REVERSING THE TREND OF COMMODITIZATION

A case study of the strategic planning and management of a call center

Brad Poulson, Jimmy Huang

Nottingham University Business School, Jubilee Campus, Nottingham NG8 1BB, England

Sue Newell, Robert D. Galliers

Bentley College,175 Forest Street, Waltham, MA 02452, USA

Keywords: Commodity process, Core compet

ence, Call center, Case study

Abstract: The paper challenges the prevalent paradigm that differentiates between the management of a core

competence and commodity processes. A case study is conducted to examine the strategic planning and

management of a call center to illustrate that a commodity process, such as handling customers’ complaints

and enquiries, can be transformed into a core competence, if a clear strategic intent is articulated and

adequate management approaches are followed. Findings derived from this study suggest that a call center

can provide substantial added value to the business and be managed differently through devising an

appropriate intellectual capital management approach.

1 INTRODUCTION

Firms are increasingly competing on the utilization

of unique and intangible resources, such as the

intellectual capital of their workforce and the

distinctive value this can add, as a means of

attracting and retaining customers. To achieve this

goal, a growing number of firms are choosing to be

specialists, focusing on areas where they can

differentiate themselves from their competitors. For

instance, Nike has transformed itself into a cutting

edge innovator through OEM (Original Equipment

Manufacturing) and partnerships (Cho & Chu,

1994), while Cable & Wireless has redirected itself

into a marketer of telecommunication services by

outsourcing its IT function to IBM and laying off

other businesses that are no longer perceived as part

of the core.

The above indicates a distinction that firms

rposefully make between core, value- adding

competencies (seen as essential to competitiveness)

from commodity operations and processes (seen as

being uniform across the players in the industry).

The result of such a distinction is reflected in the

strategic direction that guides and initiates firms’

actions, i.e. continuously investing in core

competencies to enhance competitiveness, or

outsourcing commodity processes to achieve a

higher level of cost efficiency (Kern, et al., 2002).

This seemingly logical thought process contains

some hidden assumptions that require clarification.

First, to derive competitiveness from commodity

operations and processes is perceived as infeasible

or unnecessary. Second, there is no need to

introduce differentiation in areas where industrial

standards, such as returning purchased good or

obtaining information through customer helplines,

are prevalent.

To challenge the above assumptions, we use a

case st

udy to explore whether commodity processes

can be value-adding, if some modifications are

injected. If such modifications are introduced, can

the uniqueness and characteristics of a firm’s

intangible resource be reproduced? The focus of our

research is the examination of the strategic planning

behind the setup of a call centre in one of the largest

retailers in the UK. As we will see, particular

emphasis was placed upon one of the organization’s

core intangible resources, notably brand equity. In

other words, this study explores how some

characteristics of the case organization’s brand

image was reproduced in its call center operation as

a means of adding value to a commodity process.

Evidence derived from the analysis confirms that

the busine

ss process underlying the examined call

center has the characteristics of a commodity

396

Poulson B., Huang J., Newell S. and D. Galliers R. (2004).

REVERSING THE TREND OF COMMODITIZATION - A case study of the strategic planning and management of a call center.

In Proceedings of the Sixth International Conference on Enterprise Information Systems, pages 396-402

DOI: 10.5220/0002614903960402

 SciTePress

process, as defined in the current literature.

However, in the case company the intent was to re-

create the experience that customers expect during

their visit to any of the stores and building. Thus, the

call-center experience, while a commodity process,

was revitalized to provide strategic value to the

business. Our findings are crucial not only to

emphasize the need to reexamine the value of

commodity processes, but also to highlight the fact

that the significance of branding has been largely

neglected by the IS strategic planning literature.

The rest of the paper is organized as follows.

Section Two outlines debates and perspectives

related to two main areas, notably core competencies

and commodity processes. Section Three highlights

the methodological issues and concerns considered

in this study. Section Four reports the findings by

illustrating the evidence collected, as well as through

comparing these with findings generated by other

studies. The final section concludes the paper by

addressing the contributions and implications of this

study.

2 THEORETICAL FOUNDATION

Authors (e.g. Drucker, 1999) suggest that the

emergence of the knowledge economy calls for a

new way to compete that is unique in the

deployment of resources and focused on the

selection of segments and/or markets. The rationale

for the former is based on the need to innovate and

differentiate, while the latter is rooted in the belief

that emphasizing the core, rather than all, areas of

business facilitates the generation and maximization

of added value. The need to differentiate and focus

has increasingly led firms to select, prioritize and set

apart areas that have the scope for enhancing

competitiveness from areas which are perceived as

cost centers (Fjeldstad & Haanaes, 2001; Pelham,

1999). As a result, areas that are identified as cost

centers are managed based on the principle of cost-

efficiency and become the primary targets for cost

cutting. For instance, areas like warehousing and

fulfillment are often perceived by retailers as cost

centers and are subject to cost reduction, because of

their limited potential for adding value to the

business. This distinction has led to the emergence

of two categories that form the basis of

contemporary organizations, notably core

competencies and commodity processes.

Core competencies represent a firm’s unique

abilities and characteristics in developing,

coordinating and integrating available resources to

create a source for differentiation (Prahalad &

Hamel, 1990). By contrast, commodity processes

symbolize a set of activities performed by firms that

offer limited scope to generate differentiation or

make this uneconomical (Poulson, 2002).

Distinguishing core competencies from commodity

processes offers a convenient classification for

managers, prescribing appropriate actions in relation

to each. Thus, as Bowman and Faulkner (1997)

suggest, firms engaged in competition are providing

‘hygiene value’ capable of satisfying the basic needs

of customers. These ‘hygiene value’ activities are

identical to other competitors. However, to acquire

and retain customers, firms need to generate and

promote ‘motivator value’ as a source of attraction.

In other words, the ‘motivator value’ is the source of

differentiation that influences customers’ decisions.

The distinction between hygiene and motivator

values is crucial for the following two reasons. First,

it offers an explanation as to why it is important to

distinguish between core competencies and

commodity processes. Second, it suggests that a

commodity process to one firm might not

necessarily mean the same thing to another. For

instance, the process of producing and assembling

PCs is perceived by IBM as a commodity process

which is carried out through an OEM arrangement.

By contrast, the same function of assembling PCs

for Dell is a core competence (Eisenhardt & Brown,

1999). One of the key points derived from this

discussion is that the difference between a core

competence and a commodity process can be very

ambiguous, arbitrary and subjective.

Due to the belief that a commodity process

provides limited added value to the business, options

available to firms in managing these commodity

processes are largely driven by and rationalized

based on the principle of cost-efficiency. Firms’

sensitivity towards cost, in particular in relation to

those involved in performing commodity processes,

has restricted the opportunity to invest in or reinvent

areas that might potentially be able to provide

additional competitive advantage. For commodity

process areas, who should perform the process is

seen as unimportant. In other words, it makes little

or no strategic difference whether the commodity

process is performed by the firm or by its service

providers. Hence, when firms can obtain the

required function with less cost through outsourcing,

the motivation for continuing to perform the

function in-house becomes less attractive. In

situations where performing the commodity process

in-house is necessary, firms often benchmark other

competitors to streamline their operation, so that

cost can be reduced to the same level as the

competition. As a result, some processes and

functions performed by firms are increasingly

becoming identical, and the ability to differentiate is

very limited.

REVERSING THE TREND OF COMMODITIZATION: A CASE STUDY OF THE STRATEGIC PLANNING AND

MANAGEMENT OF A CALL CENTER

397

The ambiguity and difficulty of differentiating

core competencies from commodity processes

surfaces the question of whether, in practice, this

differentiation has created unnecessary limitations

on the selections and choices which managers

perceive. In other words, could firms generate added

value, if a so-called commodity process were

transformed or performed differently? As an

illustration, Gilmore and Pine (2002) consider the

example of a wakeup call in the hospitality industry.

They demonstrate how traditionally there has been

little difference between hotels in the way this

service is delivered. However, they also identify

how some hotels have focused on delivering even

such a commodity service in a ‘magical’ way so that

guests cannot help but talk about it after. Their study

provides examples of hotels, like the MGM Hotel &

Casino in Las Vegas and resort hotels at Walt

Disney World, which take a more innovative

approach by waking up their guests with recorded

voices from celebrities or the Disney characters. By

so doing, these hotels are able to upgrade this

routine service into an unforgettable experience.

Their study not only provides interesting examples

of how commoditization can result in no or little

differentiation across an industry, but also suggests

the possibility of transforming a commodity process

into a value added core competence.

Call centers are becoming increasingly popular

as an alternative channel to streamline the customer

interface (Silvestro & Silvestro, 2003). A manager

must make various decisions about call center

design, so that studying the strategic planning

process should be interesting. While there is little

consensus about how to manage call centers, it is

clear that call centers are perceived and

conceptualized as a commodity process. Given this

context, in order to explore the possibility of

revitalizing a commodity process, the focus of this

study is on the strategic planning behind the setup of

a call center – a service that is typically seen as a

commodity service that is often outsourced. The

commoditization of call centers is reflected in

various practices that are frequently documented and

reported in the literature. For instance, the emphasis

is typically on deskilling the call center workforce,

justified by the need to overcome the high turnover

rate (Batt, 2002). Also, focusing on efficiency at the

expense of effectiveness exemplifies the belief that a

call center represents a cost to the firm, not a place

where value can be added (Dean, 2002). Essentially,

the underlying principle used to manage a call center

resembles a Taylorist methodology where low cost

and high quantity are the key (Bain, et al., 2002;

Peaucelle, 2000). The issue of underinvestment and

mismanagement in call centers has called for a new

approach that can potentially turn a call center

workforce into idea hunters (Arussy, 2002).

Moreover, based on the above idea that it is possible

to turn a commodity process into a core competence,

it seems vital to examine the fundamental beliefs

that determine how a call center is planned and

managed. In particular, it is vital to take into account

issues, such as how the value proposition of a firm

can be reproduced in any new communication

channels (Rayport & Jaworski, 2001), in this case a

call center. And how ‘motivator value’ (Bowman &

Faulkner, 1997) can be built into the operation of

call centers.

3 METHODOLOGY

The research illustrated here is characterized as an

interpretive case study (Walsham, 1993), and

formed part of a larger and ongoing research project

investigating the strategic planning and management

of call centers in the UK retailing starting in 1997.

The strengths of the interpretivist approach in IS

research have been documented in a number of

studies, notably Klein and Myers (1999) and

Walsham (1993). In particular, the interpretivist

approach assumes that meanings, as something fluid,

ambiguous and context dependent, are defined and

redefined by actors through the social construction

and reconstruction of information systems

(Mohrman & Lawler, 1984). As Klein and Myers

(1999; 69) explain, interpretive research “attempts to

understand phenomena through the meanings that

people assign to them”.

Four sources of evidence were collected from 20

semi-structured face-to-face interviews, informal

dialogues with the researched, on-site observation,

and examining documentation. The latter included

all written information that could be freely accessed

by one of the researchers who is employed by the

case organization. Typically, interviews lasted more

than 90 minutes and were tape-recorded, with the

prior permission of the interviewee. The rationale

behind adopting multiple data collection methods

was not merely for the process of triangulation

(Denzin, 1988), but also for the purposes of

enhancing the richness of findings through the

process of reflexivity (Alvesson & Sköldberg,

2000). Data collected from the various sources were

analyzed based on the coding techniques proposed

by Miles and Huberman (1994) and Strauss and

Corbin (1990).

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4 CASE DISCUSSION

BeingWell is one of the best known and trusted

brands in the UK. BeingWell’s primary business is

retailing, manufacturing and marketing healthcare,

beauty and leisure products. More than 80,000

employees and over 1400 stores in the UK and Irish

Republic have generated approximately £5.3 billion

turnover for the year ending 31

March 2002. The

provision of friendly and caring services has long

been perceived by the customers as well as the

company as the major strength that differentiates

BeingWell from its competitors. Currently, the

Customer Service (CS) function is processing

approximately 1,000 phone calls and 500 letters,

faxes and emails daily to address a wide range of

enquiries and complaints. Enquiries can be as

general as store opening hours and product

availability to as specific as the use of hair colorants

and skin preparations. Complaints can range from

the quality of purchased products and services

received to issues, such as nudity in television

adverts and the grammar used in literature.

A strategic and systematic effort to reach the

current state of capability and capacity in providing

customer service started in 1996 when a few reviews

related to BeingWell’s existing CS were carried out.

Many factors were found to trigger the initiation and

formalization of the CS function. First, an internal

review indicated that, compared to other major

competitors who had invested heavily in CS, the

methods, processes and systems did not support

BeingWell’s strategic intent. Second, there was a

perceived need to enhance BeingWell’s personal

service and after sales service as a means of creating

differentiation. Third, there was a recognized

inconsistency in dealing with customers’ enquires

and complaints, due to the decentralized approach

then adopted and the inadequacy of staffing. At this

time it was noted that staff operating CS units were

not necessarily selected for their customer service

skills, and their approach was characterized as

“anything for a quiet life”. For instance, when a

customer called the head office to complain about

being trapped in an elevator in a store, the call would

thoughtlessly be put through to an engineer. As

stated in the ‘Customer Service Complaint Handling

Review’ (Interim Report, August 1996), the strategic

intent for the Customer Service function is: “to

maximize customer relationship opportunities

thereby driving customer loyalty and increasing

sales and profit”. To actualize this goal, two

distinctive yet related phases were set. First, it is

“the effective management of customer complaint

handling within BeingWell”. Second, it is “the

development and execution of a customer

relationship strategy to include care lines, expert

help lines and BeingWell store card customer

contact handling”.

Specifically, this customer relationship strategy

aimed to promptly and effectively resolve

complaints; ensure consistency in performance and

communication; generate feedback that could help to

increase sales and profit; and protect and enhance

BeingWell’s reputation. The need to invest in the CS

function is reflected in the following statements.

From the CS manager, customer service is perceived

as “A necessity, you have to recognize that

customers want to contact you.”

For the corporate Telecommunication Client

manager: “CS was born out of a need to gather

together in one place the complaints that were

received via the switchboard, which was

inconvenient for them and the caller. We also lost

lots of information. Switchboards are about ‘speed’

and ‘volume’ and passing on the call as speedily as

possible. It is not necessarily about chatting with the

customer. The principle of taking a call live and

dealing with it at the first attempt, then that’s the

most productive way of dealing with any complaint

or problem.”

In April 1997, the CS Department was formed

from the disparate ‘Complaint Handling’ units run

by various business centers or product units. A CS

call center was established. A system called

‘Customer Q®’ was installed that included computer

telephony integration software and applications for

customer relationship management, email response

management, Web and e-commerce integration. It

captures, stores and retrieves critical information

instantly through an interface and accesses

information from multiple knowledge bases. All

calls are logged to ensure quality and consistency.

Also, to make sure that customers’ enquires and

complaints are handled as carefully and

professionally as possible, the CS Department’s aim

is that “it matches the experience you get in a

BeingWell store.”

To reproduce the experience of ‘visiting a

BeingWell store’ in the call center environment,

some thoughts that were incorporated during its

planning were outlined as follows:

First, they determined the approach to setting up

the call center. Issues addressed at this stage

included its structure and how to obtain or acquire

the required capability that can best leveraged

BeingWell’s brand equity. In terms of its structure,

the final decision was to centralize the call center to

ensure that consistency in service quality across

different parts of the business could be achieved.

Despite the fact that there were numerous service

providers who could provide the capacity in

handling customers’ phone calls, the decision was to

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399

have the CS function in-house, simply because it

was believed by the managers that only staff of

BeingWell would know how to deliver the service in

a ‘BeingWell way’. As the CS manager explained:

“If we can’t give you an answer we commit to come

back to you with the answer, In contrast to

outsourced call centers you are able to escalate the

complaint, unlike call centers where you’re not even

talking to the people with whom you do the business.

A third party hasn’t got the incentive to do what we

do.”

Second, they thought about the selection of

personnel. Considerable emphasis was placed upon

the importance of the BeingWell brand during the

selection of call center personnel. In addition, to

evaluate how candidates would respond to calls,

various tests, such as an in-tray exercise, a

personality test, interpersonal and problem solving

skills, were used. Many staff recruited to work in the

call center had many years’ experience working in

stores. In addition to the product knowledge they

possessed, their experience in dealing with

customers was a vital source to recreate the ‘in store

experience’ that the call center aimed to achieve. As

the call center manager noted: “The advisors are the

voice of BeingWell, and customers look upon us as

custodians of the nation’s morals. We need to ensure

that the ‘music on hold’ is sensible; that we adopt a

semi-formal style; that correspondence is free of

grammatical errors; and that adverts are free of

naked ladies.”

Third, they had to devise the approach to

managing the call center after it was established.

Issues, such as establishing service level agreements

(SLA’s) like those used in stores, linking SLA to

performance, continuously developing call center

staff and leveraging sales through the information

gathered from the call center, were taken into

account and various actions were taken. Based on

the principle of ‘making people feel valued’, the

commitment from the top management was to

ensure that members of staff who worked for the CS

function in general and the call center specifically

were continuously motivated. An open plan office

was selected not only to create a mutually supportive

environment during the peak hours, but also to

lessen the boredom when call rates and energy level

were low. Maximizing the relationship with

customers was reflected in the belief that the call

center was established to do more than just handle

the issues raised by the customer. Rather, the call

was to be treated as an opportunity to understand

more about the customer. For instance, customer’s

personal information is now considered useful in

gauging effectiveness of advertising, understanding

if special interest groups are adequately catered for,

and building an even stronger relationship between

the customer and BeingWell.

5 ANALYSIS AND FINDINGS

The initial stage of analysis aimed to unravel the

activities performed by the call center. Derived from

the analysis, five sequential steps were identified

that characterize all activities performed. The five

steps are to ‘receive inbound calls’, ‘identify

customer and information’, ‘handle the complaint or

enquiry’, ‘initiate other processes’ and ‘close the

call’. The stage ‘initiate other processes’ occurs

when the complaint cannot be resolved to the

customer’s satisfaction or the severity requires a

more experienced advisor to be consulted. This

suggests that activities performed by BeingWell’s

call center are very similar or virtually identical to

those outlined by other studies (e.g. Aksin & Harker,

2003; Houlihan, 2002).

Referring to the process of the call center, it

seems clear that handling a customer’s complaint or

enquiry efficiently is essential for creating the

hygiene value that satisfies the basic requirement of

the customer (Bowman and Faulkner, 1997). The

question then becomes whether a successfully

handled complaint or enquiry only means a seamless

hygiene satisfying operation, or whether it can have

some added ‘magic’ so that customers cannot stop

talking about it with their family or friends (as in

Gilmore and Pine’s, (2002) study) In other words,

the question is whether this commodity process can

be operated differently by building in ‘motivator

value’ (Bowman & Faulkner, 1997).

Guided by the above question, our second stage

of analysis looked for elements that contribute to the

creation of the motivator value in BeingWell’s call

center. Our findings suggest that to recreate the in-

store experience in a call center environment was a

crucial starting point that influenced other decisions

subsequently made. The results indicated that the

need to recreate such experience was considered by

many stakeholders involved in the strategic planning

as more important than the concern about cost.

Various issues that were prioritized during the

planning stage indicated that ‘prompt and effective

resolution of complaints’, ‘consistency of delivery in

performance and communication’, ‘opportunity for

information feedback contributing to increased sales

and profit’, ‘protection and enhancement of

BeingWell’s reputation’ and ‘maximizing customer

relationship opportunities’ were far more important

than cost. The decision to have an in-house call

center with very experienced members of staff was

seen by those involved as a sensible way to deliver

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the level of service that BeingWell’s customers

would expect. The intention, then, was to build a

stronger customer relationship through leveraging

the existing brand equity (Keller, 1999).

The centralized approach adopted by BeingWell

was argued by the management to be effective in

ensuring the consistency of service performance and

quality. However, the case analysis also suggested

that to effectively manage the call center, in

particular with the intension of maximizing

relationship building with customers, relied on more

than just putting control mechanisms in place.

Rather, the success of the operation was seen to

depend heavily on recruiting a dedicated workforce

who had crucial understanding and experience in the

services and products offered by BeingWell, as well

as the ‘life skills’ to yield trust from any irate callers.

The intensive effort to select the call center

personnel from a pool of very experienced staff was

thus considered by the interviewees to be crucial.

Compared to the recruitment approach commonly

outlined in the call center literature (i.e. deskilling),

the approach taken by BeingWell was clearly very

different. The call center staff were treated as one of

the most crucial frontiers of BeingWell and they

were motivated with various rewards. Furthermore,

BeingWell’s approach to capitalizing on the

information gathered reflects Arussy’s (2002) notion

that a call center can be more than just an

organizational setting where complaints and

enquiries are dealt with. Rather, it can be developed

into an idea hunting ground as evident in the case of

BeingWell’s call center.

6 CONCLUSION

Our findings support the notion that the difference

between a commodity process and a core

competence can be very ambiguous and misleading.

Even though the operation of BeingWell’s call

center characterizes a commodity process, in the

sense that many retailing organizations operating in

this arena have adopted such a center, it clearly

shows that such a commodity process can be turned

around and made into a core competence. Instead of

seeing a call center as merely a channel to streamline

communication with customers, evidence yielded

from the case indicates that a call center can be a

place where added value can be generated. As

argued by Prahalad and Hamel (1990), firms often

fail to identify their core competence and worsen the

situation by under-investing it. Our findings

reinforce their argument and highlight the fact that

to recognize what processes to invest can be a tricky

and difficult decision. Our findings challenge not

only the prevalent paradigm in operating call centers

largely driven by the principle of cost efficiency, but

also the effectiveness of building customer

relationship through a Taylorist approach or

outsourcing the call center operation to a third party.

In addition to the theoretical contribution which

addresses the ambiguity between a commodity

process and a core competence, this paper also

provides some new insights to managers who are or

will be involved in the planning and/or management

of call center operations. Future research is needed

not only to explore how customer relationships can

be leveraged through call centers, but also to

examine the nature of commodity processes in more

detail.

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