Intelligent business transformation through market‐specific value network analysis: Structured interventions and process bootstrapping in geomarketing

• Author: Claudia Kaar,Christian Stary
• DOI: http://doi.org/10.1002/kpm.1587
• Published date: 01 April 2019
• Date: 01 April 2019

CASE STUDY

Intelligent business transformation through market‐specific

value network analysis: Structured interventions and process

bootstrapping in geomarketing

Claudia Kaar

1

|Christian Stary

2

1

Institute of Business Informatics –

Communications Engineering, Johannes

Kepler University Linz, Linz, Austria

2

Institute of Business Informatics –

Communications Engineering, JKU Knowledge

Management Competence Center, Johannes

Kepler University Linz, Linz, Austria

Correspondence

Claudia Kaar, Institute of Business Informatics

–Communications Engineering, Johannes

Kepler University Linz, Altenberger Strasse 69,

Linz 4040, Austria.

Email: claudia.kaar@jku.at

When organizations aim to expand their market share by positioning a product that is

well established in a certain customer segment by positioning that product in another

market segment, they may need to adjust their processes accordingly. Implementing

such a strategic move for growth while accounting for existing product and process

knowledge requires stakeholder‐centered and constructive interventions. In this

paper, we demonstrate the use of value network analysis for this transformation pro-

cess, reporting an example case of a telecommunications provider, which approached

private households based on the customer experience in the business customer seg-

ment. Value network analysis not only enabled the removal of communication‐based

resentments by opening acceptance to organizational change but also helped define

core processes in order to reach business objectives.

1|INTRODUCTION

Once a product(or product line) has been establishedin a certain market

segment, many organizations consider whether they can expand their

business by approachingother market segments. For instance,products

designed for businesscustomers may be tested for private customers, a

part of growth strategythat is a crucial aspect of business development.

The right combination of products and markets can increase sales and

market share (Welge, Al‐Laham, & Eulerich, 2017). When considering

growth, organizations mustdecide whether to stay in a specific market

area or expand to new marketsand novel growth possibilities.

Although there are several approaches to formulating company

growth strategy, one of the most commonly applied frameworks is

the product–market matrix, also known as Ansoff matrix

(Ansoff, 1965). The matrix not only helps to categorize an enterprise's

future growth strategy but also facilitates decision‐making about pur-

suing possible strategies involving its products and market segments.

The matrix comprises four distinct strategic instances (Ansoff, 1957,

1965) along two axes (Figure 1). The vertical axis encodes the

organizational situation, that is, whether a company delivers in current

markets or plans to enter new markets. The horizontal axis describes

the product range, distinguishing current products from new.

The marketpenetration strategy focuses on already existing markets

and products with the goalto increase market share by improving per-

formance, perhapsby bringing in new customers (e.g., through advertis-

ing) or by changinga store's opened hours (Ansoff, 1957,1965; Lowy &

Hood, 2004;Schawel & Billing, 2011). When implementing this strategy,

the companymight focus on pricing strategy, in combinationwith adver-

tising and promotion, to retain or increasemarket share and drive com-

petitors out of the market. Finally, increasing existing customers'

product usagethrough loyalty schemes or added valuecould still further

accelerate market penetration (FME, 2013).

The market development strategy tries to expand into new markets

with already existing products, whether sold to new segments

(e.g., new geographical markets) or different customer groups

(FME, 2013; Schawel & Billing, 2011). Geographical growth involves

the distribution of current products into a new country, continent, or

state. Modified packaging, new dimensions, and new distribution chan-

nels (e.g., offering products via the Internet) can also open completely

new market segments. In this context, distribution to different

------------------------------------------------------- -- --- -- -- --- -- --- -- -- --- -- --- -- -- --- -- --- -- -- --- -- --- -- --- -- -- --- -- --- -- -

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided

the original work is properly cited.

© 2018 The Authors Knowledge and Process Management Published by John Wiley & Sons Ltd

Received: 20 July 2018 Accepted: 23 July 2018

DOI: 10.1002/kpm.1587

Knowl Process Manag. 2019;26:163–181. wileyonlinelibrary.com/journal/kpm 163

customer segments (e.g., private in addition to business) can be catego-

rized as market development (FME, 2013; Schawel & Billing, 2011).

A new range of customers can be reached through the product

development strategy, which focuses on modifying products to reach

new customersin a current market. Modificationsto products can either

be additional featuresor changed features, such as appearance or qual-

ity (Lowy & Hood, 2004; Schawel& Billing,2011). A research and devel-

opment team is required to modify and develop products. This team

must assess new technologies and materialsto improve and refine the

product line. Furthermore, it should identify and consider customer

needs and wishes in the course of development(FME, 2013).

The diversification strategy entails the highest risk of the four

strategies, involving the introduction of a completely new product into

a new market (Ansoff, 1957, 1965). Diversification can be done hori-

zontally, vertically, or lateral. Horizontal diversification means

expanding a product line by relying on existing technology and knowl-

edge. Producing additional components for an existing product line is

known as vertical diversification. Lateral diversification implies

completely changing the market and the product, thus entering a

completely new field of business (Ansoff, 1957, 1965). This strategy

requires a thorough risk assessment, available capital, and willingness

to invest in new products (FME, 2013).

As demonstrated by review of the various implementation strate-

gies, neitherthe knowledge of operational stakeholders nor theunderly-

ing business processes are considered at that stage of development.

Recent studies (cf. Bianchi & Mathews, 2016; Sener, 2014) involving

the Ansoff framework have relied on empirical data from field work to

identify best practices and organizational capabilities. However, some

authorshave identified a need for more methodological rigorin research

and development (Kumar,2010; van Weele & van Raaij,2014), recogniz-

ing the continuousand highly dynamic need for change on all levels of

organizational development (i.e., strategy, tactics, and operations). Such

recognitioninduces a learningtask that involvesall stakeholders, particu-

larlywhen an organizationputs a strategicdecision into businesspractice.

This paper reports a structured method to support the implemen-

tation of a strategy for entering a new market segment that takes into

account stakeholder needs and capabilities. Although we demonstrate

its feasibility to support Ansoff's market development strategy as an

example, the approach should be applicable to other variants. We

use value network analysis (VNA; Allee, 2008) and subject‐oriented

business process modeling, a combination already demonstrably suc-

cessful in developing expert organizations (Stary, 2014). The proposed

method combines structured interventions with the development of

business processes through stepwise refinement and execution.

The remainder of this paper is structured as follows. Section 2

introduces the geomarketing business case, setting the stage to apply

the method's implementation in the market. Section 3 introduces VNA

and reviews related studies of application. In Section 4, we detail the

corresponding implementation steps, and Section 5 derives the pro-

cess knowledge alongside subject‐oriented examples of process. Sec-

tion 6 shows pragmatic implications for other businesses than

telecommunication, and Section 7 concludes the paper.

2|THE BUSINESS CASE

A mid‐sized Austrian telecommunications company faced a strategic

development challenge, opening several decisions with the aim to

increase sales and enhance market share. A promising sector of the

business portfolio is the provision to business customers of high‐

speed internet over fiber optic cables. Due to increasing need in the

market, the company is constantly investing in expanding their fiber

network throughout their distribution area. However, private in addi-

tion to business customers are demanding fast and stable bandwidth.

The company had to decide which basicgrowth strategy to imple-

ment. After analyzing the market,their current products, and their cus-

tomers, they decided to implement a market development strategy,

identifying the fiber optic cable sector as the most promising business

segmentto expand market share. At that time, the companyonly distrib-

uted their high‐speedinternet to business customers; privatecustomers

had not yet been served. Ensuring deliveryto private users requires the

concept of fiber‐to‐the‐home (FTTH), which describes the distribution

of high‐speed internet over a fiber optic cable from the main network

to households themselves. This technology requires an existing and

expandable network of fiber optic cables, which the company had

alreadyinstalled throughout their distributionarea. By applying this mar-

ket developmentstrategy, the company could expandthe network even

furtherto reach every single private customer in that area,reaching over

half a million households after fullexpansion.

In implementing the market development strategy, the company

faced several changes in management. It formed a new executive

department to ensure conscientious project structure. To this depart-

ment, management assigned existing employees with experience in

the field of fiber optic cables. Their main responsibility was to oversee

the preparation and execution of existing and new FTTH projects. Fur-

thermore, the geomarketing operations team was also transferred into

the newly formed organizational structure.

The term “geomarketing”is mostly found in German literature, but

it has no clear definition. Tappert (2007, p. 16) defines geomarketing

as the “optimization of marketing and sales through the application

of a geographic information system.”According to Schüssler (2006,

p. 9), geomarketing includes “planning, coordination, and control of

companies' customer‐oriented marketing activities through a

FIGURE 1 Product–market matrix, after Ansoff (1965)

164 KAAR AND STARY