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eServices Business Value Assessment and its Methods and Metrics used among the Companies

Master's Thesis 2015 104 Pages

Business economics - Miscellaneous

Excerpt

Table of Contents

List of figures

List of tables

Abbreviation register

1. Introduction
1.1. Problem setting and motivation
1.2. Aim and approach of the thesis
1.3. Research questions
1.4. Structure of the thesis

2. Terminology
2.1. Physical products vs. services
2.2. Services vs. eServices
2.3. Business value in general
2.4. Business value of services
2.5. Business value of eServices

3. Business value assessment
3.1. Business value assessment in general
3.1.1. Business value assessment planning process
3.1.2. Economic and non-economic business value assessment perspectives
3.1.3. Economic business value assessment
3.1.4. Non-Economic business value assessment
3.1.5. Internal and external business value assessment
3.2. Business value assessment of eServices
3.2.1. Assessment of eServices features and functions
3.2.1.1. Fulfilment
3.2.1.2. Efficiency
3.2.1.3. Availability
3.2.1.4. Security
3.2.1.5. Convenience
3.2.1.6. Incentive
3.2.1.7. Reliability
3.2.1.8. Assurance through employees
3.2.1.9. Empathy of employees
3.2.1.10. Responsiveness of employees
3.2.2. Customer satisfaction
3.2.2.1. Customer survey
3.2.2.2. Focus group
3.2.2.3. Observation
3.2.2.4. Evaluation of online data
3.2.3. Employee satisfaction
3.2.3.1. Employee survey
3.2.3.2. Focus group
3.2.3.3. Observation
3.2.3.4. Employee committees
3.2.3.5. Evaluation of employee statistics
3.3.3. Economic indicators
3.3.3.1. Discounted cash flow
3.3.3.2. Shareholder value added
3.3.3.3. Total business return
3.3.3.4. Net present value
3.3.3.5. Discount rate
3.3.3.6. Residual income
3.3.3.7. Economic value added
3.3.3.8. Economic profit
3.3.3.9. Cash value added
3.3.3.10. Return on investment/assets/sales
3.3.3.11. Operating income to assets/sales/employee
3.3.3.12. Gross margin
3.3.3.13. Break-even-point analysis
3.3.3.14. Net operating profit after tax
3.3.3.15. Debt ratio
3.3.3.16. Cost of goods sold to sales
3.3.3.17. Selling and general administrative expenses to sales
3.3.3.18. Total operating expenses to sales
3.3.3.19. Cost-benefit-analysis
3.3.3.20. Productivity
3.3.3.21. Delivery cycle time
3.3.3.22. Number of incorrect order fulfilments
3.3.4. Assessment models
3.3.4.1. Balanced Scorecard
3.3.4.2. Integrated value assessment framework
3.3.4.3. Value measurement methodology
3.3.4.4. Modified SERVQUAL method

4. SWOT-analysis
4.1. Purpose and general description
4.2. SWOT-analysis in general
4.3. SWOT-analysis for eService business value assessment framework
4.3.1. SWOT-analysis for the assessment of eServices features and functions
4.3.2. SWOT-analysis for the assessment of customer satisfaction
4.3.3. SWOT-analysis for the assessment of employee satisfaction
4.3.4. SWOT-analysis for the assessment of economic indicators
4.3.5. Concluding remarks

5. Research questions, summary, limitations and further research

Abstracts
Abstract (English)
Abstract (German)

List of figures

Figure 1: Classification of eServices

Figure 2: Company’s stakeholders

Figure 3: Service profit chain

Figure 4: Service value triangle

Figure 5: Framework for economic business value assessment

Figure 6: Maximizing shareholder value

Figure 7: Economic business value assessment metrics

Figure 8: Non-economic business value assessment areas

Figure 9: Scale of the net promoter score

Figure 10: Break-even-point analysis

Figure 11: Value cube for the integrated value assessment framework

Figure 12: Categories of value measurement methodology

Figure 13: SWOT-analysis for the assessment of eServices features and functions

Figure 14: SWOT-analysis for the assessment of customer satisfaction

Figure 15: SWOT-analysis for the assessment of employee satisfaction

Figure 16: SWOT-analysis for the assessment of economic indicators

List of tables

Table 1: Comparison of physical products to services

Table 2: Metrics and methods used for eService quality business value assessment

Table 3: System Usability Scale survey questions

Table 4: Metrics and methods used for measuring customer satisfaction

Table 5: Metrics and methods used for measuring employee satisfaction

Table 6: Employee survey dimensions

Table 7: Weighted average costs of capital

Table 8: eService costs and benefits

Table 9: Customer orientation metrics

Table 10: Business contribution metrics

Table 11: Operational excellence metrics

Table 12: Future orientation metrics and models

Table 13: Cost savings and cost avoidance of eServices

Table 14: Dimensions for eService quality assessment

Abbreviation register

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

The era of information technologies (hereafter IT) has lead to a shift from exchanging goods to services and at the same time to a tremendous increase of companies operating in the field of electronic business. As continuous changes of the environment take place in this field, it is crucial for the companies to come up with new technologies and solutions on a regular basis (Oliveira et al. 2002). This complex condition leads to on-going development, adaptation and maintenance of eServices, which are seen as a central part of any electronic business activity due to their contribution to interactivity, connectivity, increase of customer satisfaction as well as mass customization (Sheth and Sharma 2007). Succeeding in these mentioned tasks guarantees long-term benefits for the companies, helps them to achieve their stated targets, as well as to retain a strong competitive advantage, which is of a great importance.

However, eServices need to be managed properly in order to really be a benefit for the company. One of these fundamental management tasks includes the continuous business value assessment of eServices, which is not only suitable for the calculation of the business value, but is also able to indicate, whether the eService contributes to the achievement of the company’s key performance indicators and how well it performs. The assessment of eServices business value is conducted using appropriate methods and metrics, which lies the midpoint of this Master thesis examination.

1.1. Problem setting and motivation

There exist many different factors contributing to the success of online companies providing eServices. At the beginning the tasks planning and forecasting need to be conducted. Then it is crucial to create unique selling proposition, which can be broadly described as offering a different and better service when compared to the competition. A proper market research together with defining the target group seems to be essential as well. Although controlling activities need to be done both ex-ante and ex-post on a regular basis in order to remain successful, many companies are underestimating their importance.

Electronic Services are found in many different areas, such as eLearning, eGovernment, eBanking, eShops or eHealth care to name a few. This broad spectrum of offered eServices is the reason why tailor made measuring methods and various measuring approached need be applied to capture their value in a correct and useful manner. Moreover, an eService can usually offer a number of benefits, such as cost reduction, greater geographic reach, flexibility or customer matched product variety (Boyer et al. 2002). As long as a company does not perform the evaluation of its own eServices, the whole Internet presence may end up with a failure, as the competition is only a click away. According to a study of eBay the benefits connected with an online business contribute positively to their survival rate. While traditional small businesses tend to reach a survival rate of 30-50 % after one year of starting the operations, online small businesses reach 60-80 %, which is still a quite low percentage (eBay 2013). This demonstrates the need for every company to be concerned with conducting proper assessment of business value, while using suitable methods and metrics. Underestimating this importance does not pay off on a long-term basis.

1.2. Aim and approach of the thesis

The first goal of this thesis is to come up with a terminological overview of differences between physical products, traditional services and an eServices together with the term business value. Furthermore, one of the prime tasks lies in developing a theoretical business value assessment framework for eServices together with its comparison to other chosen scientific and already developed assessment models. Both mentioned tasks consist of detailed descriptions and are supported by suitable eService examples where applicable. Then the theoretical specifications are supported by an empirical method that analyses all parts of the developed assessment framework in more detail. It is carried out using the SWOT-analysis, i.e. the analysis of strengths, weaknesses, opportunities and threats with regard to the business value calculation carried out through all parts of the assessment framework. Firstly, the four aspects are analysed for all parts of the developed framework separately and in general in order to show the possible differences between them and also a general suitability for the assessment of eServices. Secondly, the validity of the obtained business value results of all business value assessment framework parts is analysed as well and recommendations for the practical use are given.

In order to reach the goals of this thesis an extensive literature review is performed to deliver the framework of methods and metrics companies can use when evaluating eServices. These findings are then used to conduct the SWOT-analysis to deliver a recommendation about the most appropriate eService business value assessment area.

1.3. Research questions

This master thesis focuses on answering the following research questions:

What are the suitable metrics and models to be used for an eService business value assessment?

Do any already developed frameworks for an extensive eService business value assessment exist?

Are there any significant differences when evaluating eServices compared to physical products or traditional services?

Is it possible to develop a solid framework of methods and metrics that can be used for the evaluation of eServices in general?

What assessment tool application is recommended for companies to deliver the most valid business value of eServices?

1.4. Structure of the thesis

This master thesis consists of two main parts: theoretical and empirical part. The theoretical part is to be found in Sections 2 and 3, whereas in Section two the terms physical product, traditional service and eService are compared. Then the term business value is defined. Section 3 introduced the business value assessment in general and also presents an own-developed business value assessment framework for eServices together with findings in the field of business value assessment methods developed in scientific studies. In the Section 4 the SWOT-analysis of the developed business value assessment framework is carried out. Moreover, the research questions will be answered in Section 5. Finally the thesis concludes with a discussion and further research potential.

2. Terminology

The intention of this Section is to come up with a basic overview about the general terms, which play a central role in this master thesis. It contributes to a proper understanding of the problem examined in the following Sections. At the beginning, the term traditional service needs to be defined, as well as its differences when compared to physical products. Secondly, the same approach is used when defining eServices and comparing them to traditional services. Then also the term business value needs to be defined properly, starting with business value in general and closing with business value of traditional services and eServices.

2.1. Physical products vs. services

A good starting point, when comparing physical products to services, can be given by discussing their differences. First of all physical products are tangible, which means in more detail that they are three-dimensional and can be seen and touched. On the contrary this does not apply to services, which represent an intangible output. Moreover, physical products can be characterized by the homogeneity of perceived quality, whereas services stand out for their heterogeneity of perceived quality. The service quality evaluated by every particular customer differs depending on the customer’s expectations, needs or previous experience. On the other hand, the quality of a physical product can be evaluated by using predefined standards and also before the potential purchase. Thirdly, a typical attribute for physical products is their separability. They are being produced without the prior specification of the end customer. Then marketing activities are carried out until the product is being consumed or used by the end customer. As providing a traditional service is only possible in the presence of the customer, the production, marketing and consumption of a service often fall together. Finally there is only the possibility of storing a physical product, not a service (Parry et al. 2011, p. 19-27). The discussed differences are summarized in Table 1.

It is crucial to underline at this point that the gross value as well as the number of employees in the service sector has risen radically during the last decades. The importance and the presence of companies working in the service sector are both gaining importance.

Table 1: Comparison of physical products to services

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Parry et al. 2011, p. 19-27

2.2. Services vs. eServices

Together with the rise of information and communication technologies (hereafter ICTs), the traditional services have begun to shift towards eServices. Nowadays, a solid web presence is a must for most of the companies and organisations operating in the eBusiness field. In order to be successful, eServices should be developed in a flexible, effective and innovative way (Taherdoost et al. 2014). This is not only the case for business to consumer sector, but also for business to business, business to government, consumer to government and so forth (Janisch and Mader 2011, p. 1).

Generally speaking, eServices may be referred to as electronic supplied services, digital services or digital products. Thus, eServices can be defined as services being provided as well as delivered electronically with a high level of automation. One cannot take the advantage of using them without the IT. Besides of this, some kinds of eServices are provided only after a processed payment (Borec 2012). Furthermore eServices are not only considered to be all web-based applications, but also web services, TV, radio-broadcasting and telecommunication services (Aversano and Canfora 2002). The classification of eServices is presented in Figure 1. A popular example of a web-based application is YouTube, an application that is downloading parts of the service, i.e. videos, every time it is being used. A web service includes for instance the possibility to check an eTicket together with the time zone converter.

It is important to point out that there exist some common features of traditional services and eServices. First of all they are both intangible, as described in Section 2.1. Then they have a process nature, which means that a series of process stages need to be accomplished to reach an output result. Also, they are both of an interactive nature (Taherdoost et al. 2014). Moreover their quality can be mostly assessed only after such a service was provided. But, there are on the other hand numerous factors that distinguish eServices from the traditional services. The first mentioned can be easily and quickly reproduced and distributed, while every eService copy is of the same quality. When desired one can also change and adapt an eService easily, which can be problematic when it comes to fraud. The initial production costs of an eService are usually very high whereas the average costs per item are decreasing steadily after more items are being produced or sold, which leads to increasing returns. For commercial eServices overcoming the critical mass is crucial for the on-going success. This is caused by the fact that the trust of end customers is increasing together with the increase of previously satisfied users (Laudon et al. 2000, p. 596-602)

Figure 1: Classification of eServices

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Aversano and Canfora 2002

Finally sServices are being used in several fields, such as eFinance, eGovernment, eBusiness, eCommerce, eMarket, eLearning, social networks, entertainment, eHealth care, teleworking and so forth. (Aversano and Canfora 2002; Lu et at. 2007, p. 1). There is a very high chance of implementing eServices to another areas as well, ending with eServices playing a central role in most facets of everyday life.

2.3. Business value in general

A business value, regardless whether the core of business are physical products or services, stands for all kinds of values created and accumulated as experienced by the involved stakeholders. The higher the business value, the better it is for the company in this particular instance. It might be beneficial for the company to reach a so-called goal driven achievement of business value. In order to succeed in this task it has to identify its stakeholders together with their desired targets. Then the procedure is followed by the definition of assessment tools for these targets and subsequently the selection of the most important ones, which are called business value drivers. During the company’s lifecycle the focus should lie on them. A systematic assessment of the determined business value drivers should be a permanent task during the whole company existence (Van Cauwenbergh 2010).

Let’s explore for instance the business value from the customers’ point of view. The core of every business activity is the presence of the value proposition. It stands for the special features that create more value for the customers and differentiate the particular company from others. Subsequently, the customers prefer to buy from the company creating more value. The differentiation characteristics might be higher quality, better product design or longer product life cycle. Higher customer satisfaction is a good indicator for an increased business value as well (Laudon 2007, p. 59).

From the point of view of economic stakeholders the business value of suppliers and investor groups is also worth describing in more detail. The supplier business value can be delivered by systematic choices of suitable suppliers, necessary negotiations together with building long-lasting relationships. All of these interactions with the suppliers should lead to a maximum possible business value when carried out properly. The measurable indicators include for instance relationship duration, number of correct order fulfilments or costs saved. An increasing business value for investor groups can be ensured in several ways. The most important factor is the sustainability of a successful business activity. Some of the signs of a successful business activity might be increasing profits, decreasing costs, increased employee productivity or more satisfied customers leading to a higher demand. One can measure them for instance through the revenue growth, market share or profitability.

According to Laszlo et al. 2004 the influence of societal stakeholders has gained on importance during the recent years, while this trend will also tend to continue in the future. The successful business activity is therefore also conditioned by meeting their expectations. The powers of IT or globalization are the main enablers of the increased influence of societal stakeholders. Coping with an expected and exemplary behaviour, such as bringing efforts in environmental protection or maintaining human rights, brings an added value to the company. A negative performance in this area often spreads very fast and comes up with a damaged image of the company. In order to keep a positive image and increase the value, many companies are building partnerships with those societal stakeholders, which has been proven as a very effective strategy (Laszlo et al. 2004).

Every company with the ambition to generate a high business value should focus on stakeholders shown in Figure 2. The societal stakeholders are the so-called external stakeholders, who give value externally without being directly the part of the nature and purpose of the business. The economic stakeholders on the other hand are internal, whereas they are also the part of the value chain (Laszlo et al. 2004).

Figure 2: Company’s stakeholders

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Laszlo et al. 2004

To conclude, business value needs to be analysed from different points of view. It is generally not advisable to focus on a single element creating business value, but rather to analyse the stakeholders and their expectations from different perspectives. In the current rapid changing environments driven by globalization, shorter product life cycles, technological progress, rise of the ICTs, environmental issues, market liberalisation, but also societal changes, a constant analysis of the own business value, focus on innovations and quick adaptations to changes are the keys to a long lasting company’s success.

2.4. Business value of services

Until now, it has not been reached a consensus concerning the definition of the business value for services, as some authors see it only from a customer, while other from the company perspective (Bruhn and Hadwich 2014, p. 6). Other authors underline the importance of both perspectives including also the externally involved stakeholders (Laszlo et al. 2004; Jahn and Drengner 2014, p. 45-46). But, business value of services is in any case positively correlated with an economic success and attainment of a competitive advantage, which leads to an ensured existence of the company (Bruhn and Hadwich 2014, p. 6).

According to scientific evidence the business value for services is being defined mostly from the two first mentioned perspectives, i.e. the customer and company perspectives, which equal to the economic stakeholders’ viewpoint. From the company perspective the term business value stands for measuring the company’s success, such as the cost- effectiveness. The higher is the difference between costs and earnings, the higher is also the business value. The business value from the customer perspective reaches its peek when fully satisfying customer needs and solving their problems (Bruhn and Hadwich 2014, p. 7-10). Another studies are dealing with value creation from both, customer and company perspectives or involve into their examination also the power of societal stakeholders (Heskett et al. 1994; Jahn and Drengner 2014, p. 45-46). There exist several theoretical frameworks for all perspectives, which are examined in the following.

The service dominant logic, which is a part of the customer perspective, underlines that companies cannot deliver and create service value on their own. On a contrary, the most important and fundamental element for service value is the customer, who always acts as a co-creator of value. In this theoretical implication, companies can only provide value propositions. But only when the customer is accepting the proposition, creation of value takes place. Only he has the possibility to determine the value (Vargo and Lusch 2008). Some similarities of this model can be found in the so-called means-end analysis.

According to this theoretical framework the customers do not valuate the service according to the real quality or price, but according to their own perception (Zeithaml 1988). Based on the sacrifice-benefit theory the customer always compares the subjective value for the service with the subjective price. To be more specific, for a certain customer a premium service with a premium price set might not deliver the same value as a no-premium product with a lower price. This approach also presents the empirical findings of the customers’ expectations towards value. For some customers value stands for a low price. Other customer groups see the value subjectively as a desired output that is worth buying. Then a third customers’ group could experience value when buying high-quality premium services. However, all of the mentioned customer groups have in common that they experience value as the output they pay a certain price for (Bruhn and Hadwich 2014, p. 10-11; Zeithaml 1988). From the discussed studies, it can be drawn a conclusion that underlines the complications to capture, but also to measure the business value from the customer perspective due to the customers’ heterogeneity. It is nevertheless crucial, as satisfied customers ensure a higher business value.

In the service profit chain the emphasis lays on both the company and customer perspectives. What is more, the centre of the business activity consists of targeting the customers’ and employees’ needs, which create success on a company level. The company may measure its business value for instance with profits, revenues or growth rates. But all of these indicators are directly influenced by the customers, to look closely by their loyalty and satisfaction. In the end productive, loyal and satisfied employees are closing the successful service profit chain (Heskett et al. 1994).

It is worth mentioning that the service profit chain became the target of many further studies, which focused on its empirical validity. Yee et al. 2011 conducted an empirical study in a number of physical service shops, where always two employees have been surveyed. Also customer and financial data were collected in order to prove the relationships between the indicators shown in Figure 3. All of the examined hypotheses were supported. To be more specific, employee loyalty is directly influenced by employee satisfaction and has a direct impact on service quality. Both service quality and employee satisfaction cause higher customer satisfaction. Then the customer satisfaction positively influences customer loyalty, which in turn increases the number of recurring customers.

Naturally, these increase the profitability of an enterprise and make the employees more satisfied (Yee et al. 2011; Balasubramanian et al. 2002).

Figure 3: Service profit chain

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Heskett et al. 1994

As already demonstrated in Figure 2, there exist several stakeholders in every company one should focus on when maximizing the business value. Also when examining business value of services, societal stakeholders are very important (Laszlo et al. 2004). For example communities are of a great concern. Consumers often take the value proposition of a certain company in order to get closer to people with the same interests. A service that has a high value for a community or a social group might also have a higher value for other consumers (Karababa and Kjeldgaard 2014). As analysed in the previous Section other external actors such as media, non-governmental organisations, government or universities are also influencing the business value of services. This can happen through the promotion of certain activities or products of that particular company. The image can be degraded by a negative propaganda, which in turn can decrease the number of customers and also revenues (Jahn and Drengner 2014, p. 46).

Finally, there are several studies belonging to the company perspective. But, the strong opinion that the companies are creating and determining value on their own, respectively that the value is being created through manpower exclusively, has been mostly replaced by the perception of a customer, who is in the midpoint of the value creation process (Jahn and Drengner 2014, p. 41). However, in some cases the company can still play a central role in value creation, which is mostly expressed in monetary terms. It influences the value of its own services by their development, design, production or delivery (Grönross and Voima 2013). Attention should be paid at this point to three possible value propositions from the company perspective, i.e. primary, secondary and tertiary value propositions. The primary value propositions stand for the given non-branded service with its additions, such as insurance. A good example is a bank service offering a checking account. Then the secondary value proposition includes the brand giving the customer signals of trust or satisfaction. In our example it would mean opening a checking account in a bank with a strong brand name, reputation and perhaps also monetary coverage. The tertiary value propositions at last deliver any additional services e.g. through marketing campaigns, such as competitions or special offerings. In this perspective, the value is either directly economical, such as sales or revenues, or not directly economical, such as worth-of-mouth (Jahn and Drengner 2014, p. 42-43). The value triangle, which consists of all discussed perspectives, is illustrated in Figure 4.

Figure 4: Service value triangle

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Jahn and Drengner 2014, p. 47

To sum up, the categories creating business value are as follows: performance, company and customer. In the first category the quality of a service has a significant positive influence on the business value. The same effect has also the performance level of a service, continuous improvement and innovation. From the company’s point of view several value drivers such as productivity, employees’, suppliers’ and customers’ loyalty or reduced costs play an important role for value creation. When analysing the drivers for business value creation from a customer perspective, the most important are perceived quality and performance. Both factors differ among the customers because of their heterogeneity. Because of this the perceived quality and performance from the customers’ point of view are not the same as experienced internally by the company (Bruhn and Hadwich 2014, p. 18-19).

2.5. Business value of eServices

Although the business value of eServices can be partially analysed from the perspectives discussed in the previous Section as well, the range of the business value of eServices is much broader and differs from the business value of traditional services remarkably. This is caused by the existence of a very extensive range of different eServices, whereby some of them have characteristics that cannot be found in traditional services. For instance the consumer is mostly playing a central role. Nowadays every customer can choose from an enormous range of offered eServices anytime and practically everywhere due to the diffusion of mobile Internet devices. Furthermore, in the “virtual world” consumers can easily find the cheapest offerings and compare the suppliers. Also they can very easily get to information from other buyers and have thus currently the highest knowledge compared to the past (Band et al. 2013, p. 3-4). Today we live in the age of “prosumers”, i.e consumers acting also like producers. They provide feedback to eServices, which is in a consequence used and processed with the intention of introducing even better offerings. The term “better offerings” refers to eServices fulfilling the consumers’ needs to a greater extent together with creating more value (Penkert and Eberwein 2013). More than that, enterprises have understood that an introduction of a market innovation specifically designed according to the customers’ feedbacks is likely to substitute the currently used eService solution (Band et al. 2013, p. 3-4). In this Section four aspects with a direct impact on the eService business value creation are introduced. They include:

-customer perspective,
-customer interactions with the eService provider,
-stakeholders,
-internal business value creation.

First of all, as a result of the special eService characteristics, the value creation takes place mainly in the customer perspective. Thus primarily, the value is created by the customer and not by the company (Kuppelwieser et al. 2013). As an example, eServices of a social network or community character, such as YouTube, include very complex value creation processes. They include countless interactions between the community members, who can either be service providers or customers (Kuppelwieser et al. 2013, p. 314-315; Kuppelwieser and Simpson 2014, p. 460-461). A portal with no community members and interactions would not create any value for the platform provider.

Secondly, in the eServices’ field the interactions between the eService provider and the customer are typical. The customers act as very important partners in the value creation process, whereas the providers are able to support them in creating even a higher value (Grönross and Voima 2013). One typical example of value co-creation in eServices is a “comparison” portal. Here everyone can search for offerings and compare the cost- performance ratios. In this case the value is created in a traditional way, namely the provider of the website offers the opportunity to search the database and compare the offerings, while the value creation takes place when the customers make use of the service. When there is no customer interest, also no value is being created in this two-party relationship (Kuppelwieser and Simpson 2014, p. 460-461). Mostly the co-created value is the result of personalized offerings and exclusive experiences on the one hand, and revenue, learning and improved performance indicators on the other hand (Ahrar and Rahman 2012). Moreover, during the mentioned interaction processes there is the phenomenon of investing the so-called “operand” and “operant” resources. The first mentioned do not directly create value, but are needed prior to the value creation. In the case of an eService provider the operand resources include buildings with a server placement, hard- and software, funds and human capital. The operand resources to be invested by the customers include for instance time and money. Operant resources create value and are often intangible. They include for instance employee support on the provider level and PC knowledge on the customer level (Jahn and Drengner 2014, p. 44; Vargo and Lusch 2004).

The phenomenon of stakeholders already discussed in the previous Section, influencing the business value, is to be found also when providing eServices. Thus, they belong to the third group with a direct impact on the eService business value. Value propositions on social media are being shared and accepted between the users in order to belong to certain communities (Jahn and Drengner 2014, p. 46). Moreover, the boundless information on the Internet coming from media, social networks and another organisations are influencing the buying behaviour directly, which also results in changes in the business value, depending on the character of these information.

Because of the discussed characteristics of eServices, it is almost not possible for the enterprises to create value only on the internal basis. They have to cope with high competition as well as deep customer knowledge. Thus, there is the need to focus on providing special features and functions for the customers (Jahn and Drengner 2014, p. 44). In the eService’s field the differentiation characteristics might include higher security, reduced searching time together with lower searching costs, higher retrieval speed, reduced costs due to price comparing tools or eService customization. The focus needs to be on improving these characteristics in order to attract a wide range of customers and increase their satisfaction. Higher customer satisfaction is a good indicator for an increased business value (Balasubramanian et al. 2002; Laudon 2007, p. 59, 76).

3. Business value assessment

The goal of this central master thesis Section lies in identifying methods and metrics for the business value assessment of eServices. Companies should systematically analyse, whether the investments in eServices are paying off. Also the focus should consist of ensuring investment payoffs in the future (Barua et al. 2001). Business value assessment targets indicators and factors that are able to influence the future situation of an enterprise rather than predicting it. Moreover, it is proven that proper business value assessment leads to better investment decisions and improvement of performance indicators (Kryvinska et al. 2013). One of the reasons is the already mentioned element of finding areas that do not perform according to the company targets and thus should be the object for further measures. In addition being aware of the business value is of a great interest also for the involved stakeholders.

This Section consists of two main parts. First of all an overview about eService business value assessment in general is given. The Section starts with describing general steps that are to be followed prior to conducting the assessment. Then the general evaluation methods on an economic and non-economic level, but also internal and external level are presented. The first complexities of the business value assessment are shown in this part as well. To continue the business value assessment of eServices together with their specific assessment methods and metrics will be at the midpoint of the examination. The goal of this Section includes presenting an excessive own-developed eService business value assessment framework based on the review of already existing scientific contributions. The framework consists of four main parts: assessment of eServices features and functions, customer satisfaction, employee satisfaction and the economic indicators. This Section concludes with describing the most relevant eService business value assessment tools already developed and present in scientific studies. These tools open a possibility to complement the own-developed framework, as well as to shown the commonalities and differences between them.

3.1. Business value assessment in general

As the entire society went through a change up to reaching a knowledge economy, also changes in value during the last decades became more than apparent. The value drivers are no more considered to be land, capital and labour, but instead information and knowledge.

It seemed to be simpler to assess the business value of a traditional industrial economy, as putting more labour efforts and increasing the number of machines as well as improving their output possibilities was directly connected with a higher business value. The traditional transactions were mostly based on a single exchange of standard goods, which could be expressed on a monetary basis. But, the value of immaterial resources does not equal the value of material resources. Having a traditional service and putting more and more information into the person carrying it out does not automatically lead to an increased service output or performance. Moreover, the value in this case is a product of collecting unique kinds of information and delivering extra features in order to attract the customers. As far as the relationship towards the customers turned to be the value creator in the 1990s, repeated relational transactions took place. The value of these transactions depends for instance on price and knowledge exchanged (Bang and Cleemann 2010; Buschak et al. 2014, p. 96). The special characteristics of eServices discussed in Section 2.5 contribute to a variety of difficulties when trying to measure or model their value. The single IT component is not the value driver on its own, but only with interactions with the business environment (Lee 2001). For example, one can explicitly look at the IT investments into an eService, let’s say YouTube. Increased investments in the application do not directly increase the business value of YouTube. Coming up with special features and innovations and most importantly attracting users, increasing their acceptance and interactions within the application are the key factors for business value in this case.

3.1.1. Business value assessment planning process

Generally speaking, the business value assessment planning process should consist of the following steps:

-Identifying and stating the business objectives
-Defining indicators that stand for achieving the objectives
-Identifying whether the data for those previously mentioned indicators are present or how and by which method they should be collected
-Determining the data analysis, result ranges for achieving the objectives, comparison benchmarks
-Keeping track of any company changes able to influence the results
-Classifying the amount of resources needed for the assessment process (Aspen Institute 2005, p.12)

It is of a great importance to consider the heterogeneity of every company in this planning process and implement it on a regular basis in order to be successful.

3.1.2. Economic and non-economic business value assessment perspectives

Depending on the business objectives, a company can perform the assessment process on an economic or non-economic/social level.

There exist a wide range of useful assessment tools for measuring the economic value. All of them are based on the understanding of a very simple and basic framework shown in Figure 5. The economic value is given by the difference between the customer willingness to pay and the costs for the offered item. An important factor is also the price set by the company. In the best case it should equal the customer willingness to pay. For example, in the case an offered item costs the company EUR 30,00 and the customer is willing to pay EUR 100,00 for it, the value created equals EUR 70,00. At the same time the difference between the price and the costs represents the producer surplus and the difference between the customer willingness to pay and the price the customer surplus. Typically, a company is using metrics and models based on these three indicators in order to improve the business value. Optimizing them is usually connected with improved results. They are expressed in monetary terms and are thus easily to compare (Tambe 2014a).

On the contrary the non-economic or social business value assessment is difficult to conduct, as it cannot be measured and quantified easily. That is one of the reasons why companies struggle to perform it on this level. There is a lack of theoretical frameworks that can be used for understanding and measuring the non-economic value of a company. More than that every company is unique and can provide different non-economic or social activities that are worth measuring and help it to differentiate from the competitors as well as increase its overall image (Tambe 2014b). “ Social value is created when resources, inputs, processes or policies are combined to generate improvements in the lives of individuals or society as a whole ” (Liu et al. 2008, p. 87). This is for instance more than relevant for companies providing eServices, as their need to differentiate is on a high level and the competition is mostly very high. So in this sense the company can come up with increased quality (Stiglingh 2014), customer and employee satisfaction, increased number of social activities, which in turn can contribute to economic well-being, changes in the society or community relationships, but also to increased health, environment protection or employee satisfaction (Liu et al. 2008, p. 90-95).

Figure 5: Framework for economic business value assessment

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Tambe 2014a

3.1.3. Economic business value assessment

According to scientific evidence, the main goal in the economic value based management is the maximization of shareholder value. It is given by stock returns, whose source is represented by dividends and stock price appreciations. Capital structure changes and share issuances are also taken into account (Holler 2009, p. 16). Figure 6 represents the process of shareholder value maximization.

As it can be seen from the illustration above, management decisions are the starting point of shareholder value maximization. Decisions in the fields of operations, investments and finances have a direct impact on the value drivers, which intensively influence the business value either in the positive or negative direction (Kazlauskienė and Christauskas 2008). Furthermore, it is important to choose value drivers that are measurable, repeatedly inspected and that the management can control and set targets for. A high duration of the value growth, sales growth, profit margins, low income taxes and ideal financial situation have a positive impact on the operations’ cash flow. But, also the costs of capital seem to be essential as they directly influence the discount rate. The maximum of the shareholder value is the product of operations’ cash flows, optimal discount rates and debts kept low. These are the valuation components that are able to measure the company’s value (Holler 2009, p. 17-18).

Figure 6: Maximizing shareholder value

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Holler 2009, p. 17

The number of valuation components shown in Figure 6 is only one of many possible evaluation approaches and is thus not yet complete. Series of value based performance metrics coming from traditional cash flow calculations include: discounted cash flow (DCF), shareholder value added (SVA), total business return (TBR) (Holler 2009, p. 30) and net present value (NPV) (Liu et al. 2008, p. 86). Other metrics focusing on earnings and profits include: residual income (RI), economic value added (EVA), economic profit (EP), cash value added (CVA) (Holler 2009, p. 30-31), return on investment (ROI) (Liu et al. 2008, p. 86), return on assets (ROA), return on sales (ROS), operating income to assets (OI/A), to sales (OI/S) and to employee (OI/E) (Zhuang 2005), gross margin (Barua et al. 2001), break-even-point analysis (BEP) (Kryvinska et al. 2010, Kryvinska et al. 2011) as well as net operating profit after tax (NOPAT). Furthermore Schryen analyses the performance metric productivity (Schryen 2010, p. 228) and Barua et al. 2001 presents another performance metrics including order delivery cycle time and the number of incorrect order fulfilments (Barua et al. 2001). Metrics and models on an economic level also include the cost and expense perspectives, such as cost of goods sold to sales (COG/S), selling and general administrative expenses to sales (SGA/S), total operating expenses to sales (OEXP/S) (Zhuang 2005) or cost-benefit analysis (Kryvinska et al. 2013). Figure 7 illustrates all of the mentioned economic business value assessment metrics. Based on these generally used metrics, many scientists have developed economic value models, as well as metrics suitable for the evaluation of some particular areas of operations.

Figure 7: Economic business value assessment metrics

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Barua et al. 2001, Holler 2009 p. 30-31, Liu et al. 2008 p. 86, Kryvinska et al. 2010, Kryvinska et al. 2011, Kryvinska et al. 2013, Schryen 2010 p. 228, Zhuang 2005

3.1.4. Non-Economic business value assessment

Succeeding in focusing on non-economic activities and its specific business value assessment may also lead also to increased company benefits on an economic level. As already shortly explained, non-economic features are not easy to quantify. So firstly every company needs to determine how these indicators will be measured. For instance if the company tries to measure customer satisfaction, it can choose between several measurement methods, such as customer surveys, focus groups, observations or simply collect online data like the number of loyal customers or a rate of applied discount coupons (Rust and Kannan 2002, p. 18). Besides of this every customer behaves differently and has other view on an excellent customer service. Therefore, the next step in general includes developing suitable evaluation scales together with a proper specification of every single scale dimension. For an illustration measuring eService security on a scale with the values high, middle and low is not yet a complete and appropriate approach. Rather the scale should deliver numeric or non-numeric measures. So the security may be defined either on a numerical scale or a scale expressed in lexicons as much detailed as possible (Chang et al. 2005). Moreover, also the scale dimensions should be characterized as detailed as possible, so that it is plausible for the concerned enterprise what is understood by the terms high, middle and low security.

To improve the business value on a non-economic level, companies usually need to maximize customer and employee satisfaction as well as quality of the offered items. The assessment areas are summarized in Figure 8, whereas both customer and employee satisfaction have wide application possibilities not only for eServices, but also for traditional services or physical products. The illustrated quality assessment dimensions of Figure 8 on the other hand are only exemplary and target the eServices quality assessment.

Figure 8: Non-economic business value assessment areas

Abbildung in dieser Leseprobe nicht enthalten

Source: Own representation with reference to Stiglingh 2014

As already shortly explained, in order to measure customer satisfaction companies can run customer surveys, organize focus group discussions with selected customers, observe their buying behaviour or evaluate data collected online. A very similar approach can be applied for evaluating employee satisfaction. On the employee level the companies are able to make employee surveys or focus groups, observe the behaviour of the employees, but also build employee committees that enforce measures in order to increase employee satisfaction. Several employee data might be used in specific employee-base metrics as well. Lastly the internal quality is of crucial importance for a high business value. When taking an eService as an example, the company should measure the fulfilment of the eService purpose, its efficiency, availability, security, trust, convenience, but also the incentive as the motivation for using the eService. Nevertheless the customer service is also very important, as it can contribute to reliability and assurance, whereas the empathy and high responsiveness of employees is a must (Stiglingh 2014).

3.1.5. Internal and external business value assessment

Business value assessment metrics and models may be also classified to be internal or external. The internal business value assessment includes measures that can be internally influenced by the company itself. These measures include the management decision factors shown in Figure 6. This means in more detail that every company can directly influence the operations, the type of investments and financing in order to maximize the business value. Also the performance metrics shown in Figure 7 together with the quality components and employee satisfaction assessment shown in Figure 8 are part of an internal business value assessment. On the other hand the customers and their behaviour directly influence the external business value assessment. Therefore all metrics from Figure 7 connected with purchasing transactions, sales volumes and revenues, as well as customer satisfaction assessment shown in Figure 8 belong to the external business value assessment (Bolton and Drew 1993, p. 175; Rust and Kannan 2002, p. 17-18).

3.2. Business value assessment of eServices

Lu et al. 2007 distinguishes in his study four major categories of the eServices business value assessment: assessment of eServices features and functions, customer satisfaction, economic indicators and assessment models. This Section of the master thesis presents an own-developed business value assessment framework based on the first three mentioned categories, but including a forth one, assessment of employee satisfaction. For all of these four categories suitable metrics and models are developed and described in detail. Then an overview about already existing assessment models is given. The relevant categories are described as follows:

eServices features and functions: The first step in the eServices business value assessment is the basic evaluation of the eServices itself. That means, every company

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Details

Pages
104
Year
2015
ISBN (eBook)
9783668302990
ISBN (Book)
9783668303003
File size
1.1 MB
Language
English
Catalog Number
v340147
Institution / College
University of Vienna – Institut für Betriebswirtschaftslehre
Grade
1
Tags
business value assessment methods metrics companies

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Title: eServices Business Value Assessment and its Methods and Metrics used among the Companies