The following chapter portrays the sequence of activities that the research has identified in the examined firms for implementing a performance-oriented system. The presentation of the findings is structured according to the prevalent two-step approach of environment analysis in chapter 5.1 and the adaption of the firm resources. The latter is divided into the two types of value creation in chapter 5.2 and value protection in chapter 5.3. The section closes with a description of relevant contextual factors in chapter 5.4. Each section comprises central results derived from the qualitative research.
The quantity of quotes to verify a finding only has illustration purposes and no relation to the accuracy of the specific result. The chapter closes with the derivation of a comprehensive framework for performance-oriented system development in section 5.5.
5.1. Analysis of Firm Environment
The first section of the results comprises the analysis of the firm environment.
Interviewing the key managers of performance-oriented systems about their motivation for system development, it becomes apparent that the dominant reason lies within changing user preferences. Exemplary, 'ICT 4' well illustrates this transformation in user demand: "So we are strong in the desktop software space, we have some strong products and business models. However, in the UK, there are people, customers, that are starting to want to be able to use it online. An online solution, an online offering that is developed online. Benefits are such, as they don't need to buy infrastructure, they don't need to install the software. It is already installed and you get access to all data sections. You can access it from anywhere, anytime. So there are customers in the UK wanting that choice." This excerpt clearly illustrates the perspective of an incumbent firm with an existent product portfolio who has detected new emerging user preferences as a reason to develop a performance-oriented system. In contrast, an entrepreneurial firm has no established users with altered requirements, but the founders were in most cases previously users themselves who have detected unmet needs or a problem in existing offerings. Ultimately, this circumstance led to the foundation of an entrepreneurial firm to resolve this shortfall. For example, entrepreneur 'Mobility 7' asserts that "One of our first goal was, we were just solving our own problem, because we all needed a car but we didn’t want to own a vehicle. So we were thinking of, we were really only using the
car only once or twice a week, so we didn’t see the need to own a vehicle just to have one-two trips a week. That was the original idea. Second one, we were thinking of a system, like a national system. At the early stage, we were thinking of a service that could provide vehicles to a broader, public arena." The former two excerpts illustrate well on an aggregate level that incumbent and entrepreneurial firms have detected changing user preferences in the respective industry. This transformation in the environment of the firm has motivated the development of a performance-oriented system. In the following, the specific preferences that emerged will be discussed on a more granular level.
The majority of informants accentuates that the costs for acquisition and operation of comparable products or services has been the primary driver of system development.
For example, 'Energy 2' explains that "The idea came up initially, where we have clients who didn’t have the capital to invest in the [prior] system." Across all industries, the informants answer in a comparable manner. 'Chemical 1' points out the high acquisition costs of their new product that prohibits a conventional product sale albeit its superior characteristics: "In terms of user value, this fluid is typically only used in very difficult and complex well operation where simpler and cheaper fluids will not do the job as well.
[...] There were quite a lot of customer’s resistance to the fluids mainly because initially it was approximately ten times more expensive than any fluid that they had previously experienced with. So that is a major leap for potential customers to make." A central characteristic of a conventional product sale is that the user has to deploy his financial resources prior to the usage or operation of the product. The informants accentuate that users prefer the transformation of upfront capital expenses towards operational expenses in performance-oriented systems if the products are not core to their business. Talking about this aspect, 'ICT 1' asserts that "You enable them [the users] to concentrate on their core competencies and reduce and transform their cost to variable cost." To clarify this aspect, 'Mobility 8' explains in more detailed manner: "Because car-sharing in the end, when you compare the costs of ownership for the customer, is car-sharing more or less designed to have the same cost as ownership. If you own the vehicle, if you would buy a vehicle and add everything together, fuel consumption, taxes, insurance costs, repair, maintenance, tires, winter tires, summer tires, all this stuff and you add them all together and divide that through the driven kilometer, you have a value of cents per kilometers.
You know, and when you compare that to car sharing you should more or less end, I mean your car-sharing cost, in this level as if you owned a vehicle on your own." Albeit
the overall cost of ownership for product acquisition and operation are the same (or in some cases even higher) in performance-oriented systems in comparison to existing conventional alternatives, e.g. product sale, the users of the examined systems prefer a remuneration on variable terms rather than to deploy all financial resources in advance.
This is especially true when the product or its delivered performance respectively is not core but rather contextual to their business (in the case of B2B offerings) or personal lifestyle (in the case of B2C offerings). To summarize, high product (or service) acquisition cost in conventional offerings facilitated the development of performance-oriented systems.
A second aspect that motivated the development of performance-oriented systems is changing user preferences in terms of effort or time necessary during the acquisition or operational phase. In coherence with the first aspect, this preference is especially emphasized by the user if the product is not core to their business or lifestyle activities.
Exemplary for a B2B offering, 'ICT 3' summarizes: “So the main motivation was not to loose on this trend and opportunity where companies are looking for externalised solutions where they can focus on the use of a software but not on the maintenance and on the installation and on the running of the infrastructure.” The quote clearly accentuates the reluctance of the users to deploy their valuable (working) time resources for contextual activities. This disadvantage ultimately reduces the users confidence in conventional offerings and led to the development of performance-oriented systems, as illustrated by 'Energy 1', who asserts that “[Company name] main drivers to develop the [system name] model are to make solar heating technology more accessible for people, to remove financial barriers, and to eliminate the problem of customer’s confidence.”
The former quote describes the motivation as an equal combination of effort and financial constraints. In comparison 'Energy 5' clearly carves out the barrier of operational effort in conventional offerings: "What I’ve found was that customers were very interested in solar and wind, but they did not want to put money up front to own or operate the power plant because it’s not just the money but also the responsibility of maintaining the power plant for the next 20 years. [...] I think, if [company name] had only been a financing company, it would not have been successful. It was successful because it gives the monitoring, maintenance, and all of the paper work and everything."
To summarize, a time-consuming operational effort for conventional offerings facilitated the development of performance-oriented systems.
A third aspect that led to the development of performance-oriented systems is a lack of user know-how for product acquisition and operation that constrains the consumption of conventional offerings. Exemplary, 'Energy 6' connects this user preference to the former two: "And the other key ideas were that customers, they don’t want to operate power plant. They don’t wanna have to finance them. They don’t wanna have to operate them, and they are not even good at operating them because they don’t know what the best approach is and what the best techniques are." The disadvantage of advanced knowledge requirements for efficient product acquisition and operation is reflected in other industries as well, e.g. 'Chemical 3': “This product, [product name], is a very high-price product. [...] You need a lot of know-how in order to keep it running and to keep it in use and to work with this chemical as long as possible.” Other informants support this analysis, as 'Energy 7', who concludes that "We also discovered that the customers were interested in solar energy but they did not feel comfortable about owning the solar panel and solar heater for use because they were uninformed and they were fearful of equipment breaking down so they didn’t want to take a risk of buying something that they did not understand but they wanted solar." Albeit the aforementioned quotes for this preference have a heritage in the chemical and energy industry with comparatively complex technologies, the results indicate its relevance to a certain extent also for the ICT and mobility industry. Therefore, a high demand of operational skill or knowledge in conventional offerings facilitated the development of performance-oriented systems.
To summarize the former three aspects, the key-managers of performance-oriented systems have identified changing user preferences concerning the deployment of knowledge, time and capital for product acquisition and operation in an analysis of the firm's environment. The examined users clearly prefer a high elasticity of resource deployment, i.e. a variable deployment of their financial, time and know-how resources distributed over the entire operational phase, rather than an extensive fixed commitment before use. These changes in demand motivated the development of the respective systems. This leads to the first finding:
Finding 1: Changing user preferences in terms of knowledge, time and capital