in new ventures have often centered on “poor management,” or have postulated that firms chose inappropriate strategies for their markets and economic environments.The present article conceives of new venture mortality as similar in nature to patterns of development that we observe, for instance, in human embryos or in the formation of new species. That is, development is an inherently hazardous process.Some of the specific hazards of development are:

• 1.1. Generic Entry Barriers. It is generally not possible for a new firm or product to successfully enter an already crowded, stable market where competitors are strong. It is more feasible instead to enter a new or growing market; or to enter with a “substitute” product that is clearly superior to those existing; or to exploit an unnoticed market opening; or to develop competitive strengths “secretly,” without overtly challenging others in the industry.
• 2.2. Density of Developmental Hurdles. Any new entity must clear a sequence of important hurdles on its way to maturity, such as establishing a well-ordered office, a functional sales channel, etc. Failure at any one hurdle is potentially fatal, and a mathematical analysis shows that the likelihood of passing even 10 hurdles in a row is about one in three. The earliest hurdles tend to be the most difficult and to crowd more densely than later hurdles. Particularly troublesome are “phase changes” where a company first starts business or becomes one thing rather than another within a short period of time.
• 3.3. Amplification of Maturational Error. Any complex system that grows rapidly and is unable to predict the future perfectly is going to accumulate structural errors that become very difficult to remedy. This is a natural and inevitable developmental process, as the system grows in complexity and the flaw itself becomes a pillar of the system. If an imitator or competitor arrives soon afterward and spots the error, he or she will easily be able to retool and redesign a better system, whereas the first firm is stuck with old habits, tools, dies, and production methods.
• 4.4. Sequence and Control in Development. Every embryonic organism has a design template outlined in its DNA that is carefully followed. Both the developing fetus itself and the mother have monitoring and control mechanisms that trigger an abortion if the development process goes awry. New ventures lack such mechanisms. They are more susceptible to “developmental deviance,” likely to differ from the model successful corporation of their type.
• 5.5. Smallness and the Asymmetry of Luck. Small things are more subject to the whims of fate than big things. Amount of resources is the key. Because new ventures typically start off with scarce resources, a bad bounce can sink the company, and the probability of at least one such bad bounce is high.
• 6.6. Costs of Organizing. Like all of the larger-brained mammals, a new company, such as a medical supply firm, must learn through experience much of what it means to be mature. Costs associated with learning arrive just when the firm is most vulnerable and distracted by other challenges.

In one sense, the message of this article is good news, in that managers of failed enterprises need not assume all the blame. After all, if most new businesses do poorly, then failure is the average or typical case, and it makes little sense to say that the average manager is “poor.” The bad news is that, if our perspective is correct, managers of new ventures have less scope to influence the success of their enterprises than is commonly believed. The managerial recommendations that emerge are that new ventures are more likely to succeed to the extent that they: have sponsorship or capital, have managers with a range of experience in previous ventures, are given extra assistance of “shelter,” or can ensure a high probability of passing all of the hurdles faced by a new venture.     

Assessing economic value added by university-based new-venture outreach programs

A new-venture development office was set up in a university to solicit, screen, and allocate community ventures into upper-level undergraduate and graduate project courses. Innovative ventures in the early stages of development were allocated according to: 1) the project requirements of different courses and 2) the assessed needs of the ventures themselves. During 1984, 89 different projects with a weighted average of 125 manhours per project were run through the new-venture office. Students who conducted the projects included law students, industrial-design students, and a few undergraduate commerce students, although the majority of the work was done by second-year MBA students. Most of the MBA students were parttime students holding middle-management positions and having five or more years of relevant business experience. Projects were run through twelve different courses and a seed-capital conference. The program was conceptualized and coordinated by a number of professors teaching within an entrepreneurship concentration in an MBA program. Early in 1985, a telephone survey of 50 of the 63 entrepreneurs who had projects in the program was completed. These people were asked to systematically and realistically assess the resulting net benefits to their ventures along a number of different prespecified dimensions. The total value added was computed to be $1.75 million (CDN). which stands in contrast to the direct, out-of-pocket cost of the program, which was only $75,000 (CDN).The individual dimensions of value added that were measured included:

• •• Time gained or saved in advancing their new venture;
• •• Knowledge (understanding) gained of new-venture development;
• •• Information added of use in pursuing their new venture;
• •• Contacts made in support of their new venture;
• •• Strategic changes made; and
• •• Overall value of the experience.

Additionally, respondents were asked to report whether or not they had secured new capital injections, increased or decreased employee levels, or made structural advances in their ventures. Rather than assume that the program was the primary instigator of all such changes, the respondents were asked to assess the relative impact of the program along appropriate dimensions.The program was perceived to have had a significant influence on most of the dimensions measured. A summary of the major results includes:

• •• Average value added of time saved or gained: $6,097.50;
• •• Average valeu added of new knowledge about venture development: $9, 389.47;
• •• Average value added of new information added: $6,293.48;
• •• Average value added of new contracts made: $7, 238.89;
• •• Average value added of strategy changes: $16,937.50;
• •• Average value added of overall involvement in the program: $37,269.00;
• •• Net employment generated: 20.4 FTE; and
• •• New capital raised: $5.1 million.

Certain shortcomings of the research are discussed, including the validity and reliability of the value added measures. Research is continuing to validate the findings and refine the program.     

Learning needs of growth-oriented entrepreneurs

As firms increase in size and complexities, the entrepreneurs managing them face a number of unique problems. Often the entrepreneurs lack the experience to address these challenges. Further, finding the best method to acquire the needed information has proven elusive for both entrepreneurs and educators.The existing entrepreneurship education literature related to teaching and/or learning skills to grow a business does not significantly address the problems brought on by growth. Most studies have examined students in an academic environment, away from realworld problems, in a relatively structured setting of a specific duration and with similar levels of competency and knowledge. Practicing entrepreneurs do not fit this educational mold.The results of this study show that entrepreneurs prefer learning experiences that are short, to the point, content oriented, and taught by practicing professionals. This study also identifies the priority learning needs and preferred delivery methods of fast growth entrepreneurs. These findings could be used to develop a series of courses or modules that could enhance the management efficiency and effectiveness of fast growth entrepreneurs.This study contributes to the general knowledge of entrepreneurship education in the following areas:

• 1.1. It identifies the learning needs and preferred instructional methods of practicing, fast growth entrepreneurs.
• 2.2. It provides market information on course offerings for executive education programs.
• 3.3. It provides a model of curriculum content for universities that wish to bring their courses more in line with the needs of practicing entrepreneurs.
• 4.4. It provides a teaching approach that can help bridge the gap between academe and the business world by focusing on learning needs common to both students and entrepreneurs.

     

After the cash arrives: A comparative study of venture capital and private investor involvement in entrepreneurial firms

Equity investments in entrepreneurial firms continue to grow in number and dollar amount from both venture capital and private investment sources. Increasingly, these two sources of capital play an important role in the development of new and existing entrepreneurial ventures. Due to the sometimes hurried attempt to turn their dream into reality, entrepreneurs may fail to consider similarities and differences in the value-added benefits supplied by venture capital firms (VCs) and private investors (PIs).Accordingly, the purpose of this study was to determine how initial relationships are established and maintained between entrepreneurs and their primary investors. Specifically, we asked entrepreneurs to assess characteristics of the relationship with their primary investor. We then contrasted the results between entrepreneurial firms that had received venture capital funding versus private investor funding. Differences were examined along the following lines:

• 1.• Levels of investor involvement in entrepreneurial firms
• 2.• Reporting and operational controls placed on the firm
• 3.• Types of expertise sought by the entrepreneur

     

Venture capital in transition: A Monte-Carlo simulation of changes in investment patterns

This article examines the nature of the investment process which has historically generated high returns for venture capital funds, and the impact on fund returns of perceived changes in management practice and the structure of the industry. The article outlines some policy implications for fund managers, investors, and the general management of corporations.The authors have investigated the investment process and the changes in the nature of the process through the use of a Monte-Carlo simulation model. Information gathered from interviews with fund managers and the available published data on venture fund performance (including proprietary surveys) was used to develop and calibrate the model. The model replicates the relatively high average fund returns and distribution of returns for funds through the early 1980s. The model simulates a multistaged investment process which draws on a pool of investment opportunities which have a log normal distribution of returns and a low (zero) average return. The model readily permits the exploration of the impact of management and industry practices on fund returns.The conditions identified by the authors, which led to high rates of return on the part of venture capital funds, include:

• 1.1) multistaged investment or commitment of funds on an incremental basis with evaluation of venture performance before commitment of additional fund;
• 2.2) objective evaluation of venture performance with the clear distinguishing of winners from losers;
• 3.3) parlaying funds or having the confidence to commit further funds to ventures identified as winners;
• 4.4) persistence of returns from one round to the next, which implies that valuable information is gained from previous rounds of investment in the same venture;
• 5.5) long-term holding of investment portfolios for a period sufficient for geometric averaging of compound returns to cause the winners to “take over” or raise portfolio returns.

Taken together, these conditions have permitted venture capital funds to historically realize strong average returns with a few of them realizing extraordinary returns.The article also explores the consequences of what some believe is happening in the industry: a trend toward holding investments for shorter periods, increased competition both for investments and later in the product-market arena, and a growing lack of loyalty between investors and investees. All of these conditions and their indirect consequences were shown by the model to negatively impact the limited partners in the venture capital funds while general partners, given the structure of fees and the distribution of investment returns, generally realized a reasonable to extraordinary return. The article outlines a number of management and investment policy implications for investors and fund managers.     

Unprofitable customers and their management

The widespread use of customer relationship management (CRM) applications has provided companies with increasingly detailed insights into the profitability of their individual-level customer relationships. Historically, this information has primarily been used to identify the most profitable customers and to define ways for serving them in an optimal manner. Nowadays, however, companies have become more aware of unprofitable clients, and the fact that these relationships can account for a substantial share of their total customer base. Drawn from a series of research projects conducted by us over the last few years, we herein propose a six-step approach for dealing with such unprofitable customers, a framework we refer to as the ABCs of Unprofitable Customer Management: Avoid their acquisition in the first place, Bear in mind potential rescue operations, Catch the possibility of abandonment, Draw up a cost-benefit analysis, Ensure familiarity with your environment, and Facilitate biting the bullet. We also provide a series of recommendations regarding how best to break up with customers, in order to ensure that firms can separate themselves from unprofitable accounts in the least painful way.     

THE DIFFUSION OF SALT INTO POTATOES DURING BOILING AND CONSUMER PREFERENCES FOR VARIOUS FINAL SALT CONCENTRATIONS

This paper describes an investigation of the diffusion of salt into potatoes, which are boiled in salt water, and the perception by and preferences of the consumer for various final salt concentrations. Potatoes were cooked in boiling salted water and tested by untrained taste panels. It was established that:

• 1 Salt only penetrates the outermost layers of the potato during cooking.
• 2 Despite this fact the cooked potato is perceived as ‘salted’.
• 3 Mashing the potatoes gives a final internal salt concentration of about 0.05 M.
• 4 The internal salt concentration preferred by most people is 0.1–0.15 M.

     

A Strategic Approach to Enhance Management and Marketing Effectiveness: Utilizing the SOAR Leadership Model to Improve Communication for Public Sector and Not-for-Profit Organizations

ABSTRACT

The effective implementation of the SOAR Strategic Leadership Model in not-for-profits and public sector organizations is explored, with a focus on both marketing implications and improvement of intra-organizational communications. The SOAR Model is especially valuable in such organizations, as leaders in this business structure are progressing from a production orientation to a marketing orientation because of changes in the marketplace.

1. Strategic goals, coupled with a strong vision, are essential to growth and success of an organization. The vision must be strong enough to remain valuable and usable even through changes of organization leadership and serve as a guide through changes in life cycle and strategic modes.

2. Marketing programs must be developed to communicate the strategic focus to target market publics and to associates of the organization. “Buying in” to the vision will enhance employees' motivation and ability to grow the organization both profitably and effectively. Further, potential customers want to do business with organizations that clearly and definitely display a clear-cut focus of consumer need satisfaction.

3. Feedback both to and from all levels of the organization is requisite for successful implementation of varied strategies. Thus, strategic leadership requires that the leader use different styles to manage effectively under varying circumstances.

4. Specific emphasis is given to the unique situations encountered with delivery of services, focusing upon the not-for-profit and public sector provider. As leaders surface, many often discover themselves with an organization that is ill equipped to follow, and thus to know how to follow, when to follow and the roles each should and can play.

Recommendations are offered on how organizations can use strategic leadership and the SOAR Strategic Leadership Model to excel in managing the organization as it develops and matures.