BTC: Developing Call Center Capability Teaching Notes

Transcription

1 Asian IT Case Series Barney Tan, Shan Ling Pan, Mahdieh Taher Case No: Date: November 21, 2008 BTC: Developing Call Center Teaching Notes The Case in a Nutshell BTC is a well known retail brand in the UK, comprising businesses operating principally in retailing, manufacturing and marketing health and personal care products. Employing over 4000 pharmacists, it is regularly ranked one of the most trusted brands in the UK and its business portfolio continues to grow today with the addition of dentistry, optometry, chiropody, medical, slimming and beauty services. BTC decided to develop the call center capability in three units, Customer service, Boots Advantage Card, and Mother and Baby Direct units. Because of the different nature of these units, BTC strategy was also different in implementing call center in these units. Customer Service Call Center Before 1996, customer service for BTC stores was performed by disparate customer service units located within store clusters known as Business Centers. A project team was formed to improve the efficiency and effectiveness of the Customer Service function. The project team deemed the call center capability necessary for the support of the centralized customer service unit. Because of the high costs of outsourcing and the increase in risk to the brand, BTC decided to develop the call center capability in-house. Boots Advantage Card Call Center The Boots Advantage Card was a high profile project that began as a marketing initiative in The call center capability was provided by AT&T during the trials on a temporary basis. Eventually the development of the call center capability and administration of the loyalty card scheme was outsourced to AT&T. But after a while, because of some reasons they brought the call center inhouse. Mother and Baby Direct Call Center Mother and Baby Direct (MABD) was a home shopping catalogue operated by Boots, with a range that included over 1500 products. The call center capability was deemed necessary to MABD s operations from its inception as the ability to take orders via telephone calls was an integral part of operational requirements. An independent mail order company was chosen after a rigorous tender process to receive customer calls and handle telephone orders for MABD products. Teaching Objectives The BTC case can be used in a variety of ways in courses on strategy implementation and general management. Depending on the particular course, one or more of the following teaching objectives should be emphasized: NUS School of Computing Cases are developed solely as the basis of class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright 2008 School of Computing, National University of Singapore (NUS). To order copies or request permission to reproduce materials, please contact [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise without the permission of NUS School of Computing.

2 To underscore the need of call center capability in today s competitive marketplace To understand the differences between units and their strategy to develop call center capability To understand the development paths of non-strategic capabilities To explore the challenges faced during implementing a call center Assignment Information The following questions could be addressed by students in preparation for the case discussion: 1. For what reasons did BTC decide to develop call center capability? Justify why BTC developed call center in three units separately. In your opinion, what are the benefits? 2. What are the developmental paths to implement call center capability in three units at BTC? 3. What are the key activities in developing internal and outsourced non-strategic capabilities? 4. Compare the developing call center capability in three units according to the reason of developing, key decisions, and outcome. Suggested Background Readings: 1. Montealegre, R. (2002), A Process Model of : Lessons from the Electronic Commerce Strategy at Bolsa de Valores de Guayaquil, Organization Science, 13, pp Walsham, G. (2006), Doing Interpretive Research, European Journal of Information Systems, 15, pp Pan, S.L., Pan, G. and Hsieh, M.H. (2006), A Dual-level Analysis of Process: a Case Study of TT&T, Journal of the American Society for Information Science and Technology, 57, pp Eisenhardt, K.M. and Martin, J.A. (2000), Dynamic Capabilities: What Are They?, Strategic Management Journal, 21, pp Teaching Plan Case Introduction The instructor may introduce the class by noting that the call center capability is the archetypical nonstrategic capability as the widespread availability of external call center service providers renders the capability common and easily imitable. Employing the business unit; defined in this case as a division of a firm selling a set of products to an identifiable set of customers in competition with a well-defined set of competitors, as the unit of analysis in the study, three call center capability developments were examined in three different business units at Boots The Chemist (BTC), a well known retail brand in the United Kingdom (UK). The intention of the case is to examine the necessity of non-strategic capability development and to ascertain if the underpinnings and assumptions of the strategic capability development process according to the extant literature will hold in the context of non-strategic capabilities as well. 2

3 Class Discussion During the class discussion, the instructor can discuss the assignment questions with the students and guide them in answering these questions: 1. Compare the developing call center capability in three units according to the reason of developing, key decisions, and outcome. The instructor can first mention that the business nature of each unit is different from the others. Then he/she may encourage students to discuss the similarities and differences between these units. The main points are summarized in Table 1. Reasons for call center development Key decisions made regarding call center development Consequences of decisions and outcome Customer Service Advantage Card Mother and Baby Direct Necessary to support operations of centralized Customer Service Function. Call center developed in-house, staffed with internal employees due to high costs of outsourcing and perceived risk to Boots brand. Call center is institutionalized, gaining recognition and support organizationwide. Expanding role within BTC to support its new initiatives. Necessary to handle anticipated call volume. Call center outsourced to AT&T as call center is a cost with little or no value. Call center is brought in-house due to overwhelming customer response which resulted in escalating costs, concerns over operations of LSOS Table 1: Comparison across the Units Integral part of mail order business. Competitors had the capability. Call center outsourced to Salestrac for speed of development and to remove the politics. Call center remained outsourced to Salestrac as its performance was satisfactory. However, rigorous governance was necessary. 2. What are the developmental paths of BTC to implement call center capability in three units? The Customer Service case indicate that the development of non-strategic capabilities in support of a core business unit (refer to Figure 1) follows a similar developmental path. After the call center capability was identified as necessary to support the centralized customer service units, the decision was made to develop the capability in-house (Arrow A) due to the perceived high cost of outsourcing and the potential risks to the BTC Brand. 3

4 B Identification of Needs A In-house C Institutionalization of Developed Figure 1: Path of Non-Strategic Capabilities in Support of Core Business Units Following the establishment of the call center capability, the focus of Customer Service shifted to expanding its capacity and involvement in BTC s other businesses, actively supporting BTC s new business and e-commerce initiatives. Through its role expansion, the call center achieves support and recognition of its ability organization wide (Arrow B) and continues to acquire more functionality and capacity to support its expanding role (Loops between Arrow B and Arrow C). Advantage Card The case of the Boots Advantage Card illustrates the development path of a non-strategic capability in support of a resource or capability that turned strategic over time (refer to Figure 2). Having identified that the development of call center capability was necessary to handle the anticipated call volume, call center capability development was initially outsourced to AT&T (Arrows A to C) as the call center capability was perceived as a cost with little or no value. The phenomenal success of the Advantage Card however, transformed the loyalty card scheme into a strategic resource with important CRM implications. Growing concerns that a capability with such latent strategic value was managed by an external party and escalating costs eventually led to initiatives to bring the capability in-house (Arrow D), leveraging the expanding role and capacity of the institutionalized Customer Services call center (Loops between Arrow E and Arrow F). B Identification of Needs A Outsource C Governance of Outsourced D E In-house F Institutionalization Developed of Figure 2: Path of Non-Strategic Capabilities in Support of a Resource or that turns Strategic over Time 4

5 Mother and Baby Direct The developmental path of other non-strategic capabilities is illustrated by the case of MABD (refer to Figure 3). Supporting the call center of MABD was not a part of Boots core business; MABD was Boots first foray into the alternative shopping arena. Neither was the call center capability supporting other strategic resources or capabilities. Consequently, it afforded MABD the choice of outsourcing capability development as it posed little risk to the Boots core business and possessed comparatively less strategic value. Moreover, outsourcing call center capability development provided MABD the advantage of quicker access to the required capability, and hence, faster time to market. B Identification of Needs A Outsource C Governance Outsourced of Figure 3: Path of other Non-Strategic Capabilities In the case of MABD, call center capability development was identified as necessary to its operations due to the need to take orders via the telephone. However, the decision was made to outsource capability development (Arrow A) to Salestrac instead of using the existing Customer Service call center or developing a new in-house call center as the project team felt that the existing call center did not have the capability to support its operations, and outsourcing would expedite the capability development process. It was evident that prior to MABD s closure, the outsourced call center was successful as it garnered regular positive feedback from its customers. It was, however, noted that to make the ongoing relationship viable, rigorous governance and monitoring of Salestrac s activities (Arrow B) was necessary, just as the payable fees were. Demands were constantly made of Salestrac to modify or improve the call center capability to BTC s requirements (Loops between Arrow B and Arrow C). While the subsequent development of Wellbeing.com is beyond the scope of this paper, it is significant that when the product line was expanded to include Boots core products for this strategic initiative, the decision was made to use the in-house call center to support its operations. A model of the key developmental phases and decisions in non-strategic capability development (refer to Figure 4) was constructed iteratively from analyzing the data collected, comparing the findings with existing capability development research and verifying the model with the key representatives from the three case studies. The development of non-strategic capabilities begins with a common first phase; the Identification phase (Phase 1) where the emphasis of this phase is on Selection. For strategic or dynamic capabilities according to the existing RBV (Resource-Based View) literature, this phase consists of identifying the resources and capabilities that has the greatest potential for providing sustainable competitive advantage and evaluating alternative ways of obtaining the strategic resources. In the case studies, the decision to develop call center capability was made for a variety of reasons (refer to Table 1), not necessarily because it has great potential for providing 5

6 competitive advantage. It is evident, however, that even in the case of non-strategic capabilities, careful consideration of the alternative means of obtaining the capability is necessary. The data indicate that the decision to develop the capability in-house or outsource capability development is particularly important, and careful consideration of the benefits and costs of each approach in light of the specific context is necessary before choosing how to proceed with capability development. After the Identification phase, the development of non-strategic capabilities forks into two distinct paths based on the decision to acquire or develop the capability internally, or to outsource capability development to a third party. For non-strategic capabilities in support of a core business unit or other strategic resources or capabilities, the process follows the same developmental path as strategic capabilities The process first moves into an Acquisition/ phase (Phase 2a) where the emphasis is on resource acquisition or development by pursuing the most effective and efficient means of the obtaining the capability identified in Phase 1. This is in turn followed by an Institutionalization phase (Phase 3a) where widespread distribution and support for the capability acquired or developed in Phase 2a is sought. Because capabilities evolve in response to internal demands and environmental changes, if the capability is deemed to be inadequate at meeting the organization s needs over time, the development process returns to the Identification phase (Phase 1) where the development options for the required changes are assessed. For non-strategic capabilities that are neither in support of core business units nor strategic resources or capabilities, capability development moves into an Outsourcing phase (Phase 2b), contingent on the availability of an external capability provider, which can generally provide faster access to the required capability at a higher quality and a lower cost. After capability development is outsourced, the capability development process transitions to the Governance phase (Phase 3b) where constant monitoring and periodic reviews are conducted to ensure that service standards conform to requirements. If service standards are below expectations or if additional functionality or capacity is required due to internal demands and environmental change, the development process returns to the Identification phase (Phase 1) where service gaps are resolved or new agreements are worked out with the capability provider. development for outsourced non-strategic capabilities will continue to loop between the Identification phase, the Outsourcing phase (Phase 2b) and the Governance phase (Phase 3b) until the business unit it supports become part of the organization s core business or if complementary resources and capabilities turn strategic. When either of these conditions happens, the outsourced capability may possess strategic value that the organization would like to have direct control over. development thus breaks out of the Outsourcing Loop and enters the Internal Loop at the Acquisition/ phase (Phase 2a). 6

7 Renewal of capabilities required due to internal demands and external environment changes Internal Loop Phase 1: Identification of Needs Yes Is the capability supporting the organization s core business/ other strategic resources and capabilities? No Outsourcing Loop Renewal of capabilities required due to internal demands and external environment changes Phase 2a: Acquisition/ In-house Phase 2b: Outsource Phase 3a: Institutionalization of Inhouse Phase 3b: Governance of Outsourced Figure 4: The Paths of Non-Strategic Capabilities 3. What are the key activities in developing internal and outsourced non-strategic capabilities The key activities are summarized in Table 2 and Table 3. Phase 1 Identification Key Activities for each Phase Identify that needs to be developed Evaluate alternative means of obtaining the capability by looking at the organization s asset position and paths available Phase 2a Acquisition/ Acquire or Develop using the most effective and efficient method identified in Phase 1 through the establishment of managerial and organizational processes Phase 3a Institutionalization Institutionalize the capability through obtaining widespread distribution and support organization wide Involves increasing the functionality, the capacity and the extent of involvement in the business of the organization Table 2: Key Activities for Internal 7

8 Phase 1 Identification Phase 2b Outsourcing Key Activities for each Phase Phase 3b Governance 1. Identify that needs to be developed 2. Evaluate alternative means of obtaining the capability by looking at the organization s asset position and paths available 1. Identify an appropriate external vendor based on an appropriate vendor selection criterion 1. Monitor outsourced capability and conduct periodic review of the vendor s performance and fees based on service agreement. 2. Outsourced capability may be enhanced or further developed depending on the needs of the organization. Table 3: Key Activities for Outsourced 8

9 Author Information Barney Tan Chee Chang Department of Information Systems School of Computing, National University of Singapore 3 Science Drive 2 Singapore [email protected] Tel: (65) Barney Tan Chee Chang is a doctoral candidate in the Department of Information Systems, School of Computing at the National University of Singapore (NUS). He graduated from the National University of Singapore in 2004 where he received his Bachelor of Computing (Hons) degree in Information Systems. His research interests include Strategic Information Systems, E-Business, Technology-Enabled Service Innovation and Enterprise Systems. Prior to joining the Graduate Program of NUS, he was a Lecturer in Business Information Technology at the Institute of Technical Education (Singapore). Shan-Ling Pan Department of Information Systems School of Computing, National University of Singapore 3 Science Drive 2 Singapore [email protected] Tel: (65) Shan-Ling Pan is the coordinator of the Asian IT Case Series, NUS. He is a faculty member in the Department of Information Systems, School of Computing, National University of Singapore. His research interests include enterprise system implementation, egovernment, IT-enabled organizational transformation and knowledge management. As a case study researcher, Dr. Pan has conducted and published more than 30 case studies on Asian organizations. He has published two case books in 2004 and 2006: Managing Strategic Enterprise Systems and E-Government Initiatives in Asia: A Casebook and Managing Emerging Technologies and Organizational Transformation in Asia: A Casebook. Mahdieh Taher Research Assistant Asian IT Case Series School of Computing National University of Singapore [email protected] Tel: (65) Mahdieh Taher is a research assistant at the Asian IT Case Series, NUS School of Computing, NUS. Her research interests are e-government, Analysis and Design of Information System, Information Technology Management, and IT Strategic Planning. Her research has been published in the Journal of Information Technology Era, IEEE International Workshop and International Electronic City Conference. She has also worked closely with Global360 Corporate. 9