Business Models in the Area of Logistics: In Search of Hidden Champions, their Business Principles and Common Industrymisperceptions

Regina M. Neubauer Business Models in the Area of Logistics

GABLER RESEARCH Schriftenreihe der HHL – Leipzig Graduate School of Management

In dieser Schriftenreihe werden aktuelle Forschungsergebnisse aus dem Bereich Unternehmensführung präsentiert. Die einzelnen Beiträge spiegeln die wissenschaftliche Ausrichtung der HHL in Forschung und Lehre wider. Sie zeichnen sich vor allem durch eine ganzheitliche, integrative Perspektive aus und sind durch den Anspruch geprägt, Theorie und Praxis zu verbinden sowie in besonderem Maße internationale Aspekte einzubeziehen.

Regina M. Neubauer

Business Models in the Area of Logistics In Search of Hidden Champions, their Business Principles and Common Industry Misperceptions With a foreword by Professor Ludo Van der Heyden, PhD

RESEARCH

Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.

Dissertation HHL – Leipzig Graduate School of Management, 2010

1st Edition 2011 All rights reserved © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011 Editorial Office: Stefanie Brich | Nicole Schweitzer Gabler Verlag is a brand of Springer Fachmedien. Springer Fachmedien is part of Springer Science+Business Media. www.gabler.de No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright holder. Registered and/or industrial names, trade names, trade descriptions etc. cited in this publication are part of the law for trade-mark protection and may not be used free in any form or by any means even if this is not specifically marked. Cover design: KünkelLopka Medienentwicklung, Heidelberg Printed on acid-free paper Printed in Germany ISBN 978-3-8349-2526-8

Foreword

V

Foreword It has been more than ten years now that the concept of ‘4PL’ (Fourth Party Logistics) in both theory and practice was introduced and proposed as the business model and promise in logistics. By 4PL one thinks of one external logistics provider being responsible for the total supply chain activities of a business customer. This is also referred to as the ‘Total Integration Promise’. Discussions between supporters and opponents have been numerous and have remained inconclusive.

This is where Dr. Regina M. Neubauer makes her contribution: ‘4PL’ or ‘Total Integration’ has appeal and has been much discussed, but not to the extent and depth that she has studied so in her dissertation. She holds that insufficient investigation has led to the lack of conclusion of this debate. Hers is the first grounded research on the topic, and the results are most interesting.

A second contribution that Dr. Regina M. Neubauer makes is the search in this sector for so-called “Hidden Champions”, a term made famous more than two decades ago by Hermann Simon. Her dissertation sheds light on how relatively smaller operators can be Hidden Champions, and survive the competition with the giants that dominate the industry.

In terms of data, Dr. Regina M. Neubauer has examined European logistics service providers, including both small- and medium-sized enterprises, as well as large size enterprises (LSEs), of which there is a much smaller number. The latter do not form the core of her study, as their offer is more of a commodity type and they certainly do not fall in the ‘Hidden Champion’ category. Based on this research, Dr. Regina M. Neubauer is able to formulate and substantiate an original hypothesis as to how Total Integration might work.

Total Integration, if it is to work, would require a ‘new breed’ of actors that would not themselves run operations which the LSEs aim for. These new breeds would thus avoid the conflict of interest that LSEs face by trying to both deliver and oversee a customer’s logistical operations (a conflict that can only lead to sub-optimal logistics provision for the customer). This conclusion thus hypothesizes the emergence of a ‘new breed’ of

VI

Foreword

logistics actors exclusively focused on orchestrating the various actors engaged in a company’s logistical network (both internal and external), and also designing the optimal system for their corporate customers.

The dissertation also makes a contribution in identifying the business principles that characterize the Hidden Champions: i) niche sovereignty by a practice of gradual conquest and establishment of the niche; ii) choice for independence (and limited network ties) in order to be able to ‘defend and attack’ niche leadership in the face of customer opportunities and threats from other players, and consequently continuous improvement and innovation; iii) focus on longer-term sustainability in relations so as to gain and maintain the customers’ trust, that then becomes one of the key competitive assets of Hidden Champions and also the basis for superior service delivery and performance. Finally, it is clear that Hidden Champions are better at exploring collaboration with their customers which involves role complementarities; LSEs on the contrary try to minimize collaboration to their advantage (generating trust and risk problems for the customer).

The remaining question at the end of the dissertation then is whether some Hidden Champions or even non-Hidden Champions might transform themselves into this new breed of logistics ‘orchestrators’ that would resemble a kind of flexible ‘my-SAP’ player who has the total view on a company’s logistical network. This question provides useful input for further research.

Prof. Ludo Van der Heyden, INSEAD

Acknowledgements

VII

Acknowledgements This dissertation was inspired through practical experience in the area of logistics. I was very motivated to contribute something of value to such a lively industry, which has been subject to long-lasting changes during the past decade, while growing in importance for every economy. During this period, the industry was also characterized by strong mergers and acquisition activities which focused public interest on large size enterprises, while small- and medium-sized companies were neglected. As the latter companies can be considered the backbone of an economy, I focus my attention onto this class. My first thanks go to my thesis advisor, Professor Ludo Van der Heyden of INSEAD. I thank him not only for the many inspiring discussions in Fontainebleau, Brussels and Leipzig, and his scientific support for the thesis document in hand, but also for his persistence and encouragement on my ‘journey to the final destination’. Professor Van der Heyden’s comprehensive knowledge and broad practical experience, and, last but not least, his charisma have been of great value. I would also like to thank Professor Stefan Spinler of WHU for his willingness to act as a second reader. Thanks are due to all the many practitioners, who supplied deep insights into their companies and sacrified many hours in company visits, interviews and the supply of information. I particularly value their readiness to disclose company data as small- and medium-sized logistics companies are usually rather restrained in this regard. I am especially indebted to my parents, who supported me throughout my ‘journey’. I dedicate this dissertation to them. Finally, I thank Wilhelm Claßen for his affectionate care and understanding.

Regina M. Neubauer

Content

IX

Content List of illustrations ..................................................................................................... XIII List of tables ............................................................................................................. XVII List of abbreviations .................................................................................................. XXI 1 Introduction ................................................................................................................ 1 1.1 Motivation and objectives .................................................................................... 4 1.2 Object of consideration: Hidden Champions ....................................................... 7 1.2.1 Origin of the term and criteria ................................................................. 7 1.2.2 Size and profitability ............................................................................. 11 1.3 Outline of the study ............................................................................................ 14 2 The area of logistics.................................................................................................. 21 2.1 Industry fundamentals ........................................................................................ 21 2.1.1 Origin of the term .................................................................................. 22 2.1.2 Definitions ............................................................................................. 23 2.1.3 Similarities and differences with supply chain management ................ 28 2.2 Recent developments .......................................................................................... 34 2.2.1 From value chain to value network ....................................................... 34 2.2.2 Environmental conditions ..................................................................... 41 2.2.2.1 Micro environmental factors ................................................... 41 2.2.2.2 Macro environmental factors .................................................. 46 2.2.3 Trends and current developments ......................................................... 50 2.3 Industry demography .......................................................................................... 52 2.3.1 Market volume ...................................................................................... 52 2.3.2 Market segments ................................................................................... 59 2.3.3 Large actors in the industry ................................................................... 62 2.3.4 SMEs and Hidden Champions in the area of logistics .......................... 64 3 Business models as an approach for analyzing companies .................................. 68 3.1 About business analysis ...................................................................................... 68 3.1.1 Environmental dynamics as a starting point ......................................... 68 3.1.2 Approaches for analyzing companies ................................................... 70 3.2 Business models: an approach for corporate analysis in a dynamic environment ........................................................................................................ 75 3.2.1 Fundamentals of business models ......................................................... 75 3.2.1.1 Evolution of the terminology .................................................. 75 3.2.1.2 Purpose of business modeling ................................................. 78 3.2.2 Prevailing approaches ........................................................................... 79 3.2.3 Definition .............................................................................................. 85 3.2.3.1 Requirements of the framework .............................................. 85 3.2.3.2 Research framework................................................................ 86 3.2.4 Limits of business models ..................................................................... 89 4 Issues of empirical research and analysis .............................................................. 97 4.1 Methodology....................................................................................................... 97 4.1.1 Research challenges .............................................................................. 97 4.1.2 Research approach................................................................................. 99 4.1.2.1 Classification ........................................................................... 99 4.1.2.2 Representative research......................................................... 100 4.1.2.3 Explorative research .............................................................. 101

X

Content

4.1.2.4 Experimental research ........................................................... 102 Research process .................................................................................. 103 4.1.3.1 Process....... ............................................................................ 103 4.1.3.2 Theory………........................................................................ 105 4.1.3.3 Reality………….................................................................... 105 4.1.3.4 Quality….…… ...................................................................... 106 Business model architectures ............................................................................ 107 4.2.1 Industry developments and business model architectures ................... 107 4.2.2 Derivation of business model architectures and comparisons ............. 108 4.2.2.1 Descriptions and characteristics ............................................ 108 4.2.2.1.1 Traditional architecture......................................... 108 4.2.2.1.2 Outsourcing architecture....................................... 109 4.2.2.1.3 Network architecture ............................................ 110 4.2.2.1.4 Integration architecture ......................................... 111 4.2.2.2 Research relevance ................................................................ 113 Survey of LSPs ................................................................................................. 113 4.3.1 Typology .............................................................................................. 113 4.3.2 LSPs relevant for research ................................................................... 119 4.3.3 Selection of LSPs for empirical research............................................. 120 Role of customers in empirical research ........................................................... 122 Questionnaire design ......................................................................................... 123 4.1.3

4.2

4.3

4.4 4.5

5 Formulation of hypotheses..................................................................................... 126 5.1 Formulation of micro hypotheses on business model components .................. 126 5.1.1 Micro hypotheses on Ambitions & Aims ............................................ 126 5.1.1.1 Single Source Hypothesis ...................................................... 126 5.1.1.2 Segmentation and Transaction Hypotheses ........................... 129 5.1.1.3 Commodity Trap Hypothesis ................................................ 131 5.1.2 Micro hypotheses on Implementation ................................................. 132 5.1.2.1 Cherry Picking Hypothesis .................................................... 132 5.1.2.2 Global Standard Hypothesis .................................................. 134 5.1.2.3 Virtual Logistics Hypothesis ................................................. 135 5.1.2.4 Complexity Hypothesis ......................................................... 137 5.1.2.5 Information Processing Hypothesis ....................................... 139 5.1.2.6 Complementarity and Reliability Hypothesis........................ 140 5.1.2.7 Rules Hypothesis ................................................................... 141 5.1.3 Micro hypotheses on Financials .......................................................... 142 5.1.3.1 Significant Turnover Hypothesis ........................................... 142 5.1.3.2 Risk Aversion Hypothesis ..................................................... 143 5.2 Formulation of macro hypotheses ..................................................................... 145 5.2.1 Customer Centricity Hypothesis: Egoism Syndrome as hurdle for Total Integration .................................................................................. 145 5.2.2 Partnership Hypothesis: Collaborative entity as solution for Total Integration ............................................................................................ 148 5.2.3 Size Compatibility Hypothesis: Minor company size as limitation for Total Integration ............................................................................. 149 5.2.3.1 Correlation between size of LSP and size of customer ......... 151 5.2.3.2 Critical company size for Total Integration ........................... 152 6 Empirical results ..................................................................................................... 154 6.1 Evaluation of micro hypotheses and common industry misperceptions ........... 156 6.1.1 Misperceptions on Ambitions & Aims ................................................ 156

Content

XI

6.1.1.1 The striving for single source misperception ........................ 156 6.1.1.2 The sector specificity and selection misperception ............... 164 6.1.1.3 The damnation to low margin business misperception ......... 167 6.1.2 Misperceptions on Implementation ..................................................... 173 6.1.2.1 The competition misperception ............................................. 173 6.1.2.2 The global standard misperception ....................................... 181 6.1.2.3 The asset misperception ........................................................ 184 6.1.2.4 The prevalence of complex internal settings…………….. misperception ........................................................................ 194 6.1.2.5 The reservation expectation misperception ........................... 196 6.1.2.6 The partner relationship misperception ................................. 199 6.1.2.7 Formality as a norm .............................................................. 201 6.1.3 Misperceptions on Financials .............................................................. 203 6.1.3.1 The market leadership misperception ................................... 203 6.1.3.2 The willingness to take risks misperception ......................... 206 6.2 Summary of the micro analysis ........................................................................ 208 6.3 Evaluation of the macro hypotheses and common industry misperceptions .... 214 6.3.1 The customers’ lacking attention misperception: Customers as activators for innovation and/or business growth ............................... 214 6.3.1.1 Confidence and performance as a basis for innovation and business growth .............................................................. 214 6.3.1.2 The reality of balanced responsibilities: The dream of Total Integration .................................................................... 216 6.3.1.3 Escaping the commodity trap ................................................ 220 6.3.2 The collaboration misperception: The failure of collaborative integration in the absence of special conditions .................................. 222 6.3.3 The power of smallness misperception: Issue of size ......................... 230 6.3.3.1 Similarity in company size is a wish but not reality ............. 230 6.3.3.2 Company size and survival ................................................... 235 6.4 Summary of the macro analysis ....................................................................... 239 7 In search of Hidden Champions: BMPS .............................................................. 242 7.1 Introduction to performance measurement and scoring ................................... 242 7.2 Scoring performance along the micro dimensions ........................................... 246 7.2.1 Incrementalism .................................................................................... 246 7.2.2 Scope ................................................................................................... 250 7.2.3 Gradual Conquest ................................................................................ 252 7.2.4 Customer Favor Striving ..................................................................... 254 7.2.5 Customer Proximity ............................................................................ 257 7.2.6 Entrepreneurship ................................................................................. 259 7.2.7 Simple and Fast Decision Making ...................................................... 261 7.2.8 Open Communication and Collaboration ............................................ 264 7.2.9 Strategic Self-Sufficiency ................................................................... 266 7.2.10 Mutual Trust ........................................................................................ 270 7.2.11 Niche Sovereignty ............................................................................... 272 7.2.12 Customer Granularity .......................................................................... 274 7.2.13 Conclusions on scoring the micro dimensions .................................... 275 7.3 Scoring performance along the macro dimensions .......................................... 278 7.3.1 Gradual Service Extension, Role Complementarity, and Continuous Innovation ........................................................................ 279 7.3.2 Reliable Execution .............................................................................. 283

XII

Content

7.3.3 Courage and Self-Confidence as well as Defense and Attack ............. 284 7.3.4 Conclusions on scoring the macro dimensions .................................... 287 7.4 The BMPS Framework ..................................................................................... 288 7.4.1 Developing the BMPS Framework ...................................................... 288 7.4.1.1 The BMPS Framework’s micro perspective ......................... 289 7.4.1.2 The BMPS Framework’s macro perspective ......................... 299 7.4.2 Results from the BMPS Framework .................................................... 306 7.4.3 Identification of starting points for improvements at non-Hidden Champions ........................................................................................... 313 7.5 Comment on business principles ...................................................................... 323 8 Conclusions ............................................................................................................. 326 8.1 My main point: fallacy of Total Integration ..................................................... 326 8.2 Market and competitive implications: SMEs can not be neglected in any serious study of the LSP industry ..................................................................... 330 8.3 Future research .................................................................................................. 334 Appendices ................................................................................................................... 337 Appendix 1: Overview of approaches to business models ....................................... 338 Appendix 2: Overview of approaches to strategy .................................................... 351 Appendix 3: Questionnaire/Interview Manual Logistics Service Provider .............. 354 Appendix 4: Questionnaire/Interview Manual Customer ......................................... 365 Bibliograhpy ................................................................................................................ 371

List of illustrations

XIII

List of illustrations Figure 1: Research objectives and value ....................................................................... 6 Figure 2: Three criteria a company has to meet to qualify as a Hidden Champion ...... 8 Figure 3: Outline of the dissertation ............................................................................ 17 Figure 4: Approaches to defining logistics .................................................................. 24 Figure 5: Most narrow term of logistics ...................................................................... 25 Figure 6: Phases-specific definition of logistics .......................................................... 25 Figure 7: Partnering-specific definition of logistics (example) ................................... 27 Figure 8: Overview of the terminology in the area of logistics ................................... 32 Figure 9: Developments in the industry from the 1970s towards the new millennium and onwards .............................................................................. 37 Figure 10: From value chain to value network: Developments from the perspective of participants’ roles ................................................................. 40 Figure 11: Micro environmental conditions: forces driving industry competition ....... 44 Figure 12: Macro environmental factors affecting the logistics industry (examples) .................................................................................................... 47 Figure 13: Trend towards demand chain management.................................................. 51 Figure 14: Global logistics market value and forecast .................................................. 55 Figure 15: Actual and forecasted logistics market value according to Datamonitor .... 56 Figure 16: Total logistics and contract logistics volume in Europe .............................. 57 Figure 17: European TUL costs and logistics turnover 2007 by country...................... 58 Figure 18: Total logistics and contract logistics volume in Germany ........................... 59 Figure 19: Market volume for outsourced logistics in Germany 2007 by segments..... 61 Figure 20: Top LSEs presence in the European logistics industry ................................ 63 Figure 21: Number of transport services providers in the EU 27 in 2005 .................... 65 Figure 22: Approaches for analyzing companies .......................................................... 74 Figure 23: Occurrences of the term business model in scholarly reviewed journals ......................................................................................................... 77 Figure 24: Purposes of business models ........................................................................ 79 Figure 25: Prerequisites for successful business models ............................................... 86 Figure 26: Categories and components of a business model ......................................... 88 Figure 27: The macro layer of a Business Model Framework ...................................... 89 Figure 28: Categories and components of strategy ....................................................... 95 Figure 29: Business models and strategy in view of static and dynamics..................... 96 Figure 30: Paradigm to empirical research: Adaptability to best practices ................... 98 Figure 31: Types of research approaches and main methodologies for performance ............................................................................................... 100 Figure 32: Research process as iterative learning process .......................................... 104 Figure 33: Type I: Traditional Architecture and Traditional Business Model ............ 109

XIV

List of illustrations

Figure 34: Type II: Outsourcing Architecture and Outsourcing Business Model ....... 110 Figure 35: Type III: Network Architecture and Network Business Model ................. 111 Figure 36: Type IV: Integration Architecture and Integrative Business Model .......... 112 Figure 37: Segmentation of LSPs ................................................................................ 117 Figure 38: Overview of customers studied in-depth .................................................... 123 Figure 39: Types of Assets .......................................................................................... 136 Figure 40: Correlation between risk and profit ............................................................ 145 Figure 41: Statements from theory and practice on hurdles for Total Integration directly or indirectly based on customer-neglecting behavior of LSPs...... 146 Figure 42: Three organizational forms for Total Integration, by business model partner(s) .................................................................................................... 148 Figure 43: Distinction of enterprises............................................................................ 151 Figure 44: Expected relationships between size of LSP and size of customer ............ 151 Figure 45: Basic and supplemental research data ........................................................ 154 Figure 46: Number of LSPs creating value for its various stakeholder groups ........... 157 Figure 47: Five main groups of value creation for customers ..................................... 158 Figure 48: Groups and examples of value creation for employees .............................. 160 Figure 49: Principle of Incrementalism ....................................................................... 163 Figure 50: Sector specificity of research cases LSP .................................................... 165 Figure 51: Customers decision triggers in the LSP selection process ......................... 167 Figure 52: Mission statements of LSPs studied in-depth............................................. 168 Figure 53: Visions of research cases LSP .................................................................... 169 Figure 54: Core competences of research cases LSP................................................... 170 Figure 55: LSP allocation in the logistics industry’s service offering portfolio and adaptation behavior .................................................................................... 172 Figure 56: Types of services provided by LSPs studied in-depth ............................... 175 Figure 57: Share per service group based on individual total number of types of services per LSP ......................................................................................... 176 Figure 58: LSPs’ scope relating to the number of types of services per service group........................................................................................................... 177 Figure 59: Relationship between groups of services and success of an LSP............... 178 Figure 60: Reasons for LSPs’ service portfolio revisions ........................................... 179 Figure 61: LSPs’ global presence with personal locations by continent ..................... 181 Figure 62: LSPs’ representation with personal locations on continents ...................... 182 Figure 63: Ownership and access to assets by LSP ..................................................... 185 Figure 64: Ownership and access to assets by service ................................................. 186 Figure 65: Openness in providing insights on human resources issues ....................... 189 Figure 66: Awards........................................................................................................ 191 Figure 67: Innovations as capital ................................................................................. 192

List of illustrations

XV

Figure 68: Employee productivity ............................................................................... 192 Figure 69: LSPs’ organizational forms........................................................................ 194 Figure 70: Research cases LSP’s behavior in terms of cooperation with partners (by LSP) ..................................................................................................... 200 Figure 71: Research cases LSP’s behavior in terms of cooperation with partners (by statement)............................................................................................. 200 Figure 72: Turnover development of research cases LSP ........................................... 205 Figure 73: Publication behavior of research cases LSP in terms of business result.... 207 Figure 74: Customers as activator for innovations and business growth (examples) .................................................................................................. 215 Figure 75: Actual Integration versus Virtual Integration ............................................ 219 Figure 76: Logistics market dynamics (‘Commodity Syndrome’).............................. 222 Figure 77: Experience with joint ventures of research cases LSP............................... 224 Figure 78: Experience with collaborative entities of the further 95 LSPs studied ...... 225 Figure 79: Collaborative entities of 47 potential Hidden Champions ......................... 226 Figure 80: Eight special conditions for joint venture success ..................................... 229 Figure 81: Comparison of company sizes of collaborating potential Hidden Champions and customers ......................................................................... 232 Figure 82: Competitive areas by size of LSP and size of customer ............................ 233 Figure 83: Market penetration approaches of SMEs and LSEs in logistics ................ 234 Figure 84: Relation between size of LSP and geography: four development phases ......................................................................................................... 236 Figure 85: Duration of contracts with customers ........................................................ 237 Figure 86: Two surviving groups of LSPs in competition and distinction criteria ..... 238 Figure 87: Concepts for performance measurement in the area of logistics ............... 243 Figure 88: Types of LSPs according to stakeholder group scope ............................... 249 Figure 89: Relationship between sector scope and average contract duration ............ 251 Figure 90: Relationship between portfolio strength and international presence ......... 259 Figure 91: Relationship between asset ownership and performance........................... 261 Figure 92: Organizational Advantage and Organizational Deficit for meeting demands regarding Product/Service and Market ....................................... 264 Figure 93: Redundancy and Self-Sufficiency of Product-Market-Offer in the context of networking ................................................................................ 268 Figure 94: Independence Overextension and Network Advantage of ProductMarket-Offer in the context of independence ............................................ 269 Figure 95: Three groups of actors in terms of the business model components Product-Market-Offer and Relationships ................................................... 270 Figure 96: Relationship between turnover development and adaptability in Business Purpose as well as Customer Favor Striving .............................. 274 Figure 97: Potential Hidden Champions’ business principles ..................................... 289

XVI

List of illustrations

Figure 98: The micro perspective of the BMPS Framework: business principles’ roles for sustainability in competition ........................................................ 291 Figure 99: Comparison of LSP M’s with the other LSPs’ moldings relating to the micro perspective’s business principles’ roles for sustainability in competition ................................................................................................. 293 Figure 100:LSP M’s attaching of significance to business principles in the micro perspective .................................................................................................. 294 Figure 101: The standardized normal curve ................................................................. 297 Figure 102:The macro perspective of the BMPS Framework: business principles’ roles for sustainability in competition ........................................................ 301 Figure 103:Comparison of LSPs A’s, D’s and E’s with the other LSPs’ moldings relating to the macro perspective’s business principles’ roles for sustainability in competition ...................................................................... 302 Figure 104:Overview of research results ...................................................................... 306 Figure 105:LSPs’ status of Hidden Championship after consolidation of findings from the micro and macro perspectives’ analysis ...................................... 308 Figure 106:Comparison of performance in the micro perspective by status of Hidden Championship ................................................................................ 311 Figure 107:Comparison of performance in the macro perspective by status of Hidden Championship ................................................................................ 312 Figure 108:Priority of business principles at Hidden Champions ................................ 313 Figure 109:Comparison of performance of Hidden Champions with Potential Hidden Champions’.................................................................................... 314 Figure 110:Comparison of performance of Hidden Champions with Hidden Championship Failures’ ............................................................................. 315 Figure 111:Hidden Champions’ business principles for managing tensions in today’s area of logistics .............................................................................. 325 Figure 112:Explanatory statements justifying the fallacy of Total Integration ............ 328 Figure 113:Research cases customers’ most valued attributes of LSPs according to final remarks of interview partners ........................................................ 330 Figure 114:Threats for SMEs in future logistics........................................................... 332 Figure 115:The future of logistics and its competitive groups ..................................... 333

List of tables

XVII

List of tables Table 1:

Preview of this study’s research contents and research values .................... 20

Table 2:

Definitions of SCM (examples) ................................................................... 29

Table 3:

Terminology: ‘XPL discussion’, logistics, contract logistics and SCM ...... 33

Table 4:

Structural analysis of the logistics industry ................................................. 43

Table 5:

Overview of logistics market estimates ....................................................... 54

Table 6:

Examples of LSEs in the European logistics industry ................................. 63

Table 7:

The Top 10 contract LSPs in Germany........................................................ 64

Table 8:

Top SMEs in contract logistics in Germany ................................................ 66

Table 9:

Evaluation of approaches on business models ............................................. 84

Table 10: Categories and components of business models .......................................... 88 Table 11: Evaluation of approaches on strategy .......................................................... 92 Table 12: Categories and components of strategy ....................................................... 94 Table 13: Delimitation of business models from strategy ........................................... 95 Table 14: Means and their application to examine the quality of the research design ......................................................................................................... 106 Table 15: Overview of segmentation approaches of LSPs ........................................ 114 Table 16: Segmentation of LSPs ................................................................................ 116 Table 17: Types of LSPs ............................................................................................ 118 Table 18: Types of LSPs and selection of relevant types for empirical research ...... 120 Table 19: Examples of prior knowledge causing supremacy hypotheses .................. 128 Table 20: Sector focus of LSPs (examples from the ‘Top 100+ Company List’) ..... 130 Table 21: Cost focus of customers ............................................................................. 130 Table 22: Industry incumbents and new entrants concentrating on advanced service solutions (examples) ...................................................................... 134 Table 23: Examples of the importance of trust .......................................................... 137 Table 24: Prevailing views on LSPs organizational flexibility .................................. 139 Table 25: Examples demonstrating information exchange/transparency reservation .................................................................................................. 140 Table 26: Prevailing views on the necessity of partnership networks (examples) .... 141 Table 27: Reasons for large company size being beneficial for risk-taking (examples) .................................................................................................. 144 Table 28: Academic examples dealing with customers’ key role for business success........................................................................................................ 147 Table 29: Arguments for SMEs limitations in Total Integration yet overcoming through networks ....................................................................................... 153 Table 30: Customers’ views and attitudes on total supply chain leadership (examples) .................................................................................................. 161

XVIII

List of tables

Table 31: Examples of additional potential Hidden Champions reinforcing findings on the Single Source Hypothesis .................................................. 162 Table 32: Potential Hidden Champions’ strategies in terms of geographic coverage...................................................................................................... 183 Table 33: Customers’ views on LSPs’ asset ownership and treatment ...................... 193 Table 34: Number of LSPs’ subsidiaries .................................................................... 195 Table 35: Information exchange policies with detailed examples from research cases LSP.................................................................................................... 197 Table 36: Overview of research cases LSPs’ information exchange policies ............ 198 Table 37: Views and behavior in the industry on relationships and networks with partners ....................................................................................................... 201 Table 38: IT and contractual settings as norm in collaboration (examples) ............... 203 Table 39: Information about business results by research cases LSP ........................ 207 Table 40: LSPs’ risk-taking through investments for individualized and outstanding service offerings...................................................................... 208 Table 41: Overview of (Sub-)Components of Business Model, Micro Hypotheses, Evaluations, Common Industry Misperceptions and Business Principles ..................................................................................... 213 Table 42: Statements from interviews at LSPs about service scope developments ... 217 Table 43: Attitudes of customers in terms of Total Integration offerings by LSPs.... 218 Table 44: Innovations in logistics (examples) ............................................................ 221 Table 45: Collaboration behavior of LSP research cases ........................................... 223 Table 46: Joint venture experience by research cases LSP ........................................ 225 Table 47: Reasons for the failure of joint ventures (examples) .................................. 227 Table 48: Customers’ interview partners views on the role of the LSP’s company size .............................................................................................. 231 Table 49: Overview of Macro Hypotheses, Evaluations, Common Industry Misperceptions and Business Principles .................................................... 241 Table 50: Quantitative and qualitative concepts for performance measurement ....... 244 Table 51: Scoring weights .......................................................................................... 246 Table 52: LSP C’s replies to value creation for stakeholder groups .......................... 247 Table 53: Value creation for stakeholder groups........................................................ 248 Table 54: Number of sectors served by LSPs............................................................. 250 Table 55: Average contract duration at LSPs ............................................................. 251 Table 56: LSPs’ openness to adaptation and management of changes relating to Business Purpose (selected examples) ....................................................... 253 Table 57: Scoring LSPs’ positions in terms of Business Purpose and change behavior ...................................................................................................... 254 Table 58: LSPs’ portfolio strength for Customer Favor Striving ............................... 255 Table 59: Comparison of the scores for Active Offering and Actual Deployment .... 257 Table 60: LSPs’ presence with personal locations on continents ............................... 258

List of tables

XIX

Table 61: Evaluation of asset ownership applied on road transportation and assembling.................................................................................................. 260 Table 62: Scoring LSPs’ organizations ...................................................................... 262 Table 63: Comparison of the scores for Product-Market-Offer and Organization .... 263 Table 64: Scoring information exchange ................................................................... 265 Table 65: Scoring the relation between networking and independence ..................... 267 Table 66: Comparison of scores for networking and Product-Market-Offer ............. 267 Table 67: Comparison of scores for independence and Product-Market-Offer ......... 268 Table 68: Scoring Exchange Mechanism and visibility ............................................. 271 Table 69: Comparison of the scores for Exchange Mechanism and Product/Service .......................................................................................... 271 Table 70: Scoring development of turnover............................................................... 273 Table 71: Comparison of the scores for the components Business Purpose, Product/Service and Performance Measurements ..................................... 273 Table 72: Scoring business result............................................................................... 275 Table 73: Business Model Scorecard for the micro layer .......................................... 275 Table 74: Overview of conducted comparisons and relationships amongst selected micro dimensions ......................................................................... 277 Table 75: Scoring Gradual Service Extension ........................................................... 280 Table 76: Scoring Role Complementarity.................................................................. 281 Table 77: Scoring Continuous Innovation ................................................................. 282 Table 78: Summary of the scores on business principles identified in research on the Customer Centricity Hypothesis .......................................................... 283 Table 79: Scoring Reliable Execution........................................................................ 284 Table 80: Scoring Courage and Self-Confidence...................................................... 286 Table 81: Scoring Defense and Attack....................................................................... 287 Table 82: Business Model Scorecard for the macro layer ......................................... 287 Table 83: Demonstration of the systematic structure of this study for developing the BMPS Framework................................................................................ 288 Table 84: Overview of LSP research cases’ scores related to the micro perspective’s business principles, their means and standard deviations .... 290 Table 85: Normal (Gaussian) distribution for business principles in the micro perspective ................................................................................................. 298 Table 86: Overview of LSP research cases’ scores related to the macro perspective’s business principles, their means and standard deviations .... 300 Table 87: Normal (Gaussian) distribution for business principles in the macro perspective ................................................................................................. 305 Table 88: Hidden Champions’, Potential Hidden Champions’ and Hidden Championship Failures’ average scores (means) in the micro perspective’s business principles ............................................................... 309

XX

List of tables

Table 89: Hidden Champions’, Potential Hidden Champions’ and Hidden Championship Failures’ average scores (means) in the macro perspective’s business principles................................................................ 310 Table 90: Comparison of LSP B’s performance with Hidden Champions’ ............... 316 Table 91: Comparison of LSP C’s performance with Hidden Champions’ ............... 317 Table 92: Comparison of LSP G’s performance with Hidden Champions’ ............... 317 Table 93: Comparison of LSP H’s performance with Hidden Champions’ ............... 318 Table 94: Comparison of LSP F’s performance with Hidden Champions’ ............... 318 Table 95: Comparison of LSP I’s performance with Hidden Champions’ ................ 319 Table 96: Comparison of LSP J’s performance with Hidden Champions’ ................ 319 Table 97: Comparison of LSP K’s performance with Hidden Champions’ ............... 320 Table 98: Comparison of LSP L’s performance with Hidden Champions’ ............... 320 Table 99: Potential Hidden Champions’ strongest and weakest dimensions ............. 322 Table 100: Hidden Championship Failures strongest and weakest dimensions ........... 323 Table 101: Assignment of Hidden Championship status to category of type of LSP ............................................................................................................. 327

List of abbreviations

XXI

List of abbreviations 1PL 2PL 3PL 3.5PL 4PL 5PL ABV AG AG & Co. KG AMR A/S ASA ATL

B2C BAG BLG BMPS BMW BMWi bn bp BP B.V. BVL C CA CAGR CD CEO CEP CHF CIS CO2 CRM CSCMP DB D.C. DHL

First Party Logistics Second Party Logistics Third Party Logistics Third.Five Party Logistics Fourth Party Logistics Fifth Party Logistics All-embracing-Based View Aktiengesellschaft (German terminology for a public limited liability corporation) Aktiengesellschaft & Compagnie Kommanditgesellschaft (German terminology for a limited partnership whose liable partner is a public limited company) Advanced Manufacturing Research Aktieselskab (Danish terminology for a public limited liability corporation) Allmennaksjeselskap (Norwegian stock company) Arbeitsgruppe fuer Technologien der LogistikDienstleistungswirtschaft (workgroup for technologies in the logistics services industry) Business-to-Consumer Bundesamt fuer Gueterverkehr Bremer Lagerhaus Gesellschaft Business Model Performance Scoring Bayerische Motoren Werke Bundesministerium fuer Wirtschaft und Technologie Billion business principle in micro dimension Business Principle in macro dimension Besloten Vennootschap (Dutch terminology for a limited liability company) Bundesvereinigung Logistik Chapter California Compound Annual Growth Rate Compact Disc Chief Executive Officer Courier, Express, Parcel Swiss Franc Corporate Information Solutions Carbon Dioxide Customer Relationship Management Council of Supply Chain Management Professionals Deutsche Bahn District of Columbia Dalsey (Adrian) – Hillblom (Larry) – Lynn (Robert)

XXII

List of abbreviations

(company letters according to family names of its founders) DKK Danish Krone (currency of Denmark, including the autonomous provinces of Greenland (Danskinut koruuni) and the Faroe Islands (Donsk króna) DM Deutsche Mark (currency in Germany before introduction of the Euro) DMG Deckel Maho Gildemeister Dr. Doctor DSV De Sammensluttede Vognmaend DVV Deutscher Verkehrs-Verlag DVZ Deutsche Verkehrs-Zeitung EBIT Earnings Before Interest and Taxes EBITDA Earnings Before Interest, Taxes, Depreciation, and Amortization ECR Efficient Customer/Consumer Response ed. Editor EDI Electronic Data Interchange EES Equipment Electronic Systems e.g. exempli gratia, for example ERP Enterprise Resource Planning et al. and other people or things (Latin et alii/alia) et seq. et sequens (and the following one) et seqq. et sequentes (and the/those following) etc. et cetera (‘and so forth’) EU European Union EU 17 European Union of 17 Member States EU 27 European Union of 27 Member States EUR Euro fig. figure FM (Logistic) Faure Machet (Founders’ last names) FTE Full-Time Equivalent FTL Full Truck Load GCI Global Commerce Initiative GDP Gross Domestic Product GEFCO George E. Failing Company GmbH Gesellschaft mit beschraenkter Haftung (German terminology for a company with limited liability) GmbH & Co. KG Gesellschaft mit beschraenkter Haftung & Compagnie Kommanditgesellschaft GmbH & Co. KG a.A., KG Gesellschaft mit beschraenkter Haftung & Compagnie Kommanditgesellschaft auf Aktien, Kommanditgesellschaft GmbH & Co. OHG Gesellschaft mit beschraenkter Haftung & Compagnie Offene Handelsgesellschaft GPS Global Positioning System h Micro hypothesis H Macro hypothesis HBS Harvard Business School

List of abbreviations

HEC HR HUB i.e. IfM Bonn IFRS IKB IL Inc. IPL ISP IT Jr. JV KGaA KMU KN LCL LGI LLP LSE LSP Ltd. m M m. MA mbH MBV MI MIT Mr n.a. N.A. NBV NJ N.L. No. N.V. N.Y. NY

XXIII

Faculté des Hautes Etudes Commerciales Human Resources Haupt-Umschlagbetrieb (Place where traffic is exchanged across several modes of transport) id est, it is Institut fuer Mittelstandsforschung Bonn (Institute for SME-Research, Bonn/Germany) International Financial Reporting Standards Industriekreditbank (IKB Deutsche Industriebank) Illinois Incorporated Integrationsplattform Logistik (Integration Platform Logistics) International Specialty Products Information Technology Junior Joint Venture Kommanditgesellschaft auf Aktien Kleine und Mittlere Unternehmen (small- and medium-sized enterprises) Kuehne + Nagel Less than Container Load Logistics Group International Lead Logistics Provider Large Size Enterprise Logistics Service Provider Limited Misperception in micro dimension Misperception in macro dimension Million Massachusetts mit beschraenkter Haftung (German terminology for limited liability) Market-Based View Michigan Massachusetts Institute of Technology Mister not available, not applicable No Author Network-Based View New Jersey No Location Number Naamloze Vennootschap (Dutch terminology for a public limited liability) corporation) No Year New York

XXIV

OEM p. PA plc pp. RBV R&D RFID ROA RoW RWE S.A. SAP SCC SCM SCOR SME S.p.A. SPL TML TMS TNT TU TUL TX UK UML UPS US USD VAS Vol. VW XPL WestLB WMS WWW XPL ZLU

List of abbreviations

Original Equipment Manufacturer page Pennsylvania public limited company pages Resource-Based View Research & Development Radio Frequency Identification Return on Assets Rest of World Rheinisch-Westfaelisches Elektrizitaetswerk Société Anonyme Systemanalyse und Programmentwicklung (System Analysis and Program Development) Supply Chain Council Supply Chain Management Supply Chain Operations Reference Small- and Medium-sized Enterprise Societá per Azioni (Italian terminology for a limited share company) Seminar fuer Planung und Logistik (University of Cologne) Tailormade Logistics Transport Management System Thomas Nationwide Transport Technische Universitaet (Technical University) Transport, Umschlag, Lagerung (Transportation, Transshipment, Warehousing) Texas United Kingdom Unified Modeling Language United Parcel Service United States United States Dollar Value-Added Services Volume Volkswagen eXtended Party Logistics Westdeutsche Landesbank Warehouse Management Solution World Wide Web eXtended Party Logistics Zentrum fuer Logistik und Unternehmensplanung

1 Š Introduction

1

1

Introduction

The area of logistics is important for the European economy in two ways. First, major expenditures of businesses are in logistics, thereby affecting and being affected by other economic activities. In the EU 17 logistics contributed to 5.5% of the GDP in 1997 (total logistics volume of 420 bn euros), 7.6% of the GDP in 2004 (total logistics volume of 730 bn euros) and 7.4% of the GDP in 2007 (total logistics volume of 837 bn euros) (Klaus and Kille 2008, p. 159; Klaus and Kille 2006, p. 43; Klaus and MuellerSteinfahrt 2000, p. 42; International Monetary Fund 2009).1 Improving the efficiency of logistics may result in lower prices for consumers, higher profits for businesses, or both. The result could be a higher overall standard of living and/or a higher tax base. Thus, the area of logistics makes an important contribution to the economy as a whole. Second, the area of logistics is a significant activity in facilitating the sale of virtually all goods and services. It supports the movement and flow of many economic transactions. While brand products are well-known to the public, logistics is not. However, without logistics each business is like a car without an engine: if goods do not arrive on time, in the proper place, in the proper condition or in the proper quality, sales are impossible and economic activities throughout the supply chain will suffer. For example, if automobile production has to be suspended because of lack of inventory caused by unsatisfactorily-executed logistics, expenses of 335,000 euros per hour can be incurred2 (Heriot-Watt University 2008, p. 42). The latter is just one example demonstrating the real extent of the importance of logistics for businesses and thus for an economy. Without smoothly-operating logistics, businesses are likely to struggle. Nevertheless, in politics and economics this industry is a neglected area. Yet it is undoubtedly one of the growth sectors in an industrial

1

The EU 17 countries are Austria, Belgium, Denmark, Germany, Finland, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and United Kingdom. In 1997 the GDP for the EU 17 was USD 8,873.37 bn (equivalent to 7,600.97 bn euros at an exchange rate of 1 EUR equivalent to USD 1.1674 as of 1 January 1999 when the euro was introduced to world financial markets as an accounting currency). In 2004 the GDP for the EU 17 was USD 13,091.01 bn (equivalent to 9,594.7 bn euros at an exchange rate of 1 EUR equivalent to USD 1.3644 as of 31 December 2004). In 2007 the GDP for the EU 17 was USD 16,574.43 bn (equivalent to 11,253.3 bn euros at an exchange rate of 1 EUR equivalent to USD 1.47285 as of 31 December 2007). 2 The report from Heriot-Watt University states an amount of £300,000. This amount equals 334,881 euros at an exchange rate of £1 equivalent to 1.11627 EUR as of 31 October 2009.

R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2_1, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

2

1 Š Introduction

economy that has known a lot of retrenchment. In fact, as more production has been outsourced abroad, logistics has grown in importance. Even when mentioned, news and discussions about the area of logistics tend to concern large size enterprises (LSEs) rather than small- and medium-sized enterprises (SMEs). However, an economy that is aligned to success and growth cannot permit itself to ignore this sector further, or treat it with neglect. The increasing importance of logistics is justified in enormous changes in the macro economic environment in the last two decades. These changes have led to a decisive and profound redistribution of supply chain activities amongst producers and logistics service providers (LSPs). Globalization and developments in the European Union, for instance, dramatically impacted the ways of doing business. Locations for production plants have been centralized and/or have been shifted to Asia, resulting in a strong increase in transportation as well as shipping of raw materials and goods. Besides this drive for centralization and economies of scale, producers have also started to concentrate on their core competences, with the consequence that services like transportation or warehousing increasingly were outsourced. Economic developments have caused pressures on producers’ costs, leading to a rethinking of the focus of activities and resulting in a further broadening of the scope of outsourcing. In its utmost form, LSPs’ scope of services covers the management of total supply chains. Consequently, the supply chain scopes of producers and LSPs have shifted. While the scope of producers’ supply chains has decreased, the scope of the supply chains of LSPs has increased. Outsourced activities by producers have been taken over by a network of partners that I refer to as the supply chain network or value network. LSPs have started to organize the physical, informational, financial and knowledge flows within these value networks. I describe the service scope of an LSP that covers the management of total supply chains as Total Integration or Integrated Supply Network Management. In this study I use both self-defined terms synonymously. Furthermore, competitive pressures have increased. In particular, LSEs in logistics have been pushing commodity business. However, smaller LSPs that are open to innovation and transformation can keep up with the developments in the competitive environment.

1 Š Introduction

3

Overall and across industries, promoting innovations has been considered a key strength of SMEs, which themselves are considered the backbone of an economy (Haussmann et al. 2006, p. 1). Traditional LSPs identify chances to escape the low margin transportation business by gradually broadening their service scope. This is where we must consider SMEs. By keeping pace with Total Integration, these logistical SMEs are often outstandingly successful and long-term survivors in an industry. Hermann Simon refers to such outstanding SMEs as “Hidden Champions”. He identified them as the backbone of the lasting German export strength, and has lauded their close relationships to customers as a pivotal element of their strategy (Simon 2007, p. 11, p. 159 et seqq.; Simon 1996a, p. 98 et seqq.). In fact, SMEs are of high importance for the economy. In Germany, for instance, more than 99% of the roughly 3.6 million companies belong to the small- and medium-sized economy. They represent about 45% of the total economic performance and their turnover amounts to close to 40% of the total of all German companies. Germany’s SMEs employ about 20 million persons (equivalent to more than 65% to 70% of all employees) and about 80% of the trainees (BMWi 2009a, p. 7; BMWi 2009b). It is surprising in view of the importance of SMEs that research on SMEs in logistics is so limited. It is more than overdue. The two key reasons are their low attention in research so far as well as their power of innovation that is required to offer Total Integration solutions. I propose to search for Hidden Champions in logistics and to identify sources for success and long-term survival. The search for Hidden Champions is therefore also a search for ‘hidden success factors’ of SMEs in logistics, a field in industry research that is not yet covered in any depth and unfamiliar to the public. I will show that these SMEs have organizational capabilities that are unique and that distinguish them from the LSEs in their sector, whose offer is much more of a commodity service. I argue that in contrast to Hidden Champions with their power for innovations, LSEs are subject to the commodity trap as they are captives to existing solutions heading for economies of scale and economies of scope in their service offerings. At this stage I wish to make a final remark that the shift of supply chains amongst producers and LSPs increased the confusion regarding the meanings of the terms logistics and Supply Chain Management (SCM). It looks, when one examines the

4

1 Š Introduction

literature, as though the interesting aspect of transport flows and supplies resides in SCM, but in fact the term described is logistics rather than SCM. In view of the developments in the industry, particularly regarding the shift of supply chains, I clarify the definitions for both terms. Accordingly, while both SCM and logistics manage the total supply chain, i.e. procurement, production and distribution, it is only SCM that covers total processes and activities. Logistics concentrates on designing products, processes and supply chains, on the fulfillment of product demand and on the recycling, reuse or disposal of products, whereas SCM also covers the processes of product introduction as well as product promotion, pricing and merchandising. Contrary to common opinion, the more important activity (in terms of volume) is logistics – and this field ought not to think that it has lost in any real sense its prominence to SCM – the latter is also too broad in scope of activities, as it also includes activities primarily in the responsibility of producers. The simple element of shipment is today only a small portion of (extended) supply chains. That is where logistics is major – and actually quite prominent in any economic sense. 1.1 Motivation and objectives This study is the result of an effort to develop a framework for exploring why some small- and medium-sized LSPs are more profitable than others, or more profitable than LSEs. The framework’s requirement was to be integrative with regards to both the micro and macro layers of a business, i.e. explaining the most important (sub-)components of a business model as well as its status and positioning in the macro environment. Furthermore, the framework should be flexible, easy to use and applicable for the totality of the various types of LSPs, which presupposes a well-structured database. For example, users should be able to change moldings in business model (sub-)components with the framework directly indicating the resulting movement regarding the status in Hidden Championship. In order to create a tool for modeling businesses in the area of logistics, the challenge was that the framework must be comprehensive without risking becoming too complex. Every LSP should be able to learn from successful companies through consideration of business model components’ moldings as well as by judging outcomes from making changes and customizations. SMEs in logistics that are less successful can learn from Hidden Champions by comparing their business model components’ moldings with those of Hidden

1 Š Introduction

5

Champions’ and identifying the differences. From this, specific actions can be derived. Also, even large LSPs can learn a lot from Hidden Champions. The main contribution of this dissertation is the development of an integrative framework that deals with most aspects of logistics and allows the diagnosis of the performance of a particular business model. I will refer to this framework as the Business Model Performance Scoring (BMPS). In particular, this framework helps to identify Hidden Champions in the area of logistics and also allows the distinguishing of ‘Hidden Champions’ from ‘Potential Hidden Champions’ and ‘Hidden Championship Failures’. The ‘p’ of the word ‘potential’ in ‘potential Hidden Champions’ remains lower-case (unless it is at the beginning of a sentence), as long as I have not identified the true status of Hidden Championship. I used the word ‘potential’ as some of the LSPs do not publish results. However, I assumed profitability if there have been no negative news about struggling, especially if the LSPs still have been in business for decades. A clear assignment of the research cases LSP to Hidden Championship status is made in Chapter 7 only. The capital ‘P’ of the word ‘Potential’ in ‘Potential Hidden Championship’ indicates either the LSP’s Hidden Champion status or that this could not be clearly identified even after examination. An earlier distinction between Hidden Champions, Potential Hidden Champions and Hidden Championship Failures was not justified in my pre-selection approach and the aim to identify real success business principles. Finally, regarding the geographic scope of the LSPs studied, my search for Hidden Champions focuses on small- and medium-sized LSPs in Europe. The framework has several uses which are developed in this dissertation. One major application concerns proving or disproving the promise of Total Integration provided by traditional LSPs. Resulting in Total Integration’s fallacy, it also points out that the area of logistics will be dominated by a New Breed of actors who are able to manage and integrate supply chain networks of LSEs, SMEs and customers for joint collaboration. Such competences need to be developed, and are not easily acquired. Therein then lies the defense of SMEs against their much larger brothers – who are also their competitors. This study is meant as a contribution to strategic management research in the area of logistics. In order to develop the BMPS and to achieve its objectives regarding the identification of Hidden Championship status in a Total Integration environment, I first

1 Š Introduction

6

had to work out a host of definitions and clarifications on logistics market issues (Chapter 2), business models (Chapter 3) and types of LSPs (Chapter 4), as they have not yet been defined in the quality and scope required. Therefore, in Chapter 2 my study will provide well-structured and condensed summaries and overviews on fundamentals, developments and demography in the logistics industry. In Chapter 3 I present detailed overviews of prevailing business models and strategy approaches that were required for both the comprehensive definitions I provide in this work, and their distinction. In this chapter also the micro and macro layers of my Business Model Framework are defined, forming the basis for the hypotheses that I formulate later in Chapter 5. The main contribution of Chapter 4 is an exhaustive classification of LSPs in the global market. Following Chapter 4, my research study concentrates on the identification of SMEs’ status with regard to Hidden Championship and the reasons for success or failure of LSPs. In this context, the research concentrates on the question of whether Total Integration is the future concept in logistics. Figure 1 provides an overview of my research objectives and the value this dissertation hopes to create. (Please note that all tables and figures are sourced whenever cited. Tables and figures with no source reference are provided by the author of this study.)

Logistics Market

Hidden Total Integration Champions Types of LSPs

Figure 1:

Business Models

Research objectives and value

This study is addressed to both academic research as well as actors in the industry. Both LSEs and SMEs in logistics are provided with insights on success factors in the industry and challenges of continued business. The aims of this study are to develop the basis for a comprehensive framework as well as to explore the research topic and applicability of this framework through an in-depth case study design. The limits of this study start

1 Š Introduction

7

when looking for a representative basis in the form of a statistical survey research for making comparisons. 1.2 Object of consideration: Hidden Champions Simon’s research about SMEs dates back to 1986, when he discussed the continuous German export success with Levitt, at that time a marketing expert at the Harvard Business School (Simon 2007, p. 11). Simon became internationally known when publishing the term “Hidden Champion”, which he used for successful and long-term surviving SMEs across the various types of industries. In 2007, Simon’s list with Hidden Champions from Germany, Austria and Switzerland, which he has collected over more than twenty years, contains 1,316 entries (Simon 2007, p. 30). Simon has condensed the most important insights from his research in three circles and eight lessons, which are leadership with ambitious goals (inner circle); decentralization, high performance employees and depth (middle circle); and in the outer circle focus, closeness to customer, innovation and globalization (Simon 2007, p. 401 et seqq.). Today, the term ‘Hidden Champion’ is in use worldwide as the examples from the US, Chinese or Korean publications show (Ewing 2004; Guanggao 2009; Jeong-ju 2009). For a common understanding, the origin and the definition of the term ‘Hidden Champion’ are presented at the beginning of this study (Section 1.2.1) while a further sub-section (Section 1.2.2) deals with the role of size for profitability. 1.2.1 Origin of the term and criteria The post-war economic success in Germany was justified by medium-sized production companies, collectively known as Mittelstand. Each of these companies was expected to be a worldwide market leader in a specific niche, that is in a part of the market or in a sub-market segment rather than in a mass market or in a large market (Drea and Hanna 2000, p. 33; Markides and Geroski 2003, p. 5; Tektas and Kavak 2008, p. 3), while neither seeking nor attracting publicity (Simon 1996a, p. 1). At the end of the 1980s, Professor Hermann Simon, chairman of the worldwide consulting company SimonKucher & Partners Strategy & Marketing Consultants (Simon-Kucher (ed.) 2009), coined the term “Hidden Champions”. He defined it by three criteria that a company has to meet for qualification (Figure 2) and used it for companies small and medium in size across industries. The first articles with this term were published by Simon in the

1 Š Introduction

8

Zeitschrift fuer Betriebswirtschaft in 1990 (Simon 1990, pp. 875-890) and in the Harvard Business Review on lessons from Germany’s midsize giants in 1992 (Simon 1992, pp. 115-123). In 1996, an article in the Business Strategy Review (Simon 1996c, pp. 1-13) and his first edition entitled “Hidden Champions” followed (Simon 1996a; Simon 1996b), the latter being translated into sixteen languages (Simon 2007, p. 12). Simon’s term became internationally known. The three criteria by which the term is defined are presented in the following.

1

• #1 or #2 (or #3)* in world market • #1 in European market (on the continent)*

Criteria for a Hidden Champion

3

Low public visibility and awareness

• Small or medium in size • Not more than USD 1 bn (3 bn euros*) 2 in turnover

* Extension in subsequent publication.

Figure 2:

Three criteria a company has to meet to qualify as a Hidden Champion (Simon 1996a, pp. 5-6)

According to Simon, the first criterion relates to market position. Hidden Champions are “worldwide leaders in their markets” (Simon 1996a, p. vii) and have worldwide market dominance (Simon 1996a, p. 1, p. 8, p. 18). Often with market shares of more than fifty percent they are truly global (Simon 1996a, p. 1, p. 18). Hidden Champions are the number one or number two in their world market (Simon 1996a, p. 5). In his 2007 edition of the book about Hidden Champions of the 21st century, Simon extended this definition to also include the number three position in the world market, since many more companies are internationally or even globally active compared to a decade ago (Simon 2007, p. 29), causing a substantial increase in the size of the market. Alternatively, Hidden Champions are defined to be in the number one position in the European market (Simon 1996a, p. 5; Simon 2007, p. 29) or number one position on their continent if the company is non-European (Simon 2007, p. 29). Market position is defined by either absolute or relative market share. Absolute market share is measured in percentage points and is calculated by dividing company turnover by total market turnover. Alternatively, the relative market share is a company’s percentage share divided by the percentage share of the strongest competitor (Simon 1996a, p. 8).

1 Š Introduction

9

Second, according to Simon, Hidden Champions are “small or medium in size” (Simon 1996a, p. 6). A company is small or medium in size if it does not generate more than USD one billion in turnover (equivalent to 1.5 bn DM or 767 m. euros). In his subsequent publication in 2007, Simon extended this limit to three billion euros, as he observed that many Hidden Champions have grown beyond the billion dimension without changing typical characteristics, strategies or leadership styles. In Simon’s research, companies with typical characteristics of Hidden Champions are also exceptionally included even if these companies’ turnover is higher than the defined limit (Simon 1996a, p. 6, p. 18; Simon 1996b, p. 14; Simon 2007, p. 29). Simon further states that Hidden Champions “remain relatively small or medium in size” (Simon 1996a, p. 11) and their corporate culture favors continuity as well as steady rather than explosive growth. In comparison to LSEs, Hidden Champions grow more slowly. They have to grow by crossing borders due to small home markets (Simon 1996a, p. 11). Third, Hidden Champions have “low public visibility and awareness” as defined by Simon (Simon 1996a, p. 6; Simon 2007, p. 29). They are “scarcely known” (Simon 1996a, p. vii) and “remain hidden under a layer of inconspicuousness, invisibility, and even secrecy” (Simon 1996a, p. 1). According to Simon, Hidden Champions “often trade ‘invisible’ or low-profile products”, i.e. their products are often used in the production process or subsumed by the final product (Simon 1992, p. 115; Simon 1996a, p. 18; Simon 2007, p. 27). Hidden Champions adhere to anonymity, discretion and rejection of press contacts (Simon 1992, p. 116). While they are restrained to the public they have high publicity, excellent reputation and very popular brands in their markets. Hidden Champions are very well known and familiar to their customers but competitors failed to notice their niches. However, within the last few years Simon noticed

an

increasing

opening.

He

argues

that

strong

growth

and

fast

internationalization automatically cause more visibility (Simon 1996a, pp. 3-4; Simon 2007, pp. 27-28). Simon states that in order to qualify as a Hidden Champion, a company must fulfill the above three criteria. In addition, he mentions further typical findings that apply to Hidden Champions across industries but which he did not integrate systematically in his definition of criteria for a Hidden Champion. I introduce further findings from Simon to my catalogue of criteria that I consider to be sustainable characteristics for Hidden

10

1 Š Introduction

Championship. Therefore, this study can be considered as a continuation of Simon’s research. One of its research values is to extend Simon’s three criteria for Hidden Championship by the following five sustainable characteristics. First, and according to Simon, Hidden Champions’ practices are “more down to earth than one might expect” (Simon 1996a, pp. 11-12). Operating mainly in stable rather than in fashion or boom markets, their approaches are mostly unknown. According to Simon, Hidden Champions draw vigilant attention to detail, commit to serving customers continuously and are persistent (Simon 1996a, p. viii, pp. 11-12). Second, Hidden Champions “have a remarkable record of survival” and “have excelled throughout the world for decades” (Simon 1996a, p. vii, p. 18). Although occasionally experiencing serious crises, they managed to survive well, sometimes even emerging stronger. Thus, these companies may be longer lived (Simon 1996a, p. 11, p. 13). Third, Hidden Champions “earn a large part of their revenue from exports, enabling them to contribute heavily to a country’s trade balance” (Simon 1996a, p. 18). Fourth, Simon found that Hidden Champions are “largely family owned” (Simon 1996a, p. 18) or “closed held” (Simon 1996a, p. 11) and, fifth, he states that Hidden Champions are “successful but not miracle companies” (Simon 1996a, p. 18). In my search for Hidden Champions in the area of logistics, I apply both Simon’s three criteria for a Hidden Champion as well as the five sustainable characteristics further identified from Simon’s findings. Regarding Simon’s three criteria, his third criterion, low public visibility and awareness, is implied in SMEs in logistics. The reason is that small- and medium-sized LSPs ‘remain hidden’ due to logistics invisibility in the final product. His second criterion, small or medium in size, was the key criterion for my selection of potential Hidden Champions and their assignment to the various types of LSPs (Section 4.3.3) since it is most measurable. I defined the criteria in the sense of achieving a turnover of not more than one billion euros including the allowance of some exceptions. The reason is that at this stage of the study Simon’s 1996 publication was available only with its USD one billion limit. This value is equivalent to 856.6 m. euros at an exchange rate of 1 EUR to USD 1.1674 as of 1 January 1999 when the euro was introduced to world financial markets as an accounting currency (Antweiler 2001, p. 1). After that I apply qualitative criteria as with Simon’s first criterion on market position, which I use to prove or disprove of Hidden Championship in the course of my case

1 Š Introduction

11

study research (Section 6.1.3.1). Regarding the further identified characteristics, I also applied the second (in business for decades), fourth (family-owned) and fifth (success) characteristics of Hidden Champions in my selection of LSPs in a first step. This means that LSPs were excluded from my database for the survey panel that were just recently founded, listed on the stock market or that reported losses (the detailed process is described in Section 4.3.3). An evaluation of the first (down to earth business practices) and third (large proportion of foreign revenues) characteristics is made in the course of the further empirical study of companies. 1.2.2 Size and profitability Company size is of particular interest in this study. First, my research focuses on companies small- and medium in size; I specifically do not target LSEs. Second, I selected LSPs in terms of potential Hidden Championship according to Simon’s criterion of company size regarding generated turnover. Third, according to common understanding, profitability goes with size normally. However, Hidden Champions are highly profitable companies even though they are small or medium in size (Simon 2007, p. 36). This makes the trade-off between size and margin an important aspect when searching for Hidden Champions. The difficulty is that SMEs are often privately held companies that provide data neither about corporate profits nor about unit profits, thus limiting the ability to draw conclusions. This section deals with company size and its relation with profitability. Discussions about the role of company size require the definition of a manageable measure for describing classes of company size. As Kessler pointed out in his research on company size, innovation and growth in value creation, there is no agreement on company size and its scale (Kessler 1992, pp. 109-111). In Section 5.2.3 I defined classes of companies by basically distinguishing between LSEs and SMEs. This was necessary as a single hypothesis is dedicated to the issue of size (Section 5.2.3). The key focus of this study is on SMEs. They are also the core of the economy. As stated in the introduction in 1, in Germany, for example, 99.7% of all companies are small or medium in size. SMEs have contributed to economic stability, to accelerated economic progress and rapid industrialization while generating almost half of gross value creation of a company’s sector. At the same time, SMEs promote innovations and

1 Š Introduction

12

contribute to further growth and employment (Arinaitwe 2006, p. 167; Haussmann et al. 2006, p. 1). While the majority of SMEs generally do not operate internationally, an easily comprehensible, but very meaningful and thereby also successful group of companies has a large degree of internationalization. In contrast, LSEs outperform in meeting defined quantitative criteria, whereas a common definition is lacking. Accordingly, companies are large in size if they achieve an annual turnover of at least 100 m. DM, which equals about 51 m. euros3 and if their number of employees is more than 1,000 (Schwietert and Middeke 1968, p. 20). The classification scheme for company sizes after the European Union (EU) from 2005 uses three criteria, as presented by the IfM. According to the EU’s definition, companies are LSEs if the number of employees amounts to at least 250, and if the annual turnover exceeds 50 m. euros or if the balance sheet total goes beyond 43 m. euros (Institut fuer Mittelstandsforschung Bonn 2004, p. 4; see also Section 5.2.3). In his research on Hidden Champions, Simon defined companies as LSEs if they achieve as a rule at least one billion USD in annual turnover (Simon 1996a, p. 6), or more than three billion euros in annual turnover (Simon 2007, p. 29). Lacking a general definition for classification of companies according to size, I define a company as being large if its turnover exceeds one billion euros. This value may be considered as an approximate value; for example, a company may still be an SME if the turnover volume only slightly exceeds this value and solid turnover figures were obtained over years. The size of a company influences corporate strategy and consequently matters for business success. Already in the 1960s and before, research dealt with the relationship of size and profitability. An example is Stekler’s publication in 1963 on the relationship between the size of firms and profitability measured by profit rates. Stekler states that prior studies allow the inference that there is no tendency that the largest profitable companies earn the highest rates of returns, i.e. these studies could not prove that the ability to earn profits is positively correlated with size (Stekler 1963, p. 101). However, researchers from these previous studies as well as Stekler noted that, with exceptions, the ability to expand out of retained earnings is positively correlated with company size. According to Stekler, the tax system also probably does not handicap but may even aid 3

1 EUR amounts to 1.95583 DM.

1 Š Introduction

13

the relative expansionary ability of smaller firms. In contrast, for larger companies the ability to grow does not improve but LSEs would be handicapped without income that is subject to very low effective tax rates. Stekler also concluded that there is a declining relationship between profitability and size in terms of relative profitability of firms with net income. Another research result is that the variability of the profit rates of firms diminishes with size (Stekler 1963, pp. 100-102). Welge and Holtbruegge refer to advantage sources of multinational companies that SMEs can use if they become larger in size due to internationalization (Welge and Holtbruegge 2006, pp. 142-143). Economies of scale, economies of scope and arbitrage effects are stated as advantages of LSEs. Scale economies result when an increased size of a single operating unit producing or distributing a single product leads to reduced unit costs of production or distribution (Chandler 1990, p. 17). They can be achieved mainly through standardization of company structures, systems, processes and resources. Economies of scope result from joint production or distribution (Chandler 1990, p. 17) and can be realized for example through worldwide use of brands, by serving customers that are operating globally or by pooling knowledge which has been gathered from different markets. Arbitrage effects result from usage of national differences like different factor costs, factor productivities or tax and interest rate levels. One might conclude that LSEs have to be successful in the sense of profitability due to these advantages. However, there are various trade-offs between these advantage sources. Furthermore, research has proven superiority for profitability of small company size. One major example is that SMEs are superior in terms of innovations, innovative efforts or in planning innovation costs (Adams and Brock 1998, pp. 72-76). According to Adams and Brock, LSEs’ inability to innovate is based on: a bureaucratic organization, which means that qualities which are most useful in large companies do not correspond to those most beneficial for technical creativity and human ingenuity; a dominance of large administration hierarchies rather than liberal and unbound company styles; and conservative attitudes by insisting on the status quo while simultaneously being resistant to changes. The authors refer to LSEs as “resistance centres against changes“ (Adams and Brock 1998, p. 78); missing familiarity with the different working sequences of a company, its customers, markets and needs and to missing consciousness for costs as is prevailing in companies small in size. The aim to become a

14

1 Š Introduction

LSE contradicts the power of innovations of SMEs, which can be an essential driver for profitability. 1.3 Outline of the study In this section the outline of my dissertation is presented. The aim is to provide an overview of the structure, research content and value contributions of my study (for the structure see also Figure 3 and for the content and research value see Table 1). Overall, this dissertation is structured in three parts. In the first part the theoretical basis is provided. I refer to this part as ‘Fundamentals’ (Figure 3). Herein, Chapter 2 deals with the area of logistics as the industry in focus and Chapter 3 contains the framework of the business model. My extensive study on a generic Business Model Framework forms the core and basis for the following empirical research, which forms the second part of this study (‘Empirical Research’ in Figure 3). In a third part (‘Finals’ in Figure 3), findings and outcomes are discussed, leaving room for future discussions and research. In more detail, this dissertation is subdivided into eight chapters (see yellow ellipses in Figure 3). In this opening first chapter (‘Introduction’ in Figure 3), my motivation and the objectives of this study are described (Section 1.1). The second section (1.2) of this introductory chapter deals with Hidden Champions. It covers the origin of the term and its criteria as well as the issues of size and profitability. This chapter concludes with the outline of this study in this section. Chapter 2 provides an overview of the area of logistics. First, industry fundamentals are presented (Section 2.1), covering logistics-related terms and their relationships. Section 2.2 describes the developments in the industry from the 1970s onwards, micro and macro environmental conditions as well as trends and current developments. The third section in this chapter (2.3) is about industry fundamentals and provides an overview of the market and its actors. The following Chapter 3 deals with business analysis (Section 3.1) and business models (Section 3.2) in particular. In the section on business models I present its fundamentals

1 Š Introduction

15

(Section 3.2.1), prevailing approaches (Section 3.2.2), my definition (Section 3.2.3), as well as the delimitation of business models from strategy (Section 3.2.4). Chapter 4 covers issues of empirical research and analysis. In Section 4.1 on methodology, research challenges, the research approach and process are presented. Next, business model architectures are derived and described (Section 4.2). Section 4.3 is dedicated to LSPs as an object of research. In Section 4.4 the role of customers in this dissertation is presented and in Section 4.5 information on the questionnaire design is given. Chapter 5 presents the hypotheses that will be tested in this research. Section 5.1 contains the micro hypotheses on the business model categories Ambitions & Aims (Section 5.1.1), Implementation (Section 5.1.2) and Financials (Section 5.1.3), while Section 5.2 covers the macro hypotheses. Chapter 6 presents findings and results with regard to each micro hypothesis (Section 6.1, summary in Section 6.2) and macro hypothesis (Section 6.3, summary in Section 6.4). At this stage of the dissertation no conclusions are made with regard to findings and also no relationships to performance are covered. The search for Hidden Champions continues in Chapter 7. Before further developing my BMPS Framework, I cover the issues of performance measurement and scoring (Section 7.1). After that, I score performance along the micro (Section 7.2) and macro dimensions (Section 7.3). In Section 7.4 my BMPS Framework’s micro and macro perspectives are developed (Section 7.4.1), the framework’s results are presented (Section 7.4.2) and starting points for improvements at non-Hidden Champions are identified (Section 7.4.3). Comments on business principles round off Chapter 7. Chapter 8 is a concluding chapter that summarizes my main point (Section 8.1) as well as market and competitive implications (Section 8.2). Finally, Section 8.3 provides an outlook and hints for future research. Figure 3 shows that throughout the study I stick to the structure defined in Section 3.2.3.2 on the research framework. In my search of Hidden Champions’ business

16

1 Š Introduction

models I distinguish between two principle dimensions, which are the micro and macro dimension, whereas the micro dimension is further structured into ‘Ambitions & Aims’, ‘Implementation’ and ‘Financials’. For both the micro and macro dimension, hypotheses are formulated for each of their defined component in the research framework. For each of the hypotheses the empirical results are presented, and each performance is scored. In this way, the structure (i.e. the order) is analogous to the chapters on the hypotheses, empirical results and search for Hidden Champions. This is shown graphically by the blue arrows in Figure 3.

Outline of the dissertation

Fundamentals

Empirical Research

Figure 3: Logistics Empirical research and analysis

C8

Conclusions Main points – Implications – Future research

H2

H3

Macro perspective

Scoring performance along the macro dimensions BP 1 BP 2 BP 3

Evaluation of macro hypotheses and common misperceptions M1 M2 M3

H1

Macro hypotheses

BMPS: Business Model Performance Scoring; bp: Business principle in micro dimension; BP: Business principle in macro dimension; C: Chapter; h: Micro hypothesis; H: Macro hypothesis; m: Misperception in mirco dimension; M: Misperception in macro dimension.

Ambitions & Aims bp 1 bp 2 bp 3

C7

In search of Hidden Champions Scoring performance Scoring performance along the micro dimensions Implementation Financials bp 4 bp 5 bp 6 bp 7 bp 8 bp 9 bp 10 bp 11 bp 12 BMPS Framework Micro perspective

Financials m 11 m 12

C6

Empirical results Evaluation of micro hypotheses and common misperceptions Ambitions & Aims Implementation m1 m2 m3 m4 m5 m6 m7 m8 m9 m 10

Hypotheses Micro hypotheses on business model components Implementation h4 h5 h6 h7 h8 h9

Business models

Fundamentals – Approaches – Definition – Limits

C3

Methodology – Architectures – LSPs – Customers

C4

Fundamentals – Developments – Demography

h10

Ambitions & Aims h1 h2 h3

C2

Introduction Object of consideration

Financials h11 h12

C5

Legend:

Finals

C1

1 Š Introduction 17

18

1 Š Introduction

My BMPS Framework is the key research contribution of this study, which is structured in line with the framework’s moldings in the micro and macro dimension as Figure 3 shows. Moreover, this study provides additional research values. The research contents and research values are summarized in Table 1, with the major points listed here: x Chapter 2 is an approach to create clarity in the confusion about terms used in the area of logistics. Moreover, this chapter presents a condensed overview of developments in the history and on the micro and macro environmental conditions. In particular, I provide an overview of the global market, something that is still missing and that shows the variety in prevailing views about market potentials. x The terms business model and strategy are often used interchangeable. Chapter 3 contains an in-depth study of both terms, showing also their delimitations and relationships, thereby filling an identified research gap when starting to work out a framework. x While the industry has been lacking a detailed structure of players in the industry, Chapter 4 provides a comprehensive typology. x Chapter 5 covers the hypotheses derived from prevailing knowledge. x The questionnaires/interview manuals for LSPs and customers can be found in Appendix 3 and Appendix 4. They are guidelines for in-depth analyses of LSPs. Please note that all information from questionnaires and interviews is strictly confidential and not intended for distribution due to interview partner requirements. Information is available upon request and by permission of the LSPs only. x Chapter 6 presents the state of the research cases LSP and highlights common industry misperceptions. x Chapter 7 is the identification stage for Hidden Champions. x Chapter 8 presents the expected future state of the area of logistics and points to identified further research gaps. Overall this study is an approach for mapping the landscape in particular for small and medium LSPs, but also for LSEs in logistics. My framework helps to clarify LSPs’ status of Hidden Championship, i.e. regarding Hidden Champions, Potential Hidden Champions and Hidden Championship Failures.

1 Š Introduction Chapter 2

Research Content Industry

3

Framework

4

Research Objects

5

Hypotheses

Appendix 3 and Appendix 4

6

Questionnaire/ Research

Empirical Results

19 Research Value Summary and overview on: x Fundamentals: - Definitions of terms in the area of logistics - Relationships between logistics terms x Developments: - History - Micro and macro environmental conditions - Trends x Demography: - Market sizes - Typology of actors Definition: Business model (delimitation from strategy) x Micro perspective: 12 defined business model (sub-)components x Macro perspective: 3 company comprehensive business model dimensions x Segmentation of LSPs x Selection of 308 LSPs with at-first-sight network business model or integrative business model independent of size and Hidden Championship status based on: - Surveys (top SMEs in Europe and in single European countries) - Magazines and newspapers (portraits of LSPs) - Cooperations (associated/partnering SMEs in logistics) - Primary research (other SMEs in logistics) x Further selection resulting in 100 potential Hidden Champions and 8 interesting Failed Hidden Championships x Assignment of representative industry coverage: 17 categories of LSPs with 10 relevant for network business model or integrative business model x For each of the 10 relevant categories at least one LSP studied in-depth: 13 LSPs in total x Strengthening LSPs’ research by adding customers’ perspective: - Selection of customers of LSPs studied in-depth - In total, 13 customers studied in-depth x Basis for hypotheses is gathered knowledge from theory and reality x Micro perspective: 12+1 hypotheses with one hypothesis on each of the 12 (sub-)components of a business model x Macro perspective: 3 hypotheses for company comprehensive business model dimensions x ‘Questionnaire/Interview Manual – Logistics Service Provider’: - Micro perspective: Structure according to the 12 (sub-)components of a business model - Macro perspective: Structure according to the 3 company comprehensive business model dimensions x ‘Questionnaire/Interview Manual – Customer’: - Micro perspective related issues - Macro perspective related issues x As-is status micro perspective: - Representation of the situation for each of the 12 (sub-)components of a business model without evaluation at this stage - Outcome: 11 common industry misperceptions and 12+1 business principles x As-is status macro perspective: - Representation of the situation for each of the 3 company comprehensive business model dimensions without evaluation at this stage - Outcome: 3 common industry misperceptions and 6 business principles

1 Š Introduction

20

7

BMPS

8

Conclusions

Table 1:

x Scoring performance: - Micro dimensions - Macro dimensions x Consolidation of scores in BMPS Framework x BMPS Framework’s research values: - Impact of business principle for success/failure: 1 success (2 failures) business principle(s) in micro dimension; 1 success (1 failure) business principle in macro dimension - Status of Hidden Championship: 4 Hidden Champions; 2 Potential Hidden Champions; 7 Hidden Championship Failures x Final result: 4 Hidden Champions with: - 3 outstanding dimensions in micro perspective - 3 outstanding dimensions in macro perspective x Recommendations for improvements at Potential Hidden Champions and Hidden Championship Failures ÆIdentification stage for Hidden Champions x Fallacy of Total Integration provided by traditional LSPs x Market implications x Future research

Preview of this study’s research contents and research values

2 Š The area of logistics

2

21

The area of logistics

Chapter 2 is an introduction to the area of logistics and provides an overview of the industry which is the focus of this study. The aim of this chapter is to create a coherent picture of the logistics industry and to provide the basic knowledge required for this research study. In the first section (2.1) I start with industry fundamentals. I begin with the history and definitions of the term logistics. Logistics theory and practice lack unified and established views and vocabulary. The rise of new terms such as third party logistics (3PL), fourth party logistics (4PL) and logistics service provider (LLP) has caused further confusion. In particular, the term SCM has emerged in the context of logistics. In a separate sub-section I present the similarities and differences of logistics with SCM. Section 2.1 is an attempt to present a more uniform view of the area of logistics. The next section (2.2) covers developments in the industry including the presentation of a historical review as well as the industry’s micro and macro environments. Finally, Section 2.3 provides an overview of the size of the market, its segments and actors through examples and numbers. 2.1 Industry fundamentals Logistics is no longer just the transportation of goods from one point to another. Rather, it consists in the management of complex services and processes. The variety and scope of this industry is expressed, for example, in the definition of logistics management by the worldwide association Council of Supply Chain Management Professionals (CSCMP):

“Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements. Logistics management activities typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management, supply/demand planning, and management of third party logistics services providers. To varying degrees, the logistics function also includes sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution-strategic, operational, and tactical. Logistics management is an integrating function which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions, including marketing, sales, manufacturing, finance, and information technology.” (Council of Supply Chain Management Professionals 2009, p. 98).

R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2_2, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

22

2 Š The area of logistics

The definition confirms the broad field of logistics. Section 2.1 provides greater detail about the term and the scope of the area of logistics. 2.1.1 Origin of the term Logistical activities have existed since time immemorial. They are literally thousands of years old, dating back to the earliest forms of organized trade. However, no specific term was applied to describe these activities. The use of the term logistics has its origins in war and the military for the efficient and effective distribution and storage of supplies and personnel. The historical roots lie in the end of the 18th century, when the emergence of large stationary armies, mainly in France, required a more systematic planning and execution relating to the supply of the troops. The term logistics probably originates from the French term ‘loger’. By the beginning of the 19th century Napoleon’s military strategy relied on rapid movement over large areas. Throughout the century headquarters became increasingly pre-occupied with the need to move troops quickly. With the possibility of the use of rail as a means of transport, qualitative requirements on military logistics activities increased. For example, the logistical department of the large Prussian General Staff was called ‘railway department’ for a long time. The rise of logistics’ recognition and emphasis is further exemplified by the Allied victory in World War II where a lot of effort was put into first destroying the Nazi logistical systems, and later into securing the supplies for the Allied forces in their final march to Germany. To this day, specialized logistics departments plan and implement logistical processes in armies (Lambert et al. 1998, p. 5; Wiendahl 2002, p. 9). Logistics gradually entered civil society, and in the early 1900s one finds research on the distribution of farm products (Lambert et al. 1998, p. 5, quoting Crowell 1901). However, until the 1960s, the term ‘logistics’ was not part of business management in either Europe or Germany (Blom and Harlander 2003, p. 1; Klaus 1999, p. 16). The first attempts to convert the term ‘logistics’ from a purely military use towards its presentday business sense were made in the US. In 1955 Oskar Morgenstern used the term in his publication “Note of the Formulation of the Theory of Logistics” (Blom and Harlander 2003, p. 1). Five years later, in 1960, John F. Magee published an article with the title “The Logistics of Distribution” in the Harvard Business Review (Magee 1960, pp. 89-101). In Germany ten years later, the term ‘logistics’ had still not been fully

2 Š The area of logistics

23

integrated into business. For example, Dr. Gablers Wirtschaftslexikon from 1968 did not even mention it at all, while the 1970 edition of the Brockhaus defined ‘logistics’ only in the military sense (Blom and Harlander 2003, p. 1). The term was first introduced to business in Germany in 1971 by Goesta B. Ihde, who later also introduced logistics as a business discipline (Merkel and Heymans 2003, p. 7). As in the times when logistics was used in a military context, logistics remains a decisive factor for competitive victory today. Competition is the ‘war’ of business where moving goods and products are the weapons and ammunition of modern business firms. 2.1.2 Definitions Section 2.1.1 very briefly reviewed the emergence of logistics in business and management. In fact, the definition of the term logistics is strongly influenced by the industry’s developments in history. The term’s meaning has changed in line with service offerings’ adaptations . Today’s area of logistics is characterized by the use of a variety of acronyms, jargons and hype terms. Overcomplicated definitions, phrases and words such as 3PL, 4PL, LLP or solution mystify the industry, which suffers from a lack of a shared concept. As a result, the word logistics means different things to different people. For example, an LSP paints the words ‘Integrated European Logistics’ on the side of its vehicles, but the company is still seen as a haulage carrier by people whose perception of the industry remains that of unsophisticated truckers, rather than that of integrators whose organizations design and manage total supply chains. The aim of this section is to provide a clear view of the terms used in modern industry. Definitions of the term ‘logistics’ in dictionaries of transport and logistics cover two perspectives. First, logistics is the time-related positioning (movement and placement) of resources (people and goods), i.e. its planning, execution and control to meet user requirements. Second, logistics is a total concept of planning and organizing the supply and movement of materials or goods from the original source through the value chain stages to the final customer, i.e. logistics also includes supporting activities related to movement and placement within a system organized to achieve specific goals (Lowe 2002, p. 147; TNT 2005, p. 59). The definitions show that logistics does not only mean transportation, which is only one of its components. Its definition is complex and

2 Š The area of logistics

24

diverse and requires some more attention. Figure 4 summarizes possible approaches to defining logistics. Definitions of logistics are either service-oriented (phases-specific or performance-specific), provider-oriented (partnering-specific or player-specific) or market-oriented (positioning-specific). These five types of logistics definitions (‘5Ps’) are described below.

Definition of Logistics (“5Ps”) Main distinction criteria Sub distinction criteria (“5Ps”)

Orientation

Types

Service-oriented

Provider-oriented

Market-oriented

Phases-specific

Performance-specific

Partnering-specific

Player-specific

Positioning-specific

Value chain

Resources and tasks

Work sharing

Perspective

Customer focus

• Procurement logistics • Production logistics • Distribution logistics

• Operative logistics • Basic value-added logistics

• Third party logistics • Fourth party logistics

• Service sector logistics

• Commodity logistics • Specialized logistics

• Logistics as company internal service function

• Expanded valueadded logistics • Strategic logistics Representative(s)

Figure 4:

Klaus and Kille (2006) / Merkel and Heymans (2003)

Baumgarten and Thoms (2002)

Ehner et al. (2008)

Zentes and Morschett (2003)

Pfohl (2007)

Approaches to defining logistics

First, phases-specific definitions are oriented on the processes of the value chain. It is often qualified as procurement logistics, production logistics or distribution logistics if logistics relates to procurement, production or distribution (see for example Merkel and Heymans 2003, p. 4). In Germany, probably one of the most detailed research studies on the term logistics was conducted by Professor Klaus from the University of Erlangen-Nuremberg. Klaus’ definition is phases-specific. He uses the term TUL, which means

Transport

(transportation),

Umschlag

(transshipment)

and

Lagerung

(warehousing) and distinguishes between most narrow TUL logistics (Figure 5) and extended coordination logistics. Extended coordination logistics is the most narrow TUL logistics plus (administrative) activities for order management and disposition, company-comprehensive planning, coordination and disposition tasks as well as cost of capital, deduction costs and other charges for inventory management in the supply chain (Klaus and Kille 2006, p. 32).

2 Š The area of logistics

25

Logistics services

Production internal “TUL” services

Prema terial stora ge

Tra nsport supply

Stage 1 in production

Work-inprocess stock

“TUL” services of distribution

CommissioStage 2 in ning producproduction tion pa rts

Storage fina l products

Distribution transporta tion

Warehouse distribution

Outlet storage in shelves

Legend: Most narrow term of logistics: production external “TUL” services without company internal logistics activities in the production process (TUL/German: Transport [transportation], Umschlag [transshipment], Lagerung [warehousing])

Figure 5:

Most narrow term of logistics (Translated from Klaus and Kille 2006, p. 32)

My phases-specific definition of logistics applies in particular to online orders. It is based on the current status of logistics research and practice, and is a summary which highlights key components. I defined the value chain from communication and customer order at the beginning to product entry at the customer and finalization of payment processes. According to my phases-specific definition, logistics is the designing, planning, organizing and managing of all process steps in the three process areas of procurement, order management and fulfillment (Figure 6).

Communica tion at the Site Customer Receiving Order

ORDER MANAGEMENT

Customer Order

Notification

Consume/Use

Order Return Handing Over

Purchasing

Disposition/ Procurement

Wa rehousing

Registering Order

Assembling

Pick & Pa ck

Transportation & Distribution

After Sales

Customer Payment

Pa yment & Accounting Processing

FULFILLMENT

PROCUREMENT

LOGISTICS (designing, planning, organizing and managing all process steps) Legend: Trigger activity

Figure 6:

Activities (operative services and value-added services)

Event indicating or completing activity

Environmental influence

Phases-specific definition of logistics

Second, logistics can be defined as performance-specific. A performance-specific definition is oriented on resources and tasks. Resources are either tangible or intangible. Baumgarten and Thoms, for example, distinguish between operative and administrative tasks in logistics. Part of operative logistics is production supply and -disposal in industry as well as packing, packing disposal and return management in retail, whereas

26

2 Š The area of logistics

administrative tasks are strategic and coordinative (Baumgarten and Thoms 2002, p. 2). My performance-specific definition of logistics is also related to tasks and distinguishes between operative logistics, basic-value-added logistics, expanded value-added logistics as well as strategic logistics (for more details see Section 2.2.1 with Figure 9 below in this chapter). I refer to a partnering-specific definition of logistics if the term is explained from a work sharing perspective. Representatives of this third ‘P’ in defining logistics are, for example, Ehner et al. (2008, p. 2). The terms used in this type of definition are first party logistics (1PL, where the single party is the manufacturing company), second party logistics (2PL), 3PL, 4PL as well as to some extent fifth party logistics (5PL), also known as LLP. Here, I provide a summary of the prevailing views by defining the various terms according to my findings (see also Table 3). Accordingly, the term 2PL is used if the manufacturing company (first party) provides in-house all logistics activities that are necessary to produce and distribute its goods to the customer (second party). With 3PL the first party outsources to a third party (usually an external LSP) those of its logistics activities which are necessary to produce and distribute its goods to the second party. 4PL means that the first party outsources these logistics activities to several, if not many, usually external 3PLs. Thereby, a further (fourth) party (LSP) is a ‘steering man’ for multitude operating LSPs with the role of planning, constructing, integrating, managing and optimizing all physical, informational, financial and knowledge flows related to procurement, production and distribution that are provided by 3PL providers. I refer to an LLP if the fourth party does not have own tangible resources, unlike a 4PL which has its own tangible resources. Synonymous, but rarely used for LLP is the term 5PL. Some authors or practitioners (see for example Lutz 2003, p. 10) even use the term 3.5 party logistics (3.5PL) provider in the context of this X-party or ‘eXtended’-party logistics (XPL) discussion, whereas the ‘X’ usually stands for the number of parties. The term 3.5PL, which is rarely used, describes the situation when customers build their own logistics infrastructure for reasons of increased trust, but also approach a 4PL or LLP solution to achieve higher margins. In this study the XPL discussion is not further pursued. While only the terms 3PL and 4PL/LLP are considered to be comprehensible, the terms 2PL, 3.5PL and 5PL are unreasonably related to the original neologism with indirectly achieving a quality ranking. For these reasons, I do not use the terms from the XPL discussion unless necessary. Nevertheless, at this stage I want to make some

2 Š The area of logistics

27

clarifications by applying my phases-specific definition of logistics as presented in Figure 6. The trigger activity, i.e. activities indicating operative and value-added services (VAS), events indicating or completing an activity as well as the environmental influence as presented in Figure 6 apply to Figure 7, i.e. in Figure 7 I use the outlines from Figure 6 in order to assign LSPs to the activities and events. In my example, the total value chain is served by four 3PLs. The third party logistics provider, 3PL1, is only responsible for procurement with its activities purchasing, disposition/procurement and warehousing. 3PL2 is in charge of registering orders and notification in order management. 3PL3 is responsible for assembling, pick & pack, transportation & distribution and handing over while 3PL4 takes care for order return, after sales and payment & accounting processing. Further, either a 4PL or an LLP integrates and manages all processes and activities provided by the four 3PLs (Figure 7).

Communica tion a t the Site Customer Receiving Order

ORDER MANAGEMENT

Customer Order

Consume/Use

3PL4

3PL2 3PL3

3PL1

3PL2

3PL1

3PL1

Customer Payment

3PL3

3PL3

3PL3

3PL4 3PL4

FULFILLMENT

PROCUREMENT

connectivity connectivity

LLP

Legend:

3PL1 : 3PL2 : 3PL3 : 3PL4 : 4PL / 3PL 4PL LLP

Figure 7:

connectivity

LOGISTICS

LLP:

4PL

Purchasing, Disposition/Procurement, Warehousing Registering Order, Notification Assembling, Pick & Pack, Transportation & Distribution, Handing Over After Sales, Payment & Account Processing, Order Return Integration & Management of the total processes/all 3PLs Third Party Logistics (Provider) Fourth Party Logistics (Provider) Lead Logistics Provider

Partnering-specific definition of logistics (example)

Fourth, logistics can be defined as player-specific. Here, the distinction is oriented on the perspective of the party that is conducting the logistics processes. Zentes and Morschelt, for example, refer to service sector logistics if logistics processes are managed by an external provider and to logistics as a company-internal service function if logistics activities are the responsibility of the producer (Zentes and Morschett 2003, pp. 420-421).

28

2 Š The area of logistics

Finally, a market-oriented definition of logistics is positioning-specific and directed on customer focus (Pfohl 2007, p. 58). Based on Pfohl’s differentiation, I refer to commodity logistics if single services or integrated services are provided as a commodity service for all customers in the market and to the term specialized logistics if single services or integrated services are provided for individual needs of a specific customer. The term logistics traditionally covers operative services besides production – transportation, transshipment and warehousing. The definition of the term logistics is strongly influenced by developments in the industry’s history as shown in Section 2.1.1. This applies in particular to the performance-, partnering-, player- and positioningspecific definition of logistics. Overall, today logistics can be defined according to the most distinct development in the service spectrum that is the move from traditional services up to the construction and optimization of global networks. In addition, the term contract logistics is common in the area of logistics. Contract logistics describes integrated service solutions that contain different and in terms of volume, essential, logistics activities which can be completed by value-added services and that are provided by an LSP as part of a service contract with the customer. In contract logistics services are designed individually for the customer (Weber et al. 2007, pp. 37-38). 2.1.3 Similarities and differences with supply chain management The terms logistics and SCM have become very related. In order to present their relations and to delimit both areas, a definition of SCM is necessary in addition to the definitions of logistics provided in the section above. I have used the definitions of SCM from Ayers, Bowersox et al., Bundesvereinigung Logistik and BearingPoint, Frazelle, Kopczak and Johnson as well as Wansel and Tittel as examples. To summarize their definitions, SCM contains the aspect of covering the total value chain’s physical, informational, financial and knowledge flows of all processes across a network of companies (Table 2).

2 Š The area of logistics

29 Definition of SCM

Management of life cycle processes that support physical, informational, financial and knowledge flows when moving products and services from suppliers to customers. Companies “collaborating to leverage strategic positioning and to improve operating efficiency.” Supply chain management is oriented on consideration of the total value chain across companies. Managing the network of facilities, vehicles and logistics information systems that are connected by a company’s supplier’s suppliers and its customer’s customers. Supply chain management covers “all the processes from product generation through end-of-life recycling and disposal.” Supply chain management is the control and optimization of material and information flows. It includes the total planning chain across all value steps from customers’ customers to suppliers’ suppliers.

Table 2:

Source Ayers 2002, p. 5.

Bowersox et al. 2002, p. 4. Bundesvereinigung Logistik and BearingPoint 2003, p. 36. Frazelle 2002, p. 8.

Kopczak and Johnson 2003, p. 29. Wansel and Tittel 2002, p. 37.

Definitions of SCM (examples)

According to the above definitions, there is some overlapping between SCM and 4PL or supply chain manager and LLP. These examples show the lack of a shared concept and the prevailing confusion. Therefore, I have worked out an overview that helps in clarifying the distinctions and relationships between the terms logistics and SCM, adding value to the discussions about industry terms (Figure 8). My presentation is derived from a presentation by Kopczak and Johnson (2003, p. 29). x SCM covers the totality of processes and activities along total supply chains. The totality of the five processes and activities are ‘Design product, process and supply chain’, ‘Introduce product’, ‘Promote, price and merchandise product’, ‘Fulfill product demand’ and ‘Recycle, reuse or dispose of product’. SCM coordinates and integrates all physical, informational, financial and knowledge flows from sub-suppliers to endconsumers (light grey field in Figure 8). x Logistics covers only the processes and activities ‘Design product, process and supply chain’, ‘Fulfill product demand’ and ‘Recycle, reuse or dispose of product’. This means that logistics does not target product introduction as well as product promotion, pricing and merchandising. Like SCM, however, logistics is also related to the total supply chain that covers procurement, production and distribution (darky grey fields in Figure 8). The main distinction to SCM is that logistics does not approach processes and activites that are primarily covered by the first party that is the producer, also referred to as original equipment manufacturer (OEM) or manufacturer (black fields in Figure 8). x The first party in SCM and logistics is the producer. A production company is primarily responsible for research and development, production and sales. Activities

30

2 Š The area of logistics

that are covered primarily by the first party concern the product’s introduction as well as its promotion, pricing and merchandising. x The group of the producer’s customers forms the second party in SCM and logistics. Customers may either be distributors/wholesalers, retailers, consumers of retailers or end-consumers. x The third party is the group of LSPs that is referred to as 3PL provider. 3PL providers are partners of the manufacturer, for example, suppliers of raw materials or distributors of the final products. A 3PL provider is responsible for a part or parts of a supply chain only. x The fourth party is an integrator or integrated provider which I refer to as LLP rather than using the term 4PL provider. An LLP is responsible for the management of the total supply chain. Unlike a supply chain manager, an LLP does not cover operational processes and activities but is restricted to strategic, i.e. administrative, tasks. x Supply chain players are all parties involved in a company’s supply chains. (For reasons of complexity Figure 8 does not present the possibility of having several 3PL providers for single supply chain activities as this is usually the case in reality.) Finally, a short note is required on the distinction between the terms logistics chain, value chain and supply chain. According to TNT’s logistics dictionary, a logistics chain includes all successive links involved in a logistics process (TNT 2005, p. 59). A value chain can be defined as the representation of the conversion of primary materials into a customer’s desired object (Lowe 2002, p. 267). According to Porter, the value chain is the basic tool for a systematic examination of all activities a company performs and how these activities interact in order to analyze sources of competitive advantage (Porter 1985, p. 33). A supply chain is, firstly, the continuous link from raw materials supply through production to delivery of the finished product to the end-consumer. Second, it is the total sequence of business processes from either a single company or a multiple company environment (Lowe 2002, p. 237). In this study the term supply chain is used for total business processes of a network of parties, while the term value chain refers to a single company’s internal business processes, and logistics chain to consecutive steps in a logistics process.

2 Š The area of logistics

31

To conclude this section, a summary of definitions regarding the ‘XPL discussion’, logistics, contract logistics and SCM is provided in Table 3. This terminology is relevant for this study.

Figure 8:

Processes (activities)

Subsuppliers Third party

Procurement

First party: producer Second party: consumers Third party: LSPs Fourth party: integrator/LLP Activities covered primarily by first party Logistics activities SCM

Design product, process and supply chain

Introduce product

Promote, price and merchandise product

Fulfill product demand

Recycle, reuse or dispose of product

Systems-/ components suppliers

Third party

First party

Distributors/ wholesalers

Supply chain players

OEM/ manufacturers

Production

Physical flow Informational flow Financial flow Knowledge flow

Second party

Fourth party

Reta ilers

Distribution Consumers

Endconsumers

32 2 Š The area of logistics

Overview of the terminology in the area of logistics (Based on Kopczak and Johnson 2003, p. 29; adapted for the logistics industry)

2 Š The area of logistics Term

Short description

2PL

3PL (Provider)

3.5PL4 (Provider)

4PL (Provider)5

5PL (Provider)6

LLP

Logistics

Contract Logistics

Supply Chain Management (SCM)

Table 3:

4

33

• A manufacturer’s logistics activities are conducted in-house. • Consumers receive goods from the manufacturer directly. • No third party (in the sense of a market player or market participant) is involved in providing logistics activities. • Logistics provider offers selected operative, basic value-added or expanded valueadded services. • Logistics provider uses own tangible resources and systems. (While in theory and practice the terms tangibles as well as intangibles are common, in this work the terms tangible resources and intangible resourses are used.) • The concept emerged out of the weakness of an LLP/5PL provider in terms of having no assets, leading to a lack of trust among customers. Therefore customers build their own infrastructure or acquire companies with assets. • The concept emerged out of the strength of 4PL/LLP/5PL in terms of achieving high margins. It is the move from 3PL to 4PL/LLP. • The focus of the service offering is on strategic services. • The aim is to offer total solutions, also referred to as one-stop-concept or one-stopsolution, and covers the planning, construction, integration, management and optimization of (logistics) networks, i.e. all physical, informational, financial and knowledge flows related to procurement, production and distribution. • Ownership of operative and strategic systems and networks (intangible resources/soft assets and tangible resources/hard assets). • A virtual (logistics) provider managing (logistical) networks. • No ownership of physical assets (logistics assets/hard assets/tangibles resources). • The term LLP is often used synonymously. • Provider’s concept is analogous to a 4PL provider’s concept. • Unlike a 4PL, an LLP does not have its own tangible resources/hard assets but has access to an extensive network of partners. In this way, neutrality in service provision is guaranteed. • Traditionally operative services besides production which are transportation, transhipment and warehousing. • The most distinct development is that the service spectrum has been extended from traditional services up to the construction and optimization of global networks. • Integration of several logistics functions within a close, individualized relationship. • Service spectrum covers operative and/or value-added and/or strategic services. • The relationships are long(er) term. • Relationships are formalized on a contractual basis (‘contract’). • The business volume exceeds considerable minimum annual turnover. In practice the minimum value is an annual turnover of 0.5–1 m. euros per year (HypoVereinsbank et al. 2004, p. 7). • Flow of products, information, finance and knowledge across all levels of value added and all processes from product, process and supply chain design to product recycling, reuse or disposal. • Integration and coordination across companies from sub-suppliers to endconsumers.

Terminology: ‘XPL discussion’, logistics, contract logistics and SCM

The 3.5PL concept is, for example, discussed in Lutz 2003, p. 10. Origins of the term 4PL go back to 1996 when Accenture (formerly Anderson Consulting) coined the term fourth party logistics (Helmke 2001b, p. 3). US literature increasingly dealt with the issue in the following years (see e.g. Copacino 1997, p. 43; Bade and Mueller 1999, pp. 78-80; Stone 1999, p. 103) with European literature to follow (see e.g. N.A. 2001a, p. 6; Baumgarten 2001a, pp. 36-38; Moeller 2005, p. 9). 6 The term 5PL is rarely used. This definition is based on Gericke 2003, p. 37. 5

34

2 Š The area of logistics

2.2 Recent developments During the past forty years, logistics has developed from a business function that was strongly concentrated on physical operations into an integral, process- and customeroriented management and business leadership concept. The future of logistics is shaped by trends and current developments as well as by macro and micro environmental factors. LSPs have to take them into account for the reason that logistics will remain decisive for competition in the future. 2.2.1 From value chain to value network The area of logistics is characterized by constant change. Each of the past four decades formed a new milestone in logistics’ development (the following explanations are based on Baumgarten and Thoms 2002 as well as on Baumgarten and Walter 2000). The phase of classical logistics was in the 1970s. Logistics was mainly concerned with the flow of materials and goods. The aim was to guarantee the availability of materials and goods in the production process. LSPs’ responsibility for inbound and outbound logistics covered operative services, in particular transportation, transshipment, warehousing, commissioning, packing and freight forwarding, including optimization. Often logistics was embedded in the functional organization of a company with dissociated functions of logistics. Also, in the 1970s the development of information technology was still low. Consequently, work structures were redundant and efficiency low; parts of processes were uneconomic and order management times were long (Baumgarten and Thoms 2002, p. 62; Baumgarten and Walter 2000, p. 3). The 1980s were characterized by the development of logistics management. Logistics had a cross-section function with the aim of optimizing functional comprehensive sequences. Functional interfaces between procurement, production and sales causing decreases in effectiveness and efficiency were in the focus of interest. From this time onwards, logistics management optimized logistics services by integral consideration of previously separately planned and headed functions. In addition to operative services, LSPs increasingly offered basic value-added services such as warehouse value-add, provision of materials synchronized to production, or quality control (Baumgarten and Thoms 2002, p. 62; Baumgarten and Walter 2000, p. 3).

2 Š The area of logistics

35

Functional integration and company comprehensive integration are the two developments recorded in the 1990s. In this period a transformation from a functional perspective towards a flow-oriented perspective occurred. Construction and optimization of process chains (functional integration) and of value chains (company comprehensive integration) were the focus of interest. The field of logistics increasingly covered not only the company itself but all companies involved in the value chain. Logistics aimed at creating efficient flows of materials and goods. Its tasks were to coordinate information flows, to reduce information deficits through the development of new technologies and to manage own inventories. With functional integration, the process-oriented and integral view allows a comprehensive optimization of the process chain that also included development and recycling besides procurement/supply, production and sales/distribution. Furthermore, order fulfillment accompanies production and distribution as the responsibility of LSPs. With company-comprehensive integration, the company is no longer the sum of single disassociated functions but an integral system of value chains of suppliers, producers, retailers and customers (Baumgarten and Thoms 2002, p. 62; Baumgarten and Walter 2000, pp. 3-4). Today, logistics goes beyond a single company’s borders. LSPs offer customized endto-end logistics solutions for the entire, extended supply chain (Pfohl 2006, p. 3). Logistics is the worldwide integration of value chains. I refer to this as Integrated Supply Network Management. Supply chain partners cooperate, aiming to construct and optimize the total supply chain from suppliers’ suppliers to customers’ customers in global supply networks. LSPs no longer offer just operative or value-added services but have entered the field of strategic services. Examples of LSP activities are merge in transit, or the optimization of the distribution network. Customers are the focus of interest as they influence the total supply chain process through their requirements (Baumgarten and Thoms 2002, p. 62; Baumgarten and Walter 2000, p. 4). Figure 9 summarizes the developments in the industry from the 1970s towards the new millennium and onwards touching all LSPs independent of company size. The horizon of logistics increased from efficient flow management of materials and goods up to comprehensive, customer-oriented optimization of total supply chains. Consequently, logistics is a strategic instrument for business management and a decisive factor in competition (Baumgarten and Walter 2000, p. 4). This confirms Magee’s view that

36

2 Š The area of logistics

industrial logistics and trends in logistics technology will receive increasing attention from business. Moreover, Magee’s perspective of logistics with a pure concentration on physical distribution and distribution systems has been surpassed by far. Magee pointed in particular to three revolutionary changes that have taken place, which are the strides forward in information-handling methods, the acceptance of materials-handling methods and the progress in ways of looking at the logistics problem and at methods for analyzing distribution systems (Magee 1960, p. 89 et seq., p. 100).

Procurement

Crosssection function

Functional and company comprehensive integration

Worldwide integration of value chains

1970s

1980s

1990s

2000s and onwards

Supply

Responsibility of the area of logistics.

Integrated Supply Network Management Supplier

Transportation Transshipment Warehousing

Logistics

Transportation Transshipment Warehousing

Outbound

Client

LSP

LSP

Retailer

Producer

Retailer

Sales

Sales

Global Supply Network (Extended Supply Chain)

Recycling

Customer

Order Fulfillment Production Distribution

Production

Production

Producer

Transportation Transshipment Warehousing

Logistics

Transportation Transshipment Warehousing

Inbound

Developments in the area of logistics

Company comprehensive integration LSP Supplier

Development

Functional integration

Procurement

Classical logistics

Phase

Construction/optimization of global networks

Construction/ optimization of value chains

Construction/ optimization of process chains

Optimization of function comprehensive sequences

Optimization of disassociated functions

Functions and tasks

Operative services Value-added services expanded basic

Figure 9: Strategic services

Period

Transportation Transshipment Warehousing Freight forwarding (customs, documents, etc.)

• Merge in transit • Optimization of the distribution network

• Inventory management • Advanced IT services • Inventory ownership

• Warehouse value-add • Provision of materials synchronized to production, quality controls

• • • •

Exemplary activities

2 Š The area of logistics 37

Developments in the industry from the 1970s towards the new millennium and onwards (Based on Baumgarten and Thoms 2002, p. 62; Baumgarten and Walter 2000, p. 2)

38

2 Š The area of logistics

In my view, the above description of developments in the industry requires two basic adaptions. First, the value chain as presented prior to the 2000s has to be further specified as it covers more than procurement, inbound logistics, production, outbound logistics and sales. Second, the phase beyond the 2000s, with its strong network characteristics, has to be further detailed in terms of the value chain participants, as this is a development of major impact on the logistics industry and on doing business in general. Figure 10 shows my presentation of developments in the industry as an improved alternative to Figure 9. In the 1970s and 1980s the traditional value chain was of interest for logistics. There was clear work-splitting between the LSP and the producer. Logistics tasks concentrated on operations management in inbound logistics/raw material supply and outbound logistics/delivery only. The responsibilities of the producer were on the value chain activities of research and development, product design, process development, procurement, production/product transformation, marketing, sales and after-sales service. This means that the producer’s roles covered product development, i.e. its design and product-to-market activities, operations management in particular regarding assembly, as well as process management like integration of complementary vertical and horizontal resources and competences. In the 1990s an advanced value chain was the focus of LSPs which increasingly took over more activities from producers. The roles of logistics concentrated on operations management by providing operative services like outbound logistics and value-added services like assembling, as well as on process management by providing strategic services like integration of complementary vertical and horizontal resources and competences. Specifically, the value chain activities of LSPs were process development, procurement, inbound logistics/raw material supply, production/product transformation, outbound logistics/delivery and after-sales service (see dark grey arrows in part ‘1990s: Advanced Value Chain’ in Figure 10). The producer, as the other party in providing value chain activities, focused on product development with product design and product-to-market activities. The producer was specifically responsible for research and development, product design, marketing and sales.

2 Š The area of logistics

39

However the key turnaround in the industry has happened since the turn of the century with the rise of value networks. There are no longer just the two parties of an LSP and a producer. Now, business is networking with four types of participants. The first group of participants is the product designers who are responsible for product development. The second group is formed by several producers who are responsible for a part of a final product. All these parts are consolidated by outsourcers. I describe this role of outsourcers with the phrase ‘cooking transformation’ of the production process. The third group of network participants is the retailers who are in charge of retailing, while LSPs, as the fourth group, are responsible for supply chain operations and integration. With my presentation of developments in the industry in Figure 10 I would like to highlight the decisive change in the industry with value chain activities moving away from the producer to other parties. This aspect is, for instance, also covered in a publication by Hirn and Neukirchen (2001, pp. 294-304). The authors state that companies increasingly leave production and focus on product development and branding. While at that time it could not be categorically stated whether this strategy would result in future success and long-term survival due to the constantly changing industry, from my perspective this seems to have been proven at least in the medium term as many companies like Adidas or Nokia, among others, pursue this strategy. However, there are contrarians like the Spanish clothier Zara which manages a lot of design, warehousing, distribution and logistics functions itself instead of relying on outside partners (Ferdows et al. 2004). This example shows the tension remaining regarding this development in the industry. Summarizing the essence of this section, liberalization, in particular in the EU, and globalization, have led to a fracturing, if not to an explosion, of the value chain, where companies are doing less and less themselves. Companies’ value chains are becoming smaller, while their partners’ are becoming larger. One of the changes of major impact was the outsourcing of manufacturing away from design and service. All of this leads to the emergence and growth of the logistics function and industry while the manufacturing industry is decreasing – a development that applies in particular to Europe. This provides the interesting distinction between value chain and value network which is that logistics is what makes the value network work.

Legend:

2000s and onwards: Value Network

1990s: Advanced Value Chain

1970s and 1980s: Traditional Value Chain

Product Design

Research & Development

Operations Management/ Process Management

Retailing

Retailers

Sales

Producers and other value chain or network participants

Product Development

Outbound Logistics/ Delivery

Logistics

Supply Chain Operations/ Integration

LSPs

Production “Cooking Transformation”

Outsourcers

Marketing

Producer

Inbound Production/ Logistics/ Product Raw Material Transformation Supply

Sales

Roles and responsibilities

Procurement

Outbound Logistics/ Delivery

Group of value chain participant or network participant

Product Development

LSP

Process Development

Product Development, Production, Retailing

Marketing

Producer

Inbound Production/ Logistics/ Product Raw Material Transformation Supply

In- and Outbound Logistics

Procurement

LSP

Process Development

Product Designers

Product Design

Research & Development

AfterSales Service

AfterSales Service

40 2 Š The area of logistics

Figure 10: From value chain to value network: Developments from the perspective of participants’ roles

2 Š The area of logistics

41

2.2.2 Environmental conditions Section 2.2.2 aims to identify the causes of current developments in the area of logistics. For this reason an analysis of the micro and macro environments is conducted. For the micro environment analysis I applied Porter’s concept of structural analysis of industries and searched for the underlying sources of the five competitive forces. The macro environment analysis covers causes from the ecological, economical, legal, political, sociological and technological fields. 2.2.2.1 Micro environmental factors In the course of the literature review, I analyzed articles, surveys and presentations in terms of environmental factors that affect the area of logistics. Applying the concept of Porter with its five competitive forces and their allocated sources (Porter 1980, pp. 329), examples of logistics were assigned. The analysis considers the competitive forces acting on all types of providers operating in current logistics. Based on the examples, an evaluation is made whether the sources have a high, moderate or low impact on industry competition. This evaluation is subjective and based on the literature review as well as on practical experience. Table 4 presents this structural analysis of the industry that fits for the area of logistics.

2 Š The area of logistics

42 Forces driving industry competition Potential entrants

Sources of the forces

Barriers to entry: Economies of scale

Product differentiation

Capital requirements Switching costs Access to distribution channels

Cost disadvantages independent of scale Government policy Expected retaliation from entrenched competitors

Industry competitors

Numerous or equally balanced competitors Slow industry growth

High fixed or storage costs Lack of differentiation or switching costs Capacity augmented in large increments Diverse competitors

High strategic stakes

High exit barriers

Continued on next page

Examples of the industry that fits the area of logistics

Evaluation: impact on industry competition

Regarding total solutions, the changed, increasingly heterogenous and individualized needs of customers require a variety of engagements in logistics and a steadily increasing service spectrum Reduced loyalty of customers; risky investments in building a brand name by newly-emerged companies focussing on strategic tasks, while established companies (usually asset-intensive companies) are already well-known High capital requirements for asset-intensive companies; companies with soft assets invest in knowledge, advertising, etc. Shorter contract times/increased frequency for tenders and ‘auctions’ of tenders; psychic costs of serving a relationship Existing competitors with stronger ties to channels, in particular new market entrants joining networks have to deal with building strong relationships to third parties (higher trust for established companies) Declining costs at established companies due to improved methods and more efficient processes; shared learning for players founded within existing companies Due to deregulation in the postal market, postal operators are moving heavily into the area of logistics Strong commitment of established companies to the industry: foundation of subsidiaries providing total solutions, acquisitions of companies which offer total solutions, driving out of companies which tried to move into the industry during the age of new information and communication technologies

low

Tendency for concentration; a few relatively balanced companies in terms of their size and perceived resources have the resources for retaliation The European logistics market grew by roughly 8% from 2004 to 2007; the volume also increased due to higher prices for fuels and road charges Individualized service offerings provided just-in-time High individualization of customers’ needs

high

Less risky than in commodity business as the demand for logistics services is not cyclical in general and services are differentiated Intensified competition: market players from various industries (IT, consultancy, etc.); market players are diverse in strategies (operative/strategic service provider), origins (logistics, IT, consultancy), personalities (owner/individual with many years of experience in transportation) and relationships to their parent companies (start-ups, merged divisions) Postal operators increased efforts to establish a solid position in logistics for becoming global market leaders with potential willingness to sacrifice profitability (discussion of crosssubsidizing) After the ‘e-Hype’, e-Logistics providers and e-Commerce enablers left the market and were barely missed

low

high

moderate lowmoderate high

high

high high

moderate

low low

high

moderate

low

2 Š The area of logistics

43

Continuation from previous page Forces driving industry competition

Sources of the forces

Substitutes

Pressure from substitute products

Buyers

Buyer group is powerful if: it is concentrated or purchases large volumes relative to seller sales

the products it purchases from the industry represent a significant fraction of the buyer’s costs or purchases the products it purchases from the industry are standard or undifferentiated it faces few switching costs it earns low profits buyers pose a credible threat of backward integration the industry’s product is unimportant to the quality of the buyer’s products or services the buyer has full information

Suppliers

Supplier group is powerful if: it is dominated by a few companies and is more concentrated than the industry it sells to

it is not obliged to contend with other substitute products for sales to the industry the industry is not an important customer of the supplier group the suppliers’ product is an important input to the buyer’s business the supplier group’s products are differentiated or it has built up switching costs the supplier group poses a credible threat of forward integration

Table 4:

Examples of the industry that fits for the area of logistics

Evaluation: impact on industry competition

Use of potentials with new IT; changes in supply chain responsibilities, for example insourcing

low

The number of producers requiring logistics services is large and producers are of a wide range of sizes; however, dependence on specific buyer groups with similar requirements on services (e.g. “Freshnet” as defined core sector for food/catering trade at Thiel Logistik AG, Luxemburg) Outsourcing (focus on core competencies); “phenomenon of forward shifting” (“Phaenomen der Vorwaertsverlagerung”): shifting complexity towards distributors

moderate

Trend towards individualization of services but services are not very differentiated; increased requirements on quality of the European logistics systems which have to meet individual needs

moderate

Switching costs are linked to the contract; trend towards reduced period of validity of logistics contracts (Depending on target group) Customers with their own experience in logistics due to their own activities in the past or partly still today Service (delivery at the right quality, in the right quantity, in the right place, at the right time) is especially important in e-Commerce

low

Cost transparency; possibility for comparison of products and prices worldwide due to the Internet

moderate

Depending on the specific market the degree of concentration of the top 10 companies in Europe stretches between 7% (industrial contract logistics, in particular industrial production supply, spare part distribution and other ‘business-to-business’ contract logistics) and 69% (CEP – courier, specialized express services and parcel); suppliers are often large companies, in particular airports or ocean carriers, but they are not numerous Possibility of the introduction of Deutsche Post’s Packstation (picking up of the delivery by the customer at a specified place) in the business-to-consumer area also for the business-tobusiness area Trend towards services from a single supplier: providers in the area of logistics offering the total solution have a strong position as suppliers’ direct access to buyers is interrupted by this party positioned in-between Input is important to service provision in particular for companies with hardly any assets or no assets at all

lowmoderate

In general, similarity of services; differences in quality (e.g. delivery without losses, etc.)

low

Highly-skilled, experienced employees with the ability to integrate global value chains in the buyer group

high

high

--moderate moderate

low

moderate

high

Structural analysis of the logistics industry (Based on Porter 1980, pp. 3-28; sources for the examples: Baumgarten and Thoms 2002, pp. 8-9, p. 67, p. 83, p. 104; Fritzen 2005, p. 12; Heaton 2004, p. 94, p. 96; Helmke 2002, p. 3; Klaus 2003, p. 70, pp. 79-151; Klaus and Kille 2008, p. 45; Kuehner 2002, p. 23; N.A. 2003b, p. 6; Schmeling 2003, p. 10; Truszkiewitz 2002, pp. 55-56)

2 Š The area of logistics

44

I counted the number of high, moderate and low evaluations per force in order to gauge the strength of their effect on industry competition. For example, the industry competitors force has two high, two moderate and four low evaluations. This procedure was similarly applied to the other four forces leading to the results as presented in Figure 11. The force of potentential entrants with five high, 1.5 moderate and 1.5 low evaluations is a force with a high impact on industry competition. The forces buyers (one high, five moderate and one low evaluation), suppliers (two high, 1.5 moderate and 2.5 low evaluations) and industry competitors are forces with moderate impact on industry competition while the force substitutes has a low impact.

POTENTIAL ENTRANTS

High: Moderate: Low:

SUPPLIERS High: Moderate: Low:

High: Moderate: Low:

5 1.5 1.5

Threat of new entrants

2 2 4

INDUSTRY Bargaining power COMPETITORS Bargaining power of suppliers of buyers

2 1.5 2.5

Rivalry Among Existing Firms

BUYERS High: Moderate: Low:

1 5 1

Threat of substitute products or services Low:

1

SUBSTITUTES

Legend: Force with high impact on industry competition. Force with moderate impact on industry competition. Force with low impact on industry competition.

Figure 11: Micro environmental conditions: forces driving industry competition (Based on Porter 1980, p. 4)

My judgements of the overall strength of the five forces on industry competition originate in the arguments below. x I assess the power of new market entrants as high. Well-established LSPs in the industry have been known by customers for years. These LSPs often provide individualized and Total Integration solutions by setting up subsidiaries or through the acquisition of companies as a response to new entrants. Furthermore, in entering global networks, new entrants have to manage hurdles such as costs and efforts for creating

2 Š The area of logistics

45

trust and building relationships, both very well-established at LSPs that have been in business for decades. x The power of buyers on industry competition is moderate. Despite the trend towards individualization, logistics services are not highly differentiated. If logistics generates a large volume of a producer’s costs or is a vital part of their business, buyers are more willing to switch or to insource logistics services again. Buyers are independent and price-sensitive. x Suppliers’ power is assessed as moderate. LSPs operate in a strong network of partners. They may own assets for offering services or access those of other parties. For example, airports or ocean carriers are vital suppliers if it is not feasible to transport goods by road. But employees in logistics have become highly-skilled, leading to the expectation of increasing forward integration towards total solution offerings. x There is also moderate rivalry in the logistics industry. Major players offer similar commodity services, while SMEs concentrate on individualized offerings. Rivalry is mainly driven by the lack of diversity, a large number of LSPs and easy expansion. x The threat of substitutes in logistics is weak although according to current industry developments in-house logistics, consultancies and IT companies have to be considered as possible providers for substitute services. Advances in technology may change the way logistics is provided but their impact is also low. Overall, my analysis identified a tension between current developments in the industry with the rise of new value chain participants (2.2.1) and the high strength of the force potential entrants in industry competition. According to my findings from literature review and experience, new value chain participants have to deal particularly with five barriers to market entry. The first barrier is that new entrants have difficulties in establishing a brand and reputation. LSPs that have been in business for decades are well-established and wellknown to customers. New entrants have to make large investments to create such a good brand and high reputation in the industry. A further barrier is that new entrants are restricted in accessing networks. Well-established LSPs have strong global networks. Success in Integrated Supply Network Management requires new entrants to have a key strength in relationship building. The third barrier is that new entrants lack knowledge. The area of logistics is traditionally a low margin business. Offering single services or

46

2 Š The area of logistics

integrated services for an anonymous market requires experience, for example in terms of improving methods for making processes more efficient. In contrast to moving boxes or transporting goods the spectrum of activities for LSPs is today very complex. Fourth, in the course of deregulation, postal operators are approaching the area of logistics aggressively as the example of Deutsche Post shows and finally, there is a fierce competition initiated from established LSPs. LSEs in logistics strongly defend their market position through the acquisition of new entrants that help to enhance the service portfolio. Moreover, industry competition is intensified and strongly characterized by concentration of a few relatively balanced companies from many industries. Buyers increasingly focus on core competencies and outsource other activities. Thereby, the LSPs key power is in their inputs’ importance to the buyers’ business. LSPs with highly-skilled and experienced employees who are able to integrate complex supply chains have a strong power to overcome the hurdles in today’s industry competition and to compete with the arising new value chain participants. 2.2.2.2 Macro environmental factors Besides micro environmental factors, factors from the macro environment also influence the developments in the area of logistics. In this section the aim is not to provide an all-embracing list but to highlight important factors from each of the six dimensions of the legal, sociological, ecological, technological, economical and political environment. Figure 12 provides examples of issues in the macro environment.

Deregulation and privatization EU East Enlargement Introduction of toll charges Cross-border transportation regulations, norms and issues (e.g. putting goods from trucks on trains when moving from Germany into Switzerland)

Political Environment

Macro Environment

Legal Environment Sociological Environment

• Safety legislation due to terrorism • Environmental directives • Conditions for working safety (e.g. hours allowed for driving a truck)

• Networking of companies • Building and further developing cooperations and strategic alliances to Economical Ecological cover a broad service spectrum in a network of partners Environment Environment • Corporate mergers and acquisitions (designed Technological to merge international logistics expertise with Environment domestic warehousing and distribution capabilities) • Intensified collaboration between producers and distributors due to reduced depth in production and fractal • Acceleration of frequency of economic distribution of value creation and know-how activity in an on-demand world • Increasing shift of initiative in value-added • Shorter product life cycles benefit towards the end-consumer • Dynamic of technology change • New distribution channels • Networking (Internet, Intranet) • Merging of logistics competencies • Automatization (robotics) • Globalization/global expansion of markets • Comprehensive locating (e.g. through GPS) • Market stagnation • Software/database developments allowing • Cutbacks in resources controllability and automization of product and • New business models information flows by means of, for example, RFID

• • • •

• Growing environmental sensibility • Dramatic increase in requirements on safety, prevention and sustainability • Demand for reduction in CO2 emissions • Environmental pollution • Increasing costs in road transportation due to ecological taxes (e.g. “Oekosteuer” in Germany) and road tolls for lorries and trucks • Increasing recycling tasks for LSPs due to stronger ecological laws

• Transition to a post-industrial society • Stagnation of growth in industrial production in Western Europe • Financial crisis • Influence of private equity investors • Increased demand for individualized products and services • Social burden caused by higher contributions to, for example, health insurance leading to additional costs in wages • Share of persons with higher education and share of qualified employees increases

2 Š The area of logistics 47

Figure 12: Macro environmental factors affecting the logistics industry (examples) (Based on Baumgarten and Thoms 2002, p. 8, p. 67, p. 83, p. 104; Eyefortransport 2003, p. 1; Gooley 2002b, p. 45, p. 47; Klaus and Kille 2008, p. 18; RFID Journal 2004, p. 9; Kuehner 2002, p. 23; N.A. 2001b, p. 1 ; N.A. 2001c, p.1; Wereldsma 2008, p. 21; WestLB Panmure 2000, p. 23)

48

2 Š The area of logistics

On the macro level, the economical, technological and ecological environments have the strongest impact on the area of logistics. The key factors in the economical environment are globalization, awareness of the importance of an optimized organization as well as concentration on core competencies. Due to the globalization of production and global economy traffic transport, logistics has also become internationalized. The demand for large networks and competition is increasing. An optimized organization of structures and processes by lean management, process management or event management is viewed as a success factor in the industry. The rise of outsourcing due to a concentration on core competencies leads to reduced complexity and increased financial performance (Klaus and Kille 2008, p. 18; Straube and Borkowski 2008, p. 17; Weber et al. 2008, p. 7). The technological environment also has a strong impact on the area of logistics. New technologies are enhancing the requirement for communication and integration and the frequency of economic activity in an on-demand business world is accelerating. Also, success or failure in competition is dependent on time and speed. Technology and product cycles are shorter and just-in-time production is increasingly replacing large inventories. With IT logistics, systems are more flexible and enable operations in a dynamic field. Furthermore, technological progress provides new options for logistics design. For example, networking is narrowing as a result of the Internet, comprehensive locating is possible with GPS or controllability and automization of product and information flows is enabled by means of RFID and other technologies (Klaus and Kille 2008, p. 18; Weber et al. 2008, p. 35). In the past few years the importance of ecology has increased in logistics due to growing environmental threats and sensibilities. In particular, the industry has to be concerned with reductions in CO2 emissions as on average 10% to 20% of the CO2 emissions of a product are caused by transportation alone (Arretz and Jungmichel 2008, p. 5). Germany, for instance, has the political aim of reducing greenhouse gas emissions by 40% from 1990 to 2020. As of 2006, the aimed reduction was being missed by 2.5 percentage points. The share of total traffic (persons and goods without air and sea traffic) on total CO2 emissions was roughly 18% in Germany in 2007. Although the transportation of goods accounts for only roughly six percent of total CO2 emissions (in 2005, without air traffic), its share of emissions of total traffic, currently at around 30%,

2 Š The area of logistics

49

is continuously increasing. This shows that for the future even stronger ecological requirements on goods traffic are to be expected (IKB Deutsche Industriebank 2008, p. 3). A final example of the ecological environment is that requirements on safety, prevention and sustainability will increase dramatically (Klaus and Kille 2008, p. 18). One of the key characteristics of the sociological environment is the transition to a postindustrial society. While in Western Europe in particular the growth in industrial production of goods stagnates, customers increasingly demand individualized products and services as well as the enrichment of goods through services (Klaus and Kille 2008, p. 18). The political environment is mainly shaped by the deregulation and privatization of state-owned communication and transportation companies. The abolition of public, i.e. not fixed by market and competition, prices and entrance rights has triggered a revolution. In particular, strong decreases in prices for the transportation of parcels and other goods has led to a hard rationalization pressure in these markets. Traditional service providers, i.e. formerly fully state-owned operators, started to give themselves new structures, to create new products and services in new qualities and to commercializing these aggressively. They searched for possibilities of rationalization, of improving quality and flexibility. Thus, by deregulation logistics also has become an impulse giver and enabler of innovations in many areas of the economy. To mention just two examples, the German postal incumbent Deutsche Post AG with DHL as the umbrella brand for its express and logistics business since 2003 (Deutsche Post 2005, p. 31) or the German rail operator Deutsche Bahn with its business unit DB Schenker Rail (Deutsche Bahn 2009, cover page) are very strong competitors in the area of logistics today. They are usually hybrid LSPs that operate in several business segments (Klaus and Kille 2008, p. 18). Finally, regarding the legal environment, rules and norms such as those concerning conditions for working safety, e.g. maximum hours allowed driving a truck, also influence the area of logistics. Furthermore, safety legislation due to terrorism or environmental directives are being increasingly approved (Wereldsma 2008, p. 21).

50

2 Š The area of logistics

In this Section 2.2.2 my research contribution is the identification of micro and macro environmental conditions that are the causes for developments in the industry as described in Section 2.2.1. A summary and overview of my findings is given. In the micro environment, the key conclusions are that the force potential entrants has a high impact on industry competition, whereas the forces industry competitors, suppliers as well as buyers have a moderate impact while substitutes’ impact is low. This is of special interest as industry developments demand for new market participants. Providers in the area of logistics are challenged to overcome many barriers in industry competition. Besides these micro environmental issues, the area of logistics is strongly impacted by economical, technological and ecological factors from the macro level. 2.2.3 Trends and current developments As described in Section 2.2.1, the industry has developed from classical logistics in the 1970s towards integrated supply chain management in the 2000s. The first decade of the 21st century is inclining to the end and a new period in the area of logistics is crystallizing which is customer-driven. Customers’ expectations decisively influence the future concepts in the industry. While in the past four decades complexity and scope of requested logistics services has increased continuously, this trend is now being strengthened even further. In the context of a highly customer-driven business, the requirement on supply chains is an increasingly dynamic and less static responsiveness, and the intensity of collaboration is high. I use the term demand chain management to describe this current and future concept. Integration in demand chain management means ad-hoc availability compared to disassociated functions in the 1970s and transactional integration in Integrated Supply Network Management. Demand chain organization is end-to-end, i.e. integrated rather than departmental or intra-company. The management approach is collaborative instead of hierarchical as in the 1970s or characterized by instruction and control as in the 2000s. While local technical solutions were used in classical logistics, Enterprise Resource Planning (ERP) solutions that ensure greater coordination of business processes (Lowe 2002, p. 85) shaped Integrated Supply Network Management. By comparison, currently and in future supply chain participants are web-connected. This

2 Š The area of logistics

51

allows real time operations rather than responses in days, weeks or even months. Performance is no longer measured primarily in terms of costs as it was in classical logistics or in terms of costs and quality as in Integrated Supply Network Management, but – since it is driven by stakeholders rather than customers or providers – in terms of turnover and profit. Figure 13 provides an overview of past and future trends in the area of logistics.

Supply chain responsiveness

Static

Dynamic

High

Intensity of collaboration Low

Dimension

1970s

2000s

2009+

Logistics

Integrated Supply Network Management

Demand Chain Mangement

Integration

Disassociated

Transactional

Ad-hoc availability

Organization

Departmental

Intra-company

End-to-end/integrated

Management approach

Hierarchical

Instruction and control

Collaborative

Technology

Local solution

ERP

Web-connected

Time

Months/weeks

Weeks/days

Real time

Performance

Costs

Costs and quality

Turnover and profit

Figure 13: Trend towards demand chain management (Based on Wereldsma, D. 2008, p. 20)

Demand chain management as the future of the area of logistics will be characterized by serving ‘smart’ customers, a differentiated buying experience, rich-media information, greater personalization, the shift from products to services and solutions as well as the commoditization of quality. According to the GCI (GCI et al. 2006, pp. 9-10), there are six critical areas of opportunity for growth and improved performance, i.e. for customer-driven behavior in demand chain management. There will be a new interface with the customer (‘shopper’) for a two-way dialogue (shopper dialogue), open platforms for distributed data-sharing models (information sharing), synchronized production with full integration of upstream suppliers (synchronized production), a move from retailer brand-centric logistics to geographic-centric logistics with more collaboration on transportation and consolidation (integrated logistics/home fulfillment), economic development and environmental protection aiming at a higher quality of life for everyone (sustainability) as well as shared services, shared information and

52

2 Š The area of logistics

collaboration leading to, for example, organizational development or improved trust (company cultural and behavioural changes). As a reaction to these trends and current developments, LSPs have to review and transform their business models. High priority is on focussing on core competencies and on commoditizing existing offerings. However, LSPs have to provide differentiated services to add value and to succeed in the dynamic customer-driven industry. Additions to service offerings are, for example, the provision of end-to-end supply chain visibility, business process re-engineering or supply chain analysis and improvement. 2.3 Industry demography This section provides an overview of the sizes of the global, European and German logistics markets based on estimates from Klaus and Kille, the Fraunhofer Institut, Datamonitor and Armstrong & Associates. A segmentation of logistics is feasible from several perspectives. I present the approach by Klaus and Kille, who segment by the functional area of logistics, means of transport and geography. Following this, I provide an overview of LSEs in the European logistics industry. LSEs are the one group of actors, SMEs are the other. I also present examples of German LSEs and German SMEs offering contract logistics services. Section 2.3 ends with a closing remark on the number of LSPs in Europe and on Hidden Champions in the industry. 2.3.1 Market volume Only a few researchers, experts, authors or institutions have concentrated on a detailed analysis of the size of the market for logistics. The Fraunhofer Institut (Professor Klaus), Armstrong & Associates, and Datamonitor are the best-known sources, being industry standard and with long-term experience in market analyses. I cite these sources in this section without making further explanations or evaluations of market potentials. The first source, the Fraunhofer Institut Integrierte Schaltungen/Arbeitsgruppe für Technologie der Logistik-Dienstleistungswirtschaft ATL has published estimates on market volumes in its regular study on the ‘Top 100’ in logistics. The key authors Klaus and Kille have focused on market estimates for Germany and Europe (Klaus and Kille 2008, 2006). Similarly, it is the supply chain market research and consulting company Armstrong & Associates which regularly estimates the logistics market volume for the US. The worldwide association of supply chain management professionals, the CSCMP,

2 Š The area of logistics

53

also relies on the market figures from Armstrong & Associates (Wilson 2005). Market research by Datamonitor (2008a; 2008b; 2008c; 2008d) covers the global logistics industry. Datamonitor is a business information company specializing in industry analysis. Its market volume estimates are extremely divergent from those of Klaus and Kille as well as from those of Armstrong & Associates. These differences show the confusion in literature regarding to statements on market volumes. One of the essential reasons might be a different view of what logistics is and which services should be included in the total logistics volume. Logistics can be defined very narrowly or very expansively (Klaus 1999, p. 39; for data sources, gaps and quality as well as incompatibilities or limits of information value regarding Klaus’ market research, see Klaus and Kille 2008, pp. 41-44). Datamonitor’s procedure was shown to be extremely untransparent by a request by Kille (also on behalf of the Fraunhofer Institut) for an explanation as to the radical differences in data. The figures from Klaus and Kille are based on several estimates as well as on statistics which are publicly available. Kille suspects that the figures of Datamonitor contain only the volumes of the LSPs, as well as only transport and warehousing but no administration, capital and management costs (Kille 2009). Datamonitor did not comment on the request for an explanation for the difference to the other sources’ market estimates. One of my contributions to research in the area of logistics is summarizing available estimates on market volumes. Accordingly, Table 5 provides an overview of the published logistics market volume estimates from the three key sources mentioned. To avoid this kind of confusion in market volume estimates a clear definition of terms in the area of logistics as clarified and provided in Section 2.1.2 is a necessary prerequisite. My research finals in that section should be helpful for future market volume estimates and a more shared understanding.

2 Š The area of logistics

54

[in bn EUR]

Geography

Kla us and Kille

Datamonitor

2004

2007

2004

2007

Germany – Total Logistics

170 1

205 5

378

40 12

Germany – Contract Logistics

672

837 6

1609

177 13

145 10

163 14

Europe – Total Logistics

730 3

Europe – Contract Logistics

<360 4

US – Total Logistics

2004

2007

74416

66 17

US – Contract Logistics Global – Total Logistics

Armstrong & Associates (CSCMP)

4,2007

475 11

573 15

Global – Contract Logistics 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Klaus and Kille 2006, p. 43. Klaus and Kille 2006, p. 73; market segment “consumer goods distribution and consumer goods contra ct logistics” (21.5 bn EUR) and market segment “industrial contract logistics” (45.5 bn EUR). Klaus and Kille 2006, p. 43; value for seventeen European countries. Klaus and Kille 2006, p. 164. Klaus and Kille 2008, p. 159; projection of total logistics costs. Klaus and Kille 2008, p. 159; projection of the sum of total logistics costs; value for seventeen Europea n countries. The value is 905.8 bn EUR for twenty-nine European countries. Klaus and Kille 2008, p. 45. Datamonitor 2008c, p. 9; excha nge rate as of 30 May 2009; 1 EUR = 1.4043 USD. Datamonitor 2008b, p. 9; exchange rate as of 30 May 2009; 1 EUR = 1.4043 USD. Datamonitor 2008d, p. 9; exchange rate as of 30 May 2009; 1 EUR = 1.4043 USD. Datamonitor 2008a, p. 9; excha nge rate as of 30 May 2009; 1 EUR = 1.4043 USD. Datamonitor 2008c, p. 9; excha nge rate as of 30 May 2009; 1 EUR = 1.4043 USD. Datamonitor 2008b, p. 9; exchange rate as of 30 May 2009; 1 EUR = 1.4043 USD. Datamonitor 2008d, p. 9; exchange rate as of 30 May 2009; 1 EUR = 1.4043 USD. Datamonitor 2008a, p. 9; excha nge rate as of 30 May 2009; 1 EUR = 1.4043 USD. Wilson 2005, p. 2 [text]; excha nge rate as of 31 December 2004; 1 USD = 0.73314 EUR. Wilson 2005, pp. 9-10 [presentation]; exchange rate as of 31 December 2004; 1 USD = 0.73314 EUR.

Table 5:

Overview of logistics market estimates

The table shows the extremely divergent market volume figures, signaling the prevailing confusion in this perspective. For 2007 Klaus and Kille estimated the global logistics volume at around 4,200 bn EUR (Klaus and Kille 2008, p. 45). However, Datamonitor’s market volume amounts to only about 14% of this value, with 573 bn EUR in 2007 (Datamonitor 2008a, p. 9). Further and more detailed estimates on the global logistics market volume are only available from Datamonitor. These are presented in the following two figures.

2 Š The area of logistics

55

CAGR: 5.3% 800 CAGR: 6.2% 700 600 450.8

503.5

533.9

595.6

621.6

654.1

741.0

8 7 6 5

400

4

300

3

200

2

100

1

0

% Growth

EUR bn

500

475.0

573.0

694.6

0 2003 1

2004

Legend: CAGR

1

2005

2006

2007

2008

2009

2010

2011

2012

Actual figure global logistics market value in EUR bn Forecast figure global logistics market value in EUR bn % Growth Compound Annual Growth Rate Figure % Growth not available

Figure 14: Global logistics market value and forecast (Based on Datamonitor 2008a, p. 9, p. 31; exchange rate as of 30 May 2009: 1 EUR = USD 1.4043)

Datamonitor expects a growth of close to 65% from 2003 (global logistics market volume of 450.8 bn EUR) to the estimated value of 741.0 bn EUR for 2012. The actual CAGR is 6.2% from 2003 to 2007 and the estimated CAGR is 5.3% from 2007 to 2012 (Figure 14). Datamonitor’s publications further allow conclusions on the development of the market shares of Europe and the US from the total global logistics market volume (Figure 15). The market shares for Europe were 34.6% in 2003 and 30.9% in 2007. The European market share is expected to amount to 24.6% in 2012. For the US the market share was 30.8% in 2003 and 28.4% in 2007. It is expected to be 26.1% in 2012. These figures show that the market shares of Europe and the US on the total global logistics market will decline continuously. With a market share in Europe decreased by 3.7 percentage points from 2003 to 2007 and an expected decline by 6.3 percentage points from 2007 to 2012, the volume is expected to decline by 10 percentage points from 2003 to 2012 overall. The US market share declined by 2.4 percentage points from 2003 to 2007 and is expected to decline by 2.3 percentage points from 2007 to 2012. The overall decrease from 2003 to 2012 is expected to amount to 4.7 percentage points. While both the European and American share of the global logistics market volume has been declining

2 Š The area of logistics

56

(though volumes in absolute numbers have grown), the fall is much stronger for Europe than for the US. The market volume has shifted increasingly to other countries around the world. The market share of Rest of World (RoW) increased from 34.6% in 2003 to 40.7% in 2007 and is expected to account for 49.4% in 2012.

Logistics Market Value 2003 – Actual

Logistics Market Value 2007 – Actual

Logistics Market Value 2012 Forecast

[in bn EUR]

[in bn EUR]

[in bn EUR]

741.0

182.0

40.7 193.1 573.0 450.8

177.1

156.1 40.2

365.9

162.9 36.5 138.7 233.0 156.0

Global Europe Germany US

RoW

Global Europe Germany US

RoW

Global Europe Germany US

RoW

Exchange rate as of 30 May 2009: 1 EUR = 1.4043 USD RoW Rest of World Sources: Datamonitor (ed.). 2008a. Global Logistics. Industry Profile. New York/London/Frankfurt/Sydney. December 2008, p. 9, p. 31. Datamonitor (ed.). 2008b. Logistics in Europe. Industry Profile. New York/London/Frankfurt/Sydney. December 2008, p. 9, p. 27. Datamonitor (ed.). 2008c. Logistics in Germany. Industry Profile. New York/London/Frankfurt/Sydney. December 2008, p. 9, p. 28. Datamonitor (ed.). 2008d. Logistics in the United States. Industry Profile. New York/London/Frankfurt/Sydney. December 2008, p. 9, p. 28.

Figure 15: Actual and forecasted logistics market value according to Datamonitor

Next, a closer look at the actual and forecasted volume figures for the US, European and German markets is presented. For 2004 the CSCMP estimated the total logistics costs in the US at 744 bn euros7 (Wilson 2005, p. 2 [text]; Wilson 2005, p. 1, p. 7 [presentation]). This figure surpasses Datamonitor’s estimates by 145 bn EUR for 2004 and 163 bn EUR for 2007 (Datamonitor 2008d, p. 9).

7

Calculation of the stated USD 1,015 bn by the CSCMP at a rate of USD 1 equivalent to 0.73314 EUR (exchange rate as of 31 December 2004).

2 Š The area of logistics

57

The key source for European market volume estimates is the ‘Top 100’ study in logistics with its regular updates from the Fraunhofer Institut with Professor Klaus as the main author. While the study is regularly published, the developments are not captured. For this reason, my contribution is the provision of such presentations (for an overview of the logistics market volumes see Figure 16 and for an overview of the contract logistics market volumes see Figure 18). Regarding the EU 17 countries, the total logistics market grew by 62.2% from a value of 450.2 bn EUR in 19978 to 730.0 bn EUR in 2004. For the same countries and for the same period, the contract logistics market grew very strongly by 180.6% from a value of 128.3 bn EUR in 1997 to fewer than 360.0 bn EUR in 2004. The logistics market volume for the EU29 countries from 2005 (market value of 799.6 bn EUR) to 2008 (market value of 950.0 bn EUR) increased by 18.8%.

1997 1

2001/2003

2004

2005

2006 4

2007

2008 950.0

730.0

799.6

855.6

905.8

583.8 450.22 <262.7

<360.0

<389.6

128.33 n.a. Legend: 1

2 3 4

n.a.

n.a.

The total logistics and contract logistics volume date from around 1997. The logistics volume equals the sum of enlarged logistics costs; the sum is 880.6 billion DM; 1 EUR amounts to 1.95583 DM. The contract logistics volume equals the share of the segment industrial contract logistics, which is 28.5%; projection based on the distribution in Germany. Own calculation based on the prognosis of a market growth of roughly 7%. Total logistics volume in billion EUR for the EU 17 (1997, 2001/2003, 2004) and for the EU 29, i.e. for the 27 EU countries plus Switzerland and Norway (2005, 2006, 2007, 2008) Contract logistics volume in billion EUR for the EU 17 (1997, 2001/2003, 2004) and for the EU 29, i.e. for the 27 EU countries plus Switzerland and Norway (2005, 2006, 2007, 2008)

Figure 16: Total logistics and contract logistics volume in Europe (Based on Klaus and Kille 2008, p. 79, p. 159; Klaus and Kille 2007, pp. 55-56; Klaus and Kille 2006, p. 43, p. 164; Klaus 2003, p. 69; Klaus and Mueller-Steinfahrt 2000, pp. 41-42)

In Europe the largest logistics market is the German market (Figure 17). In 2007 the logistics turnover amounted to 205 bn EUR. Of this, the value of narrow logistics/TUL costs9, i.e. the value of logistics turnover without costs for order management, logistics planning and administration as well as warehousing, is 142 bn EUR. The Dutch 8 9

According to Klaus, the projections of the logistics volume date from around 1997. See Section 2.1.2 for the detailed definition of narrow logistics/TUL costs.

2 Š The area of logistics

58

logistics market and the UK logistics market are ranked second and third with 113 bn EUR and 108 bn EUR of logistics turnover. These figures show that Germany is by far the largest logistics market in Europe with a share of 22.6% of the total European market volume of 905.8 bn EUR in 2007. The market share for the Dutch logistics market is 12.5% and for the UK it is 11.9% (Klaus and Kille 2008, p. 159).

Narrow logistics/TUL costs in bn EUR Logistics turnover in bn EUR

205

142 113

108 83

83 57

75

78

57

46

4 5

6 9

9 13

10

14

11

16

12

17

13

19

16

22

16

23

20

28

22

32

32

Country

Figure 17: European TUL costs and logistics turnover 2007 by country (Based on Klaus and Kille 2008, p. 159)

Finally, the German logistics market as the largest in Europe is looked at in more detail based on the Fraunhofer Institut’s market estimates. From 1997 to 2008 the logistics market volume increased by 76.7% from 124.5 bn EUR in 199710 to 220.0 bn EUR in 2008 (Figure 18). Unfortunately, figures for the contract logistics market are available only for 1997, 2001/2003 and 2004. From 1997 to 2004 the contract logistics market volume grew by 88.7% from 35.5 bn EUR to 67.0 bn EUR. In comparison, the total logistics volume increased by only 36.1% in the same period. The growth of the market for contract logistics was stronger by 53 percentage points than for the total logistics market volume in Germany.

10

According to Klaus, the projections of the logistics volume date from around 1997.

2 Š The area of logistics

19971

2001/2003

59

2004

2005

20065

2007

Segment contra ct logistics as “growth winner“

160.02 58.63

124.5 35.5

Legend: 1

2 3 4 5

169.4 67.04

175.7 n.a.

205.0

189.4 n.a.

n.a.

20085

Segment contract logistics as “growth winner“

220.0 n.a.

The total logistics and contract logistics volume date from around 1997. The logistics volume equals to the sum of enlarged logistics costs; the sum is 243.4 billion DM; 1 EUR amounts to 1.95583 DM; the contract logistics volume equals to the share of the segment industrial contract logistics which is 28.5%. Correction from 150 billion EUR (“Top 100“ survey from the year 2003) to 160 billion EUR (“Top 100“ survey from the year 2006). Market segment “consumer goods distribution and consumer goods contract logistcs”: 19.3 billion EUR; market segment “industrial contract logistics”: 39.3 billion EUR. Market segment “consumer goods distribution and consumer goods contract logistics”: 21.5 billion EUR; market segment “industrial contract logistics”: 45.5 billion EUR. Prognosis. Total German logistics volume in billion EUR German contract logistics volume in billion EUR

Figure 18: Total logistics and contract logistics volume in Germany (Based on Klaus and Kille 2008, p. 159; Klaus and Kille 2007, pp. 55-56, pp. 66-67; Klaus and Kille 2006, p. 43, p. 73; Klaus 2003, p. 41, pp. 69-70, p. 112, p. 117; Klaus and Mueller-Steinfahrt 2000, pp. 41-42)

In summary, the area of logistics lacks a shared concept about market volumes. This demonstrates the scarcity of knowledge and the confusion regarding this issue. My research contribution is the provision of an overview of data available. Overall, the market for the area of logistics contains a great potential with high expectations on future growth. 2.3.2 Market segments In literature, specifically in Klaus and Kille (2008), the volume for the logistics industry is further specified by its sub-segments. Before presenting the figures for the German logistics industry’s sub-segments, a short note on market segmentation in logistics should be made. A segmentation of logistics markets is feasible from many perspectives, such as transport objects (e.g. food transports), customer lines of business or customer types (e.g. publishing house logistics), type of order and execution (e.g. express freight), means of transport (e.g. tank and silo transports), traffic network structure (e.g. relation forwarding agents) or functional connections (e.g. spare parts logistics). Despite clear segmentation, definitions can nonetheless often be confused as delimitations are

60

2 Š The area of logistics

blurred. Clear assignations are not always possible or LSPs may earn revenues from side segments which are not separately reported. Klaus and Kille segment logistics markets according to functional areas, means of transport and geography. Their first segment, bulk and direct cargo traffic logistics (point-to-point logistics), includes the sub-segments national bulk cargo logistics; national general cargo load traffic; heavy transports and crane services; national tank and silo transports; and national other cargo load traffic with special equipment. The sub-segments from the second segment, industry and consumer goods logistics national requiring handling, i.e. markets for Less than Container Load (LCL; consignments that do not fully fill a shipping container) freight transports (Lowe 2002, p. 139), are national general LCL freight traffic; consumer goods distribution and consumer goods contract logistics; industrial contract logistics, particularly industrial production supply and spare part distribution; hanging dress logistics; high tech goods, fair logistics, new furniture and move transports; terminal services, non-integrated warehousing, transshipment and other logistical value-added services; and CEP – parcel, courier and specialized express services. The third segment, international transports and logistics systems, consists of cross-border transport and forwarding services with the focus on either road and rail or on ocean shipping and seaport forwarding. It also contains crossborder air cargo carrier and services of air forwarding (Klaus and Kille 2008, pp. 39-41, p. 87 et seqq.). Out of the four largest sub-segments in terms of market volume in billion EUR, two are from the second and two are from the third segment. The largest sub-segment is industrial contract logistics followed by cross-border transport by sea, CEP and cross-border transport by road and rail. The volume of each of the four largest sub-segments exceeds 10 bn EUR (Figure 19).

2 Š The area of logistics

German logistics market 100% = 204.1 bn EUR

61

Sub-segment

Volume [in bn EUR]

Industrial contract logistics, particularly industrial production supply, spare part distribution and other ‘business-to-business’ contract logistics Cross-border transport and forwarding services, focus ocean shipping/seaport forwarding

13.8 11.5

CEP – parcel, courier and specialized express services

10.5

Cross-border transport and forwarding services, focus road and rail

10.4

Consumer goods distribution and consumer goods contract logistics

Outsourced (§100.0 bn EUR)

49% 51%

9.1

National general cargo load traffic

8.8

Cross-border air cargo carrier and services of air forwarding Terminal services, non-integrated warehousing, transshipment and other logistical value-added services

7.8 7.1

National bulk cargo logistics

Insourced (§104.1 bn EUR)

6.1

National general LCL freight traffic

5.9

National tank and silo transports

3.6

High tech goods, fair logistics, new furniture and move transports

3.4

National other cargo load traffic with special equipment Heavy transports and crane services Hanging dress logistics

2.9 0.9 0.4

Figure 19: Market volume for outsourced logistics in Germany 2007 by segments (Based on Klaus and Kille 2008, p. 45, p. 92, p. 97, p. 102, p. 105, p. 108, p. 112, p. 121, p. 125, p. 128, p. 130, p. 133, p. 137, p. 141, p. 144, p. 147)

Of the three sub-segments with the largest volumes in Germany in the above figure, the largest – industrial contract logistics, particularly industrial production supply, spare part distribution and other ‘business-to-business’ contract logistics – is also the one of most interest to SMEs and Hidden Champions, independent of the country of origin. This sub-segment offers great opportunities for LSPs of this size, unlike the second (cross-border transport and forwarding services, focus ocean shipping/seaport forwarding) which particularly requires heavy investments in ships, and the third, CEP (parcel, courier and specialized express services) –, which requires heavy investments in distribution networks. DVZ, the German logistics magazine, for example, pointed to French GT Logistics (Klingsieck 2008, p. 9) and Belgium Tailormade Logistics (TML) (Kloss 2008, p. 18) as logistics champions in industrial contract logistics. GT Logistics, which does not directly provide transportation, manages the logistics processes for the paper manufacturer Smurfit Kappa in France. TML is responsible for the integrated product flow from South-Korea to the end-customer within LG Electronics’ home appliance segment. Amongst its activities, TML takes care of custom formalities,

62

2 Š The area of logistics

packing or advertising material. These are just two examples for the demonstration of industrial contract logistics solutions. 2.3.3 Large actors in the industry The competitive landscape of the area of logistics is dominated by the group of large players. According to my final research results, these LSPs offer a large-scale business with cost focus and therefore, I refer to this group by the term ‘commodity players’. A commodity player usually generates logistics revenues of several billion euros per annum. Table 6 shows examples of top LSEs in the European logistics industry. European leaders are, for instance, the German Deutsche Post AG, the Danish A. P. Møller – Mærsk A/S, the Swiss Kuehne + Nagel International AG or the British CEVA Group plc. I calculated the share on the total European logistics revenues of the top ten LSEs from Table 6. Accordingly, the ten LSEs together generate approximately 15.1% of the total European logistics revenues of 950 bn EUR in 2008 (Figure 20).

2 Š The area of logistics

Logo of LSP

Table 6:

Name of LSP

63

Country of Headquarters

Logistics Revenues 2008 (in m. EUR)

Remarks

Sources

Deutsche Post AG

41,534

Revenues Express (13,637 m. EUR), Global Forwarding/Freight (14,179 m. EUR) and Supply Chain/CIS (13,718 m. EUR).

Deutsche Post AG 2009, p. 52.

A. P. Møller Mærsk A/S

26,410

Revenues Container shipping and related activities (146,032 m. DKK), APM Terminals (15,888 m. DKK), Tankers, offshore and other shipping activities (27,349 m. DKK) and Shipyards, other industrial companies interest in Danske Bank A/S, etc. (7,599 m. DKK); exchange rate as of 17 March 2009: 1 EUR = 7.4544 DKK.

A. P. Møller - Mærsk A/S 2009, pp. 12-13.

Deutsche Bahn AG

19,334

Revenues DB Schenker Rail (4,654 m. EUR) and DB Schenker Logistics (14,680 m. EUR).

Deutsche Bahn AG 2009, p. 63.

Kuehne+Nagel International AG

14,211

Revenues Seafreight (10,032 m. CHF), Airfreight (3,859 m. CHF), Road & Rail Logistics (2,853 m. CHF) and Contract Logistics (4,732 m. CHF); exchange rate as of 30 May 2009: 1 EUR = 1.51127 CHF.

Kuehne + Nagel International AG 2009, pp. 124-125.

CMA CGM

10,753

Total revenue 2008: 15.1 bn USD; exchange rate as of 30 May 2009: 1 EUR = 1.40430 USD.

CMA CGM 2009, p.1.

SNCF

7,726

2007 turnover for the profession including inter-division turnover.

SNCF 2008, pp. 16-17.

CEVA Group plc.

6,329

Revenues Contract Logistics and Freight Management.

CEVA Group plc. 2009, p. 5.

Hapag-Lloyd AG

6,220

Revenues Container Shipping 2008.

Hapag-Lloyd AG 2009, p.1.

Panalpina World Transport (Holding) Ltd.

5,875

8,878 m. CHF net forwarding revenue 2008; exchange rate as of 30 May 2009: 1 EUR = 1.51127 CHF.

Panalpina World Transport (Holding) Ltd. 2009, p. 17.

DSV A/S

5,022

37,435 m. DKK revenues Road, Air & Sea and Solutions; exchange rate as of 17 March 2009: 1 EUR = 7.4544 DKK.

DSV A/S 2009, p. 2.

Examples of LSEs in the European logistics industry

Top LSEs’ share of total European logistics revenues [in bn EUR; 100% = 950.0 bn EUR (2008)] 950.0 806.7

Figure 20: Top LSEs presence in the European logistics industry (Based on Table 6 and its sources)

§15.1%

2 Š The area of logistics

64

Since this study concentrates on contract logistics that describes the most recent developments in the industry, examples of LSEs in the German contract logistics industry are listed in Table 7.

No.

Logo

LSP

1

Deutsche Post AG

2 3

HAVI Logistics 1 DB Schenker

4

Fiege

5

Rhenus

6

Volkswagen Logistics

7

Kraftverkehr Nagel

Contract Logistics Revenues 2006 in percentage from Group Revenues

Group Revenues 2006 (in m. EUR)

Logistics Revenues 2006 (in m. EUR)

Contract Logistics Revenues 2006 (in m. EUR)

60,545

39,934

11,957

19.7

2,300

2,300

2,300

100.0

30,053

13,232

2,123

7.1

1,750

1,750

1,630

93.1 14.4

9,000

2,300

1,300

104,875

1,922

1,300

1.2

1,205

1,205

1,205

100.0

8

Arvato

19,297

1,010

1,010

5.2

9

MGL

59,882

700

700

1.2

10

Hellmann

2,647

2,647

439

16.6

1 Formerly Alpha Management (renamed in July 2008).

Table 7:

The Top 10 contract LSPs in Germany (Based on Klaus and Kille 2007, pp. 199-200)

According to Klaus and Kille, the Top 8 contract LSPs in Germany – Deutsche Post AG, HAVI Logistics, DB Schenker, Fiege, Rhenus, Volkswagen Logistics, Kraftverkehr Nagel and Arvato – managed to generate contract logistics revenues of over one billion euros in 2006 (Table 7). This group of large LSPs has to be considered in contrast to the group of SMEs and Hidden Champions about which some information is given in the next section. 2.3.4 SMEs and Hidden Champions in the area of logistics While the market share of the top ten LSPs in the logistics industry regarding turnover is approximately 15%, their share of the total number of LSPs is low. In fact, in 2005 more than 1.1 m. LSPs were operating in the 27 EU countries11 (European Commission/Eurostat 2009, p. 124). Spain is the country with most LSPs by number

11 The 27 EU countries are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and United Kingdom.

2 Š The area of logistics

65

(223,300 LSPs), followed by Italy (154,400 LSPs) and Poland (131,900 LSPs). Germany, with its 84,100 LSPs, is ranked fifth (Figure 21).

[in 1000s, excluding Malta]

223.3

154.4 131.9 1104.3

93.5 84.1 68.2 65.8 44.9

34.5

31.1 172.6

EU-27

Spain

Italy

Poland

France

Germany

Greece

United Czech Kingdom Republic Hungary

Sweden

Other 17

Country

Figure 21: Number of transport services providers in the EU 27 in 2005 (Based on European Commission/Eurostat 2009, p. 124 and its sources Eurostat (SBS) and information from Member States)

In addition to the low interest in public and poor focus in research, it is the strong emphasis on the total number of LSPs which motivates my research on SMEs and Hidden Champions in the area of logistics. These LSPs’ revenues are usually below one billion euros and they are thus not well known to the public and are not the focus of research interest. However, SMEs and Hidden Champions’ business is characteristized by interesting dynamics. According to my research findings, while logistical SMEs and Hidden Champions are small, may be more vulnerable in case of unforeseen developments and are at the risk of being taken over by other, usually large LSPs, they are also more agile and competitive. According to Klaus and Kille, top SMEs in contract logistics that challenge LSEs in the area of logistics are, for example, Schnellecke, BLG, D.Logistics, Hans Geis, Betz, Lehnkering, Hoyer, Kieserling, Mosolf or Online Systemlogistik (Table 8).

2 Š The area of logistics

66

No.

Logo

LSP

Group Revenues 2006 (in m. EUR)

Logistics Revenues 2006 (in m. EUR)

Contract Logistics Revenues 2006 (in m. EUR)

Contract Logistics Revenues 2006 in percentage from Group Revenues

1

Schnellecke

820

520

385

47.0

2

BLG

760

760

364

47.9

3

D. Logistics

322

322

200

62.1

4

Hans Geis

516

516

166

32.2

5

Betz

760

620

160

21.1

6

Lehnkering

600

525

125

20.8

7

Hoyer

837

837

100

11.9

8

Kieserling

280

280

60

21.4

9

Mosolf

400

400

50

12.5

10

Online Systemlogistik

1,058

808

37

3.5

Table 8:

Top SMEs in contract logistics in Germany (Based on Klaus and Kille 2007, pp. 200-202)

According to Klaus and Kille’s ‘Top 100’ list of leading LSPs in Germany, only eight LSPs with contract logistics service offerings12 were listed which might be potential Hidden Champions with a logistics turnover of at least 500 m. euros and below one billion euros in 2007. The figure rises to 60 potential Hidden Champions if considering the ‘Top 100’ LSPs with a logistics turnover of at least 100 m. euros and below one billion euros. From the full list containing the top 168 LSPs, only slightly more than half (88 LSPs) are potential Hidden Champions in contract logistics with a total logistics turnover of at least 50 m. euros and below one billion euros (Klaus and Kille 2008, pp. 227-230). Although this source indicates listed LSPs as top providers, I refer to potential Hidden Champions at this stage as I do not yet know whether these LSPs meet all criteria of a true Hidden Champion. Of the ‘Top 100’ LSPs listed by Klaus and Kille, only six of the ten LSPs that generate a turnover below one billion euros operate in contract logistics. I concentrate on this area for the reason that since the beginning of this decade, German LSPs that focus on transportation have only had to deal with high cost pressures (IKB 2004, p. 1) and increasingly with pressure on business success (IKB 2008, p. 1). It is predominantly SMEs in transportation that are most prone to insolvency. (IKB 2005, p. 1). For 12 LSPs for that turnover are listed in the segments ‘Industrial contract logistics, particularly industrial production supply and spare part distribution’ and ‘Consumer goods distribution and consumer goods contract logistics’.

2 Š The area of logistics

67

example, the number of insolvencies rose by 20% in 2008 and further increases were expected for 2009, back up to the high of 1,703 insolvencies in the logistics industry that occurred in Germany in 2002 (IKB 2008, p. 1). In comparison to the total economy, failure in logistics is above average (IKB 2007, p. 1). The situation is more advantageous for LSPs that focus on services of higher value-add (IKB 2005, p. 1). In international competition, SMEs in the German logistics industry can be partially very successful through specialization and by focusing on specific fields (IKB 2007, p. 1). Thus, searching for Hidden Champions in the area of contract logistics seems to be most promising. Publications about the number of true Hidden Champions in the logistics industry in Europe or individual countries could not be gathered during the research process. For comparison, Simon noted in his first book on Hidden Champions that he had identified more than five hundred Hidden Champions across industries in Germany (Simon 1996b, p. vii, p. 5). In summary, in Chapter 2 I focus on industry fundamentals, recent developments and industry demography of the area of logistics. The reason for this is to provide clarity in prevailing confusion about the industry. In particular, I worked out an overview of the terminology in use and the relationships between terms. My research about industry developments resulted in the tension between the need for new market participants to arise and the high barriers identified for new entrants in demand chain management. I also provide overviews about estimates on market volumes. These figures are rarely, if at all, available and vary widely between authors, confirming the discrepancy in the views about the market. Overall, this chapter contains the basic information that is necessary to understand the area of logistics which is the focus of this research study.

3 Š Business models as an approach for analyzing companies

68

3

Business models as an approach for analyzing companies

The analysis of the environmental conditions in Section 2.2.2 shows that logistics managers increasingly face new difficulties when making business decisions. Fierce global competition, rapid changes in the environment or intensive use of new technologies are just three causes. The economic environment for LSPs can be described by the characteristics of rising diversity, increased complexity, greater uncertainty and stronger demand for adapting to change than ever before. Therefore, managers need a clear framework which allows them to analyze their company and to decide on specific business issues and changes in the context of the environmental conditions. Taking into account the environment and possible approaches for analyzing companies in this chapter, I defined the business model as a framework that helps managers to understand their business. By studying single business model components and their interrelations in the current state as well as by making changes, the tool is designed to enable managers to learn about business opportunities and to adapt to environmental changes. 3.1 About business analysis Environmental dynamics impact business analysis. In Section 3.1.1 I outline characteristics of the logistics industry’s environment and in Section 3.1.2 I present a generic overview of concepts for analyzing a business. I conclude with the decision and arguments for the framework that is applied to search for Hidden Champions in logistics. 3.1.1 Environmental dynamics as a starting point Business analysis within the logistics industry requires a tool that does not operate in a vacuum. The reason is that environmental conditions influence business activities and long-term success. In particular during the last decade, LSPs’ environment has becoming increasingly diverse, complex and uncertain. Operators in the industry have to deal with the pace of change through rapid adaptability. The starting point for defining a framework for company analysis forms the consideration of these four environmental conditions and their key challenges, which are described in more detail below.

R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2_3, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

3 Š Business models as an approach for analyzing companies

69

First, the logistics industry is characterized by diversity. Section 2.2.1 shows that the area of logistics was subject to a strong development. The spectrum of logistics services has been expanded enormously from the classical logistics in the 1970s to worldwide integration of value chains in the 21st century. With an increasing relative size of the service sector, diversity also increases, as Hodgson argues (Hodgson 2003, p. 471). Second, the logistics industry is complex. Global supply chain networks’ core activity of integration requires strong interactions between people and between people and their technology. Growing diversity of interactions is one driver for complexity in the view of Hodgson (Hodgson 2003, p. 472). The author also states that complexity is driven by new and varied organizational forms that lead to increased productivity and help to manage the exponential rise of products and processes (Hodgson 2003, p. 471). The formation of global supply chain networks leads to increased complexity. Complexity in turn is a mechanism for generating diversity (Andriani 2001, p. 258). Third, the logistics industry is characterized by uncertainty. Uncertainty and related risk is closely connected to complexity. The more complex an environment is the more various, dynamic and unpredictable the situations are (Wytenburg 2001, p. 118). Fourth, adaptability to rapid change in the logistics industry secures positions of competitive advantage. Fine (1998, p. 6) thinks of industries’ rates of evolution as ‘clockspeeds’. Depending on an industry’s product clockspeed, process clockspeed and organization clockspeed, each industry evolved at a different rate. In today’s logistics industry of rapid change, managers have to find new ways of keeping up with a fast industry ‘clockspeed’. Diversity, complexity, uncertainty and adaptability to change are mutually interrelated. For example, industry clockspeed is one possible cause of rising complexity. Another example is that advances and changes in increasingly shorter time frames cause uncertainty. The question is which concepts logistics managers should use for business analysis and for coping with the four factors of environmental dynamics. The key prerequisite for the concept is that it is able to cope with environmental dynamics.

3 Š Business models as an approach for analyzing companies

70

3.1.2 Approaches for analyzing companies Several approaches for analyzing companies are in focus of management literature and application. I assigned approaches to four groups according to time periods and distinguished them according to their emphasis inside the company (‘internal emphasis’), outside the company (‘external emphasis’) or both (‘internal and external emphasis’). Approaches for analyses with external emphasis were applied particularly in the 1970s and 1980s. The unit of analysis was the industry or the competitive environment in which the company is operating. I refer to company analysis based on a market-based view (MBV). The key argument of the MBV is that the structure of an industry or competitive environment is decisive for profitability. The emphasis is clearly on phenomena at the industry level. Representatives for MBV company analysis are for example Mason (1939), Bain (1956, 1968) or Caves and Porter (1977). Bain, for example, is concerned with the environmental settings within which companies operate and in how they behave in these settings. His view is essentially external and ‘behavioristic’, not taking into account an internal approach (Bain 1968, pp. vii-xiv). Other examples of concepts within the MBV are the concept of competitive strategy (Porter 1980) or business strategy. Strategy deals with questions like which customers and positions should be targeted or which choices and trade-offs should be made. For example, according to Mintzberg, strategy is the plan, ploy, pattern, position and perspective for locating an organization in an environment (Mintzberg 1988, p. 13 et seqq.).13 While the internal view is neglected in MBV approaches, the second group – which was prevailing in the 1980s and 1990s – has an internal emphasis, i.e. its concepts concentrate on company internal issues and phenomena. Analysis is resource-based and often referred to as the resource-based view (RBV). In the RBV, a company’s internal resources are considered to be decisive for profitability. Representatives are for example Wernerfelt (1984), Barney (1986, 1991) or Hamel and Prahalad (1994). One concept of the RBV is business process analysis. It implies the horizontal view of the business 13

3.2.4.

The issue of strategy and its delimitation from business models is covered in more detail in section

3 Š Business models as an approach for analyzing companies

71

cutting across the organization from product inputs to outputs. Analysis focuses on the process as “a structured, measured set of activities designed to produce a specified output for a particular customer or market.” (Davenport 1993, p. 5, p. 7). Hamel and Prahalad’s concept of core competencies is probably one of the most cited and used. According to the authors, core competencies are competitively unique capabilities and skills that enable a company to deliver fundamental customer value, but they are also process- and manufacturing-related competencies that yield sizable cost benefits to the producer. Core competencies represent the sum of learning across individual skill sets and organizational units (Hamel and Prahalad 1994, pp. 203-205). The aim of strategic behavior is to concentrate on today’s business’ core competencies and to search for new fields of operations for one’s own core competencies. The future of the company is defined primarily via core competencies. Organizational form is a further example of a RBV analysis. Here, organizational structure and design as well as processes involved in running an organization are the focus of analysis (Tolbert and Hall 2009, p. 17). The reporting of relationships, the shape of the organization or the division of labor across the organization are also reported. Davis and Olsen’s research, for example, concentrates on organizational structure and management concepts in the context of management information systems (Davis and Olsen 1985, pp. 331-364). Another example is the MIT’s Center for Coordination Science’s initiative on Inventing the Organizations of the 21st Century. Malone and Laubacher refer to an organizational model of micro businesses that conduct transactions with one another on a global basis. According to the authors, electronic networks will cause a shift to elastic networks as dominant business organizations (Malone and Laubacher 1998, p. 148). Further examples of analysis with emphasis inside the company are Wernerfelt’s concepts on resource position barrier and resource-product matrices (Wernerfelt 1984), Barney’s concept of strategic factor markets (Barney 1986), the concept of link between company resources and competitive advantage (Barney 1991), or the concept of competing on capabilities (Stalk and Evans and Shulman 1992; Sutton 2005). In the 1990s and 2000s, the emphasis of company analyses was focusing outside the company again. Relationships were considered to be decisive for profitability. I refer to a network-based view (NBV) of company analysis. Key concepts include value systems (Porter and Millar 1985), value nets (Brandenburger and Nalebuff 1996), interorganizational systems (Klein 1996), relationships of a company within a network

3 Š Business models as an approach for analyzing companies

72

(Dyer and Singh 1998, p. 661), value webs (Selz 1999) or strategic networks (Gulati et al. 2000). Just as an example, a value system is embedding a company’s value chain in a larger stream of activities that includes the value chains of suppliers, the channels, and buyers. Analysis deals with the creation of competitive advantage by optimizing or coordinating the linkages that connect physical and information-processing value activities inside a company and that create interdependencies between a company’s value chain with those of its suppliers and channels (Porter and Millar 1985, p. 3). A value net, as a further example, is a map or diagram that serves as a visual representation of the game of the business. In particular, value nets point out ways how a

relationship

between

players

can

combine

competition

and

cooperation

(Brandenburger and Nalebuff 1996, p. 9). To summarize, although approaches for analyzing companies with external emphasis do not ignore internal characteristics of a company in full, the focus is clearly on the industry level. MBV analysis looks at the industry as a group of companies with products or service offerings that substitute each other. The delimitation is carried out via the role of the product or service at the customer. The MBV overlooks companies that have advanced structural changes in the industry. It is too narrow in terms of the description of changes. The future of the company is defined primarily from the market perspective. Moreover, approaches for analyzing companies with internal emphasis have a strong concentration on the company’s internal resources. They neglect the company’s position in the external environment, which perhaps led to a move towards business analysis with external emphasis again in the 1990s/2000s. Due to new information and communication technologies, concentration was rather on networks than on the market, but company internal issues are neglected in the NBV as well. In the context of today’s environmental dynamics in the area of logistics, the question is whether the classical issues of analysis in strategic management business unit, industry, and company (Bettis 1998, p. 357) – that are in single focus and emphasize either company internals or externals are sufficient to capture the changes in the logistics industry. I argue that they are not sufficient or even harmful if changes occur that cannot be identified by these approaches. Therefore, approaches with emphasis inside and outside focus, i.e. on both company internal and external issues, have to be further considered. Future business analysis might be based on concepts with internal and

3 Š Business models as an approach for analyzing companies

73

external emphasis while also taking into account well-established concepts that have been in use for decades. My argument is that industry structure, internal resources and relationships are decisive for profitability. I refer to an all-embracing-based view (ABV) of company analysis with the concept of competitive advantage and the business model as exemplarily concepts. According to Porter, cost advantage and differentiation are the two types of competitive advantage which grows fundamentally out of the value a company is able to create for its buyers. Superior performance can only be achieved with sustainable competitive advantage. Porter adds that a company must at the same time know which competitors to attack, and how the array of competitors has an influence on the industry’s structure (Porter 1985, p. xvi, p. 62 et seqq., p. 119 et seqq., p. 203). The ABV of company analysis needs to take a totality of a company and its environment into consideration. Business model analysis is such a concept for analyzing companies with an ABV. According to Amit and Zott, a company’s business model is “an important locus of innovation and a crucial source of value creation for all stakeholders.” (Amit and Zott 2000, p. 2). It is the most important tool of analysis in order to understand how existing structures have to be adapted due to changes through environmental dynamics. Business model analysis contains not only the architecture of product and service operations but also the connectivity of the totality of a company’s business environment. For example, it includes the value-add a company is causing for its customers and how this value can be generated and with which partners. Other representatives of business model analysis are Afuah (2004) or Mitchell and Bruckner Coles (2004a; 2004b). In summary, the area of logistics with its constantly evolving ways of doing business and its fast-cycle implementations as well as its heavy reliance on networks requires an analytical concept that combines elements from both the internal and external emphasis. The evaluation of prevailing approaches for company analysis leads me to the conclusion that the business model has to be the selected concept for company analysis in the area of logistics. The concept of a business model helps in tackling at least some of the aspects of diversity, complexity, uncertainty and adaptability to rapid environmental changes by highlighting decisive issues for business success and pointing out the relationships between them. A summary from my literature review on prevailing approaches for analyzing companies is presented in Figure 22.

Figure 22: Approaches for analyzing companies

1

Mason (1939) Bain (1956, 1968) Caves/Porter (1977)

Porter (1980)

Mintzberg (1988) Markides (2000)

Environmental Settings and Barriers to Competition

Competitive Strategy

Business Strategy

Company‘s internal resources are decisive for profitability

Resource-based view (RBV) /

1980s/1990s /

Value Webs

Strategic Networks

Hamel/Prahalad (1994)

Tolbert/Hall (2009)1 Davis/Olsen (1985) Malone/Laubacher (1998) Stalk/Evans/ Shulman (1992) Sutton (2005)

Core Competencies

Organizational Form

Competing on capabilities

Network Relationships

Davenport (1993)

Interorganizational Systems

Value Nets

Value Systems

Business Process

Relationships are decisive for profitability

Network-based view (NBV) /

1990s/2000s /

Barney (1991)

Barney (1986)

Wernerfelt (1984)

Firm Resources

Strategic Factor Market

Resource Position Barrier and Resource-Product Matrices

Gulati/Nohria/ Zaheer (2000)

Selz (1999)

Dyer/Singh (1998)

Klein (1996)

Brandenburger/ Nalebuff (1996)

Porter/Millar (1985)

Industry structure, internal resources and relationships are decisive for profitability

All-embracing view (ABV) /

2000s/onwards /

Business Model

Competitive Advantage

Concepts

Amit/Zott (2000) Afuah (2004) Mitchell/Bruckner Coles (2004)

Porter (1985)

Representatives (Year)

INTERNAL AND EXTERNAL EMPHASIS Period / Approach / View

Concepts

Representatives (Year)

EXTERNAL EMPHASIS Period / Approach / View

Concepts

Representatives (Year)

INTERNAL EMPHASIS Period / Approach / View

Concepts

Representatives (Year)

EXTERNAL EMPHASIS

Hall published the first edition in 1972.

Structure of an industry or competitive environment is decisive for profitability

Market-based view (MBV) /

1970s/1980s /

Period / Approach / View

74 3 Š Business models as an approach for analyzing companies

3 Š Business models as an approach for analyzing companies

75

3.2 Business models: an approach for corporate analysis in a dynamic environment Section 3.2 deals with the business model as an approach for corporate analysis in a dynamic environment. The aim of this section is to provide a clear view of the Business Model Framework that represents reality in a structured, simplified and understandable way. I start with fundamentals of business models, the evolution of the terminology and the purpose. Next, I provide an overview of prevailing business model approaches. Resulting from the knowledge I gathered, I defined my requirements for the framework and present my definition valid for this research. In addition, I delimited the concept of the business model from strategy in order to avoid misunderstandings and to ensure a clear understanding. 3.2.1 Fundamentals of business models The terms ‘business’ and ‘model’ had already been applied for decades before it became increasingly popular to use the terminology business model. The evolution of the terminology business model and its purpose are part of the fundamentals which are the subject of this section. 3.2.1.1 Evolution of the terminology One of the first systematic research approaches relating to change and growth in industrial companies is Alfred Chandler’s on comparative business history. In 1962 he investigated the changing strategy and structure of companies (Chandler 1962). Three years later, Ansoff’s publication concerned business strategy formulation and management in the sense of an active process of determining and guiding the course of a company towards its aims (Ansoff 1965). These two authors’ concepts can be considered as antecedents to business modeling. The terms ‘business’ and ‘model’ have been subject to management literature for decades. Regarding the term business, Drucker in particular worked on the issue of what business is. He defined business starting from the understanding of its purpose. In his sense, people create and manage a business but it cannot be defined in terms of profit. Business is determined by a customer who is created by business action. Creating a customer is the only valid definition of business purpose. To discharge this purpose, the

76

3 Š Business models as an approach for analyzing companies

company must control wealth-producing resources. Business is the specific organ of growth, expansion and change in an economy (Drucker 1999a, pp. 54-62; Drucker 1999b, pp. 32-39; Drucker 1954, pp. 34-41). A business has the two entrepreneurial functions of marketing and innovation and the administrative function of productivity. Profit, in turn, is the result of business performance in marketing, innovation and productivity as well as a premium for the risk of uncertainty (Drucker 1999a, p. 57, p. 62, p. 65; Drucker 1999b, p. 35, p. 39, p. 44; Drucker 1954, p. 37, p. 41, p. 46 et seq.). A first test of a business does not focus on profit maximization but on the achievement of sufficient profit to cover the risks of economic activity and to avoid making losses (Drucker 1999a, p. 55; Drucker 1999b, pp. 33-34; Drucker 1954, p. 36). As Drucker states, it “is the first duty of a business to survive.” (Drucker 1999b, p. 44; Drucker 1954, p. 46). The meaning of the term ‘model’ as covered in standard dictionaries is broad. For example, it is used to describe an architect’s set of designs for a projected building, the ‘argument’ of a literary work or an object or figure made of clay or wax or the like, intended to be reproduced in a more durable material. Most suitable to economics is probably the understanding in the sense of a “simplified or idealized description or conception of a particular system, situation, or process … that is put forward as a basis for calculations, predictions, or further investigation” (Simpson and Weiner 1989, p. 940 et seq.). According to a dictionary of economics, a model is defined as a “simplified system used to simulate some aspects of the real economy.” Good models concentrate on the essential points they are studying and work out results of any change in the assumptions (Black 2003, p. 302). To achieve this, three prerequisites of abstraction have to be met: concentration on the essential and suppression of irrelevant details; precision, which means creating the possibility to determine the validity for each statement; and explicitness, which means the inclusion of all important facts (Kilov 2002, p. 8 et seq.). Mulvaney and Mann discuss different classes of models. According to the authors, models can be distinguished in tangible and intangible models. ‘Tangible models’ are ‘iconic models’, ‘analogue models’ and ‘symbolic models’. A model is called iconic if it physically resembles the real thing that it is intended to represent. If one quantity is used to represent another, the authors use the term analogue model. This is for example

3 Š Business models as an approach for analyzing companies

77

a graph, where distances on a piece of paper are used to represent sales volume. Symbolic models are applied for the representation of quantities and relationships between them. ‘Intangible models’ are usually verbal models that are described by managers’ words. They are also but not very often mathematical models. A further term, explicit models, is used by Mulvaney and Mann if managers extend and quantify verbal models with data (Mulvaney and Mann 1976, p. 1 et seqq.). Like the terms ‘business’ and ‘model’, which have been in use individually for several decades, the origins and first uses of the term business model also appeared in single publications decades ago already (see for example Bellman et al. 1957, p. 474 or Jones 1960, p. 619 et seqq.). However, the term business model rose to real prominence only some decades later. For tracing the appearance of the term, Staehler as well as Osterwalder and Pigneur and Tucci, for example, applied Abrahamson and Fairchild’s method (Abrahamson and Fairchild 1999, p. 716 et seqq.) on counting articles with specific key words. The result is that the popularity of the term business model is a relatively young phenomenon that is strongly connected to the rise and diffusion of commercial activities of the Internet at the beginning of this millennium (Staehler 2002, p. 37 et seq.; Osterwalder 2004, p. 23).

Word string “business model“ in all articles in the Business Source Premier database on scholarly business journals, including several variations of the original term like “e-business model“ In Title In Full Text

667

617

609 491

262 128 36

7

0 10

0 15

0 18

0 18

0

1990

1991

1992

1993

1994

1995

0

57

66

0

1

1

3

16

11

22

30

1996

1997

1998

1999

2000

2001

2002

2003

Figure 23: Occurrences of the term business model in scholarly reviewed journals (Osterwalder and Pigneur and Tucci 2005, p. 6)

Figure 23 shows the increasing use of the term business model, starting with the technological advance and the rise of information and communication systems from the 1990s onwards. The age of new technologies contributed to a large reduction of many kinds of transaction costs, e.g. of search costs, contracting costs and coordination costs (Tapscott and Ticoll and Lowy 2000, pp. 7-9). In this period Internet start-ups and

78

3 Š Business models as an approach for analyzing companies

companies used the term business model to explain their competitive position compared to old-established companies in the industry. One of the most popular examples is eBay. Bunnell, for example, researched this company and its business model in detail (Bunnell and Luecke 2000).14 To some extent, the business model concept replaced the industry as the unit of analysis (see for example the case of Dell Computer Corporation in Kraemer and Dedrick and Yamashiro 2000). 3.2.1.2 Purpose of business modeling My understanding of the purposes of business models is based on the views of Kilov, Eriksson and Penker as well as Osterwalder. I therefore start with a short recall of their views of business modeling’s purposes before summarizing the findings. According to Kilov, the purpose of business models and models in general is to create understanding. Original situations are often very complicated. Through their translation into substantially simplified models, essential characteristics of the modeled world are pointed out. Only those aspects, actions, and relationships that are of interest to stakeholders are picked and chosen. Modeling a business means getting insights into its essentials and helps to manage complexity. Kilov states that “good models provide for clear and explicit treatment of complicated problems.” They serve as a framework for decision-making about the future direction of the business (Kilov 2002, pp. 1-3). In their study on business modeling with UML, Eriksson and Penker state several arguments for business modeling. According to the authors, business models help to better understand the key mechanisms of existing businesses and to act as a basis for creating suitable information systems supporting the business. Business models are the basis for improving the current business structure and operations and show the structure of an innovated business. Moreover, business models are a means for experimentation with new business concepts or for copying or studying a competitor’s concept, for example by benchmarking on the model level. Finally, they help to identify outsourcing opportunities (Eriksson and Penker 2000, pp. 7-8). 14

See also as another example of the evolution of business models in B2C e-Commerce the case of Fabmart, a pureplay Internet retail platform which was established in 1999. However, in 2003 the company transformed into Fabmall, becoming a multi-channel retail business (Kumar and Mahadevan 2003).

3 Š Business models as an approach for analyzing companies

79

Osterwalder assigned the purposes of business models to five categories – understanding and sharing, analyzing, managing, prospects and patenting. First, business models contribute to understanding and sharing the business logic of a company as they help to capture, visualize, understand, communicate and share the logic. Second, business models help to analyze the business logic of a company by improving measuring, observing and comparing. Third, business models improve the management of the business logic of a company. Fourth, business models help to foster innovation and increase readiness for the future through portfolios and simulation. Finally, business models may have an important role in the legal issues of patenting as companies increasingly seek to patent e-Business processes (Osterwalder 2004, pp. 1922). Using Kilov’s, Eriksson and Penker’s as well as Osterwalder’s remarks, I derived a summarizing statement on the purpose of business models. The purpose of business models is to guarantee a smooth process flow from guiding a business from its current position to a promising future while concentrating on the key essentials and insights of a company in the transformation process (Figure 24).

Process Step

Purpose

Understand the business

Get insights into the business

Manage the future of the business

• Presentation

• Analyzing business

• Improving structure

• Demonstration

• Highlighting essentials

• Making decisions

• Clarification • Simplification • Explanation

• Experimenting - Innovations - New concepts - Competitive concepts

Figure 24: Purposes of business models

3.2.2 Prevailing approaches There is no agreement in the literature about the nature, components and illustration of business models. Although the term business model was already in use in the 1960s and experienced its hype in the age of new technologies from the 1990s onwards, it was not covered in dictionaries of business and management (Buehner 2001; Cross 1999; Helms 2000; Oxford University Press and Market House Books 1998; Warner 2002).

80

3 Š Business models as an approach for analyzing companies

Researching literature on business models gives the impression that theorists and practicians who have used the term do not have a clear view. Therefore, it is necessary to explore existing literature on business models to review definitions and the views by theorists and practicians and to compare prevailing approaches in order to derive an overall view. From the variety of business model views covered in the literature, I captured 33 approaches of the term which were published by 24 authors. The number of approaches exceeds the number of authors as some of the authors revised their views. From these sources I prepared a tabular overview (Appendix 1) containing the columns author(s), year of publication, source, research context, business model definition, business model components as well as more details on the components or examples. I then reviewed these 33 approaches with the goal of narrowing the field of understanding. A closer look at them revealed that several issues are treated. I assigned these issues to definition and/or classification. Approaches also contained components, a system or network aspect, a graphical representation, the delimitation from strategy, a dynamic or change aspect or they covered success measures. From the total of 33 approaches, 24 approaches, i.e. 73%, contained a definition of the term business model, 76% referred to a system or network aspect in the sense of connectivity between parties and/or components and 74% defined the components of a business model. Only roughly 30% of the approaches contained classifications of business models and provided a graphical representation, 27% of the approaches include a dynamic or change aspect, 21% delimit business models from strategy and just 18% cover success measures (Table 9). Overall, every second author’s business model approach is closely related to the fields of entrepreneurship and the age of new technologies. The entrepreneurship aspect is covered by Afuah (2004, p. 9 et seqq.); Campbell et al. speak about business models in relationship with corporate venturing (Campbell and Birkinshaw and Morrison and van Basten Batenburg 2003, p. 35), while Hamel and Miles et al. view them from the innovation perspective (Hamel 2000, pp. 65-66; Miles and Snow and Miles 2000, p. 309). In Amit and Zott (2001, p. 493 et seqq.), the business model approach has a strong relation to the age of new technologies. They offer the business model construct

3 Š Business models as an approach for analyzing companies

81

as a unit of analysis for research on value creation in e-Business similar to Weill and Vitale (Weill and Vitale 2001, p. 33). The approaches of Applegate et al. as well as of Venkatraman and Henderson are closely related to the information age (Applegate and Austin and McFarlan 2002, p. 94 et seqq.; Venkatraman and Henderson 1998, p. 33 et seqq.), while Mahadevan (2000, p. 55 et seqq.), Rappa (2003), and Tapscott et al. (Tapscott and Ticoll and Lowy 2000, p. 3 et seqq.) refer to the Internet or the web and Chesbrough to technology (Chesbrough 2003, p. 63 et seqq.). While business modeling is considered as a simplification of reality (see in particular Kilov 2002, p. xii, p. 1), the key aspects, however, are the linkages in systems of parties and components (see for example Afuah and Tucci 2003, p. 4; Alt and Zimmermann 2001, p. 7 or Slywotzky 1996, p. 4). Some authors claim that a delimitation of business models from strategy is difficult, if at all possible, as both are interrelated (Afuah 2004, p. 12; Chesbrough and Rosenbloom 2002, p. 534). A good definition of a business model requires a detailed description of the business model components, as demanded by Van der Heyden (2004).15

15 In 2009, Van der Heyden – in cooperation with Santos and Spector – published a working paper that presents a theory of business model innovation within incumbent firms. The paper expands upon past definitions of business models. It identifies a “set of elemental activities”, a “set of organizational units that perform the activities”, a “set of linkages between the activities” and a “set of governance mechanisms” as the four separate but interrelated components (Santos et al. 2009).

• Business model as system: components, linkages between components and dynamics • Delimitation between business models and strategy difficult • Business model as system: components, linkages between components and dynamics but list of components does not explicitly address causality between components or processes and change • List of components is applicable to both native and real-world business models • As there will not be a single business model, authors propose a framework with generic components and linkages between components • Connectivity/delimitation to/from strategy is doubtful • Strong focus on understanding the drivers behind value creation in e-Business • Clear distinction of business models from revenue models • Integrative approach: combination of entrepreneurship perspectives and strategy • Clear distinction between value creation (business model) and value appropriation (revenue model) • Clear distinction of “Information Age business models” from “Industrial Age business models” • Research focus on business in the Information Age • Model as simplified depiction to understand reality • “Model differentiators” used to distinguish various types of e-Business models

• Components are defined and limited in terms of corporate venturing • Broad area of management covered: financial perspective besides implementation and strategic aspects

• Research on business models in the context of technology • Competitive strategy as part of a business model • Value capturing from early stage technology as research focus • Competitive strategy as part of business models

Afuah Allan, Tucci Christopher L. (2003) Afuah Allan, Tucci Christopher L. (2001) Alt Rainer, Zimmermann HansDieter (2001) Amit Raphael, Zott Christoph (2000) Amit Raphael, Zott Christoph (2001) Applegate Lynda M., Austin Robert D., McFarlan Warren F. (2002) Applegate Lynda M. (2001) Campbell Andrew, Birkinshaw Julian, Morrison Andy, van Basten Batenburg Robert (2003) Chesbrough Henry W. (2003) Chesbrough Henry W., Rosenbloom Richard S. (2002)

1b

1c

2

3a

3b

4a

4b

5

6a

6b

[Continued on next page.]

1 System/Network Aspect in the sense of connectivity between parties and/or components.

• Integrative approach: combination of entrepreneurship perspectives (implementation, financials) and strategy (positioning) • High relation makes it more difficult to delimit both

Key Points/Evaluating Comments/Remarks

Afuah Allan (2004)

Author(s) (Year)

1a

No.

Graphical Representation

System/Network Aspect1 Legend:

Success Measures

Dynamic/ Change Aspect

Delimitation from Strategy

Issue covered Issue partly covered Issue not covered

82 3 Š Business models as an approach for analyzing companies

Components

Classification

Definition

• Secondary literature is strong basis of publication • Broad area of management covered • Modeled world as simplification of reality • Approach difficult for application in research • Story not real actions • Components and construction can only be derived as they are not explicitly mentioned • Story not real actions • Components and construction can only be derived as they are not explicitly mentioned • Critical streams to business are in focus • Internet context shapes presented approach • Focus on strategy and business definition • No precise presentation what a business model is • Approach presented in terms of innovation • Generic approach in presenting a business model • Components based on question words • Consultants with research focus on business models

• Components based on question words • Case studies used to demonstrate shapings of components

• Case studies used to demonstrate shapings of components • Consultants with research focus on business models • Focus on the web • Types of business models in the Internet world are key issue

Hedman Jonas, Kalling Thomas (2002) Kilov Haim (2002) Magretta Joan (2002) Magretta Joan (2002) Mahadevan B. (2000) Markides Constantinos C. (2000) Miles R. E., Snow C. C., Miles G. (2000) Mitchell Donald W., Bruckner Coles Carol (2003) Mitchell Donald W., Bruckner Coles Carol (2004) Mitchell Donald W., Bruckner Coles Carol (2003) Rappa Michael (2003)

8

9

10a

10b

11

12

13

14a

14b

14c

15

[Continued on next page.]

1 System/Network Aspect in the sense of connectivity between parties and/or components.

• Innovation/revolution through new business models • Competition between business models, not between products or companies

Key Points/Evaluating Comments/Remarks

Hamel Gary (2000)

Author(s) (Year)

7

No.

Graphical Representation

System/Network Aspect1 Legend:

Dynamic/ Change Aspect Delimitation from Strategy

Issue covered Issue partly covered Issue not covered

Success Measures

Components

Definition

Classification

[Continuation from previous page.]

3 Š Business models as an approach for analyzing companies 83

Table 9:

Evaluation of approaches on business models • No primary research on what business models are • Focus on b-webs

• Focus on models for Business-to-Business Trading • Limited intensity on what business models’ components are

• Focus on models for Business-to-Business Trading • Limited intensity on what business models’ components are

• Detailed description of business models’ components • Information from interview (no publication)

• Key focus on interdependence of customer, asset and knowledge • Business models in the view of the new e-age

• Alternatives to classical business model • Approach to present characteristics for success

• Structured approach in research on e-Business models • Critical aspects highlighted

• Difference between strategy and business models as major issue • Demonstration of a business model’s components by application of a case study

Tapscott Don, Ticoll David, Lowy Alex (2000) Timmers Paul (1999)

Timmers Paul (1998)

Van der Heyden Ludo (2004) Venkatraman N., Henderson John C. (1998) Viscio Albert J., Pasternack, Bruce A. (1996) Weill Peter, Vitale Michael R. (2001) Yip George S. (2004)

18

19a

19b

20

21

22

23

24

Total of 33 In %

• Key issue is the construction of business designs • Components are assigned to structuring processes

Slywotzky Adrian J. (1996)

17

1 System/Network Aspect in the sense of connectivity between parties and/or components. Legend: Issue covered Issue partly covered Issue not covered

• Research issue “bottom-feeders” (serving unprofitable customers and buyers) • Attractiveness of business for customers and company as key goal of a business model

Key Points/Evaluating Comments/Remarks

Rosenblum David, Tomlinson Doug, Scott Larry (2003)

Author(s) (Year)

16

No.

Definition 24 73

Classification 10.5 32

Components 24.5 74

System/Network Aspect1 25 76

Graphical Representation 10 30

Delimitation from Strategy 7 21

Dynamic/ Change Aspect 9 27

6 18

Success Measures

[Continuation from previous page.]

84 3 Š Business models as an approach for analyzing companies

3 Š Business models as an approach for analyzing companies

85

3.2.3 Definition In this section I present the requirements for a Business Model Framework before I introduce the definition applying to this study. 3.2.3.1 Requirements of the framework According to Porter, the two approaches to theory building are models and frameworks. Models abstract complexity to isolate a few key variables whose interactions are thoroughly checked. The applicability of findings is restricted because no model incorporates all the variables of interest or even comes close to it. Yet theory building by models can ensure logical consistency and helps to reveal the subtle interactions within a limited set of variables. Frameworks, seek to capture complexity, and encompass many variables. They identify relevant variables and can be seen as almost expert systems. As Porter states, “theory embodied in frameworks is contained in the choice of included variables, the way variables are organized, the interactions among the variables, and the way in which alternative patterns of variables and company choices affect outcomes” (Porter 1991, pp. 97-98). I refer to the term framework rather than model due to the specifics and complexity of the logistics industry, which need to be captured comprehensively. Through formalization in the context of information and communication systems, Picot et al. refer to an organization and event model that is used to realistically illustrate facts when modeling companies. A model has to cover the aspects of ‘how’, ‘with what’, ‘who’ and ‘when’ (Picot et al. 2001, p. 221). According to the authors, a successful transformation of a company towards an adaptable and flexible organization requires concentrating on the process. The key focus is not the product or service a company offers, but how it is produced or delivered with the help of partners, suppliers and possibly customers (Picot et al. 2001, p. 225). Based on Van der Heyden’s demand for a clear description of the components and on Picot et al.’s experience, the key requirement for the framework developed in this dissertation is a formalization of the components and their characteristics using universal techniques of description. This is necessary for evaluation. The framework should not only concentrate on the service scope itself, i.e. on the variety of services

3 Š Business models as an approach for analyzing companies

86

offered, but it should also include the role of stakeholders. The formal definition should be based on the components defined, and include success measures. A good business model based on these conditions must lead to success. According to Magretta, business models are “stories that explain how enterprises work” (Magretta 2002b, p. 87). They are successful if they end in a rich stream of profits. Good business models are better than competing models as they may offer more value to customers and completely replace the old way of entrepreneurship by becoming standards for the next generation of entrepreneurs. They furthermore create new, incremental demand, they neither fail the narrative nor the numbers test and they are difficult to replicate (Magretta 2002b, pp. 88-92). Figure 25 summarizes those prerequisites, which are also supposed to apply to my Business Model Framework.

6 Creating a strong competitive advantage by changing the industry’s economies and by making replication difficult

5

Neither failing the narrative test (story makes sense) nor the numbers test (profit and loss add up)

1 Representing a better way than existing alternatives

Prerequisites for a successful business model

Offering more value to a discrete group of customers

2

Shifting existing Completely replacing the revenues among old way of doing things companies or even and becoming the standard creating new, for the next generation of incremental demand entrepreneurs to beat 4

3

Figure 25: Prerequisites for successful business models (Based on Magretta 2002b, pp. 88-92)

3.2.3.2 Research framework One research contribution of this study is the development of a framework that covers a business in a comprehensive manner. My Business Model Framework is designed to adequately represent how new customers can be attracted. This is the only valid definition of the purpose of business according to Drucker (Drucker 1954, p. 37). A comprehensive representation of a business consists of an internal and an external perspective. I use the terms ‘micro layer’ for the internal perspective and ‘macro layer’ for the external perspective. One reason for extending the micro layer of my Business

3 Š Business models as an approach for analyzing companies

87

Model Framework by a macro layer is that Total Integration requires analyzing ‘external’ factors. This applies in particular to collaboration with customers and other LSPs. Another reason is that the issue of size is important for survival in the competitive logistics industry and therefore, requires looking beyond company borders. Parts of either the micro layer or macro layer are paraphrased with the term ‘dimension’. For analyzing business models in the area of logistics, I apply an explicit approach in the sense of Mulvaney and Mann (Mulvaney and Mann 1976, p. 1 et seqq.; see 3.2.1.1.), which means that, in general, the framework is described verbally. However, in some parts this approach is extended by quantifying variables. The micro layer of the business model is the core of the framework. It consists of the three categories Ambitions & Aims, Implementation, and Financials. The components of the Ambitions & Aims category are Value Proposition, Target Group, and Business Purpose. The Implementation category comprises the components Product-MarketOffer with Product/Service and Market as subcomponents; Internal Structure with the subcomponents Input Factors, Organization and Communication; and the Value Network component with the subcomponents Relationships and Exchange Mechanism. Financials as the third category covers the components Performance Measurements and Rewards (Table 10 and Figure 26). The corresponding question words for each of the component’s respective subcomponents and their descriptions can be found in Table 10. For example, the component Rewards from the Financials category answers the question of ‘how much’ a business earns, i.e. it shows the business result or margin or provides information on shareholder compensation. A separate note is required on process as a potential component of a business model, which is discussed by Van der Heyden (Van der Heyden 2004) or in Alt and Zimmermann (Alt and Zimmermann 2001, p. 6). In my definition of the micro layer, ‘process’ is not a separate component of a business model, because the components are actually involved in making the process. For example, process is part of the subcomponent Input Factors, when describing how means and techniques are applied for conducting business. Modeling is always process-related and online auctions, for instance, are not a business model in itself, but instead a pricing mechanism.

3 Š Business models as an approach for analyzing companies

88 Categories Ambitions & Aims

Implementation

Components and subcomponents of business model Value Proposition

What

Target Group

Who

Business Purpose

Why

ProductMarketOffer

Product/ Service

What

Market

Where

Input Factors

With What

Organization

How

Internal Structure

Financials

Communication Value RelationNetwork ships Exchange Mechanism Performance Measurements Rewards

Table 10:

Question

How With Whom How How

How Much

Description x Needs of customers fulfilled x Value, benefits and advantages created for other stakeholders like investors, partners, employees or society x Customers x Customer/market segments (e.g. private households/ companies, children/adults, etc.) x Vision and mission x Goals x (Portfolio of) Product(s) sold including design/configuration x (Set of) Service/information provided x Geographical presence (local/global market reach) x Go-to-market-mechanism x Means and techniques for conducting business/for accomplishing goals and performing tasks x Building blocks of internal architecture: firms’ resources, capabilities and core competencies (asset and capital intensity, technology, employees’ skills and know-how) x Business system, value chain, scope of business activities and tasks x Company infrastructure, internal organization, organizational resources, core processes x Channels of communication x Coordination mechanism x Companies’ systems, relationships and networks to customers and partners x Exchange mechanisms (communication, coordination) x Interfaces to customers and partners x Financing/funding structure, costs/cost structure x Financial targets in terms of pricing, revenues x Reporting and control mechanism x Business result/margin x Shareholder compensation

Categories and components of business models

Business model Ambitions & Aims

Categories Components Subcomponents

Value Proposition

Target Group

Implementation Business Purpose

ProductMarket-Offer

Product/ Service

Internal Structure

Market Input Factors

Financials Value Network

Relationships

Organization

Performance Measurements

Rewards

Exchange Mechanism

Communication

Figure 26: Categories and components of a business model

The micro layer of a business model is supplemented by the macro layer. It consists of three company comprehensive business model views. The macro layer covers the legal relationship of the business models of the LSP and the customer or a joint business

3 Š Business models as an approach for analyzing companies

89

model of both parties. Also, it deals with the role and impact of size of a company on the business model components (Figure 27).

Size

Legal Relationship Business Model LSP

Business Model Customer

Business Model LSP – Customer

Business Model LSEs

Business Model Hidden Champions

Business Model Other SMEs

Figure 27: The macro layer of a Business Model Framework

From above explanations I derive some summarizing statements on my business model definition. A business model is a comprehensive representation of a business. The core of modeling is the internal perspective of a company, which I refer to as the micro layer of a business. The macro layer, i.e. the external perspective, complements the comprehensive coverage of a business. A business models’ micro layer includes the categories Ambitions & Aims of a company, the issue of Implementation as well as Financials resulting from business activities. Business modeling requires all single (sub-)components to be analyzed. From the external perspective, the business model of an LSP has to be analyzed in relation to the customer’s business model and in terms of company size. The analysis of both the micro and macro layer provides insights into how to create a customer and thus how to sustain in competition. 3.2.4 Limits of business models Literature often lacks a clear distinction between the terms business model and strategy or uses them interchangeably. Some exceptions and approaches for a distinction of both terms are available (see in particular Zott and Amit 2003, p. 37). In this section I carry out a more detailed delimitation of the term business model from strategy. The reason for covering this issue is that by definition of the topic, this study is about searching for Hidden Champions’ business models and not for their strategies. This presupposes to eliminate the existing misunderstandings and to create a uniform and clear understanding of both concepts. The origin of the term strategy can be found in military or war (Grant 2002, p. 14). For management education, the concept of corporate strategy was developed at the Harvard Business School in the early 1960s and became part of the business policy courses taught by Kenneth R. Andrews and C. Roland Christensen amongst others (Christensen et al. 1987, p. viii; Uyterhoeven et al. 1977, p. vii; Staehle 1999, p. 603). Despite its

90

3 Š Business models as an approach for analyzing companies

long history, the term strategy is still lacking a coherent view. Markides states that there is surprisingly little agreement on what strategy really is despite decades of academic research and an obvious importance of a superior strategy to the success of an organization (Markides 2000, p. 193). Magretta argues that the reason for the controversial and skeptical views on strategy is that definitions have “encompassed everything from elaborate analytic exercises and five-year strategic plans, to companywide brainstorming sessions, to simple vision statements” (Magretta 2002a, p. 71). As further examples, Hedman and Kalling as well as Yip also refer to the problems with strategy theory (Hedman and Kalling 2002, p. 104; Yip 2004, p. 18). In dictionaries of business and management, the term strategy is only partly covered. Definitions can be found for example in ‘The Oxford Dictionary for International Business’ (Oxford University Press and Market House Books 1998, p. 846), the ‘International Encyclopedia of Business and Management’ (Warner 2002, Vol. 7, pp. 6120-6130) or in the ‘Dictionary of Business Terms’ (Cross 1999, p. 342). Other dictionaries like the ‘Management-Lexikon’ (Buehner 2001) or ‘The Encyclopedia of Management’ (Heyel 1982) do not cover the field of strategy or strategy-related issues at all, while other dictionaries like the ‘Encyclopedia of Management’ (Helms 2000, pp. 870-909) do not cover the term strategy itself but related issues and terms. The condition of the understanding of strategy highlights the need that this study has to provide an overview of various views on strategy and to derive an overall valid approach that also allows a clear distinction from business models. I used management literature to capture existing approaches of strategy, i.e. its definitions and components. The tabular overview of prevailing approaches from 17 authors can be found in Appendix 2. I prepared a table summarizing the key contents of the approaches of strategy from these authors by highlighting their components (Table 11). Of these 17 authors, two revised their views once and one author twice, which leads to 21 approaches in total. I assigned the components to the three categories overall purpose, competition and dynamic. The components of the category Overall Purpose are Mission, Goals & Objectives, and Winning & Performance. Positioning & Differential Advantage, Plans & Patterns & Existing Policies, Ploys & Tactics & Implementation, and Partnering &

3 Š Business models as an approach for analyzing companies

91

Collaboration are assigned to Competition. The components Decisions and Changes in time belong to the category Internal Dynamics. Of the 21 approaches the component Positioning is included most (twelve). The other key components, which are included in ten approaches, are Goals & Objectives, Winning & Performance, Plans & Patterns & Existing Policies, and Decisions.

3 Š Business models as an approach for analyzing companies

92

Categories/ Components

Key Author (Year)

Overall Purpose

Afuah (2004)

2

Andrews (1987)

3a

Ansoff (1988)

3b

Ansoff (1965)

4a

Barney (2002)

4b

Barney (1996)

5

Burgelman (2002)

6

Chandler (1966)

7

Chesbrough (2002)

8

Drucker (1964)

9

Ghemawat (1991)

10

Grant (2002)

11

Learned (1965)

12

Magretta (2002)

13

Markides (2000)

14

Oster (1999)

15a

Porter (1998)

15b

Porter (1996)

15c

Porter (1991)

16

Weill (2001)

17

Yip (2004)

Winning & Performance

Positioning

Plans & Patterns

Policies & Tactics & Ploys

Collaboration

Decisions

Changes in Time

1

10

10

12

10

4

1

10

4

™ Legend:

Table 11:

Dynamic

Goals & Objectives

No.

1

Competition

Mission

Component covered Component not covered

Evaluation of approaches on strategy

3 Š Business models as an approach for analyzing companies

93

From the evaluation in Table 11 I deducted a comprehensive definition and overview of a strategy’s categories and components (Table 12). The table also contains examples of terms used in the definition and views about strategy. I defined Overall Purpose, Competition (‘4Ps’) and Internal Dynamics as the three categories of strategy. Overall Purpose covers the components Mission, Goals & Objectives and Winning & Performance. The category Competition (‘4Ps’) includes Positioning & Differential Advantage, longer-term Plans & Patterns & Existing Policies, short-term and mediumterm Ploys & Tactics & Implementation as well as Partnering & Collaboration. The two components Decisions and Changes are part of the category Internal Dynamics. Key words of regular use when dealing with finding a definition on strategy are competition and competitors, competitive advantage, competitive strategy, concept and positioning. Figure 28 also shows the fundamental role of the category Competition. Strategy specifies both corporate dynamics as well as competitive dynamics. The categories Overall Purpose and Competition have a competitive effect or relate to a process where the category Internal Dynamics has its own effect. In the category Overall Purpose, goals define the course and direction of a company. The component Winning & Performance of the same category point out possible gaps. The category Competition highlights for example a company’s opportunities and threats, which may cause adaptations in the category Internal Dynamics.

3 Š Business models as an approach for analyzing companies

94 Categories Overall Purpose

Components of strategy Mission Goals & Objectives Winning & Performance

Competition (4Ps)

Positioning & Differential Advantage

Plans & Patterns (longer-term) & Existing Policies

Ploys & Tactics &

• • • • • • • • • • • • • • • • • • • • • • • • •

Implementation (short-term & medium-term)

• •

Partnering &

• Relationships with external environment • Internal relations

Collaboration Decisions

• Making choices • Making trade-offs in competing • Sets of decision-making rules for guidance of organizational behavior • A very specific plan of action directed at a specified result Changes within a specified period of time • Dynamic activities used to change position or business model Assignment also to category “Ploys & Tactics & Implementation (short-term & medium-term)”. Assignment also to category “Winning & Performance”.

Internal Dynamics

1 2

•

Examples for terms used in definition/ understanding of strategy Top management’s view of what the organization seeks to do and become over the long term Specific performance targets in each of the areas covered by a firm’s mission Aiming for value creation, value capturing or sustainability Yardsticks for performance measurement Result Yielding a superior return on investment Outperforming the market Competing successfully1 Definition of the business being in and in relation to other organizations The way that a firm relates with its competitive environment Creating a defendable position through offensive and defensive actions Difference of system (business model) from competitors’ Choosing a different set of activities from rivals Being different Competitive threat Competitive advantage Prevailing/surviving in competition Determination of a company’s course Planning actions Planning deployment of capabilities Pattern of resource allocation Pattern of behavior A (set of) guideline(s) Program Theory Specific actions (new policies) that firms undertake to implement their strategies Maneuvers to outwit an opponent (ploy) Competing successfully2

Table 12:

Categories and components of strategy

3 Š Business models as an approach for analyzing companies

95

Internal Dynamics Overall Purpose Goals & Objectives

Winning & Performance

Competition (4Ps)

Positioning & Differential Advantage

Categories

Plans &

Ploys & Partnering & Tactics & Collaboration Patterns (longer-term) Implementation (short-term & & Existing medium-term) Policies

Changes

Decisions

Mission

Components

Figure 28: Categories and components of strategy

From my approaches to define a business model and strategy, some issues relating to a distinction have to be pointed out. First, strategy is the link between a company’s internal and external environment. It covers the corporation (micro internal environment), the industry (micro external environment) and the society (macro external environment). Business models cover the micro internal environment, i.e. the corporation only (Table 13).

Type/Layer of Environment Micro internal environment

Coverage

Micro external environment

Industry

Macro external environment

Society

Applicable

Table 13:

Business Model

Strategy

Corporation

Not applicable

Delimitation of business models from strategy

Second, there is uncertainty relating to the aspects of static and dynamics in business models and strategy. For example, Yip states that the defined elements of strategic positioning by Porter “make up a static positioning of where the company wants to be and could just as well be described as a business model.” Yip adds that most examples used by Porter and other authors on strategy “tend to describe static business models” (Yip 2004, p. 19). According to my view, a business model is static while strategy is dynamic.

3 Š Business models as an approach for analyzing companies

96

Third, there are interrelations between business models and strategy. Business models can be the starting point for innovations. Companies may change parts of their business model consciously in order to achieve competitive advantages. Such a conscious change of the business model, a business model innovation, is a company’s strategy. With a strategy, a company’s present position moves to a new position in future. This aspect is

High

presented in Figure 29.

Development

Business Model

Low

Business Model

Past

Future

Time Figure 29: Business models and strategy in view of static and dynamics

Fourth, contrary to strategy business models are formulated more broadly in terms of subject areas. Hedman and Kalling argue that this is founded in business model’s history with relation to the age of new technologies and start-ups and their demand for investments, which has required founders to present and market their entire business model comprehensively to raise financial resources (Hedman and Kalling 2002, p. 105). In short, strategy is the dynamic approach for achieving a company’s overall purpose while managing competition and internal dynamics. Thereby, a business model is the platform for executing strategy.

4 Š Issues of empirical research and analysis

4

97

Issues of empirical research and analysis

This chapter deals with research methodologies (4.1) and the architectures of business models in logistics (4.2.). In Section 4.3 a classification of LSPs is conducted, arguments for their research relevance are presented and the process of selecting LSPs for the empirical research is described. Section 4.4 is dedicated to the role of customers for empirical research and gives background information about customers involved. Section 4.5 deals with questionnaire design. 4.1 Methodology This section covers challenges for the researcher in conducting an empirical study of small- and medium-sized LSPs. Possible research approaches are demonstrated and the chosen process is presented. 4.1.1 Research challenges As in other areas of management, also in logistics researchers have to deal with the trade-off between academically accepted modeling, optimizing or simulating and reflecting real-life complexity and real-life problems. Especially in logistics, empirical research has to deal with the problem of finding appropriate causal models (New and Payne 1995, pp. 60-67). The problems in formulating presumed causal links is elucidated in the total supply chain perspective, which addresses inter-company operations spanning the single organization boundary. As a result, partners are concerned about revealing undisclosed data. In addition, the overall ‘big picture’ with its set of commercial and managerial issues is far more complex than considering the technical issues of material and information flow, resulting in the challenge of concentration on key issues (New and Payne 1995, p. 67). Based on New and Payne’s discussions about research paradigms (New and Payne 1995, pp. 60-77), the paradigm underlying this study is presented in Figure 30.

R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2_4, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

4 Š Issues of empirical research and analysis

98

Environment • Context in which a business operates • Macro/micro environment Macro

Micro

Practice

Integration

Partnership

• Things an organization/ LSP may do • Business model categories Ambitions & Aims and Implementation (Own capability)

• Quality of links between LSP and its customers and its network partners

• Companies with which the LSP collaborates • Customer company as well as network partners (Network capability)

Performance • LSP’s outcome • Business model category Financials

Figure 30: Paradigm to empirical research: Adaptability to best practices

The above figure demonstrates a paradigm with five components. The component environment covers the context in which a business operates, i.e. the macro and micro environment (Section 2.2.2). Environmental factors mediate and influence the ‘how’ of how logistics practice affects performance, the ‘how’ of partnerships’ inducement of performance and the ‘how’ of impacting performance by quality of integration between an LSP, its customers and its network partners. Practice – things an organization, i.e. an LSP may do – affects performance by single moldings of the components within the LSP’s business model categories Ambitions & Aims and Implementation. The quality of links between an LSP and its customers and network partners impacts performance. As presented in Section 2.2, it is this link, i.e. integration, which is the key in today’s logistics industry. In this paradigm, good or interesting practices (‘best practices’) adopted may be identified by their good or interesting results, i.e. by competitive advantages achieved or optimum performances given. In order to suit particular situations with particular environmental characteristics, these practices may require adaptations. Therefore, the underlying research paradigm is called ‘adaptability to best practices paradigm’. It is no longer only the LSP but also its customers and network partners who play a key role in this system. Performance is the outcome of an LSP, e.g.

4 Š Issues of empirical research and analysis

99

operating profits or losses or share prices achieved, demonstrated by the business model category Financials. Thereby, empirical research deals with the issue of performance as a component in a system. The challenge of the empirical research and analysis is to identify adaptability of processes and data collected of Hidden Champions and to search their business model specifics that are causal for long-term success and survival and thus become a guidance for applicability by other SMEs. As business models are static in view, empirical research concentrates on the system’s issues described. In reality this system goes beyond with feedback and response taking place between the components, e.g. logistics practice influences the environment or performance influences network partnerships. This view is not covered in this study, although alluded to by the dark grey circle embracing all components in Figure 30. 4.1.2 Research approach In this section research approaches are classified and their utilization for this study is presented. 4.1.2.1 Classification From a Hidden Champion’s point of view the basis for above-average success and business excellence is supposed to be in their unique and outstanding molding of single business model components in a way other companies are unable to imitate. This strongly company-related alignment requires a sophisticated research methodology which is flexible enough to identify those specific characteristics. For this reason and the reasons of the topic’s complexity with its idiosyncratic and unique nature as well as the variety of types of competitors, a hybrid research approach would facilitate this study. Figure 31 provides an overview of possible approaches in the empirical research and their methodologies for performance.16

16

Detailed descriptions on the methodologies observations, interviews, experiments and content analysis can be found in Atteslandes (Atteslander 1991, p. 95 et seqq. on observations, p. 129 et seqq. on interviews, p. 205 et seqq. on experiments and p. 226 et seqq. on content analysis).

4 Š Issues of empirical research and analysis

100

Research Approaches

Main Methodologies

Representation

• Interviews • Observations

R

Exploration

• Case Studies • Content Analysis

R

Experimentation

• Survey Research • Experiments

R

R Applied

Not applied

Figure 31: Types of research approaches and main methodologies for performance

The classification results in three types of research approaches, namely representation, exploration and experimentation, with two main methodologies identified for each. The research approaches are described in more detail in the next sections and applied methodologies are presented. 4.1.2.2 Representative research The two main methodologies of representation are interviews and observation, both aimed at reflecting reality. This study is given a representative character by conducting a questioning in the special form of intensive interviews. I formulated detailed LSP and customer questionnaires with the interview guidance is given considerable grounds for own judgment. Schnell et al. refer to using an interlocution manual (Schnell et al. 1988, pp. 352-354). The research methodology of observation was not chosen for the reason that a systematic record of developments and events at LSPs and companies at their site for a specific time period was not possible for reasons of confidentiality or lack of resources for support. By using the questionnaires as interlocution manuals it was possible to make use of two strengths of this special form of interview. First, the interview partner’s framework can be included, i.e. insights about the experience of interview partners and relevancy can be gained (Schnell et al. 1988, p. 352). Second, central questions can be brought to discussion in decisive moments (Atteslander 1991, p. 174 et seq.). In comparison to a standardized interview, the weaknesses of such a manual also have to be considered, applied as described in Atteslander (1991, p. 175) to conducting

4 Š Issues of empirical research and analysis

101

interviews with representatives of the logistics SMEs. First, an increased knowledge and experience of the interviewer is required, i.e. practical examples and excellent comments on logistics strategy awake the interviewed person’s interest in a discussion and create the path for providing more insights. Second, the influence of the interviewer is stronger with data quality depending on the interviewer’s quality. Third, the demand on the interviewee’s readiness to participate and on the competencies is enlarged. This is challenging in particular in the logistics industry which is well-known for its restraints in publishing company data. Also, the questions cover areas that only interview partners from the top management would be able to answer. Fourth, the higher time requirements are in particular critical in conjunction with the requirement of top management inclusion. Finally, results are less comparable and thus more difficult to evaluate. For example, in question 2.6.1 (Appendix 3). LSP A mentioned exact numbers on own and subcontracted trucks while LSP L was not able to provide detailed figures and answered that although it has a variety of transport equipment, it has not developed as an asset-intensive LSP but more intellectually based. 4.1.2.3 Explorative research This study’s character is mainly explorative as the “fine-grained” research methodology (Harrigan 1983, p. 398 et seq.) of in-depth case studies – I prefer using the term ‘research cases’ – was chosen. This methodology would also assess the extent to which Barney’s (1991, pp. 106-112) four criteria – valuable, rare, imperfectly imitable, nonsubstitutable – a resource must satisfy in order for it to provide a company with a sustainable competitive advantage are fulfilled. Moreover, it is a matter of this study to gain knowledge rather than to secure knowledge. Qualitative case study research is supposed to be a suitable research methodology for building and broadening theory. Although searching for uniqueness instead of central tendencies in a group seems to be a retreat in research, it is the unique and extraordinary company which is defining the rules of competition and creating new breakthroughs (Godfrey and Hill 1995, p. 530; Aharoni 1993, p. 43). The investigation of the outstanding company identifies the means by which it was made sustainable, and the dynamics of the shifts and changes (Aharoni 1993, p. 43). The construction of case studies is characterized by openness and allows the use of numerous qualitative and quantitative data sources (Bonoma 1985, p. 203). In this

102

4 Š Issues of empirical research and analysis

dissertation, case studies – research cases LSP and customers – are used for reasons transferred from Eisenhardt, who describes the strengths of gaining knowledge from case studies (Eisenhardt 1989, p. 546 et seq.). Accordingly, with case studies the probability of generating novel theory is given. Also, there is the likelihood of testing emergent theory with readily measurable constructs and verifiable hypotheses as well as the likelihood of empirical validity of the resulting theory due to close ties between theory-building process and evidence. However, weaknesses of theory-building from case studies as outlined by Eisenhardt (Eisenhardt 1989, p. 547) apply to this research study. First, overly complex theory is yielded due to robust data collection and due to an intensive use of empirical evidence which is lacking the simplicity of overall perspective. Second, a narrow and very idiosyncratic phenomenon without level of theory generality is described (see also Harrigan 1983, p. 398). 4.1.2.4 Experimental research Most research strategies are experimental to some extent. Therefore it is difficult to determine unambiguously when the research methodology of experiments is applied (Atteslander 1991, p. 205). In contrast to representation, experiments have three decisive advantages (Atteslander 1991, p. 207-208), namely the possibility to include persons or things for trial to represent social correlations, the construction of extreme situations and the testing of hypotheses under strong conditions. Also, it is the most secure method of identifying causal relations in the area of social phenomenon. Although experiments either real or virtual in their classical forms, e.g. in the form of laboratory and field experiments, projective experiments and ex-post-facto procedures, simultaneous and successive experiments as well as simulations and planning games, are not considered to be an appropriate methodology for business models in the area of logistics, some experimental character was considered to be necessary. For this reason, survey research was chosen as the methodology for research. Unlike interviews as research methodology, in which one or only a few selected LSPs are targeted, survey research aims at multiple LSPs, i.e. it is a methodology with large research scale. All analytical and empirical data were prepared and collected in an exhaustive database, which is the key source for uncovering new insights on questions raised and validation

4 Š Issues of empirical research and analysis

103

or rejection of the hypotheses. Survey research is considered to be the methodology for identification of differences in single business model components’ moldings. These differences across the various types of LSPs are expected to reveal competitive advantages. The experimental character in this empirical study is included in the adaption of questioning during the interviews if the interviewees go into specific interesting directions. For example, interview partners who provided access to their customers’ sites were asked more intensively on the issue of customer relationships. The specifics of such situations allowed in the experimentation more depth regarding the perspective of customers as partners. 4.1.3 Research process This section describes the research process in more detail. It forms the basis for the empirical studies within this dissertation. 4.1.3.1 Process The starting point and trigger for working on this dissertation’s topic is personal and practical experience from reading industry literature, previous research activities and work experience in the field of logistics consulting. It is the primary source for prior knowledge. In addition, prior knowledge is based on secondary sources, i.e. on literature analysis. Knowledge is based on extensive reviews of books on business management and the area of logistics, articles in management and logistics magazines and newspapers, electronic media like online articles in databases and the World Wide Web or specific industry publications like handbooks on ‘Who’s Who’ in the logistics industry. Additional information was gathered from surveys focusing on logistics, outsourcing and supply chain management as well as from presentations of companies and experts on conferences and other industry events prepared for analysts and customers. Literature analysis was supplemented by companies’ presence in the World Wide Web and by their publications like company presentations, brochures and other material up to primary company information gathered by talking to companies’ employees. Based on both experience and literature analysis, i.e. on common industry and academic knowledge, the resulting prior knowledge led to interesting issues and problems in the industry. Questions were raised which needed to be checked and hypotheses were formulated. Together with prior knowledge questions and hypotheses shape the theoretical part of this study.

4 Š Issues of empirical research and analysis

104

The applied research methodologies interviews, case studies (to some extent only) and survey research (Figure 31) form the starting point for this dissertation’s practical part. Their outcomes are aspects of reality, i.e. new insights into questions that have arisen and validation or rejection of hypotheses. By observation and abstraction of theory and reality, ‘new’ knowledge is created. Thereby, reality is observed and structured due to existing theoretical knowledge with previous hypotheses not being rejected but corrected according to observed states. Research is considered as a learning process with permanent interaction between questions about reality, data gathering and critical reflection on new insights which undergo theoretical assimilation and result in new questions. Kubicek designates this approach in which the researcher is an active participant as iterative heuristic (Kubicek 1977, p. 14 et seq.). In this study the research process is understood as a cyclical iterative learning process. Figure 32 provides an overview of the research process with its iterative character.

Observations

Interviews

Questions

Experience

Präsentation

(Representation) szw

Creation of “New Knowledge“

Prior Knowledge

(Primary)

New Insights

Aspects of Reality

Bad Säck in gen, Juni 2005

Hypotheses

Validation/ Rejection

jœš›–T ”Œ™

(Exploration)

Wer wir sind Grieshaber Transpor t + Logistik

Literature Analysis



Case Studies*

Ÿ

Survey Research

(Secondary)

(Experimentation)

Abstraction

{GoG lGvGyG€

yGlGhG sGpG{G €

Legend: Personal experience

Specific industry publications like handbooks on ‘Who‘s Who’

Practical experience Books on business management/logistics Articles in management/logistics magazines and newspapers Electronic media like articles in databases and the WWW

Surveys in the area of logistics Presentations from companies or conferences Companies‘ presence in the WWW Companies‘ publications like annual reports or brochures

Präs enta tion

W er wir sind Grie shabe r Tr ansport + L ogist ik Ba d Säc kin ge n, Jun i 20 05

szw  jœš›–T ”Œ™ Ÿ

Primary gathered information from companies

Database – quantitative data

Case LSP X

Database – qualitative data

Case Customer x

Dissertation‘s final outcome (research objectives) Theoretical basis/ state of reality Input and transformational factors

Questionnaire/Interview Manual y Logistics Service Provider y Questionnaire/Interview Manual y Customer y

*

Issues of research and analysis Expected response to research issues Only to some extent applicable

Figure 32: Research process as iterative learning process (Based on Kubicek 1977, p. 14 et seq.; Tomczak 1992, p. 84)

This dissertation’s research focus is broadened by supplementing the LSPs’ perspective with customers’ views. In terms of the representative character of this study a separate in-depth questionnaire for LSPs and customers was deployed (Appendices 3 and 4). These interviews with both parties mainly took place during personal visits to their

4 Š Issues of empirical research and analysis

105

company sites, or in the case of some interviews during an extensive phone call. In total, interviews took place at twenty-six companies, of which thirteen were LSPs and thirteen customer companies. Usually, several interviews were necessary at each company, also with different interview partners. To foster the explorative research approach, two LSPs were studied more intensively (LSPs D and M) including some of their customers. The insights gained from the interviews were fostered by visiting and observing selected company sites. The experimental character of this study is underlined by the inclusion of the customers’ perspectives. Key issues addressed by customers influence the database’s content. The directions of findings may completely move in an unexpected manner. 4.1.3.2 Theory Theory is considered to be the critical issue of this research study for two reasons. First, it forms the basis for identifying and analyzing phenomenon in the industry. This resulted in Integrated Supply Network Management as the core issue. Secondly, it is a starting point for an in-depth classification and selection of LSPs. Besides a detailed segmentation, it also helped to force a clear distinction between LSEs and SMEs with the latter consisting of Hidden Champions and others. Also, the selection of the right LSPs and cases was done based on theoretical prior knowledge and not by random sampling. The aim is to focus efforts on theoretically useful LSPs by searching for those which replicate or extend the prior knowledge (Eisenhardt 1989, p. 533). 4.1.3.3 Reality Research oriented on reality attempts to describe, to explain, and to solve practical relevant problems and phenomena with theoretical directed empiricism (Tomczak 1992, p. 83). The object area and insights can be gained by experiences and discoveries of apparent contradictions between putative knowledge and putative facts (Kubicek 1977, p. 11; Popper 1973, p. 370 et seqq.; Popper 1969, p. 104). While in fundamental science empirical research has the purpose of searching for the truth by examining hypotheses, in science oriented on reality or use it is directed at the registration of typical problems that have arisen in practice with the aim of developing possible realities and the examination of models developed (Ulrich, H. 1998, p. 162 et seq.; Ulrich, H. 1981, p. 10). With this dissertation’s research aligned on practical use, the tradition of

4 Š Issues of empirical research and analysis

106

business management as applied social science is continued (Kubicek 1977, p. 14; Ulrich 1984, p. 168 et seqq.) by aiming at evaluating practice. 4.1.3.4 Quality The flexibility of analyzing data in survey research is a chance to advance in theory building. However, there is the danger of lacking transparency and consequently results may lack recognition. In order to compensate for this trade-off it is necessary to present interesting or frame-breaking theories meeting the tests of good theory or concept development like analytical conclusions or logical coherences, and which are grounded in convincing evidence (Eisenhardt 1989, p. 549). Accordingly in this study the analysis of data is guided by theory. The quality of the research process is examined with the means construct validity, internal and external validity as well as reliability (Yin 1989, p. 40 et seq. and Table 14). Means to examine research quality Construct validity

Internal validity

External validity

Reliability

Table 14:

Description

Empirical examination of the theoretical construct being equivalent to the (measured) variable (Kuss 1987, p. 63). Measure for identifying influential relationships.

Robustness of research results against specifics of the applied methods and the situation (Kuss 1987, p. 64), i.e. generalization of results with identified relations also to be expected in other situations (Boehler 1985, p. 38). Measure for conformity, i.e. repetition of the analysis of the same case with the same results (Yin 1989, p. 45).

Activities (in general)

Comparison of results with theoretical declarations and additionally obtaining confirmation from interview partners. Searching for relations between observed phenomena with specific results originating in previous phenomena. Making sure that all alternative explanations were considered (Yin 1989, p. 42 et seq.). Setting up theoretical explanation patterns whereas possible relations are described based on theoretical pre-understanding (Yin 1989, pp. 113-115). Internal validity is strengthened if theoretical relationships match empirically founded relationships. Each case is considered as a single unit and also groups of cases are built with mutuality and differences are analyzed (Yin 1989, pp. 109-113). Striving to generalize a particular set of results to some broader theory (Yin 1989, p. 44). By applying the method of triangulation, external validity is warranted (Bonoma 1985, p. 201).

Documentation of the total research process in detail (Yin 1989, p. 45).

Means and their application to examine the quality of the research design

4 Š Issues of empirical research and analysis

107

Within this dissertation I applied the means suggested by Yin to examine the quality of research. An example of the first means to examine the research process of this dissertation, construct validity, is dealing with the issue of Total Integration. In theory, Total Integration is claimed to be the future concept. Consequently, empirical research aims to identify success factors of Total Integration. The results were compared with theory and statements on this issue by several managers from one company. Regarding internal validity, a cyclical iterative learning process was chosen as the research process. External validity is given in some transfer of results to related areas. Finally, by conducting in-depth studies asking questions to several top managers of a company, reliability is secured.

4.2 Business model architectures While the first part of Chapter 4 deals with the theoretical part of the research methodology, now the focus is shifting towards practice, with business models’ architectures being described first. 4.2.1 Industry developments and business model architectures Business model architectures are influenced by developments in the industry with relation to partnership strategies and logistics networks (see also Chapter 2). The 1970s were marked by a classical provider-customer relationship with the LSP service spectrum covering single traditional, i.e. operative, services. The situation changed sometime in the 1980s when companies recognized economic benefits by also outsourcing value-added services to LSPs. This turnaround had decisive consequences for future partnerships in logistics as it initiated a process in which the extent of outsourcing increased through the course of time, in dependency upon the concrete demands and the intensity of cooperation within a logistics network. At a later stage, hollow17 companies arose with a large network of partners and currently the role of global network integrators, as the most significant form of this process is dominating discussions in the area of logistics.

17 Jenster et al. refer for example to a ‘hollow’ if a company is heavily outsourced (Jenster et al. 2005, p. 5).

108

4 Š Issues of empirical research and analysis

4.2.2 Derivation of business model architectures and comparisons The developments in the area of logistics form the starting point for the derivation of architectures and therefore defining distinctive types of business models in logistics. In this section the various forms are described in more detail and discussed in terms of research relevance. 4.2.2.1 Descriptions and characteristics The analysis of the developments in the industry resulted in the identifying of four major milestones. These can be used to define four types of business model architectures. The architecture is the molding of the business model’s transformation, i.e. the molding of the components Internal Structure and Value Network. In principal, it is transformation which defines the distinctive forms of business models. Of course, other components differ across various types of business models as well but their moldings are defined and influenced by the way of transformation. Research of this study resulted in the definition of four types of architectures and thus four types of business models, which are traditional, outsourcing, network and integration architecture or business model. 4.2.2.1.1 Traditional architecture In its classical form the task of logistics was to physically supply markets with goods. By providing transportation, transshipment and warehousing, companies operating in logistics formed the connecting part between procurement and production as well as between production and distribution. Within this stage Klaus describes logistics as the science of transfer functions (Klaus 1993, p. 7; Klaus 1999, p. 25). In this business model analysis logistics is referenced by the traditional architecture in which an LSP is the ‘connector’ between partners in the horizontal supply chain of a single firm (Figure 3318).19

18 This figure is a graphical presentation of the content from Table 10 and Figure 26 adapted to the traditional architecture. 19 For explanation see, for example, the part ‘1970s and 1980s: Traditional Value Chain’ in Figure 10.

4 Š Issues of empirical research and analysis

109

Margin Structure1

Ambitions & Aims

Value Proposition Target Group Business Purpose Product-Market-Offer

Single Firm

Transformation

Traditional Architecture

Causing Costs

Market

Internal Structure & Value Network

Performance Measurements Rewards

Obtaining Income

I O C

Financials

Implementation

Product/Service

Legend: First Party – Company Second Party – Customer Relationships/Exchange Mechanisms: Flow of Product/Service

I

Input Factors

Flow of Information/Communication

O

Organization

Flow of Money

C

Communication

Internal Structure Value Network 1 Margin structure of business model/generated value for owner(s) and other stakeholder(s)

Figure 33: Type I: Traditional Architecture and Traditional Business Model

4.2.2.1.2 Outsourcing architecture As the interfaces between the company functions procurement, production and distribution decreased efficiency, function comprehensive sequences were developed and optimized (Landesbank Baden-Wuerttemberg (ed.) 2001, p. 7). It was around 1980 when integration was evolving (Wilson and Delaney 2001, p. Figure #8: Logistics Evolution to Supply Chain Management) with value-added services being increasingly outsourced to LSPs. This advanced approach is described as outsourcing architecture with LSPs no longer being ‘connectors’ but ‘partners’ in the value chain (Figure 3420).

20 This figure is a graphical presentation of the content from Table 10 and Figure 26 adapted to the outsourcing architecture.

4 Š Issues of empirical research and analysis

110

Margin Structure1

Ambitions & Aims

Value Proposition Target Group Business Purpose Product-Market-Offer

Value Chain

Transformation

Outsourcing Architecture

Causing Costs

Market

Internal Structure & Value Network

Performance Measurements Rewards

Obtaining Income

I O C

Financials

Implementation

Product/Service

Legend: First Party – Compa ny Second Party – Customer Third Parties – Value Chain Partners (Suppliers, Distributors, etc.) Relationships/Exchange Mecha nisms: Flow of Product/Service

I

Input Factors

Flow of Information/Communication

O

Organization

Flow of Money

C

Communication

Internal Structure Value Network 1 Margin structure of business model/genera ted value for owner(s) and other stakeholder(s)

Figure 34: Type II: Outsourcing Architecture and Outsourcing Business Model

4.2.2.1.3 Network architecture It then started that LSPs took over responsibility for order fulfillment and with the trend towards broader service programs and increasing specialization not only distribution and procurement relations became more complex but also the efforts in terms of communication and coordination (Merkel and Heymans 2003, p. 10). Companies created a value network of numerous third party providers in previous and subsequent processes of distribution as well as for internal logistics activities. The underlying architecture is called network architecture (Figure 3521).

21 This figure is a graphical presentation of the content from Table 10 and Figure 26 adapted to the network architecture.

4 Š Issues of empirical research and analysis

111

Margin Structure1

Ambitions & Aims

Value Proposition Target Group Business Purpose Product-Market-Offer

I O C

Performance Measurements Rewards

Obtaining Income

Value Network

Transformation

Network Architecture

Causing Costs

Market

Internal Structure & Value Network

Financials

Implementation

Product/Service

Legend: First Party – Company Second Party – Customer Third Parties – Value Chain Partners (Suppliers, Distributors, etc.) Relationships/Exchange Mechanisms: Flow of Product/Service

I

Input Factors

Flow of Information/Communication

O

Organization

Flow of Money

C

Communication

Internal Structure Value Network 1 Margin structure of business model/generated value for owner(s) and other stakeholder(s)

Figure 35: Type III: Network Architecture and Network Business Model

4.2.2.1.4 Integration architecture Reengineering of business processes as highlighted at the beginning of the 1990s by Hammer and Champy (1993) also left behind its signs in logistics. Today, LSPs are fundamentally rethinking and radically redesigning their business processes in order to achieve enormous improvements in performance measures (see definition of reengineering in Hammer and Champy 1993, p. 32). They take on the role of an integrator who is able to manage and coordinate suppliers, the producer, retailers and customers, i.e. an integrated network, while being the single point of contact to the customer and producer. Integration architecture is referred to if the customer is in the center of interest and its total supply chain is managed. A business model with

4 Š Issues of empirical research and analysis

112

transformation through integration architecture is called an integrative business model (Figure 3622). Margin Structure1

Ambitions & Aims

Value Proposition Target Group Business Purpose Product-Market-Offer

I O C

Performance Measurements Rewards

Obtaining Income

Integrated Network

Transformation

Integration Architecture

Causing Costs

Market

Internal Structure & Value Network

Financials

Implementation

Product/Service

Legend: First Party – Company Second Party – Customer Third Parties – Value Chain Partners (Suppliers, Distributors, etc.) Fourth Party – Integrator Relationships/Exchange Mechanisms: Flow of Product/Service

I

Input Factors

Flow of Information/Communication

O

Organization

Flow of Money

C

Communication

Internal Structure Value Network 1 Margin structure of business model/generated value for owner(s) and other stakeholder(s)

Figure 36: Type IV: Integration Architecture and Integrative Business Model

These four types of architectures and business models – traditional, outsourcing, network and integration – shape the business model components Internal Structure and Value Network. Both components are the core of a business model with effects on all other components.

22 This figure is a graphical presentation of the content from Table 10 and Figure 26 adapted to the integration architecture.

4 Š Issues of empirical research and analysis

113

4.2.2.2 Research relevance As described in the second chapter, 4PL and Total Integration solutions are the most discussed concepts in logistics within the last few years. Due to their high expected margins, they are proposed as the future concept in the area of logistics. The key question to be checked arising from prior knowledge (Figure 32) relates to Integrated Supply Network Management as the key challenge in logistics. For these reasons research concentrates on the architecture and business model described in 4.2.2.1.4., i.e. business model integration is looked at both within the LSP and business integration between the LSP and the customer. 4.3 Survey of LSPs The LSPs are the focus of the third part of Chapter 4. Prevailing logistics knowledge lacks a comprehensive typology with traditional and newly emerged LSPs. However, for research regarding Total Integration not only traditional companies but also new market entrants have to be included. The reason is that according to discussions in literature and practice, a good future in the area of logistics is predicted for new market entrants. Therefore, I have worked on the segmentation of market players and suggest a typology that is extensive in scope. In a second step, the types of LSPs relevant for this study are selected. Thirdly, the process of selecting LSPs for the empirical study is presented. 4.3.1 Typology The search of Hidden Champions requires the analysis of all possible and relevant types of LSPs. This presupposes a comprehensive segmentation. In literature several approaches to classifying providers have been made. Besides some academics (in particular Professor Klaus, University of Nuremberg and Professor Baumgarten, TU Berlin), preliminary organizations and banks also deal with distinguishing LSPs. Table 15 provides an overview of selected available segmentations. The approaches reach from very simple segmentations (Vogel or eyefortransport) to very detailed presentations (in particular Klaus and Bundesamt fuer Gueterverkehr).

4 Š Issues of empirical research and analysis

114 Segmentation criterion Network density Type of service

Served functional area Traffic carrier used Geography covered Extent of service offering Performance criterion Size of goods handled Asset-intensity

Function of partnership Level of service integration Expected margin * **

Examples x x x x

Without network Dense network Basic services Value-added services

x x x x x x

Transportation Warehousing Road Sea National International

x x x x x x x x

Single service Total solution No certainty Time guarantee FTL Envelopes Asset-based Non-asset based

x x x x x x

Resource provider Business partner Low High Low EBIT High EBIT

Author(s) hFraunhofer ATL and HypoVereinsbank (ed.) 2004, pp. 30-33. hFraunhofer ATL and HypoVereinsbank (ed.) 2004, pp. 30-33. hKlaus and Mueller-Steinfahrt 2000, pp. 29-30; Klaus 2003, p. 36 et seq.; Klaus and Kille 2006, p. 37 et seq.. hBundesamt fuer Gueterverkehr 2005, pp. 3-13. hIKB Deutsche Industriebank (ed.) 2004, p. 8; IKB Deutsche Industriebank (ed.) 2005, p. 5. hVogel 2001, p. 9, p. 12. hZentes and Morschett 2003, p. 427.* hBaumgarten and Thoms 2002, p. 64. hWeber et al. 2002, p. 32. hKlaus and Mueller-Steinfahrt 2000, p. 29 et seq.; Klaus 2003, p. 36 et seq.; Klaus and Kille 2006, p. 37 et seq.. hKlaus and Mueller-Steinfahrt 2000, p. 29 et seq.; Klaus 2003, p. 36 et seq.; Klaus and Kille 2006, p. 37 et seq.. hKlaus and Mueller-Steinfahrt 2000, p. 29 et seq.; Klaus 2003, p. 36 et seq.; Klaus and Kille 2006, p. 37 et seq.. h Vogel 2001, p. 9, p. 12. hBundesamt fuer Gueterverkehr 2005, pp. 3-13. hLehmann Brothers (ed.) 2001, p. 3. hLehmann Brothers (ed.) 2001, p. 3. hLehmann Brothers (ed.) 2001, p. 3. hSeuring et al. 2003, p. 341.** hZentes and Morschett 2003, p. 247.* hWeber et al. 2002, p. 32. heyefortransport (ed.) 2004, p. 6. hSeuring et al. 2003, p. 341.** hBaumgarten and Thoms 2002, p. 64. hWeber et al. 2002, p. 32.

Based on Baumgarten and Zadek 2002, p. 4. Amended from Baumgarten and Kasiske and Zadek 2002, p. 35.

Table 15:

Overview of segmentation approaches of LSPs

The above approaches are predominantly restricted to a part of the industry only. Furthermore they are very broad and not very detailed in definition, e.g. distinction by transportation and haulage carriage only. One of the contributions of this study is to derive a detailed overview of LSPs based on the existing segmentations and prevailing knowledge in the industry. While some of the segmentation criteria are applied as well, some are for specific reasons not. I do not include performance criteria, as keeping timeframes in transportation is a specific value-add of the service of transportation and included in the criterion type of service. Also, size of goods handled is excluded. All goods relevant for logistics are covered, independent of size. Envelopes, for example, are part of the postal industry and therefore out of the scope. Furthermore, function of

4 Š Issues of empirical research and analysis

115

partnership is not a criterion for my segmentation approach. The reason is that the function is a result of the ‘sum’ of the respective moldings of all relevant criteria. Finally, I exclude expected margin as margins are the result of the performance. However, the criteria business experience in the sense of years in operation and company size were added. Applying these conditions, the segmentation of companies operating in the area of logistics is conducted according to four steps. The first distinction is the number of companies involved, whether it is a single company or a collaborative entity between two or more companies (provider(s) and/or customer(s)). Second, in the case of a single company it is the business experience or the number of years in operation which distinguishes the providers, i.e. distinction between traditional companies and new market entrants. Thereby, the term ‘traditional companies’ is used for classical carriers. They supplement their single existing service offering of transportation by value-added services which can either be provided with their own assets or via subcontracts. New market entrants, however, are companies with no or little logistics assets. They provide logistics services via subcontracts. Examples of this type of companies are IT providers or consulting companies. Third, in the case of traditional companies the classical distinction between transportation companies and haulage contractors is made (criterion ‘type of service’). Fourth, after segmentation by the previous three steps, the remaining criterion are used simultaneously; these are network density, served functional area, traffic carrier used, geography covered, extent of service offering, asset-intensity, level of service integration and company size. Seventeen types of LSPs (with two additional superordinate groups) are the result of this segmentation (Table 16 and Figure 37 for the segmentation and Table 17 for a definition of the providers identified).

4 Š Issues of empirical research and analysis

116

Table 16:

Segmentation of LSPs

Figure 37: Segmentation of LSPs

Legend:

Small selfdriving carriers (subcarriers)

1 st step;

2 nd step;

Niche providers

3 rd step;

Traditional carriers

Transportation companies

Providercustomer entities

CEP providers

Providerprovider entities

National postal/rail operators

Types of LSPs;

Superordinate group

Collaborative entities in the area of logistics

Land carriers

Mediumsized haulage carriers

International logistics groups (global players)

Haulage contractors Mediumsized sector specialists

Traditional companies

Single companies in the area of logistics

Air & ocean carriers

In-house providers

Non-assetintensive contract logistics providers

Contract logistics providers

Specialized logistics subsidiaries

Assetintensive contract logistics providers

Transport brokers

New market entrants

‘Outside conquerors’

4 Š Issues of empirical research and analysis 117

4 Š Issues of empirical research and analysis

118 No.

Type of LSP

1

2

Small self-driving carriers (sub-carriers) Niche providers

• • • •

3

Traditional carriers

• •

4

Medium-sized sector specialists

5

Medium-sized haulage carriers

• • • • • •

A*

7

International logistics groups (global players) National postal/ rail operators CEP providers

• • • • • •

8

Land carriers

9

Air & ocean carriers Contract logistics providers Asset-intensive contract logistics providers Non-assetintensive contract logistics providers Transport brokers

6

B* 10

11

12 13

14

Specialized logistics subsidiaries In-house providers

15

‘Outside conquerors’

16

Provider-provider entities Provider-customer entities

17

Short description/Key characteristics

• • • • • • • • • •

Carriers for larger transportation companies (sub-carriers) Transportation only, regional Partly one employee only (self-driving), up to ten vehicles Specialization of vehicles to market segments (e.g. transportation of spacious and heavyweight goods or automobiles) Usually regionally only Work for direct customers (long-term customer-relationships with regional companies) Transportation (11-50 vehicles), frequently also with one/few warehouses Transportation specialized to sectors Service offering partly extended (contract logistics) § 50-150 vehicles Focus on parcel services and partial loads Highly standardized service offering (rather organization of transports than transports), warehousing, value-adding services Large traditional haulage contractors and groups Large, dense European/worldwide networks Extensive service offering Service portfolio covering (almost) all important logistics segments Currently only Deutsche Post DHL with complete service spectrum Courier, express, parcel service providers with own very dense networks (land, air, ocean) Without specialization on specific services Specialists in land transportation Sometimes with focus on groups of customers Increasingly contract logistics services as supplement Worldwide operating haulage contractors with focus on air and ocean freight Increasingly contract logistics services as supplement offering Key business focus is the provision of value-added services Usually long(er)-term customer relationships on a contractual basis Ownership of tangible resources/‘hard assets’ To a minor extent: intangible resources/‘soft assets’ for service provision

• Without tangible resources • Service portfolio mainly consists of management/integration offerings • Arrangement of transports • Without ownership of vehicles • Frequently subsidiaries of international logistics groups • Extended services up to integration of overall logistics services • Subsidiaries of production companies/retailers • Overall logistics services for group up to the sale of services to the external market • Traditional outside companies to the logistics industry (e.g. consulting companies/IT companies) • Integration services • Non-asset-intensive companies • Companies/cooperations between traditional companies and/or new market entrants • Companies/cooperations between traditional companies and customer(s) or between new market entrants and customer(s)

* ‘A’ and ‘B’ are superordinate groups. Table 17:

Types of LSPs

4 Š Issues of empirical research and analysis

119

4.3.2 LSPs relevant for research The study’s sample size was limited by excluding those types of LSPs that were not ready to support the intention of this study to identify success principles of Hidden Champions in contract logistics, in particular in terms of Total Integration. Accordingly, the following types were excluded for the reasons stated, with the remaining types becoming part of the study sample: x Small self-driving carriers are out of the scope of the study due to their lack of resources to provide contract logistics or total solutions offerings. x Niche providers are not included in the study as this type of provider also does not provide contract logistics or total solutions offerings. x Traditional carriers are out of the scope too due to their lack of contract logistics and total solutions offerings. x Despite national postal/rail operators offerings of contract logistics and total supply chain integration, this type of providers is taken out of the survey sample due to their large company size, which does not meet the defined size criterion of a Hidden Champion. x Although CEP providers partially offer contract logistics and total solutions offerings, those companies are out of the scope due to these offerings’ low weight in relation to the companies’ total business. x Transport brokers do not provide contract logistics or total solutions offerings. x ‘Outside conquerors’ are able to provide contract logistics and total solutions offerings but they usually do not fit with a Hidden Champion’s criterion of being in the logistics business for decades. As a result of these exclusions, the ten remaining types of LSPs of the study sample are medium-sized sector specialists, medium-sized haulage carriers, land carriers, air & ocean carriers, asset-intensive contract logistics providers, non-asset-intensive contract logistics providers, specialized logistics subsidiaries, in-house providers, providerprovider entities and provider-customer entities. Table 18 lists all seventeen types of LSPs resulting from the typology and highlights the ten relevant types for further research (lines in grey color). It was my intention to prepare at least one research case for each relevant type of LSP, whereas I prepared two cases for the medium-sized sector specialists and three cases for the asset-intensive contract logistics providers. Experience has shown that using between four and ten cases works well as it is a

4 Š Issues of empirical research and analysis

120

sufficient number to generate theory with much complexity and to convince empirical grounding while not being too difficult to cope with the complexity and data volume (Eisenhardt 1989, p. 545). For these reasons, the total number of thirteen in-depth research cases LSP were considered to be sufficient. By choosing cases from each relevant type of LSP, I wished to ensure that any inferences made were relevant for the entire area of logistics.

No.

Type of LSP

Inclusion (Yes: 9 / No: X)

Reason for exclusion

Number of research cases LSP

1

Small self-driving carriers (sub-carriers)

X

Lack of resources for provision of contract logistics services

0

2

Niche providers

X

Contract logistics services out of business scope

0

Lacking contract logistics services

0

3

Traditional carriers

X

4

Medium-sized sector specialists

9

5

Medium-sized haulage carriers

9

6

National postal/rail operators

X

Company size not relevant to size of a Hidden Champion

0

Contract logistics minor business part only

0

2 1

7

CEP providers

X

8

Land carriers

9

1

9

Air & ocean carriers

9

1

10

Asset-intensive contract logistics providers

9

3

11

Non-asset-intensive contract logistics providers

9

12

Transport brokers

X

13

Specialized logistics subsidiaries

9

14

In-house providers

9

15

‘Outside conquerors’

X

16

Provider-provider entities

9

1

17

Provider-customer entities

9

1

Table 18:

1 Contract logistics services out of business scope

0 1 1

Company history not relevant to history of a Hidden Champion

0

Types of LSPs and selection of relevant types for empirical research

4.3.3 Selection of LSPs for empirical research After the exclusion of seven types of LSPs, ten types of LSPs remain. The objective of the next step was to assign company names to these remaining ten types. Starting point for assignment was to capture an extensive list of LSP names based on four types of sources. First, I used key market surveys (in particular Datamonitor 1999; Fraunhofer ATL and HypoVereinsbank 2004; Klaus 2003; Transport Intelligence 2004; Transport Intelligence 2003). The second type of sources relates to lists and rankings of LSPs published in magazines and newspapers like in Chemical Week (2003, pp. 19-22) or VerkehrsRundschau (2004, pp. 15-34). Logistics cooperations like System Alliance formed the third source of companies for assignment as their members were expected to be small and medium in size. Finally, as it is a search for ‘Hidden’ Champions, a lot of LSPs were identified in the process of primary research conducted over the course of time including hints found in various publications, in particular in German and

4 Š Issues of empirical research and analysis

121

international logistics magazines and newspapers. As a result, a list of 308 LSPs was generated. The survey from Klaus (2003) is used to demonstrate the further approach for the process of selecting LSPs to be studied in-depth. First of all, only those LSPs offering contract logistics services were chosen from the European ‘Top 100’ list (Klaus 2003, pp. 201-204) and countries top providers lists (Klaus 2003, pp. 157-197). Following this, those LSPs whose turnover (turnover of LSP itself as well as turnover of relating group) was larger than one billion euros were excluded. The reasons are that large LSPs are not ‘hidden’ but usually well-known to the public and the second criterion for Hidden Championship refers to this size limitation (Figure 2). This second step aimed to exclude LSPs that do not meet criterion for Hidden Champions as defined in Chapter 1. The same procedure was applied to the other surveys and to the other three types of sources used. The result is a list with 108 potential Hidden Champions for which I use the term ‘Top 100+’ (‘Top 100+ Company List’).23 For these LSPs extensive material was captured and analyzed. After that, eight of these LSPs had to be excluded for various reasons, for example because it transpired that they are not profitable and make losses, that they had been taken over in the meantime, or due to their supply chain integration offering being less than claimed. However, for the identification of Hidden Champions’ success principles and arguments, those excluded companies were nonetheless used for argumentation in the empirical research process to follow. Furthermore, LSPs without any information about their results remained on the list if no indications on troubles in profitability were mentioned anywhere and no other reasons for exclusion were identified. Finally, the remaining names of LSPs were assigned to the remaining ten types of LSPs that were identified in Section 4.3.2. I refer to the resulting complete overview as the ‘Top 100+ Company List’. To ensure representativeness, from this derived list, for each type of LSP, one LSP was chosen for in-depth analysis including interviews and company visits. Due to the strong weight of medium-sized sector specialists, two LSPs were chosen from this type and three LSPs were chosen from the asset-intensive contract logistics providers’ type. As a result thirteen potential Hidden Champions representing ‘common industry practice’ are

23 Company lists (in particular the ‘Top 100+ Company List’) and databases are confidential and not part of this publication.

122

4 Š Issues of empirical research and analysis

selected as research cases LSP. Among them ‘best in class’ cases, i.e. Hidden Champions have to be identified. The remaining LSPs in the ‘Top 100+ Company List’ are used for empirical research and analysis as well, but to a lower degree, i.e. for strengthening and supporting findings at selected stages. The selection of the thirteen LSPs for in-depth analysis was not done by any specific criterion but by the LSPs’ willingness to participate and support this empirical research study. In the following, I refer to these thirteen LSPs primarily by the terms ‘LSPs studied in-depth’ and ‘research cases LSP’. Through the selection of at least one LSP per type of LSP, the coverage of the whole spectrum of possible market players is guaranteed for the empirical research. The selected LSPs are representative of their individual type of LSP. They are dominant in a way that they had managed to pass the selection process that aimed at identifying potential Hidden Champions. Due to participating interview partners’ requests to treat information confidentially, I refer to LSPs’ names in the text by using the term ‘LSP’ followed by a capital letter. For the thirteen LSPs this results in the capital letters from ‘A’ to ‘M’. For the thirteen customers studied in-depth I used Roman numbers, resulting in the numbers ‘I’ to ‘XIII’. While company names remain confidential, the information gathered from the companies is used absolutely. This approach was preferred to one that discloses company names but limits usage of data. Therefore, the applied method of anonymization creates the best prerequisites for the most valuable results possible. 4.4 Role of customers in empirical research A business model’s success depends strongly on the conformity with customers’ demands and expectations. In order to validate or reject hypotheses conclusively, the customers’ perspective was taken into account by conducting company visits and personal interviews with selected LSPs’ customers. Thirteen mainly on-site personal interviews at LSPs’ customers took place by using a separate customer questionnaire (Appendix 4). Eight customers’ headquarters are based in Germany, two customers’ headquarters are in the US and one customer each has its headquarters in France, Netherlands and Sweden. The customers’ core businesses vary

4 Š Issues of empirical research and analysis

123

across industries, with three customers basically active in automotive, two in bicycles and one each in electronics, furniture, healthcare, drugstore, office products, books, toys as well as logistics (Figure 38). Customer companies were primarily selected based on outstanding collaboration with an LSP or interesting outsourcing projects.

Personal customer interviews by country (headquarter) 1 1 1

2

8

Personal customer interviews by industry (core business) Automotive

3

Bicycles

2

Electronics

1

Furniture

1

Healthcare

1

Drugstore

1

Office products

1

Books

1

Toys

1

Logistics

1

Figure 38: Overview of customers studied in-depth

4.5 Questionnaire design The key objective of my empirical research was to examine the state of Total Integration solutions at small- and medium-sized LSPs. As basic sources for research I developed two questionnaires, one each designed for interviewing LSPs and customers. The questionnaires’ specific aim was to test the validity of the micro and macro hypotheses that were formulated based on prior knowledge from experience and literature analysis. For this reason, detailed questionnaires were designed and structured according to the definition of a business model’s components and the activities and behavior of a business in its macro environment. By covering both the micro and macro layer, the questionnaires also provide hints on requirements for business model integration. The empirical research was designed as an exhaustive survey with thirteen in-depth LSPs and thirteen in-depth customer questionnaires supplemented by selected answers to specific parts by LSPs from the ‘Top 100+ Company List’ and further customer examples from literature. For the twenty-six companies studied in-depth, the questionnaires were used as a data pool in which all information was captured. This means that prior to the interviews I filled the questionnaires with all answers I could

124

4 Š Issues of empirical research and analysis

already find in freely available sources like the companies’ Internet pages, their company brochures, magazines or newspapers. Only after this, the responses from the interview partners were added. With this approach, usually those questions for which available publications were lacking or limited in information were in the focus of the interview. This enhanced the probability of gaining insights into the totality of the micro and macro layer. Also, by including external information as well as the interviewers’ observations and experiences, individual results can be looked at critically. Any intentions of interview partners to point out interesting issues only and market their company are thus cushioned. With regard to the questionnaire design, the structure of the ‘Questionnaire/Interview Manual – Logistics Service Provider’ is in line with the structure of the categories and components of a business model (Table 10 and Figure 26) and the definition of the macro layer of a business model (Figure 27) in Section 3.2.3.2. Therefore, the questionnaire for LSPs is structured in three parts. The first part captures company information. It contains generic information like contact details about the LSP and the interview partner as well as requests for documents. The second part deals with the micro perspective of a business, raising questions on the subcomponents and components of a business model. Finally, the third part is on the macro perspective. It covers overall views, in particular relating to causes for internal adaptations at the LSP, to the scope as well as strengths and developments of the portfolio of service offerings, to the evaluation of criteria used for selecting customer projects, to the characteristics of the relationships to customers, to cooperations with partners and customers as well as to specific forms of other agreements entered. In analogy to the LSPs’ questionnaire, the ‘Questionnaire/Interview Manual – Customer’ is structured in three parts as well. The first part covers the generic questions relating to contact details of the company and the interview partner. Part two deals with the micro perspective and is entitled ‘Partnership Initiating Questions’. It presents the customer’s supply chain, its core competencies, its priorities in selecting an LSP, insights into the relationship or cooperation with the LSP like form and details of the cooperation, reasons for outsourcing or outsourced activities as well as the description of the values created by the LSP. The third part of the macro perspective contains the questions related to collaboration. It covers the customer’s agreement with the LSP’s

4 Š Issues of empirical research and analysis

125

offering including its flexibility in adaptation, the satisfaction with the LSP’s locations, IT and technology issues like systems in use and ‘soft factors’ regarding connectivity with the LSP. Further issues relate to human capital of the customer company and the LSP, to processes including visibility into process steps, to the organizational structure, which also indicates contacts to the LSP’s staff, to communication issues like frequency or points of contacts as well as to relationship issues like activities and ‘soft factors’. Finally, customers were asked to evaluate their LSP’s performance and to indicate joint awards received. For all fields of questions in the micro and macro layers, business and management literature was studied to ensure that the questions contain all key aspects. Questions were formulated that were most suitable for evaluation, with a preference for asking for quantitative data rather than for qualitative information. However, result presentation based on quantitative data was often not possible due to the specific issues or for the reason that interview partners stated subjective impressions to many questions. However, this information is of particular value as Total Integration, the key issue of this study, is also subject to ‘soft factors’ to a large extent. In such cases the findings were summarized and evaluated with best knowledge and conscience to enable objective results and to allow conclusions to be drawn. Through this approach to clustering answers into categories, the difficulties in measuring ‘soft factors’ were overcome to a certain degree. For the reason that the LSP questionnaire covers the overall strategy of an LSP, interview partners had to be selected from the top management. Therefore, I talked, e.g. to the CEO (LSPs F and K), the CIO (LSP A), the Managing Director (LSPs L and M), the Head of Sales (LSPs D, E, and G), the Head of Marketing and Communications (LSPs B, C, and J), the Head of Service Center Logistics (LSP H) and the Global Consulting Leader (LSP I). Regarding the customer questionnaires the interview partners were in the positions of the Head of SCM, the Head of Logistics or a Logistics Manager.

5 Š Formulation of hypotheses

126

5

Formulation of hypotheses

In this chapter the hypotheses for the empirical study are formulated based on experience and the literature analysis (see left part on theory in Figure 32). The hypotheses contain the totality of a business (micro layer) and its existence in the environment (macro layer). The distinction in these two layers is described in Section 3.2.3.2 on the research framework. Thus and at first, for each of my defined (sub-)components of a business model (Table 10 and Figure 26) a single micro hypothesis is formulated (Section 5.1). These micro hypotheses are used to examine particular aspects of a business model. Second, three macro hypotheses are formulated that concern the overall business model of LSPs and their customers (Section 5.2). The purpose of the macro hypotheses is to examine overall issues on Hidden Champions and their business model. Each micro hypothesis and each macro hypothesis is summarized in boxes at the end of each section. 5.1 Formulation of micro hypotheses on business model components This section treats the micro hypotheses which are formulated for each component and subcomponent of a business model as defined in Table 10 and Figure 26. The hypotheses are based on prevailing knowledge in theory and reality. This is represented by exemplary statements by well-known scientists in literature and by statements from industry experts. 5.1.1 Micro hypotheses on Ambitions & Aims I start with micro hypotheses for the following three business model components: Value Proposition, Target Group and Business Purpose. These components form the category Ambitions & Aims. 5.1.1.1 Single Source Hypothesis The business model component Value Proposition deals with value creation of the LSP for its customers as well as with the benefits and advantages created for other stakeholders of the LSP, in particular for investors, partners, employees and society. With macro environmental trends favoring network economies (Section 2.2.2.2), customers have to deal with managing a much larger number of interfaces with suppliers, distributors and other partners in their supply chain. The integration of R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2_5, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

5 Š Formulation of hypotheses

127

partners has an increasing priority for LSPs who have identified new possibilities for value creation in these relationships. Value creation is expected from replacing single solutions by an optimized integrated concept. Theory claims that designing and optimizing existing logistics processes increases productivity due to synergy effects from integration (see, for example, Baumgarten and Darkow 2002, p. 1). The importance of integration and overall leadership has been emphasized with increasing frequency, qualifying the topic as a core issue at many conferences and business meetings as well as in publications. Researchers like Hau L. Lee from Stanford University or Helmut Baumgarten from the Technical University Berlin, as well as company representatives like Christian Schneider from Schenker or Detthold Aden from BLG Logistics Group, discussed integration. Table 19 presents their statements, amongst others; these statements illustrate views prevailing in theory (in particular from researchers at universities) and in practice (from practicians operating in logistics). These views are representative of the importance of integration and value creation in the industry.

5 Š Formulation of hypotheses

128 Origin of knowledge Theory

Author (Organization/Company) Integrator/Customer Axel Neher (Philipps-University, Marburg) Hau L. Lee (Stanford University)

Helmut Baumgarten/Felix Kasiske/Hartmut Zadek (Technical University Berlin) Robert Lieb (Northeastern University) Peter Klaus (University ErlangenNuremberg)

Practice

Christian Schneider (Schenker AG)

UPS Supply Chain Solutions (Integrator)/Philips Medical Systems (Customer) LGI Logistics Group International (Integrator)/Paul Hartmann AG (Customer) Detthold Aden (CEO) (BLG Logistics Group) Kuehne + Nagel International AG (Integrator)/Nortel Networks (Customer)

Table 19:

Statement24

The 4PL provider takes over the logistics management of the total supply chain. Integration creates value (higher profit margins, improved customer service performance, faster response time, reduced inventory investment and write-offs while doubling returns on assets, multiplied shareholder values, etc.). 4PL providers (system integrators) will be increasingly challenged to take over planning and management tasks of all logistics activities from supplier to the final customer. “… several large-scale 4PL agreements have been reported in the past year”. Contract logistics’ (trendily called 3PL, 4PL and LLP) large growth potential is derived from its definition (tight individual relationship between providers with several logistics functions being integrated, longer-term contracts, considerable annual turnover of at least 500,000 to 1 m. euros). In the logistics industry there is the trend towards providers able to offer a complete bundle of integrated logistics solutions for customers becoming larger and more influencing. Within the ‘Door-to-Room’ project covering Europe, Philips Medical Systems handed over logistics services to a single source (UPS Supply Chain Solutions). In 2003, Paul Hartmann searched for one partner able to manage all carriers and taking over operative tasks. All from a single source. One-StopShopping is the motto. Kuehne + Nagel International AG established a new division (KN LeadLogistics) for offering onestop-solutions to its customers.

Source

Neher 2001, p. 52.

Lee 2000, p. 36.

Baumgarten and Kasiske and Zadek 2002, p. 32, p. 35.

Lieb and Hickey N.A., p. 5. Klaus 2003, pp. 106107.

Schneider 2003, p. 16.

Practical experience; N.A. 2004b, p. 32-33.

Practical experience.

Aden 2000, p. B3. Practical experience; Stubbs 2003; Gooley 2002a, pp.9-10.

Examples of prior knowledge causing supremacy hypotheses

These statements all argue for total supply chain solutions and one-stop-concepts, i.e. for complete outsourcing to a single supplier. LSPs are expected to offer tasks like 24 The statements are either translations from German into English or a representation of indirect citations. In the case of a direct citation the statement is written in quotation marks.

5 Š Formulation of hypotheses

129

management and integration services that are higher level than those traditionally provided. Based on these statements, a first hypothesis, called the Single Source Hypothesis, is presented. Hereby, Single Source is contrary to Multiple Source, with the latter characterized by insourced and partially outsourced logistics activities to several providers, instead of full outsourcing to one single supplier. Single Source also covers the complete service portfolio while Multiple Source refers to one or a few specific services only.

1. Single Source Hypothesis: LSPs’ primary aim ought to be becoming the sole partner for their customers with overall responsibility for all of their customers’ comprehensive logistics processes. Managing a customer’s total supply chain leads to increased value for that customer.

5.1.1.2 Segmentation and Transaction Hypotheses According to Porter, overall cost leadership and differentiation are the two differing generic strategic approaches to outperforming competitors (Porter 1980, p. 35). Further arguments are presented by Anderson and Narus (2003, p. 43). These authors claim that profitable and sustainable growth requires a fine-grained disciplined approach to get, leverage and document knowledge about customers. This allows me to formulate the Segmentation Hypothesis, which states that LSPs focus on a few sectors and derive competitive advantage their way. Table 20 provides a few examples that substantiate this hypothesis as well.

5 Š Formulation of hypotheses

130 Company Name

Logo

Karl Dischinger Logistikdienstleister GmbH & Co. KG Hoyer GmbH/ Hoyer Group

Schachinger Logistik Holding GmbH & Co. KG

TRADISA Transportes y Distribución, S.A.

Unyson Logistics (Hub Group)

Table 20:

Country

Sector Focus

Source

• Automotive logistics procurement • Brand name products logistics • Chemicals • Food • Petroleum • Gas • Silo logistics • Technical/logistical activity • Brand name products • Food • Healthcare • Automotive • Construction logistics • Automotive • Petroleum products • Industrial sectors (e.g. consumer electronics) • Pharmaceutical industry (sample delivery)

Karl Dischinger Logistikdienstleister (ed.) 2006. Hoyer (ed.) 2005a.

PR (ed.) 2006.

Tradisa (ed.) 2006.

Unyson Logistics (ed.) N.Y., p. 4.

Sector focus of LSPs (examples from the ‘Top 100+ Company List’)

LSPs’ focus on sectors is in harmony with customers’ requirements. Literature and practice suggest that customers primarily focus on cost and quality (see Table 21). With sector focus, the efficiency and experience of LSPs is expected to rise, which may result in lower prices and better quality. No.

Requirement on LSP

Source

1

According to the roughly 530 responses from the survey “Networks and net effects in transportation logistics”* from the Technical University of Darmstadt, the second most important requirement on transportation services is price (graded with the score of 5.7 with 1 equivalent to low and 8 equivalent to high; punctuality is ranked first with a score of 6.2). Costs is such a decisive factor in the selection process of an LSP that the management of Brita GmbH, a leading producer of water filter systems, insourced logistics services for at first three years in autumn 2005 when realizing that Brita was able to provide high quality at competitive costs. According to Professor Jahns and Professor Darkow, customers’ answers to the question about criteria for LSP selection are at first quality and second price** in all relevant surveys.

Voigt 2003, pp. 1-2.

2

3

* **

The original German title of the survey is “Netzwerke und Netzeffekte in der Transportlogistik” The following criteria are spatial proximity, service and image.

Table 21:

Cost focus of customers

N.A. 2005b, p. 5.

Jahns and Darkow 2006, p. 1.

5 Š Formulation of hypotheses

131

The further micro hypothesis which I call Transaction Hypothesis covers this customer perspective and also relates to the business model component Target Group like the Segementation Hypothesis.

2a. Segmentation Hypothesis: LSPs offer Total Integration concepts to carefully selected sectors. They are able to serve the target sectors more effectively by better meeting needs and/or more efficiently by having lower costs (Porter 1980, p. 38). Besides, they are experts in knowing their customers and they are highly familiar with their customers’ sector.

2b. Transaction Hypothesis: Customers do not search for establishing mutually beneficial relationships with sector specialists. Moreover, customers select their LSPs mainly based on general objective factors such as pricing and geographical scope.

5.1.1.3 Commodity Trap Hypothesis In general, financial aspects are dominating the goal setting of businesses, with profit maximization as the key performance indicator (Macharzina 1999, p. 161 et seqq.; Woehe and Doering 2000, p. 125). In the area of logistics, the positive effect of offering value-added services on the basis of improved profit margins is a standard practice (DVZ (ed.) 7 June 2005, p. 5; Tomic 2005, p. 11; Weber et al. 2002, p. 31 et seq.) that is well-known to smaller LSPs. The provision of value-added services is a lever to break out of the commodity trap and to improve margins (see for example Skinner 1974, p. 113 et seqq., p. 121). This view is strengthened by similar experiences in other sectors such as the chemicals sector. Research identified differentiation through service and relationship management as sources for competitive advantage, while the blind allegiance to cost leadership is increasingly viewed as subjecting the company to the dangers of the commodity trap (Robinson and Clarke-Hill and Clarkson 2002, p. 149, pp. 162-163). Another example in the packaging industry is value creation for customers through package design as described by Napolitano (2002, p. 16). The risk of mature products being seen as

5 Š Formulation of hypotheses

132

commodities by consumers is reduced if marketeers apply creative packaging and strategic branding. Despite these arguments, the prevailing hypothesis remains that operative services, in particular transportation and warehousing services, are still the major activities provided by small- and medium-sized LSPs. The German provider Karl Dischinger Logistikdienstleister GmbH & Co. KG, for example, changed the ‘sector carriage’ part from its company name to ‘support team’. However, despite owning 200 fleet units and 30,000 m2 warehousing space, the company still seems to provide traditional services on a broad scale (Karl Dischinger Logistikdienstleister (ed.) 2006). The next hypothesis that relates to the business model component Business Purpose, the Commodity Trap Hypothesis, examines the commodity trap in the logistics industry:

3. Commodity Trap Hypothesis: Smaller LSPs are suffering or are trapped in low margin transportation business.

5.1.2 Micro hypotheses on Implementation The second category of my self-developed business model, labeled Implementation (Table 10 and Figure 26), refers to Product-Market Offer with Product/Service and Market as subcomponents, and to the ways these products and services are brought to market. These include the Internal Structure, with Input Factors, Organization and Communication as subcomponents, as well as the Value Network, with the subcomponent Relationships and Exchange Mechanism. The micro hypotheses relating to this second category are formulated as stated below. 5.1.2.1 Cherry Picking Hypothesis The hypothesis related to the business model subcomponent Product/Service is connected to the Commodity Trap Hypothesis (Section 5.1.1.3). The starting position for research and analysis is the product-market offer. Research in this perspective was

5 Š Formulation of hypotheses

133

already conducted more than twenty years ago when Carolyn Y. Woo25 tried to determine the factors that distinguish low-return market-share leaders from high-return market-share leaders. One of her research results was that high-return leaders have a higher value-added factor than low-return leaders. Woo stated as a reason that a high value-added factor affords more opportunity for differentiation according to product characteristics and cost structure. Thus a high value-added factor enables better control over performance in the market (Woo 1984, p. 52). Outsourcing of logistics services from pure transportation up to integrated logistics functions has been widely discussed in logistics literature over the last decade (see in particular Rabinovich et al. 1999, pp. 353-373; Razzaque and Sheng 1998, pp. 89-107). This increasingly has triggered competition between industry incumbents, but has also generated new competition between incumbents and new entrants concentrating on those advanced services, i.e. on expanded value-added and strategic services only. Table 22 provides examples of industry veterans and New Breeds of providers that concentrate on advanced service solutions.

25 Carolyn Y. Woo was assistant professor at the Krannert School of Management at the Purdue University. She published her research results in the Harvard Business Review in 1984 (Woo 1984, pp. 50-54).

5 Š Formulation of hypotheses

134 Provider type Industry veterans

Company/ Logo Honold Logistik Gruppe GmbH & Co. KG

Service focus

Source

• Outsourcing partner for the whole supply chain

Honold Logistik Gruppe (ed.). 2006.

• Specialization on consulting and implementation of procurement, production and distribution solutions • Global provider of logistics solutions for warehouses, distribution centers and hospitals

Müller – Die lila Logistik (ed.). 2006. Swisslog (ed.). 2006, p. 4.

JPMorgan Chase Vastera

• ‘One-stop-shop’ associated with moving goods across international borders

JPMorgan Chase Vastera (ed.). 2005.

4flow AG

• Supply chain management consulting • Software and content for the design of logistics networks • Business process reengineering Transformational outsourcing services including • Logistics • Direct materials sourcing • Supply chain optimization

4flow (ed.) N.Y., p. 12.

Müller - Die lila Logistik AG Swisslog Holding AG New Breeds of providers

Country of origin

IBM Integrated Supply Chain

IBC (ed.). 2005.

Table 22: Industry incumbents and new entrants concentrating on advanced service solutions (examples)

Thus the micro hypothesis, the Cherry Picking Hypothesis, concerns the types of services provided, i.e. the position of advanced logistics for the various LSPs, as well as the new type of competitors entering their segment.

4. Cherry Picking Hypothesis: In the high-margin advanced services logistics business, selected industry incumbents compete with new entrants coming from outside the traditional logistics industry.

5.1.2.2 Global Standard Hypothesis With the evolution of manufacturers to operate globally, logistics has had to manage the flows across the global supply chain. The emergence of truly global LSPs is the result of global manufacturers having to deal with potentially overwhelming economic pressures like economic downturns, upheavals, currency devaluations, the ramping-up of the European Union or new mega markets (Boysen et al 1999, p. 196 et seq.). Requirements in global logistics exceeding their own assets meant that manufacturers had to seek outside help. Personal experience of consulting in the logistics industry taught me that whilst large LSPs were expected to provide logistics services globally,

5 Š Formulation of hypotheses

135

smaller LSPs were putting full effort into dispersing any doubts about their capability of managing global logistics activities, not only by global presence through networking but also with their personal locations. The Global Standard Hypothesis related to the business model component Market refers to these strivings.

5. Global Standard Hypothesis: Small and medium LSPs are able to manage today’s global logistics processes. They are present with their personal locations all over the world.

5.1.2.3 Virtual Logistics Hypothesis Next, the hypothesis on the business model component Input Factors is formulated. Logistical performance is often measured in terms of asset-intensity, which refers to the ratio of tangible and intangible services provided to the total assets or resources utilized in the provision of the activities. Thereby, resources are defined as the tangible and intangible assets a company uses to conceive of and implement their strategies (Hitt et al. 2001, p. 138). Figure 39 defines the two types of assets in more detail. Tangible resources are the visible (money) value of a company, either in the form of current assets, fixed (long-life) assets or investments (Edvinsson and Malone 1997, p. 23). Intangible resources, so called nonphysical assets (The Brookings Institution (ed.) 2001, p. 1) or soft assets, are claims to future benefits without physical or financial embodiment (Lev 2001, p. 5). These are generated by innovation, organizational designs or human resource practices (Lev 2001, p. 7) for usage in service provision (The Brookings Institution 1001, p. 9 et seq.).

5 Š Formulation of hypotheses

136

Types of Assets

1 2 3 4 5 6

Tangibles (“physical assets”1/“hard assets”)

Intangibles (“nonphysical assets”3/“soft assets”)

• Visible (money) value of companies • Three types2: - Current assets (consumed/sold < 1 year; e.g. inventories, account receivables) - Fixed (long-life) assets (life > 1 year; e.g. plant, equipment, warehouses, trucks, call center, machines; depreciated over multiple financial reporting periods) - Investments (e.g. holdings in stocks and bonds)

• Claims to future benefits without physical or financial (stock, bond) embodiment4 • Generated by innovation (discovery), unique organizational designs, human resource practices5 • Contribute to or are used in the provision of services 6 • Examples: technology, intellectual capital, trust, reliability, trust if reliable on capabilities, organizational capabilities, brand name, customer satisfaction, flexibility, goodwill

Lev 2001, p. 1. Edvinsson and Malone 1997, p. 23. The Brookings Institution (ed.) 2001, p. 1. Lev 2001, p. 5. Lev 2001, p. 7. The Brookings Institution (ed.) 2001, pp. 9-10.

Figure 39: Types of Assets

While the measurement of tangible resources can be difficult and the assignment of a financial value for tangible resources may require considerable subjective judgment, it is an even more complex preposition with intangible resources (The Brookings Institution (ed.) 2001, p. 16). Because intangible resources are inherently difficult to define, to determine with certainty or precision, to measure, to quantify and to account for (The Brookings Institution (ed.) 2001, p. 15), research on the role of asset-intensity in logistics is lacking. Obviously, intangible resources drive a lot of the growth in the economy. At the same time, the importance of investments in tangible resources for economic growth decreases. The Brookings Task Force on Intangibles describes this phenomenon as unseen wealth (Blair and Wallman 2001). Transferred to the area of logistics, nonphysical factors are expected to be key value drivers. As an example, customers’ trust is an intangible resource that greatly influences the capacity for value creation and without trust effective and efficient performance may not be possible. In Table 23 the importance of trust is strengthened by exemplary statements from theory and practice. This leads me to the formulation of the following hypothesis, the Virtual Logistics Hypothesis, that concerns the growing requirement of intangible resources based LSPs.

5 Š Formulation of hypotheses Origin of knowledge Theory

Author (Organization/Company) John Hagel III and Marc Singer Charles Handy Henri Savall and Véronique Zardet

Practice

Table 23:

Suh-Yueh Chu (National Ping Tung Institute of Commerce, Taiwan) and Wen-Chang Fang (National Taipei University, Taiwan) Burkhard Schwenker and Stefan Boetzel (Roland Berger Strategy Consultants) Hugo Fiege (Fiege Group)

137 Statement

Source

Trust is one of the key attributes for building an infomediary business. ”Virtuality requires trust to make it work”. “The absence of performance and trust inexorably leads to the demise of the firm or, at best, to an artificial survival.” “A lack of trust among supply chain partners often leads to ineffective and inefficient performance.”

Hagel III, J. and Singer, M. 1999, p. 78ff. Handy, C. 1999, p. 112.

Restructuring and growth are achieved with an integrative concept of a trust-based organization. Services are trust goods. With decision for an LSP mutual trust may enormously reduce economic and social complexity.

Roland Berger Strategy Consultants (ed.) 2005, p. 3.

Savall, H. and Zardet, V. 1997, p. 134.

Chu and Fang 2006, p. 224.

Fiege, H. 2002, p. 15.

Examples of the importance of trust

6. Virtual Logistics Hypothesis: Customers’ trust in and desire for a one-stopsolution offer requires LSPs to be heavily non-asset-based. In contrast to the historically asset-intensive transportation providers, successful LSPs are today intangible assets based and have hardly any tangible assets, thus relying on the provision of virtual logistics solutions.26

5.1.2.4 Complexity Hypothesis As stated before, probably the factors most influencing LSP organization have been globalization, i.e. increased geographic scope, and the demand for broader service scope going beyond traditional warehousing and logistical services to include value-added services like wrapping or labeling. The two factors are related in the sense of delayed customization and broad content. First, arguments from literature on increasing complexity of the international environment are provided by Bartlett and Ghoshal, who studied organizational responses to increased global scope in the 1990s. According to the authors, the most 26 The Virtual Logistics Hypothesis is strongly connected to the Global Standard Hypothesis as logistics solutions primarily based on intangibles simplify or even just enable global service offerings.

138

5 Š Formulation of hypotheses

critical constraint when attempting to respond to the increased demand for geographic scope is limited organizational capability. Going global multiplies a company’s organizational complexity by typically adding a third dimension to the existing business- and function-oriented management structure. The researchers stated that companies must develop multidimensional organizations allowing them to optimize efficiency, responsiveness and learning simultaneously. According to their research, the most successful companies systematically differentiated tasks and responsibilities within the organization, built and managed interdependence among the different units of the companies and searched for complex mechanisms to coordinate and co-opt the units into sharing a vision of the strategic tasks (Bartlett and Goshal 1992, pp. 3-13). Second, broader service scope is characterized by too much internal complexity. New product or service development creates difficulties in adapting to increased complexity in management. To be successful, companies increasingly need change management capabilities. Also, researchers at Michigan State University revealed in a study of research and development projects at 137 North American manufacturers in 2000 that the greater and earlier design and manufacturing are integrated, the better companies can cope with other complexities and technological uncertainty. A proven methodology for designing and creating a product or service is for example the 3P program, which stands for product and production preparation, calling for five-day structured sessions bringing together manufacturing, engineering, design, procurement and maintenance personnel, as well as shop-floor operators (Moody 2001, p. 13).27 Whilst these results apply to manufacturers, the validity is to be transferred to the LSPs in the core of this study. It is to study whether these companies, often with very strong ties to the founder or a family and a long tradition of knowing how to do business, operate according to the success patterns described above. Examples found in theory and practice (Table 24) leave doubts, leading to the formulation of the Complexity Hypothesis on the business model component Organization.

27 For example, the 3P program with roots at Toyota has been successful in efforts at Pella, Maytag, Black & Decker, Daimler and other manufacturers (Moody 2001, p. 13).

5 Š Formulation of hypotheses Origin of knowledge Theory

Practice

Author (Organization/Company) Helmut Baumgarten (Technical University Berlin, Logistics Department) and Stefan Wolff (ZLU) W. Lemoine and Lars Dagnæs (Institut for Transportstudier)

Karsten Schween (McKinsey&Company)

Uwe Riedel and Matthias Sure (KPMG Advisory Services)

Table 24:

139 Statement “The purpose of logistics as an integrator between internal functions and external supply chain partners is rarely effective in strictly functional organizations.” The organization of companies in the transport sector has been changing in response to new strategies and demands from the industrial world. Current performance is characterized by skill gaps in terms of operations and change management. The strategic implication for LSPs is to establish their own ‘operating systems’ to enhance internal efficiency. For outsourcing to be successful business models must be designed sufficiently flexibly for enhancing or reducing the extent of outsourced services later on.

Source Baumgarten, H. and Wolff, S. 1999, p. 60.

Lemoine, W. and Dagnæs, L. 2003, p. 213.

McKinsey&Company (ed.) 2003, p. 11.

Riedel, U. and Sure, M. 2005, p. 5.

Prevailing views on LSPs organizational flexibility

7. Complexity Hypothesis:28 Smaller providers struggle in adapting their organization to changing market requirements. Their ‘execution system’ lacks the resilience required for a flexible response to customer needs and might show instability.

5.1.2.5 Information Processing Hypothesis Loch et al. identified Alstom Transport Equipment Electronic Systems (EES) as an example of excellence in supplier integration (Loch et al. 2003, pp. 63-83). One of the reasons is that the company’s contractual partnership with the supplier Gespac and the partnership with Ardelec are characterized by communication being “at the heart” (Gespac) and by complete transparency (Ardelec). In contrast, the reputation of the logistics industry emphasizes its reservations in terms of information provision and processing as my own experience has shown (for examples see also Table 25).

28

The Complexity Hypothesis covers the issue of ‘Minimal Size’.

5 Š Formulation of hypotheses

140 Author (Organization/Company) Herbert Stommel (Technical University Berlin) and Hartmut Zadek (Visality Consulting GmbH) Agamus Consult Unternehmensberatung GmbH and Clepa

Peter Richter (CEO, KOOB)

Table 25:

Statement

Source

Efficient supply chain management requires information transparency amongst partners as well as neutral steering of the partners. These requirements contradict in most cases practical behavior.

Stommel, H. and Zadek, H. 2004, p. 124.

It is the variety of systems (61% of survey respondents) which is the most decisive barrier and problem in supply chain collaboration besides the complexity of process integration of single companies (55%) and the fear of transparency (47%). Skilled SMEs miss many of their relatively large growth chances in cross-border logistics services as information about their specific offerings does not reach potential customers abroad.

N.A. 2003a, p. 5.

Richter, P. 2002, p. 22.

Examples demonstrating information exchange/transparency reservation

Thus, the hypothesis on information provision and processing, i.e. on the business model component Communication is formulated as follows and referred to as Information Processing Hypothesis:

8. Information Processing Hypothesis:29 There is a correlation between qualitative information processing of an LSP with its customer and company size. Accordingly, smaller providers whose customers are usually similar in size are typically private and reserved in terms of communicating company data. They process information only if required. Effective and regular qualitative information exchange and processing is only offered by larger scale providers.

5.1.2.6 Complementarity and Reliability Hypothesis The next hypothesis relates to the component Relationship of a business model. According to Coyne and Dye, in network-based businesses like in transportation and logistics, customers and LSPs particularly value the links in a network (Coyne and Dye 1998, p. 100). The importance of networks is even greater for one-stop-concept offerings. Strong and solid partnerships of LSPs with other providers are considered to be an indispensable prerequisite for such a solution. Personal experience has shown that these partnerships have to be complementary and based on reliable behavior (for prevailing views in theory and reality see also Table 26). Successful SMEs are expected

29

The Information Processing Hypothesis covers the issue of ‘Minimum Scale’.

5 Š Formulation of hypotheses

141

to meet this prerequisite. This leads me to the Complementarity and Reliability Hypothesis. Author (Organization/Company) Matthias Meyer, Stefan Weingaertner and Fabian Doering (based on E. Fleisch) Georg M. Urban (Daimler AG)

Detthold Aden (CEO, BLG Logistics Group)

Table 26:

Statement

Source

Development from sales to buyer market, progressing globalization and increasingly rapid change are the most important economic drivers for networking. There is action required for logistics in terms of partnership networks in the automotive industry. Network management is the first topic area developed from the compelling action “Integration Platform Logistics” (IPL) of the “Research for the production of tomorrow” program of the German Federal Ministry for Education and Research. It originated from a public discourse in the Smart factory in Hambach. The automotive industry does not need island solutions but networks. Thus, BLG Logistics Group and E.H. Harms Automobile-Logistics bundled its services for final vehicle logistics for its customers Daimler, VW and Audi.

Meyer, M. and Weingaertner, S. and Doering, F. 2001, pp. 16-17. Urban, G. M. 2001, pp. 13-14, p. 20.

Aden, D. 2004, p. 183, pp. 186-187.

Prevailing views on the necessity of partnership networks (examples)

9. Complementarity and Reliability Hypothesis: LSPs have a strong network with other providers. In this network, partners’ assets and services are regarded as complementary and provide mutually beneficial cooperation opportunities. The network is thus characterized by reliability in collaboration.

5.1.2.7 Rules Hypothesis30 The starting point for analyzing success characteristics related to the business model component Exchange Mechanism are Handy’s considerations on trust and the virtual organization. Handy’s thoughts on organizations start from views about the future of libraries as concepts and activities rather than places and buildings. Similarly, the author rethinks the meaning of an organization and discusses the managerial dilemma between

30 LSPs’ behavior relating to information processing is covered in the hypothesis on the business model component Communication in Section 5.1.2.5. The hypothesis deals with the state of communicating with customers in terms of regularity of oral or written information flows and depth of information content provided. Whilst the Rules Hypothesis on the business model component Exchange Mechanism is closely related, the distinction in this work is that here LSPs’ behavior in dealing with collaboration results is evaluated.

5 Š Formulation of hypotheses

142

the rules of trust for managing people31 and a managerial tradition that believes efficiency and control to be closely linked. Handy states several examples where organizations tend to be arranged on the assumption that people cannot be trusted or relied on and oversight systems have to be set up to prevent people from doing the wrong thing. These views are here transferred to the context of provider-customer relationships. The analysis starts from arranging successful relationships and setting up a box of contracts while partners cannot be trusted (Handy 1999, pp. 107-120). In this context I define the Rules Hypothesis:

10. Rules Hypothesis: Exactly-defined rules and clear contracts are the norm and the most effective way to guarantee effective performance. Mutual trust is enhanced by integrating systems and through greater transparency, but formal contracts dominate and define the relationship. 5.1.3 Micro hypotheses on Financials Micro hypotheses eleven and twelve refer to two business model components: Performance Measurements and Rewards. 5.1.3.1 Significant Turnover Hypothesis The first criterion for a Hidden Champion is defined as being a leader relative to the strongest competitors. Leadership and thus rankings of top LSEs are often derived from the value of turnover. The most famous example is the regular study of the ‘Top 100’ providers from Professor Klaus and his team at the University Erlangen-Nuremberg. It is one of the key logistics surveys that carefully observes the logistics industry in Europe.32 Top rankings in general and the positions of the studied LSPs are in the center of the first hypothesis on Performance Measurements in the business model category Financials. In principal, Hidden Champions’ turnover has to be smaller than one billion euros (see Figure 2), which is in contrast to the criterion of leadership as defined by

31 Handy defines seven cardinal principles of trust which are “Trust is not blind”, “Trust needs boundaries”, “Trust demands learning”, “Trust is tough”, “Trust needs bonding”, “Trust needs touch” and “Trust requires leaders” (Handy 1999, pp. 112-116). 32 For the latest edition used in this dissertation see Klaus and Kille 2006. A completely revised and updated edition was published in 2007.

5 Š Formulation of hypotheses

143

common sense in the industry. Thus, the hypothesis formulated is the Significant Turnover Hypothesis:

11. Significant Turnover Hypothesis: Market leadership is typically defined in terms of turnover. This applies in particular to LSEs, since high turnover offers the opportunity of economies of scale.

5.1.3.2 Risk Aversion Hypothesis The final micro hypothesis refers to the business model component Rewards. Rewards are described by business result and shareholder compensation (Table 10). The hypothesis in this section is based on arguments relating to business result in the sense of profit. Drucker, for example, refers to two functions of profit. Within the first function, he outlined the coherence between profit and result, with profit being “the test of performance”, i.e. the result of the performance of the business in marketing, innovation and productivity. As second function he states that profit is “the premium for the risk of uncertainty” (Drucker 1999a, p. 65). Other authors like Covin and Slevin (1991, p. 7) as well as Guth and Ginsberg (1990, p. 5) emphasize that corporate entrepreneurship, a company’s venturing and innovation activities as well as organizational strategic renewal are conductive to improved profitability. Derived from these arguments, the correlation of risk and profit is applied to logistics. Based on practical experience, LSEs are expected to be in a favorable position in terms of dealing with the risk of uncertainty. For example, if signing volume contracts with the option for enhancing mass, LSEs favor from a competitive position for four reasons (Table 19). First, as in the case of DHL Solutions, LSEs benefit from access to assets from other group divisions. Second, investments are easier for companies with a strong resource base; see for example A. P. Møller-Mærsk. Third, LSEs benefit from experience, like Ryder from its global operations. Fourth, substantial volume mass ensures partnerships with leading carriers. This allows supply in peak times also (see for example Panalpina). These examples concern LSEs, and a natural question is to ask whether these opportunities may be available to SMEs.

5 Š Formulation of hypotheses

144 No. 1

Size benefit for dealing with risk of uncertainty Combination of assets/ access to other divisions’ assets

2

First mover advantage based on relieved investment due to availability of resources

3

High share of global 3PL turnover/experience

4

High priority to systematic care and maintenance of partnerships with leading carriers

Table 27:

Logo

Example

Source

DHL Solutions (Deutsche Post AG): Combination of the strength of Express Logistics, former Airborne Logistics and DHL Solutions A. P. Møller-Mærsk: Terminal investments in China resulting in a strong position in the context of the privatization of Chinese railways and the giant deep sea port in Shanghai Ryder: Key customer Applied Materials selected their partner due to global credentials (amongst others); global 3PL turnover of Ryder is USD 5.2 bn Panalpina World Transport (Holding) Ltd.: Substantial volume mass ensures partnerships with leading carriers

Appel, Chiavi, and Flickinger. 2005, p. 9.

Thomson Financial (ed.) et al. 2004, p. 3.

Ryder (ed.). N.Y.; N.A. 2005a, p. 15.

Panalpina World Transport (ed.). 2007, p. 2.

Reasons for large company size being beneficial for risk-taking (examples)

Also, the correlation between profit and risk is to be viewed in terms of companies’ risk-taking behavior relating to corporate entrepreneurship. Figure 40 presents the correlation between entrepreneurial risk and profit as well as the basic experience of the SME and LSE situation. Corporate entrepreneurship is easier for smaller companies. However, from experience it is expected that the SMEs’ risk-taking behavior is either lower than the LSEs’ and thus profit is below the LSEs’ (see left light grey part in Figure 40) or their risk-taking is higher than the LSEs’, thus resulting in loss or low profit (see right light grey part in Figure 40). The question remains whether SMEs can keep pace with the LSEs’ willingness to take risks (for expectations on LSEs’ risktaking behavior and related profit see the dark grey part in Figure 40).

5 Š Formulation of hypotheses

Low

Profit

High

145

Low

High

Legend: SMEs (expectation) LSEs (expectation) * Amongst others: market risk, size, momentum, glamour, venturing, innovation, organizational strategic renewal

Risk*

Figure 40: Correlation between risk and profit

Searching for Hidden Champions earning high profits, the hypothesis focuses on the left light grey part in the above figure. Accordingly, the hypothesis in reference to the business model component Rewards is the Risk Aversion Hypothesis that is defined as following:

12. Risk Aversion Hypothesis: Smaller LSPs are more risk averse due to size disadvantages and therefore struggle in earning highly-lucrative margins.

5.2 Formulation of macro hypotheses While the micro hypotheses above were formulated for the single (sub-)components of an LSP’s business model, the three macro hypotheses in this section cover the business models of the LSP and customer as a whole. These views on the total business model(s) are necessary to strengthen and further develop this study’s final results, while insights gained from the evaluation of the micro hypotheses are included as well. The first two macro hypotheses are based on the type of legal relationship between LSP and customer, while the third hypothesis deals with the size of the actors. 5.2.1 Customer Centricity Hypothesis: Egoism Syndrome as hurdle for Total Integration The underlying legal form of collaboration of the first macro hypothesis is the classical LSP-customer relationship (Figure 27). Such a relationship is based on contracts in

5 Š Formulation of hypotheses

146

which the rules for collaboration are fixed. There are two business models in the focus of considerations, the business model of the LSP and the business model of the customer. While LSPs’ primary aim is to become the sole partner of their customers (see 5.1.1.1 for Single Source Hypothesis), practicians claim that Integrated Supply Network Management is subject to struggling caused by customer-neglecting behavior of the LSPs (for exemplary statements of practicians see Figure 41).

(4) Total integration requires consultants to successfully transition from strategic planners to managers and implementers.

(1) Dealing for the benefit of their own interest at the disapproval of an optimal solution across the total chain may be problematic. (Baumgarten 2001a, p. 36)

(Foster 1999, p. 35)

(3) High branches, management, IT, logistics and consultancy competences are required. Few providers can meet these broad range of capabilities.

(2) Customers have little interest in a neutral integration service offering (they want to bind the supply chain strictly to their own interest). (Resch 2003, p. 17)

(Nissen and Bothe 2002, p. 22; Gordon 2003, p. 53)

Figure 41: Statements from theory and practice on hurdles for Total Integration directly or indirectly based on customer-neglecting behavior of LSPs (Translations and reproductions of statements by own words)

Possible hurdles in Total Integration as stated in the above figure shall be summarized by the four arguments of providers’ selfishness, customers’ squeeze-in, lacking knowledge, and deficiency in business model adjustment (the number in brackets below refers to the number of the example in Figure 41). (1) Providers’ Selfishness Argument: LSPs put too much weight on their own company and interests. They neglect – at least partially – customers’ expectations and needs. Their own profit requirement pushes them to do so. (2) Customers’ Squeeze-In Argument: LSPs align customers to their capabilities and solutions. Any given company’s capabilities and solutions are not fully, or only to a small extent, adapted to a particular customers’ requirement. (3) Lacking Knowledge Argument: LSPs do not know enough about the customers and their industries even though they might be experts in their fields. Providers do not shift

5 Š Formulation of hypotheses

147

flows of interest to their customers. From the other perspective, customers do not disclose full information either. (4) Deficiency in Business Model Adjustment Argument: Changes in a business model is one of the hardest things to pull off, so LSPs do not adapt their business models to the changed market conditions. They simply consider themselves to be a Total Integration provider. Also, neglecting or partially disregarding customers – a typical accompanying effect of something which shall be called the ‘Egoism Syndrome’ – is the opposite to what generic management literature suggests. It argues that the key to business success are customers – their demands being waken and a careful segmentation and selection within a band width or by adaption of the band width are conducted (Table 28 presents academic examples). Area of customer theory Customers as key to success

Business management topic Outperforming rivals Suppliercustomer business Customerknowledge management Build-to-order manufacturing Competing for value

Rising customer demands Requirement of customer segmentation

Table 28:

Customer information Customer loyalty

Key point(s)

Most successful companies have best connections to their customers and are able to create and maintain an integrated focus on organizational orientation, configuration and information about customers. For profitable, sustainable growth suppliers need a fine-grained disciplined approach to getting, leveraging and documenting knowledge about their customers. Successful companies consider the person behind the transaction besides knowing rich transaction data (mix of technology and human aspects). Being effective requires companies and their suppliers first to understand what customers want (customercentric view). Customers play an active role in creating and competing for value; customers are a source of competence and competitors. Balance of power through customer information shifts from companies to consumers, who demand value in exchange for information about themselves. The relationship between loyalty and profits is weak and can only be strengthened by managing both at the same time; making loyalty profitable requires different relationship management strategies to be chosen for different customer segments.

Source

Day 2003, p. 77.

Anderson and Narus 2003, p. 43.

Davenport and Harris and Kohli 2001, pp. 63-64. Holweg and Pil 2001, p. 74, p. 76. Prahalad and Ramaswamy 2000, pp. 80-81, p. 86. Hagel III and Rayport 1997, p. 53. Reinartz and Kumar 2002, p. 90, pp. 9394.

Academic examples dealing with customers’ key role for business success

The relationship between LSP and customer – in particular the weight of customers for an LSP’s business activities – is the subject of the first macro hypotheses, the Customer Centricity Hypothesis:

5 Š Formulation of hypotheses

148

I. Customer Centricity Hypothesis: Possible causes for the struggling of Integrated Supply Network Management are based on LSPs’ self-centred behavior. LSPs are concentrating too strongly on their own needs and requirements at the expense of customers’ needs. They simply underestimate the potential full value of customer knowledge and service, and do not develop the relationship required for business success.

5.2.2 Partnership Hypothesis: Collaborative entity as solution for Total Integration The setting for the second macro hypothesis concerns the establishment of a collaborative entity between the LSP and the customer to succeed in Total Integration, i.e. in Integrated Supply Network Management (Figure 27). Such a collaborative entity can be a loose relationship, an equal partnership, a joint venture, a dedicated unit, a jointly-formed subsidiary, an alliance, or something similar. It requires the development of a collaborative business model, which cannot be accomplished by the LSP alone. Figure 42 demonstrates the difference between this section and the previous section. While in Section 5.2.1 considerations focus on the business model of the LSP only (number 1 in the figure), in this section a collaborative business model of the LSP and the customer is in the focus (number 3 in the figure). Number 2 is not subject of the macro hypotheses but it is for example targeted in the provider classification (category ‘In-house providers’, see Figure 37 and Table 17) and in the final outlook of this dissertation (Chapter 8).

3 1 LSP

Legend:

2 Customer

1

Sub-unit at LSP

2

Sub-unit at Customer

3

Collaborative entity (e.g. joint venture) Subject of the Partnership Hypothesis

Figure 42: Three organizational forms for Total Integration, by business model partner(s)

5 Š Formulation of hypotheses

149

From knowledge gathered during literature analysis and practical experience there are in particular four arguments for success of a collaborative business model. x Materialism Argument: LSPs concentrate too much on ‘hard factors’ such as money earned and neglect ‘soft factors’ like mistrust, fears or misperceptions. x Trust-Confidence-Underrating Argument: LSPs do not want to realize that even through the use of mediators, trust and confidence are significant issues which cannot be ignored easily. x Risk-Fear Argument: LSPs have to deal with increasing risks as customers prefer shorter contract durations for remaining independent and flexible (see for example Straube et al. 2005, p. 8). Also, contracts are based on tight calculations and filled with harsh punishments in the event of exiting. x Self-Overassessment Argument: LSPs overestimate their ability for global design, management and organization of customers’ supply chains. Based on these arguments, the Partnership Hypothesis was formulated.33

II. Partnership Hypothesis: With a joint (organizational) entity of an LSP and its customer, and possibly with other provider(s), overall supply chain responsibility can be achieved. Total Integration is envisaged and aimed for from the beginning of the partnership.

5.2.3 Size Compatibility Hypothesis: Minor company size as limitation for Total Integration The role of company size for Total Integration is in the focus of the third macro hypothesis, which is formulated based on the definition in Figure 27. It deals with the general facet of whether size matters, size is indifferent or size does not matter for the ability to provide Integrated Supply Network Management. While Kastl and Roedl show the difficulty of explaining the German term ‘Mittelstand’ (Kastl and Roedl 2000, p. 11), I start my explanation with a principle distinction 33 The Partnership Hypothesis is the organizational form of customer centricity (Section 5.2.1). Both the Customer Centricity Hypotheses and the Partnership Hypothesis are related but nontheless different.

5 Š Formulation of hypotheses

150

according to which enterprises are either large or small and medium in size, thus either called LSEs or SMEs (see following Figure 43). The distinction is based on qualitative aspects in the sense of the coherence between enterprise and owner as well as on quantitative aspects, i.e. definitorial indicators. Qualitative aspects are the identity between ownership and personal responsibility for the enterprise’s activities, the identity of ownership and personal liability for the entrepreneur’s and the enterprise’s financial situation, personal responsibility for the enterprise’s success or failure or the personal relationship between employer and employees. Quantitative aspects concern criteria such as turnover, number of employees, profit, fixed assets, balance sheet total, value added as well as other characteristics such as market share or production method (IfM Bonn 2004, pp. 1-2). Research suggests two sources for the classification of LSPs. The first source is the EU classification scheme for SMEs which is relevant in Germany, e.g. at the IfM Bonn (2004, p. 4). The second source is Simon’s distinction of SMEs in Hidden Champions and Others (Section 1.2.1). Both sources apply quantitative aspects for distinction. Based on the EU classification scheme for SMEs from 2005, companies are LSEs if three criteria apply: the number of employees amounts to at least 250, annual turnover exceeds 50 m. euros and the balance sheet total goes beyond 43 m. euros. Accordingly, enterprises are SMEs if the number of employees is between 10 and 249, annual turnover is between 2 and 50 m. euros and the balance sheet total amounts to 2–43 m. euros a year (see the EU classification scheme for SMEs; IfM Bonn 2004, p. 4). By applying this dissertation’s definition derived from Simon, LSEs achieve at least USD one billion in annual turnover34 (Simon 1996a, p. 6). According to Simon, companies are small or medium in size if they achieve less than USD one billion in turnover annually. Simon extended this criterion to three billion euros in his following book on Hidden Champions in 2007 (Simon 2007, p. 29). However, this extension is not taken into account in the further study. The author further distinguishes between Hidden Champions and Others. Enterprises are Hidden Champions if they are leading in a niche,

34

invisible,

approved

sustainable,

competitive

beyond

geography

and

According to the original source (Simon 1996a, p. 6), a company “should not generate more than approximately U.S. $1 billion in sales revenue”.

5 Š Formulation of hypotheses

151

entrepreneurial (Section 1.2.1). If these criteria are not fulfilled by SMEs then they are assigned to the category ‘Others’.

Enterprises LSEs

SMEs Hidden Champions

Others

Figure 43: Distinction of enterprises

Based on the distinction between LSEs and SMEs, further considerations have to be made on this section’s initial facet of whether size matters, is indifferent or does not matter. Therefore, the next two sections deal with the correlation between the size of the LSP and the size of the customer as well as a potentially required minimum size of LSPs for the provision of Total Integration. 5.2.3.1 Correlation between size of LSP and size of customer Logistics researchers and practicians, for example from Fraunhofer ATL (Tripp 2005, p. 5), claim that there is a correlation between company size of the LSP and company size of the customer. It is expected that logistics LSEs offer their services mainly to customers medium and large in company size (dark grey area in Figure 44) while logistics SMEs are expected to concentrate on providing services for customers similar in size only (light grey area in Figure 44). Other fields are of minor importance or few relationships are expected (two white areas in Figure 44).

small medium large

Size LSP X

1

X X

2

small medium large

Size Customer

Legend: Expected main correlations of logistics SMEs and customers‘ sizes Expected main correlations of logistics LSEs and customers‘ sizes Expectation of minor importance respectively hardly any correlations Competitive area of LSEs and SMEs in logistics? 1 Multiple customers 2 Multiple LSPs X Similarity in company size

Figure 44: Expected relationships between size of LSP and size of customer

Beyond this expert view, this study searches for answers on four further aspects:

152

5 Š Formulation of hypotheses

x Do LSEs and SMEs in logistics both compete for medium-sized customers (black colored rectangle in Figure 44)? x Are the ‘X’s in Figure 44 ‘ideal’ constellations, i.e. is it necessary to have an ‘exact’ similarity in company size for a successful business relationship? x What is the proportion between on-diagonal and off-diagonal correlations? x Are special logistics concepts prevailing for specific correlations? For example, do large LSPs manage multiple small customers by an outsourcing concept (Number 1 in Figure 44) or do large customers collaborate with multiple small LSPs (Number 2 in Figure 44)? These further aspects have to be looked at in order to answer the initial question at the beginning of Section 5.2.3 on the role of company size for business success. 5.2.3.2 Critical company size for Total Integration Experts often claim that Total Integration is restricted to LSEs only and is out of business scope for SMEs. The argument is that companies of minor size are unable to provide services in the context of global operations. Manfred Kuhr, representative CEO of BLG Logistics Group, for example, stated that logistics is a distinctive fastidious business with global dimensions resulting in an extreme process of concentration and that the harsh choice is either to grow or to withdraw (Kuhr 2003, p. 134). In general, the key reasons stated for logistics SMEs struggling to offer Total Integration solutions is the lack of physical, informational, financial and knowledge resources. It is often argued that SMEs do not have the required resources for extending the service scope or for making investments to expand in geographic reach. However, for managing integrated supply networks globally, access to a strong base of tangible resources and intangible resources is considered to defuse the gap. Table 29 provides examples of these views.

5 Š Formulation of hypotheses Argument35 Many small- and medium-sized LSPs have a considerable need for catching up with developing IT competence. Without partnership engagement in cooperative networks, haulage carriers are component providers only. “… networks, in which transport firms are linked to each other through alliances, and no control over the members’ assets is exerted, are better vehicles to reach the target of internationalisation than traditional corporate systems based on mergers and acquisitions.” For providing European logistics, LSPs need locations in the individual countries, not necessarily by having their own transport networks but by using existing networks.

Table 29:

153 Source Baumgarten 2001b, p. 15. Goepfert 2002, p. 9. Lemoine and Dagnæs 2003, p. 210. (Result of Ludvigsen’s network study in 2000.) Helmke 2003, p. 3. (Interview with Heinz Graeber, spokesman Fiege Group.)

Arguments for SMEs limitations in Total Integration yet overcoming through networks

In summary, the following hypothesis, the Size Compatibility Hypothesis, is the starting point for research and analysis on the role of company sizes for Total Integration. III. Size Compatibility Hypothesis36: Integrated Supply Network Management is a comprehensive concept with limited scope for SMEs. If at all and at best, SMEs in logistics are able to provide Total Integration services for customers of similar size only. Although SMEs in logistics put efforts into overcoming their resource shortage, they are nevertheless very limited in full concept implementation.

35 The statements are translations from German into English. In the case of the direct citation the statement is written in quotation marks. 36 Also the term ‘Natural Size Hypothesis’ is applicable.

6 Š Empirical results

154

6

Empirical results

In this chapter I present my empirical research results. At this stage of my study I do not provide further analyses and evaluations of data. Data are descriptive and are based on two groups (Figure 45). The first group, which I shall call basic research data, comprises data about LSPs. The second group, which I shall call supplemental research data, contains data about customers. Both parties (LSPs and customers) were looked at to identify gaps or dissonances between individual research findings. The aim was also to make the survey findings stronger all round by adding customer views to research results from LSPs.

Basic Research Data

Supplemental Research Data

LSPs No.

Extent

13

In-depth cases about potential Hidden Champions

Customers Data

No.

Literature research/ written materials 13

Interviews Personal visits

87

Selected insights from additional potential Hidden Champions

Literature research/ written materials

8

Arguments from companies not qualifying as Hidden Champions

Literature research/ written materials

Extent

In-depth customer cases

Gaps or Dissonances

Total no. of LSPs: 108

Data Literature research/ written materials Interviews Personal visits

Selected insights and arguments Va- from rious additional customers

Literature research/ written materials

Total no. of customers: 13 + X

Figure 45: Basic and supplemental research data

In total, basic research data comprise facts and figures from 108 LSPs (‘Top 100+ Company List’).37 The extent of data inclusion is differentiated according to the three groups of research cases LSP, selected insights from additional potential Hidden Champions and arguments from companies not qualifying as Hidden Champions.

37

I call it ‘100+’ as the list contains 100 potential Hidden Champions plus a further eight LSPs which do not qualify as Hidden Champions.

R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2_6, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

6 Š Empirical results

155

The method of raising data followed the principle of triangulation (Bonoma 1985, p. 201; Lamnek 1989, p. 384), which is defined as a method of determining a position by multiple reference points and the combination of methodologies for investigation of a phenomenon (Lamnek 1989, p. 384). The basis for the in-depth case analysis is the ‘Questionnaire/Interview Manual – Logistics Service Provider’ (Appendix 3), which is structured on the basis of the constitutive elements of a business model (Section 3.2.3.2). The questionnaire was used consistently with some modifications relating to the respective type of LSP. Answers to the questions were gathered from three sources, namely literature, i.e. written materials, personal visits at companies’ sites, and personal interviews with the companies’ leadership, mainly with their managing directors and in the other cases with managers directly reporting to them. Full questionnaires and databases built up are confidentially available upon request and by permission of the LSPs. The second group of data included – selected insights from additional potential Hidden Champions – covers data from an additional eighty-seven LSPs. With facts and figures from literature research, i.e. from written material, the empirical study attained a greater strength and enabled a tighter examination of the insights. The third group of included data, arguments from companies not qualifying as Hidden Champions, contributed to the research results to a minor extent only. Eight companies were found to be insignificant in terms of meeting the criteria of a Hidden Champion due to them being unprofitable and failing in their business activities, being too large in size or too recently founded. Nevertheless, I kept their data for completeness. While the result presentation of the thirteen research cases LSPs forms the core of this chapter, findings at the customer level are shown as well by providing facts and figures about customers supplemental research data (see right side in Figure 45). Thereby, data are included in the two different extent groups of thirteen in-depth research cases customers (Figure 38) and selected insights and arguments from additional customers. By request of the surveyed companies, company names and findings will remain anonymous. Similar to the research cases LSP the basis for an in-depth analysis of customers is the ‘Questionnaire/Interview Manual – Customer’ (Appendix 4) based on the defined framework of a business model in Section 3.2.3.2. Answers to the questions

156

6 Š Empirical results

were also gathered from literature, i.e. written materials, from personal visits at the customers’ sites and from personal interviews with the head of the logistics or SCM department. Full customers’ questionnaires and databases built up are confidentially available upon request and by interview partners’ permissions. At some points of the presentation of empirical research I added selected insights and arguments from various additional customers which I found in literature, i.e. in written materials. As stated before, I added the customer perspective to identify gaps and dissonances in respect to the LSP perspective and to further strengthen the research results. 6.1 Evaluation of micro hypotheses and common industry misperceptions In this section the evaluation of basic research data, i.e. data about 108 LSPs, and supplemental research data, i.e. data about thirteen research cases and various further customers (’13 + X’), is presented (see Chapter 6, in particular Figure 45). The thirteen in-depth LSP cases, supplemented by the thirteen in-depth customer cases, form the core of the presented results. If findings disprove or reject micro hypotheses, arguments for misperception are proposed. I use the term misperception for prevailing incorrect views or misinterpretation of LSPs’ business model components’ moldings. Finally, micro hypotheses are restated if appropriate and principles of business success are defined. At the end of each section the overall outcome, i.e. the key learning, is summarized in a box. 6.1.1 Misperceptions on Ambitions & Aims 6.1.1.1 The striving for single source misperception The Single Source Hypothesis states that LSPs are heading for leadership with regard to their customers’ total supply chain. LSPs claim that collaboration with a sole partner leads to a tremendous increase in the customer’s productivity. Empirical examination of this hypothesis is mainly based on the answers of the thirteen research cases LSP to the questions in part 2.1. ‘Value Proposition’ in the ‘Questionnaire/Interview Manual – Logistics Service Provider’. Findings were supplemented by selected insights on Value Proposition from additional potential Hidden Champions. Also, customer views and

6 Š Empirical results

157

attitudes about total supply chain leadership were added to identify potential dissonances. Section 2.1 of the ‘Questionnaire/Interview Manual – Logistics Service Provider’ deals with value creation of LSPs for their stakeholder groups. The questionnaire captures value creation for customers, investors, partners and employees as well as contributions to society. Twelve LSPs studied in-depth stated that they created values for their customers, who are the key stakeholder group.38 Seven of the thirteen research cases LSP emphasize that they create value for their employees and society. Contrary to expectations and thus very interesting is that only four LSPs reported about value creation for their partners. This seems to be a paradox, as networking is very necessary for SMEs in logistics if it is aimed at offering total supply chain solutions. At this stage the degree of satisfaction with partners remains open. Also surprising is that none of the interview partners at the LSPs commented on value creation for the stakeholder group of investors (Figure 46).

Customers 12

Investors

7

Employees

0 4 7 Partners

Society

Figure 46: Number of LSPs creating value for its various stakeholder groups

Relating to the stakeholder group of customers, 91 statements39 were made from the twelve research cases LSP. These statements were allocated to five defined main groups, which are process improvements, quality increases, cost savings, transparency increases and improved customer relationship (Figure 47). With roughly 45% of the statements relating to process improvements, this group is the key focus for value 38 The thirteenth research case LSP (LSP J) did not state values created for customers. The reason is that LSP J has hardly any contacts to customers. According to its business model LSP J’s partners are its customers. 39 Result of counting all statements on value creation for customers.

6 Š Empirical results

158

creation for customers. However, only 11 statements were made in terms of cost savings, while 26 statements related to quality increases. The interviewed LSPs explicitly pointed out the need for delivering excellent quality. Excellent quality is understood in the sense of providing service offerings at a high quality level, e.g. on time, in the right volume or with a service degree above expectations and with required flexibility.40 LSPs aim to achieve customer dependency on their services to prevent any possible and intended replacement of their LSP. Thus, excellent performance and quality is considered as the means to creating a strong position with their customers. 41

[Number of responses relating to group of value for customer]

26

11

Improvements of processes

Increases of quality

Cost savings

8

Increases of transparency

5

Improved customer relationship

Figure 47: Five main groups of value creation for customers (number of statements relating to respective group from the twelve relevant LSPs studied in-depth)

The above figure allows some conclusions on management priorities. Obviously process improvement, quality increases and cost savings are the key priorities, in this order. There seems to be a strong relationship between these ‘hard factors’, with the expectation of process improvements leading to quality increases and cost savings. Customers are thus most interested in their LSP’s performance. ‘Soft factors’ seem to be secondary, with transparency increases ranking fourth and improved customer relationship ranking fifth only.

40

Depending on the LSPs’ service spectrum, various measures for quality excellence are used. Just to mention one example: the quality of a CEP provider that promises to fulfill its express parcel service (delivery) within twenty-four hours after placing the order is measurable by the indicator ‘Mean Delivery Reliability šതI’ (number of service orders delivered on schedule / total number of service orders) (Delfmann and Wickinghoff 1999, p. 149.) In this case, excellent quality is achieved if the CEP provider delivers more than 90% of all orders within the promised delivery time.

6 Š Empirical results

159

Relating to the stakeholder group of employees, the statements of the LSPs’ interview partners were assigned to four groups – social culture, working environment, employee characteristics and education (Figure 48). The results are: x Firstly, LSPs are characterized by having a pronounced social culture with esteemed employees. For example, employees are given awards for outstanding achievements. Any barriers are removed which hinder direct access for employees of every company level to the top management. It is quite common that top managers share the table during lunch with lowest-level employees. Another example is the organization of group sport events like football matches or joint participation at running events like team marathons. x Secondly, potential Hidden Champions provide an exemplary working environment. They arrange working places in a fair and ethical manner. They take care of employees’ safety. x Thirdly, potential Hidden Champions’ employees are highly motivated. They have developed in the course of their affiliation to the LSP. This growing into an outstanding company community has a big impact in terms of company commitment and thus leads to low staff turnover. x Fourth, employees at potential Hidden Champions are very well-educated. They have a strong experience as well as a broad and deep knowledge. Trainings are a common tool to ensure high qualifications. Figure 48 cites two statements from each of the four groups and indicates LSPs to whom statements are applicable (names in brackets). The performance of LSP F in terms of value creation for employees is special as it is the only LSP stating value creation for employees in more than two groups.

6 Š Empirical results

160

Social culture

• Esteeming employees (awards, top management access) (D, F) • Team-/community building (family days, sports teams) (D, K)

Working environment

• Fair and ethical places to work (C) • Safe locations (C, F)

Employee characteristics

• Highly motivated (G) • Internally established/very low staff turnover (F)

Education

• Experienced and knowledgeable staff (L) • Trainings to ensure high qualifications (M)

Employees*

* Covers statements from seven of the thirteen in-depth studied LSPs only, as six LSPs did not indicate values created for their employees; anonymous LSP names in brackets.

Figure 48: Groups and examples of value creation for employees (derived from the statements of the LSPs studied in-depth)

Relating to society as the third major stakeholder group, SMEs in logistics have a strong local relation. Seven of the thirteen research cases LSP stated values created for this group. In particular, residentiary organizations are supported by LSPs’ charity donations and activities (LSPs C and D) or local sports events are sponsored (LSP E). It is considered to be natural to undertake actions for protecting the environment (LSPs A, C, F and K), even by establishing their own foundation (LSP C). Measures like supporting medical research are also undertaken (LSP M). Social responsibility for local issues substantiates the solidarity of the management to its immediate environment. Four LSPs studied in-depth provided statements in terms of value creation for partners. While one of the interview partners (of LSP D) evaluates the value as being low, LSPs H, J and L highlight the meaning of operating in a well-functioning network of partners. Networks are considered to enable a broadening of the scope of services (LSP J) and to ensure a high level of service provision (LSP L). The role of partners is to provide services which the LSPs are unable to do by themselves (LSP H). With only three (LSPs H, J and L) of the thirteen LSPs convinced about value creation in partnerships, the result is astonishing. While large LSPs, in particular those that are listed on the stock exchange, put strong efforts on satisfying investors by achieving high share prices, SMEs neglect this stakeholder group but they have to deal with the issue of ownership interests. The success of the SMEs often depends on a single person or family being in charge. If the

6 Š Empirical results

161

owners’ interests in the company decline, the company will become a candidate for low performance and, eventually, a candidate for a sale. Two major findings are the outcome of analyzing issues of value creation for an LSP’s stakeholder groups relating to the Single Source Hypothesis. First finding: SMEs in logistics do not primarily strive for being the single manager of their customers’ logistics activities. Even more, by striving for excellence in service provision, logistics SMEs’ first priority is to secure a strong position in the customer’s supply chain. Customers increase the intensity of their relation to their LSPs continuously over time if they are convinced of the LSPs’ high quality service delivery. Second finding: Total supply chain offering by a single source, i.e. by one LSP, requires the customer’s agreement. The thirteen customers studied in-depth were asked for their views and attitudes in terms of total supply chain leadership. In Table 30, I present a number of representative customer statements. Customer (industry) Customer I (automotive)

Customer II (automotive) Customer VIII (toys)

Table 30:

Statement(s) on total supply chain leadership • Our collaboration with LSP A started with a basic service; together we developed the service spectrum further at a later stage. • Our job is to preserve competition amongst LSPs. • Our position is characterized by supremacy in total supply chain. • Organizationally we are our group’s 4PL department. • We have to be considered as systems leader in logistics operations. • Our job is to put the different modules together; one of the modules is assigned to LSP H. • Total supply chain supremacy is the ‘must’ position for the producer. • Supply chain leadership is the key to customer contacts and identifying customer needs.

Customers’ views and attitudes on total supply chain leadership (examples)

The key argument for the failure of the single source approach of LSPs can be found in these prevailing views and attitudes. Thus, the overall responsibility for the total supply chain with its complex planning and management tasks remains with the customer, who keeps control and intellectual capital inside the company. Only logistics processes outside this customer core competence are outsourced. Potential Hidden Champions collaborate with their customers in the provision of logistics services. Only with LSPs and customers focusing on their respective core competences is maximum customer value created. These two findings are demonstrated by further examples in Table 31.

6 Š Empirical results

162 LSP’s company name (group)/ customer Finnlines Oy

LSP company logo/customer company logo

Infracor GmbH (Degussa AG)/ International Specialty Products (ISP)

Bibby Distribution Limited (Bibby Line Group)/ Nisa Today’s

Table 31:

/

/

Country

Example reinforcing findings

The first of the LSP’s four company values is customer focus. The company is aware of being chosen due to competence and expertise (Finnlines 2006, p. 4). Klaus Koester, Managing Director ISP, about the company’s relationship with its LSP: x We have “first-hand experience of how Infracor GmbH has developed from a traditional service division at Degussa into a customer-oriented service-provider.” x “…, there has been a clear improvement in customer focus.” x “The close relationship that has grown up over the years is certainly a major advantage.” x “Although we operate our high-voltage units ourselves, all support services have been sourced from Infracor since 1998”. (Infracor 2007) In 1985 Bibby’s relationship with Nisa Today’s began. The partnership developed over the years as did Nisa Today’s business. Besides productivity, Bibby increased service quality. The customer extended the volume levels continuously from around 16 million cases per year in 1992/1993 to more than 50 million cases in 2002 (Bibby Distribution 2006).

Examples of additional potential Hidden Champions reinforcing findings on the Single Source Hypothesis

The knowledge gathered on Value Proposition during the empirical study allows me to draw two conclusions: First, potential Hidden Champions deliver high performance in quality of service. Due to their excellent service delivery they are increasingly asked from their customers to take over further tasks in the customer’s supply chain. Thus, potential Hidden Champions spread out stealthily and with hardly any notice in their customers’ supply chain over time. In other words, a strong position of an LSP in a customer’s supply chain is not a state achieved after winning a large announcement and signing a big customer contract. It is more a relationship process over time. Second, as also stated by Normann and Ramírez, potential Hidden Champions “mobilize customers to take advantage of proffered density and create value for themselves” (Normann and Ramírez 1993, p. 69). In the logistics industry in which value occurs in complex constellations, potential Hidden Champions improve quality of service delivery continuously and additionally make their customers more intelligent. LSPs are customers’ activators for process improvements and value creation. It is this “dialogue between competencies and customers” (Normann and Ramírez 1993, p. 70)

6 Š Empirical results

163

that explains the survival and success of LSPs in their customer relationships. For example, in the case of identified weaknesses in the customers’ logistics processes, potential Hidden Champions initiate meetings for discussing solutions. Also, customers are informed about new logistics solutions and also options for implementation at the customer’s site are presented by the LSP. I call this knowledge gain from analyzing the business model component Value Proposition at potential Hidden Champions Principle of Incrementalism. It is a trustbuilding mechanism initiated and experienced by both the LSP and the customer through open dialogues and collaboration. Visually it can be explained by two stairs from two sides ending at a joint top (Figure 49). At this ‘top’ the total supply chain management remains at the customer with several, but selected supply chain parts being dedicated to the LSP. The response from customers to excellent service delivery by their LSPs is to allow the increase of small commitments.

Transport supply

Prematerial storage

Stage 1 in production

Work-inprocess stock

CommissioStage 2 in ning producproduction tion parts

Storage final products

Distribution transportation

Warehouse distribution

Outlet storage in shelves

Customer LSP

Trust Building Mechanism

Figure 49: Principle of Incrementalism

In summary, the Single Source Hypothesis is to be rejected in part. The main explanation for the Single Source misperception is lacking willingness of customers to outsource total supply chain leadership, i.e. the control barrier, notwithstanding a desire of LSPs to assume such a position. However, the Single Source Hypothesis is to be restated for potential Hidden Champions:

6 Š Empirical results

164

1. Principle of Incrementalism. Potential Hidden Champions are able to enhance their position with their customers over time due to a strong commitment to service excellence. Outstanding performance based on considerable dedication of the management to its employees increases both customer trust and the outsourced logistics activity spectrum. LSPs’ relationships to customers are characterized by an open dialogue regarding process and service mobilization.

6.1.1.2 The sector specificity and selection misperception While LSPs can focus on a few tasks or can have a broad scope relating to logistics tasks provided, focus and scope is also applicable to sectors. The point of commencement for the analysis of the business model component Target Group is the Segmentation Hypothesis. It states that LSPs focus on only a few carefully selected sectors. Service provision is expected to be more satisfying or more efficient if LSPs have very specialized sector knowledge. For these reasons this research targeted the sector specificity. Interview partners from the research cases LSP were asked about their sector specialization. The defined sectors were automotive, chemicals, consumer goods/retail, food/drink, furniture, healthcare, high tech and textile/fashion. Other sectors could also be stated if none of the listed was applicable. For drawing a conclusion, the total number of target sectors was determined for each of the LSPs. As the result in Figure 50 shows, LSPs do not follow a niche strategy in terms of sector specificity. Only less than one-quarter of the analyzed LSPs concentrate on five sectors or less.

6 Š Empirical results

165

J

Many 1, 2

G E

Many 2 Many 2 18

H 14 14

B M 9

F 8

D C

7 6

I L A K

Legend: 1 Sectors of partners 2 No specific sector focus, variety of sectors served; exact figure not available Narrow sector focus Several sectors targeted

3 1

2

Figure 50: Sector specificity of research cases LSP

For reducing their dependency from one or a few sectors, the majority of LSPs prefer developing concepts which can be transferred easily to a variety of sectors. They actively market their logistics services for many sectors and to a larger number of customers in each sector. Risk management, for example in terms of turnover losses due to customer insolvency or more intensive use of sector specific investment in assets, is enhanced, which has further benefits in terms of new contract negotiations. In summary, the Segmentation Hypothesis is to be rejected. The sector specificity misperception can be explained by potential Hidden Champions sector scope:

2a. Principle of Scope: LSPs’ strategic and core capabilities are transferable across sectors. Such transfer reduces risks and enhances the LSPs’ position in contract negotiations with customers. For the business model component Target Group, a second hypothesis was formulated which is the Transaction Hypothesis (Section 5.1.1.2). The reason was to capture the perspective of the customer, i.e. the target group, in addition. In particular, the argument had to be specified that ‘hard factors’, mainly price and costs, decide who the LSP of choice is. Thus, customers were asked to provide insights into their decision process of choosing their outsourcing partner for logistics activities. The interview results allow the conclusion that the selection process is accompanied by three groups of triggers (Figure 51).

166

6 Š Empirical results

The first group – I call it the Primary Decision Trigger – covers market conditions. Answers from customers’ interview partners on the Primary Decision Trigger mainly relate to service execution. Besides price (14% of total number of responses), which is considered as the basic frame condition criterion, it is the expected quality in service fulfillment and quality standard (12%) and reliability (11%) by which customers select their LSPs. With excellence in service execution including good pricing being a necessary prerequisite, success or failure in competing for contracts will be decided increasingly based on the second and third group of triggers in future. The second group, the Key Decision Trigger, covers customer convenience and constitutes resource-based criteria. The interview partners of the customer companies mentioned the criterion location (9%), business experience (5%) and service portfolio (5%). Additionally, in this group are the collaborative criteria trust (6%) and ‘fit’ between LSP and customer (5%). Furthermore, flexibility in service execution is decisive (5%). Due to the changes in the logistics landscape, it is the third group of triggers which will have the deepest impact on the LSP selection in future. It covers deep capabilities which are invisible and not obvious for LSPs. This group of triggers, thus called the Hidden Decision Trigger, is mainly based on collaborative criteria. Interview partners mentioned the issues of company structure and customer contact (3% each) as well as company size, counter business, reputation, impression and special situation (1.6% each). The further stated frame condition criteria were costs (3%) and advanced IT systems (3%), the executive criteria adaptability to customer (3%) and performance (2%), and the resource-based criteria is the importance of asset-intensity or availability of resources (3%).

6 Š Empirical results

Group of Decision Triggers

167

Group of Criteria and Percentage of Total Statements

Primary Decision Trigger

Market Conditions

Price

14%

19% 11% 5%

Legend:

Context of Triggers

23% Quality, Reliability

Key Decision Trigger

Hidden Decision Trigger

Criteria (Examples)

14% 6% 5% 3% = Executive criteria

Location, Business Experience, Service Portfolio Trust, Fit LSP-Customer Flexibility

Customer Convenience

Company Structure, Customer Contact, Others Costs, IT Adaptability to Customer, Performance Asset-intensity/Availability of Resources

Deep Capabilities

= Resource-based criteria

= Collaborative criteria

= Frame condition criteria

Figure 51: Customers decision triggers in the LSP selection process

In other words, while price and excellence in service fulfillment are perceived as being a basic precondition, LSPs’ resources and their way of collaboration with customers decide who will be the LSP of choice. Thus, the Transaction Hypothesis is to be rejected partially. Customers confirmed that sector specificity is not the criterion for LSP selection, but general objective factors such as pricing are not the main criteria for selection of the LSP. This partial selection misperception from the view of customers can be explained by the:

2b. Principle of Intangible Service: While price and quality are considered as basic preconditions in the LSP selection process, customers’ decisions are based on two factors influencing the method of collaboration: First, customers’ choices are made from convenience perspectives and second, LSPs’ deep capabilities and resources for engaging in service provision are decisive.

6.1.1.3 The damnation to low margin business misperception The third micro hypothesis relating to the business model component Business Purpose, which I call Commodity Trap Hypothesis, states that smaller LSPs are captives of the low margin transportation business. In Table 10 I described Business Purpose by a company’s vision and mission as well as goals. For this reason empirical research on the

6 Š Empirical results

168

Commodity Trap Hypothesis concentrates on the analysis of mission statements and visions as well as on potential Hidden Champions’ core competences. First, I captured the mission statements of all LSPs studied in-depth, which totaled fiftyseven declarations. These were assigned to and summarized in sixteen objects, those once more in four target fields (Figure 52).

Percentage of total statements by in-depth studied LSPs

Object of mission statement Total solution offering Entire network management Sole partner with one interface Customer partnership Leading provider in target segment System partner SCM/logistics specialist Individual solution provision Innovation Broad range of skills IT/connectivity Value-added services Geographic focus People focus Efficiency increase Excellence

Target field of mission statement

14.0% 5.3%

Management and integration capturing

7.0% 5.3%

Weighty partner positioning

3.5% 3.5% 3.5% 15.8% 3.5% 3.5% 3.5%

Offering specialization

1.7% 15.8% 5.3% 5.3%

Value commitment

3.5%

Figure 52: Mission statements of LSPs studied in-depth

Relating to the object of mission, the most numerous statements refer to individual solution provision (15.8% of all statements), geographic focus (15.8%) and total solution offering (14.0%). Other content of the mission statements is less often mentioned: x In the target field ‘Management and integration capturing’, 5.3% of all statements relate to entire network management. Total solution offering with 14.0% of assigned statements is part of the mission statement of more than sixty percent of the research cases LSP. x In the target field ‘Weighty partner positioning’, 7.0% of statements can be assigned to a sole partner with one interface, 5.3% to customer partnership and 3.5% each to leading provider in target segment, system partner and SCM/logistics specialist. x In addition to the 15.8% of statements on individual solution provision as object of mission, four further objects are part of the target field ‘Offering specialization’.

6 Š Empirical results

169

Accordingly, 3.5% each were made to innovation, broad range of skills and IT/connectivity. 1.7% of statements referred to value-added services. x Finally, in the target field ‘Value commitment’, besides geographic focus with 15.8%, 5.3% each relate to people focus as well as efficiency increase. 3.5% of LSPs’ statements are about excellence as object of mission statement. Second, the visions of the research cases LSP are in focus of interest. Surprisingly, the LSPs are restrained in terms of publishing their visions. Twelve objects of vision were identified. These were assigned to five target fields of vision, which are ‘Management and integration capturing’, ‘Weighty partner positioning’, ‘Offering specialization’, ‘Value commitment’ and ‘Company development’ (Figure 53). The objects stated twice as the others are full-service philosophy (within the target field ‘Management and integration capturing’), partnership (within ‘Weighty partner positioning’) and delivery excellence (within the target field ‘Value commitment’). The other objects of vision are management rather than operation, leading provider, responsibility of part of OEM’s supply chain, innovation, virtual networks with permanent system visibility, continuous innovation, survival, partnerships and acquisitions as well as extending market position.

Objects of visions of in-depth studied LSPs • Full-service philosophy • Management rather than operation • Partnership • Leading provider • Responsibility of part of OEM’s supply chain • Innovation • Virtual networks with permanent system visibility

• Delivery excellence • Continuous innovation • Survival • Partnerships and acquisitions • Extending market position

Figure 53: Visions of research cases LSP

Target field of vision Management and integration capturing

Weighty partner positioning

Offering specialization

Value commitment

Company development

6 Š Empirical results

170

Third, the research cases LSP were asked for their core competences.41 For seven LSPs the provision of individualized solutions is the core competence, followed by four statements each relating to transportation, provision of value-added services and system solutions. Three LSPs mentioned technology, two LSPs network management and one LSP logistics innovations as their core competence (Figure 54).

Individualized solution provision

7

Transportation

4

Value-added services provision

4

System solution provision

4

Technology

3

Network management Logistics innovations

2 1

Number of in-depth studied LSPs with respective core competence

Figure 54: Core competences of research cases LSP

As intermediate summary, potential Hidden Champions’ mission statements do not allow a conclusion to be drawn regarding whether they are captured to the low margin transportation business due to their strong declarations on issues like individual solution provision, total solution offering or sole partner with one interface. Additional real insights into LSPs’ visions are not possible due to their restrained company visions. However, asked about their core competences, four of the LSPs mentioned transportation. This forms one of the points of commencement in Chapter 7 in which I screen for Hidden Champions. At this stage, I like to verify the micro hypothesis in more detail through the examination of the transferability of Collins and Porras’ findings on reasons for becoming elite institutions that are able to renew themselves and to achieve superior long-term performance (Collins and Porras 1996, p. 65). The authors, whose research focused on companies’ visions, found that elite institutions preserve the dynamic of the core while stimulating progress. Thereby, a well-conceived vision consists of the two major components of core ideology and envisioned future. Core ideology (the ‘yin’ in the scheme) defines the enduring character, i.e. a consistent identity, of an organization. 41

LSPs were allowed to state more than one competence.

6 Š Empirical results

171

Envisioned future (the ‘yan’ in the scheme) consists of a 10-to-30-year audacious goal as well as vivid descriptions of what it will be like to achieve the goal (Collins and Porras 1996, p. 66, p. 73.). As the research cases LSP are restrained in terms of declaring a company vision, the identification of the ‘cores’ of the LSPs is based on their core competences (Figure 54), which are grouped for better demonstration. Valueadded services provision is combined with individualized solution provision to the core ‘individualization’. The reason is that individualization of logistics solutions is not possible without providing value-added services. Also, provision of system solutions is expected to be impossible for SMEs in logistics without having strong networks. Thus, a second core shall be called ‘system’. Logistics innovations are a necessary prerequisite for individualizing solutions and often relate to technology. Accordingly, ‘technology’ remains as the third core and ‘transportation’ as the fourth core. These four cores are arranged in a matrix based on the advancement in type of service offering and scope of service offering. I placed ‘transportation’ at the bottom left as this service is neither broad in scope nor an advanced logistics activity, ‘technology’ is placed at the bottom right as it is a less historical logistics service but not broad in scope, ‘individualization’ is placed in the center and ‘system’ as the proclaimed future of logistics is placed at the top right. The LSPs studied in-depth were allocated to these cores according to their core competences (Figure 55): x LSPs B, G, J and L claimed that transportation is their key business. While it is the single core competence for LSPs G, J and L, LSP B is taking efforts to broaden its competence spectrum by providing value-added services. Thus only LSP B will be placed in the Yan while LSPs G, J and L will be in the Yin. x LSPs C, I and K claimed to be technology experts. While offering total solutions is hardly possible with technology alone, LSP I, which stated only technology as its core competence, is placed in the Yin. LSPs C and K are also specialists in the areas of individualization and system besides technology. From their business focus, technology is not the major part and thus neither LSP are assigned to the technology core. x However, LSPs C and K consider individualizing solution provision as their core competence just as done by LSPs A, E, F, H and M. While LSPs A, C and K are also ‘system’ experts, a more detailed view on their business focus allows the assigning of

6 Š Empirical results

172

LSPs A, C, E, F, H and M to the core individualization. Further research suggests that only for LSPs E and M is an assignment to the Yan justified. x From in-depth LSP analysis, LSPs D and K seem to be the only two LSPs with system as their main competence. Both are assigned to the core ‘system’. While LSP K seems to be limited in further advancement according to research, LSP K is assigned to the Yin. Research suggests that LSP D is promising in advancing in offering system solutions. Therefore, LSP D is placed in the Yan.

z

Scope of service offering

System

K

Legend:

D

z

z

Individualization

A, C, F, H

z

Transportation B

G, J, L

z

E, M

z z

Technology

I

z

Xxx

Core purpose

X

LSP stagnating in company progress

X

LSP with audacious goal for company progress, i.e. for escaping the commodity trap by adaptions of business solutions in order to achieve higher margins Core ideology Envisioned future

Advancement in type of service offering

Figure 55: LSP allocation in the logistics industry’s service offering portfolio and adaptation behavior (transferred from Collins and Porras’ model of articulating a vision; Collins and Porras 1996, p. 67)

As Figure 55 shows, almost seventy percent of the research cases LSP left the low margin transportation business and have penetrated gradually into the more profitable value-added and strategic service offering businesses as applies for technology, individualization and system. Only four LSPs (B, G, J and L) seem to be in danger of being stuck in the low margin transportation business. This applies in particular to LSPs G, J and L, as they lack indications of escaping the commodity trap. Figure 55 also demonstrates that for four LSPs, indicators for stimulating progress could be discovered (white company letters in the Yan), while for the others it could not be (black company letters in the Yin). The conclusion is drawn that only companies able to

6 Š Empirical results

173

stimulate progress are able to be successful long-term. According to this analysis, LSPs B, D, E and M are most likely to be successful. In summary, the Commodity Trap Hypothesis is mainly to be rejected. The damnation to the low margin business misperception can be explained by the:

3. Principle of Gradual Conquest: First, potential Hidden Champions consider the low margin transportation business as an initiator for further business only. They follow the strategy of conquering service offering scope gradually. Second, they also stimulate progress of their Core Ideology towards an Envisioned Future in the course of business operations. In Chapter 7, the above findings form one of the starting points for identifying Hidden Champions. I refer to progress or advancement in service scope provision to an Increased Commitment Model. In the chapter about screening for Hidden Champions, the findings are further specified and it is analyzed whether in reality LSPs first have to operate in the low cost and low margin business before developing relationships with profit achievements. 6.1.2 Misperceptions on Implementation 6.1.2.1 The competition misperception This section searches for arguments for proof or refutation of the fourth micro hypothesis, the Cherry Picking Hypothesis, which was formulated to conduct analysis on the business model component Product/Service. According to this hypothesis, industry incumbents compete with new market entrants, e.g. with specialized logistics subsidiaries, in-house providers and ‘outside conquerors’ (Figure 37) in the high-margin advanced services logistics business, in particular in providing one-stop-solutions or concepts close to this distinctive form. The question is whether advanced services are indeed the main part of potential Hidden Champions’ service portfolios. Thus, this

174

6 Š Empirical results

section deals with the scope of services offered by the LSPs studied.42 Their service portfolios were analyzed in terms of the possibility of a one-stop-solution offer with their own assets, where the LSP is responsible for the customer’s comprehensive logistical processes. For this analysis, services were grouped into operative, basic valueadded, expanded value-added and strategic services. Each service group consists of several types of services (see also Figure 9): x Operative services: transportation, transshipment, warehousing, freight forwarding. x Basic value-added services: customization and other warehouse value-add, transport planning and optimization, selection of transport mode, production value-add, aftersales services/reverse logistics, financial settlement. x Expanded value-added services: inventory management, inventory ownership, assembling, facility management, advanced IT services. x Strategic services: merge in transit, construction/optimization of the distribution network, integration of global supply chains. Thereby, merge in transit is a transportation concept by which delivery chains of different origins are brought together. As a consequence, warehousing steps become needless and advantages in terms of time and accumulation of capital are achieved (Kuemmerlen 2005, p. 46). In the analysis, five issues were targeted for argumentation of the Cherry Picking Hypothesis. These five issues are presented in the next paragraphs. First, information gathered from the research cases LSP was evaluated in terms of the share of LSPs with respective type of service in their portfolio (Figure 56).

42 The analysis refers to the questions in section ‘2.4. Product/Service Offering’ in the ‘Questionnaire/Interview Manual – Logistics Service Provider’ (Appendix 3). Results and their evaluations refer to the findings from the thirteen LSPs studied in-depth.

6 Š Empirical results

Service group

175

Transportation Transshipment Warehousing Freight forwarding Customization and other warehouse value-add Transport planning and optimization Basic Selection of transport mode value-added Production value-add services After-sales services/reverse logistics Financial settlement Inventory management Inventory ownership Expanded Assembling value-added services Facility management Advanced IT services Merge in transit Strategic Construction/optimization of the distribution network services Integration of global supply chains

Average coverage per service group

Percentage of in-depth studied LSPs with service offering

Type of service

77 46

Operative services

Ø 65.5%

77 62 62 62 38

Ø 50.2%

31 77 31 15 0 54

Ø 32.2%

15 77 0 77

Ø 33.3%

23 100%

Figure 56: Types of services provided by LSPs studied in-depth

x In the service group operative services, 77% of the LSPs provide transportation and warehousing respectively, 62% freight forwarding and 46% transshipment. The average coverage of this service group by the totality of LSPs amounts for 65.5%. x Relating to the service group basic value-added services, 77% offer after-sales services/reverse logistics, 62% customization and other warehouse value-add as well as transport planning and optimization respectively. With more than 30%, selection of transport mode, production value-add as well as financial settlement are also part of the LSPs’ service portfolios. Overall, basic value-added services are provided by roughly half of the thirteen LSPs. x In the service group expanded value-added services, advanced IT services are provided by 77% and 54% do assembling activities. However, the other three types of services in this group (inventory management, inventory ownership, facility management) are provided by only 15% or not at all as is the case for inventory ownership. Overall, the average coverage in this service group is only 32.2%. x Construction/optimization of the distribution network is the key strategic service which 77% of the LSPs provide. Integration of global supply chains is part of the service portfolio for less than one-quarter of the LSPs and merge in transit is provided by none of the LSPs. The average coverage on strategic services by the research cases LSP amounts to only one-third.

6 Š Empirical results

176

This analysis shows that potential Hidden Champions mainly focus on operative services and basic value-added services. Services under expanded value-added services and strategic services are part of only roughly one-third of LSP service portfolios. Second, further analysis concentrates on single LSPs’ focus on service groups. Based on each LSPs’ individual total number of types of services in their service portfolio, the share of operative services, basic value-added services, expanded value-added services as well as strategic services are calculated (Figure 57).

A B C D E F H

7

29 33

67

J

9

9

36

28

8

15 46

36

I K

13

25 46

31

G

14

29 25

37

25

13

37 29

28

22

11

56 25

10

10

40

40 11

= Operative services (%) = Basic value-added services (%) = Expanded value-added services (%) = Strategic services (%)

20

20

60

Legend:

67

33

L

44

M

43

12

44 14

43 100%

Figure 57: Share per service group based on individual total number of types of services per LSP

As the figure shows, the first eight LSPs provide services from each service group. Three LSPs do not provide strategic services at all (LSPs J, L and M). LSPs I and K are most outstanding in terms of more advanced, i.e. strategic services. Apart from LSPs I and K, all other eleven LSPs’ share of operative services and basic value-added services amounts for more than 50%. Again, the analysis’ finding is that potential Hidden Champions do concentrate less on advanced, i.e. expanded value-added and strategic services, than expected. Third, the above view is further differentiated. At the beginning of this section, the types of services were defined for each service group, with four types for operative services, six types for basic value-added services, five types for expanded value-added services and three types for strategic services. Figure 58 presents the LSPs’ scope

6 Š Empirical results

177

relating to the number of types of services per service group. For example, LSP C offers two services from the four potential types of services in the service group operative services, thus 50%.43 LSP C also offers 50% of potential types of services in the service group basic value-added services, i.e. LSP C offers three of six service types.44 Moreover, LSP C offers advanced IT services from the five potential service types of the group expanded value-added services only, thus 20%. Finally, two strategic services are part of LSP C’s portfolio, which amounts to two-thirds due to three service types in this group in total.45

[Share on total number of type of services per service group in %]

LSP

Basic value-added services

Operative services

A

67

100 25

B

50

D

50

40

33

33

40

33

40

33

G

100

83

H

100

83

K L M

100

0

0

20

67

0 67

17

33

40

17

75

33

80

17

100

33

20

0 75

J

67

20

100

0

67

33

F

I

33

20

50

75

Strategic services

20

83

C

E

Expanded value-added services

0

20 60

0

Figure 58: LSPs’ scope relating to the number of types of services per service group

Above figure shows clearly that none of the potential Hidden Champions is able to offer all types of services. This is graphically presented by white bars at all of the LSPs 43

The two operative services which are provided by LSP C are transportation and warehousing. The three basic value-added services are customization and other warehouse value-add, transport planning and optimization as well as after-sales services/reverse logistics. 45 The two strategic services are construction/optimization of the distribution network and integration of global supply chains. 44

6 Š Empirical results

178

studied in-depth. As a conclusion, we can say that without networks, none of the LSPs would be able to offer a one-stop-solution. Fourth, in the course of my empirical studies it was my experience that there are two ‘critical points’ which SMEs in logistics should not miss to be successful. If companies provide too few advanced services, i.e. concentrate too strongly on operative services only, they are in danger of being taken over by another, competitive LSP who has a more complete offer. If they lie too strongly on the advanced services side, they are in danger of being taken over by the key customer, who eliminates the contract with the LSP and executes a takeover of the LSP for in-house provision of the previously outsourced logistical services. LSPs’ long-term success and survival are expected if their service spectrum is neither too operative nor to strategic, i.e. if their service scope is in the ‘middle’ (Figure 59).

Legend: X Successful LSP X Unsuccessful LSP Critical point in service offering

Success

LSP D …

LSPs’ result

LSP A …

Danger of takeover by competitive LSP

Danger of takeover by key customer

Failure

LSP G

Operative Basic value-added

LSP K

Expanded value-added

Strategic

Services’ share from total turnover

Figure 59: Relationship between groups of services and success of an LSP

Fifth, I further experienced that LSPs hold on to their core competences with the service portfolio not being subject to frequent changes. This is the finding from looking at the issue of service portfolio revisions (in the sense of progressing towards more advanced services) and asking the interview partners at the LSPs for reasons to adapt the service portfolio (Figure 60).

6 Š Empirical results

179

Reasons Interview partners‘ responses in %

80

Customer needs

40

Market requirements

20

Synergy effects

20

Cost advantages Expected special orders

0

Expected profit increase/loss reductions

0

Resource/skill shortage

0

Figure 60: Reasons for LSPs’ service portfolio revisions

LSPs do not regularly adapt their service portfolio due to internal reasons; portfolio revisions are driven by external needs. The main trigger to break through portfolio continuity takes place due to a major customer’s requirement. 80% of the interview partners confirmed this reason for adapting the service portfolio. They further stated that in most cases service portfolio changes are not the results of strategic company decisions but the results of a development process in significant customer relationships. Dynamics and change in customer relationships has been in the focus of management literature with corresponding explanations for the developments in the area of logistics. Reinartz and Kumar for example found in their studies (Reinartz and Kumar 2002, pp. 86-94) that loyal customers are not necessarily those who generate profit. According to the authors, the reason for a weak link between loyalty and profits has a lot to do with the crudeness of the methods most companies use for the decision about whether or not to maintain customer relationships. When profitability and loyalty are considered simultaneously then different customers need to be treated in different ways. In logistics, LSPs obviously apply different approaches to different customers, i.e. potential Hidden Champions manage both profits and loyalty at the same time by offering new and innovative higher margin offerings to important customers. Prahalad and Ramaswamy (Prahalad and Ramaswamy 2000, pp. 79-87) dealt with the evolution and transformation of customers in general. While from the 1970s until the 1990s customers were a passive audience, since 2000 they have become active players, i.e. cocreators of value. Making use of customer competence is also one success criterion in logistics when approaching a higher margin service offering.

6 Š Empirical results

180

Interview partners’ further-stated reasons for revising the service portfolio are market requirements (40% of the statements) as well as synergy effects (20% of the statements) and cost advantages (also 20% of the statements). However, they are considered to be less important. The results from the five argumentation fields above shall be summarized here. First, potential Hidden Champions are not mainly active in the high-margin advanced services logistics business (Figure 56). Second, roughly one-quarter of the research cases LSP do not provide strategic services at all. For approximately eighty-five percent of the LSPs, operative services and basic value-added services amount to more than fifty percent (Figure 57). Third, none of the potential Hidden Champions is able to provide a onestop-solution offer (Figure 58). Fourth, pure concentration on strategic services does not lead to long-term business success and survival (Figure 59). Fifth, adaptations of the service portfolio in the sense of progressing towards more advanced services are not to the result of the threat of competitive LSPs. Potential Hidden Champions mainly revise their service portfolio due to developments in customer relationships (Figure 60). Thus, the in-depth studies establish that the one-stop-product or service portfolio is not at the top of LSPs’ agendas. Therefore, potential Hidden Champions do not compete in the high-margin advanced services logistics business. Even more, their product or service portfolio is characterized by outstanding innovations, individualization and continual improvements to meet customer needs. As a conclusion, the industry is not merely characterized by competition between logistics incumbents and New Breeds of providers, but by competition for meeting customers’ needs best. In summary, the Cherry Picking Hypothesis is to be rejected. The competition misperception can be explained by the:

4. Principle of Customer Favor Striving: Traditional and New Breeds of providers do not merely initiate competition amongst providers. They independently focus on meeting their customers’ needs in the best way possible.

6 Š Empirical results

181

6.1.2.2 The global standard misperception The interview partners from the research cases LSP were asked to list their locations in order to determine their geographic coverage without help from partners. Geographic coverage was used for validation or refutation of the Global Standard Hypothesis in Section 5.1.2.2. LSPs were supposed to include locations that they supply and that they serve, with the prerequisite of at least fifty percent ownership. I defined geographic coverage by the five types regional, national, continental, multi-continental and truly global, with the term international applying to the last four stages. While global operations are possible through partnerships and networks without personal assets, this aspect is not considered here. According to the interview partners’ statements, all LSPs are operating internationally in the sense that they supply and serve over multiple continents. The locations stated were assigned to the five continents Europe, Asia-Pacific, North-America, SouthAmerica and Africa. None of the LSPs has ownership in locations on the sixth continent Australia. Thus, none of the LSPs studied in-depth is truly global. On average, the LSPs have their personal locations on 2.8 continents with 38.5% of the LSPs having their personal locations on two continents, 46.1% on three continents and only 15.4% on four continents. These figures, in particular the share of LSPs with locations on four continents, again make clear that global coverage based on personal assets is low (Figure 61).

15.4% 38.5%

On average LSPs have personal locations on 2.8 continents

Personal locations on two continents

46.1%

Personal location on three continents Personal locations on four continents

Figure 61: LSPs’ global presence with personal locations by continent

6 Š Empirical results

182

All LSPs are based in Europe or have at least one personal location on this continent. A strong presence can also be found in Asia-Pacific with 54% of the LSPs with their personal locations. 38% of the research cases LSP are represented by their personal locations in North-America, while only one LSP is located in South-America and Africa (Figure 62).

100%

100% 54% 38%

Europe

AsiaPacific

NorthAmerica

8%

8%

SouthAmerica

Africa

Figure 62: LSPs’ representation with personal locations on continents

Above figure again confirms that SMEs in logistics are not truly global players if measured in terms of locations on continents. This view was taken independently of factors such as distance to home country or other specific difficulties and characteristics of a continent. I verified the finding that SMEs are not truly global players by researching the other 95 LSPs from the ‘Top 100+ Company List’. Potential Hidden Champions’ strategies relating to geographic coverage is demonstrated by selected examples in Table 32.

6 Š Empirical results Example

LSP / Logo

1

BLG Logistics Group AG & Co. KG

2

FM Logistic

3

H. Essers & Zonen NV

4

Transportes Azkar S.A.

5

Gondrand Group

Table 32:

183 Country

Strategy

Source

Detthold Aden, CEO, stated in an interview that in contract logistics BLG Logistics Group followed customers from the automotive sector. Activities are also provided abroad in and near customers’ plants in South Africa, Brazil, US, Malaysia, Italy and Slovakia. By taking over Premium Logistics (formerly Giraud) in 1995, activities from France as well as Central Europe and Eastern Europe were expanded to Southern European countries (Portugal, Spain, Italy). Essers’ network is considered as “almost unlimited”. The LSP operates within the ‘Eurologistics’ network with roughly 46 regional partners.

N.A. 2008, p. 33.

Azkar is a specialist for packaged goods transportation services all over Spain and international as well as contract logistics. The LSP is market leader in the Iberian Peninsula with a network of 85 subsidiaries for packaged goods in Spain and Portugal. Azkar’s share of turnover in Spain and Portugal amounts to about 86%, equivalent to roughly 320 m. euros. Mr Weller from Gondrand stated that unlike LSEs in logistics, Gondrand is not able to create its own worldwide network. As a medium-sized LSP, Gondrand has to export the business with customers. For example, Gondrand developed together with the customer Deckel Maho Gildemeister (DMG) a logistics concept in Shanghai.

N.A. 2007a; Dachser (ed.) 2009.

Klingsieck 2006, p. 12.

Findeis 2007, p. 13.

Schmidt 2006, p. 14.

Potential Hidden Champions’ strategies in terms of geographic coverage

The examples in Table 32 show the following five strategies: x If the logic is to meet customer needs, then customers also define global presence, or not (Example 1). x If global presence is required, LSPs bypass their restriction in meeting this need by founding subsidiaries or acquiring small local LSPs in strategically important countries (Example 2). x Potential Hidden Champions are experts in creating networks with local market leaders in a specific country or region and in entering cooperations with local partners, correspondents and agents (Example 3). x Moreover, for successful LSPs it is not global presence that defines company excellence but an outstanding level of business services in a niche area and for a specific region (Example 4).

6 Š Empirical results

184

x Additionally, LSPs extend their own geographic coverage in the event of expecting a long-term, strategically important and financially sound business relationship (Example 5). In summary, the Global Standard Hypothesis is to be rejected. The global standard misperception can be stated instead as follows:

5. Principle of Customer Proximity: LSPs do not target global standards in service delivery. Single customer relationships define market coverage through company locations or through complementary local partnerships.

6.1.2.3 The asset misperception In Section 5.1.2.3 the Virtual Logistics Hypothesis was defined. It states that LSPs with mainly intangible assets are more successful than asset-intensive LSPs. The reason is that customers’ trust in the LSP to provide a one-stop-solution offer increases. Consequently, research and analysis in this section concentrates on types of LSP assets. First of all, I looked at logistics LSEs and their types of assets. Both non-asset-based as well as asset-intensive LSPs are dominating the industry. Certain logistics experts continue to consider that their key problem is how to fully occupy their large fleet while also keeping pace with the development of global supply chains and the need to manage them effectively. LSE in logistics like Kuehne + Nagel International AG, traditionally non-asset-based, operates hardly any means of transport in order to avoid the pressure to fully use and operate the capacity. Kuehne + Nagel International AG has a large network that provides it with the flexibility to achieve maximum efficiency as required by customers (Helmke 2001a, p. 5). In contrast, other large groups acquire most often asset-intense logistics SMEs, for example the Danish DSV A/S acquired Koninklijke Frans Maas Groep N.V., mainly in order to complete its own European network in road transportation (N.A. 2006a, p. 1; N.A. 2006b, p. 2). To answer the question of whether the situation is similar at potential Hidden Champions, their state and ideal mix of tangible assets and intangible assets is examined and presented (for results see Figure 63 and Figure 64). I asked my interview partners at

6 Š Empirical results

185

the LSPs to provide answers to the question of ownership and access to assets. Answers were expected on assets in the areas of road, rail, sea as well as air transportation, transshipment, warehousing, assembling and IT & technology. Interview partners should either differentiate between ownership of assets (white), partial ownership of assets with additionally access to third parties’ assets via contracts (marbled), access to third parties’ assets via contracts only (light grey), out of business scope with third party handling if required (dark grey) as well as out of business scope (black). For better presentation and differentiation, credits were assigned to the answers with five credits for ‘white’ replies, four credits for ‘marbled’ replies, three credits for ‘light grey’ replies, two credits for ‘dark grey’ replies as well as one credit for ‘black’ replies. The sum of credits per LSP defined the arrangement in the sequence in the presentation.46

LSP Service Road

G

F

H

M

L

D

K

A

C

E

B

J

I

35

34

33

29

27

26

26

25

24

23

22

19

12

Rail Sea Air Transshipment Warehousing Assembling IT & Technology Total Credits Asset state Legend:

Asset-intensive

Asset-indifferent

Non-asset-based

Ownership of assets (five credits/service) Partial ownership of assets, additionally access to third parties’assets via contracts (four credits/service) Access to third parties’assets via contracts (three credits/service) Out of business scope if required handling via third parties (two credits/service) Out of business scope (one credit/service)

Figure 63: Ownership and access to assets by LSP

In the above figure, three states in assets were defined based on total credits. I call the LSPs studied in-depth asset-intensive if total credits in my analysis are above 30. LSPs are non-asset-based if total credits are below 20. For all other total credits, LSPs are 46 LSP D was placed before LSP K despite same total credits. The reason is that LSP D provided two ‘white’ replies, i.e. one reply more than LSP K relating to the highest category of ownership and business scope in assets.

6 Š Empirical results

186

asset-indifferent. As a result, LSPs G, F and H are asset-intensive, LSPs I and J are nonasset-based and all others are asset-indifferent. This finding is used in Chapter 7 when screening for Hidden Champions by linking empirical research results with potential Hidden Champions’ performance. While Figure 63 is presenting ownership and access to assets by LSP, findings can also be presented by service (Figure 64). In this figure, numbers refer to the sum of LSPs with their own assets (white), with partial ownership and additional access to third parties’ assets via contracts (marbled), with access to third parties’ access via contracts only (light grey), with service out of business scope but access to third parties if required (dark grey) as well as with service out of business scope at all (black). Again, I assigned between one and five credits to the answers. For example, the total credit in warehousing is calculated by (4 x 5 + 6 x 4 +1 x 3 + 2 x 1) resulting in 49 total credits. Calculation is applied similarly for the other services. The sum of credits per service defined the arrangement in the sequence in the figure.

Service

IT & Technology

6

4

Road

6

3

Transshipment

Legend:

6

3

3 1 2

2

49

2

47 39 38

5 3

2

4 3

2 1

2

1

Rail

1

6

3

Assembling

Air

65

13

Warehousing

Sea

Total Credits

Number of in-depth studied LSPs

4

33

3

5

30

3

5

29

Ownership of assets (five credits/service) Partial ownership of assets, additionally access to third parties’ assets via contracts (four credits/service) Access to third parties’ assets via contracts (three credits/service) Out of business scope if required handling via third parties (two credits/service) Out of business scope (one credit/service)

Figure 64: Ownership and access to assets by service

The main finding from Figure 64 is that there are three services for which more than fifty percent of all representatively studied LSPs regard full or at least partial ownership

6 Š Empirical results

187

of assets as important. These are IT & technology (100% of the LSPs), warehousing (77% of the LSPs)47 as well as road transportation (69% of the LSPs).48 Obviously potential Hidden Champions’ asset ownership has its main focus on the traditional operative logistical services but in addition, almost half of the LSPs possess assets for providing assembling, i.e. advanced services. Thus, LSPs also concentrate on services from which higher margins are expected. While ownership in IT and technology is considered self-evident, LSPs are open for investments required for advanced services. According to the six LSPs that own assembling appliances, these assets were usually installed due to individual needs of customers. Concerning the other four services, transshipment as well as transportation by other modes, i.e. by sea, rail and air, less importance is prevailing at the LSPs. These services are out of business scope for more than fifty percent of the LSPs, or they provide these services only by handling via third parties if required. Transshipment as well as transportation by rail and air is out of business scope at five LSPs and four LSPs do not provide transportation services by sea. Each of these three transport modes and transshipment is offered by three other LSPs only through outsourcing to third parties. However, contracts do not exist for access to third parties’ assets as is the situation with two other LSPs for transshipment as well as transportation by sea and air and with one further LSP for rail transportation services. Summarizing the state in ownership and access to assets by LSPs, two points have to be mentioned. First, as established by the selection process for the research cases LSP, those studied meet the criteria for potential Hidden Champions at first glance. The first view on ownership and access to assets does not clearly show whether Hidden Champions are asset-based, asset-indifferent or non-asset-based providers (Figure 63). Second, potential Hidden Champions asset ownership relating to traditional operative logistical services is significant. The reason might be that Hidden Champions have been in business for decades and thus this state in asset ownership has its origins in tradition. However, the studied LSPs are also open for investments to provide high-margin

47 31% of the research cases LSP provide warehousing with their own assets only and 46% make use of third parties’ assets in addition to their own warehousing spaces. 48 23% of the research cases LSP operate with their own vehicles only and 46% access third parties’ assets for road transportation if capacity is required.

188

6 Š Empirical results

services, in particular assembling, in order to meet customer requirements (Figure 64). The studied LSPs stressed their openness to invest in tangible assets necessary for advanced service offerings as well as to invest in intangible assets. This stated readiness to invest in intangible assets caused me to question leadership and human resource issues. I expected answers to the questions whether successful LSPs need a very open and progressive leadership style and what top managements’ behavior and attitude relating to their staff is. The replies should give an insight into whether an LSP’s people are the key asset and thus a prerequisite for managing the development from a traditional asset-intensive LSP towards an LSP providing advanced services and operating a more intangible assets-based business. The interview partners were asked to provide their views on leadership and human resources issues. According to interview partners’ replies relating to leadership, top managers have tight roots to the company either by being the founders or their successors. Decision processes are centralized and shaped by the owning family with fast decision making pace. Leadership positions are stable and only a small share of total employees is in management positions (for example, at LSP G five percent of total staff at the maximum). Top managers can be characterized as leaders and integrators who define the culture and shape the company. Their characteristics are impatience, entrepreneurial behavior, energetic and emotional acting going along with future-oriented thinking (in particular applicable to LSP M). Their leadership style is described as being cooperative, teamoriented, fast and straight while being open-minded and giving staff the freedom to make decisions within their fields of responsibility. There is a closeness of the CEO and of the top managers to their staff, creating a family flair and engendering high loyalty. The spirit of the leadership is omnipresent in the LSPs studied. However, it is the strong concentration on one or a few very strong personalities at the top which decides business success or failure. More successful LSPs make arrangements for management succession far ahead. Top management change, e.g. appointing young family members or managers from outside the family, is often connected with successful turnaround from a capital-intensive LSP towards an

6 Š Empirical results

189

employee-intensive LSP. Acquisitions for advancing into a more value-added logistics business often result in managers of the acquired company being at the top of the combined LSP even years later (for example at LSP M). After interviewing about leadership, I targeted staff issues at the representatively studied LSPs to answer the question whether people are the key asset or not. Interview partners’ openness and demonstrated willingness to provide insights on selected human resources issues is shown in Figure 65. Roughly half of the interview partners is reserved in terms of information, either to keep information secret or due to a low attribute of importance. Thus, subsequent accomplishments refer to replies from seven LSPs.

LSP HR Issue Recruiting

A

D

B

F

I

M

J

C

E

G

H

K

L

4

4

2

2

2

2

1

0

0

0

0

0

0

Training Incentives Employee Suggestions Total Insights Legend:

Insights on human resources issue provided. No insights on human resources issue provided.

Figure 65: Openness in providing insights on human resources issues

All seven LSPs have several processes in place regarding recruiting, training, incentives and employee suggestions: x Recruiting: While there are hardly any personnel changes at the top management, vacant positions at the other organizational levels are preferably filled from internally. The reason is that the company culture is secured if the proportion of external new hires is kept at a minimum. For example, LSP D even has its own temporary work company that staffs positions and projects with internal personnel. x Training: Unlike LSEs in logistics, potential Hidden Champions train their staff for being a generalist instead of a specialist, most often through employee development programs in an internal academy (for example at LSP D). x Incentives: Roughly 31% of the representatively studied LSPs provided an answer on their internal incentive behavior. LSPs A and D give a qualification based pay which is

190

6 Š Empirical results

variable and oriented on performance. In addition, LSP D grants monetary rewards for improvement suggestions and a bonus for not being sick. As further examples, LSP B shares the profit with employees and LSP M’s incentives are connected to submitted ideas. x Employee suggestions: Only about 31% of the LSPs were open to discuss their attitude and behavior relating to the human resource issue. Most interesting is that LSP D even created a special program which is mainly applied for suggestions relating to processes, savings and pricing arrangements. Based on this program, employees are granted monetary rewards. A short conclusion is given below based on the gathered insights on leadership and staff: Leadership: Top management is closely interlocked with company ownership. In fact, the spirit of the leadership is omnipresent. The cause of successful transformation from a traditional asset-intensive LSP towards an LSP providing advanced services and operating a business with more intangible assets is often linked with management change. Staff: Interview partners were either open or reserved in providing insights on human resources issues. Those LSPs who replied have several processes in place regarding recruiting, training, incentives as well as employee suggestions. All interview partners emphasized that employees are the key asset for successful business transformation. In addition, the interview partner stressed that top management expects full commitment of the staff to the employer. More than two-thirds of the potential Hidden Champions, i.e. roughly 69%, have received a unique or regular award confirming company excellence or excellence in certain areas. Such awards are considered to be the employees’ achievement. The other approximately 31% of LSPs have not received an award so far, but this partly influenced by the popularity of awarding in the country of the LSP’s headquarters. For example, in Northern European countries awarding is less popular. Figure 66 shows the categories in which potential Hidden Champions received their awards, the number of LSPs that have been awarded in the respective category and their share from total research cases LSP.

6 Š Empirical results

Award category

191

Number of LSPs and share from total LSPs studied

High quality customer solutions

54%

7 4

Partnership

31%

Strong and dynamic growth

2

15%

Top provider

2

15%

Network modelling

2

15%

Technological excellence

2

15%

Environmental contributions

1

8%

Innovations

1

8%

Figure 66: Awards

Most interestingly, potential Hidden Champions generate public attention by excellent, i.e. high quality, customer solutions with more than 50% of the LSPs being granted an award in this category. Just to give an example relating to the above figure, LSP D has received numerous awards so far. Besides awards for high quality customer solutions, LSP D has been granted the award in the category of innovations. At a European university research is done on innovation management at medium-sized companies. The Professor who heads this research identified LSP D’s holistic approach for logistics solutions as preeminent and innovative. LSP D is excellent in the sense that the company provides logistics services along the total supply chain. The potential Hidden Champion managed to reorganize procurement, warehousing and delivery processes for the medical technique division of a global electronics producer. This management service by the LSP contributed to productivity increases worth millions of euros. Finally, human resources are the intangible assets that shape customer capital, innovation capital and process capital. In terms of customer capital, the key finding is that potential Hidden Champions have very tight relations with very few customers which last long-term. At least 50% of the LSPs focus on a business relationships with one or a few major customers. Two-thirds of the LSPs collaborate long-term with their customers. Regarding innovations, the interview partners mentioned eight process innovations, eight innovative individualized customer approaches, five innovative solutions and three technology innovations (Figure 67).

6 Š Empirical results

192

Number of innovations from the Type of innovation thirteen in-depth studied LSPs Process

8

Individualized customer approach

8

Solution

5

Technology

3

Figure 67: Innovations as capital

For findings relating to process capital, LSPs’ employee productivity was the focus of the research. This indicator is important as employees are logistics process managers. For this reason, employee productivity was calculated (Figure 68).

EUR 300,000 250,000 200,000 150,000

3

100,000

Legend: 1 Category “provider-provider entity” does not allow comparisons. 2 No turnover figure available. 3 Figures from turnover and number of employees from different years.

50,000

A

B

C

D

E

F

G

H

I

J 1 K2 L

M

LSP

Figure 68: Employee productivity

Out of eleven LSPs’ figures received, four LSPs’ employee productivity is at least 200,000 euros (LSPs A, F, G and L) and only at LSP C it is below 100,000 euros. For making the final conclusion on findings regarding the Virtual Logistics Hypothesis customers’ perspectives on LSP asset ownership and treatment have to be supplemented. Table 33 provides some examples that representatively demonstrate the prevailing indifference of customers’ views. Nevertheless, one of the key messages of the interview partners at customer companies is that they trust potential Hidden Champions due to their experience in the asset-intensive business. They value their indepth know-how gained over many decades that enables them to provide highly innovative and individualized services. Customers are also convinced that LSPs’ employees are highly skilled in planning, organizing, coordinating and managing tasks.

6 Š Empirical results Requirement of asset ownership No Yes x x

193 Assumption of preferential treatment of own assets No Yes

x x x

Table 33:

Source

Interview at Customer I Interview at Customer II Interview at Customer V Interview at Customer IX Interview at Customer XII

Customers’ views on LSPs’ asset ownership and treatment

Finally, all findings from this section are summarized: For historical reasons, potential Hidden Champions still have a large ownership in assets to provide traditional services. However, there is a clear tendency towards more investments in tangible assets for providing more advanced services and in intangible assets that supplement the traditional business with planning, organization and management tasks. This trend is even intensified at LSPs with an entrepreneurial leader or through management change. Potential Hidden Champions regard their employees as key assets for business success. They treat their employees as people in a friendly social environment. Thus the basis for employee intensive business solutions and individualized customer innovations is created. Customers are indifferent in asset ownership of their LSPs. On the one hand, credibility relating to experience in implementing operative services requires personal resources. On the other hand, impartiality is impeached. Customers might fear that LSPs use their own assets to occupy capacity in full instead of more suitable assets from a partner. Hidden Champions solve this dilemma by offering one or very few single services with their own resources at most favorable conditions. No other services are part of the core competence and therefore part of their planning, organization and managing tasks with implementation by third parties. In summary, the Virtual Logistics Hypothesis has to be confirmed in part for the reason that potential Hidden Champions demonstrate the tendency towards investments in intangible assets for advanced logistical solution offerings. But the asset misperception is currently still valid due to LSPs’ very strong ownership in assets for traditional

6 Š Empirical results

194

service provision. However, the state of asset ownership at potential Hidden Champion is characterized by the following principle:

6. Principle of Entrepreneurship: Potential Hidden Champions’ leaders are entrepreneurs who force innovative, more advanced solutions. In doing so, they manage to transform the asset portfolio barely unnoticeably. As a result, their business tends to be intangible assets based relating to low margin services. Also, they are open to invest in tangible assets to offer high-margin services, which are often innovative new solutions designed for specific customer needs. The key asset for this development is the staff, which is brought up to follow the spirit of the leadership.

6.1.2.4 The prevalence of complex internal settings misperception The Complexity Hypothesis was formulated in association with the business model component Organization. According to this hypothesis, SMEs in logistics struggle in organizational adaptations to market needs for the reason that they lack the resilience required for responding flexibly to demands. Ten interview partners from the LSPs shared information about their LSP’s organizational form (Figure 69). Half of those LSPs is organized functionally (38.4% from the total number of LSPs), i.e. according to their supply chain functions, such as finance, logistics or IT. 23.1% of LSPs are organized by divisions, i.e. by their service groups, and 15.4% of LSP organizational forms are the matrix.

LSP Org.-form

A

B

F

J

K

I

L

M

D

H

C

E

G

Functional 23.1% 38.4%

Divisional 15.4%

Matrix

23.1%

N.A.

Figure 69: LSPs’ organizational forms

Regarding Organization, the interview partners from the ten LSPs stated two further issues. First, potential Hidden Champions prefer a flat organization with only a few

6 Š Empirical results

195

management positions, which allows direct communication and quick decision making. Second, within the development process from a traditional LSP towards a more advanced LSP, organizations are restructured but struggle with the new matrix organization and decentralization. The renunciation of the simple, flat organization as a consequence is considered as losing a competitive advantage and is not viewed as a long-term solution. Potential Hidden Champions’ number of subsidiaries is captured next. It varies from a total of 59 to no subsidiaries. Overall the LSPs’ number of subsidiaries is easily comprehensible. Four LSPs (H, F, I and E) have more than 20 subsidiaries (dark grey fields in Table 34). LSPs G, J and K do not have any subsidiaries (white fields in Table 34). All other LSPs’ number of subsidiaries is one-digit (light grey fields in Table 34).

LSP

H

F

I

E

A

C

D

M

L

B

G

J

K

Number

59

33

24

21

9

6

5

4

2

1

0

0

0

Table 34:

Number of LSPs’ subsidiaries

In summary, based on interview partners’ statements the Complexity Hypothesis is to be confirmed in part as potential Hidden Champions struggle with organizational adaptations. Complex organizational structures are temporary states, if at all. The hypothesis is to be rejected partially as potential Hidden Champions regard their flat and simple organizational form as a competitive advantage. The reasons are that decision processes are less complex and customers have direct access to their LSP at every company level which makes the LSPs’ relationships to customers special, open and fair. Thus, the prevalence of complex internal settings misperception can be explained by the:

7. Principle of Simple and Fast Decision Making: Potential Hidden Champions’ organizational structure is kept as simple as possible. Their flat hierarchy simplifies and speeds up decision making.

196

6 Š Empirical results

6.1.2.5 The reservation expectation misperception On basis of the business model component Communication, the Information Processing Hypothesis was formulated. It states that SMEs in logistics are reserved in communication of company data. With the majority of logistical SMEs not being listed on the stock market, publication of data is restricted to minimum requirements only. From the analysis of the more than one hundred LSPs (‘Top 100+ Company List’), it turned out that these LSPs have excellent methods of communicating and collaborating with customers, partners and employees. Like LSEs in logistics, they have excellent IT systems and strong information exchange platforms. In addition, they outperform in ‘soft factors’, as in creating closeness or trust, e.g. with ‘open book’ policies prevailing, meaning that customers see their third party LSP’s costs and pay those as contracted with the third party LSP collecting a management fee.49 The examples of information exchange policies of the LSPs studied in-depth in Table 35 provide representative insights relating to communication and collaboration. The statements from the LSPs can be assigned to three groups, which are simple and open communication processes (light grey lines), transparency through IT connectivity (medium grey lines) and special communication states (dark grey lines).

49 In contrast, a ‘closed book’ is spoken of when a fixed-price contract was signed where the customer does not see the third party LSP’s costs. Fixed price often varies by volume (Ton and Wheelwright 2005, p. 21).

6 Š Empirical results LSP D

E

G

H

I L

M

B

F

197 Statement(s) on information exchange policy

For the sake of customers, partners and employees, communication processes are characterized by simplicity and without complexity at all company levels. Fast, straight and open communication and leadership style.

Conviction that results are already improved through better communication (which is applicable to the post-merger period in particular). Interaction is characterized by individual responsibility, an open dialogue and confidence in the competence of the other party; conflicts are brought out into the open. Pursuing lifetime partnerships with customers by joint development of service processes and support services. Company’s competitive advantages are simplicity in doing business and in getting hold of the LSP, quick response to customer requests and dealing on an electronic basis; assignment of dedicated contact persons to each customer. Positioning as single point of contact for customers, i.e. customers’ contact person for all issues emerging.

Self-developed IT systems and Transport Management System (TMS) connect all CEP providers, thus partner-comprehensive and on-time communication; customer care 24 hours/7 days per week; communication, information and service system grants access to all available sales figures at any time. “We literally create the platform for an exchange in which there is mutual understanding.”; standard Warehouse Management System (WMS) developed internally for customers in order to steer the data exchange centralized between customer and LSP.

J

Online documentation of consignment tracking.

A

In 2003 the leadership decided to document its strategy, which resulted in the publication of an annual strategy paper; this paper is communicated to customers, partners and employees to inform about the group’s path being pursued. Working in close partnership with all customers, meaning to create one powerful team for supply chain transformation.

C

K

Legend:

Table 35:

LSP personnel are staffed onsite at the customer to facilitate speed of implementation and project deliverables.

Source Interview with LSP D’s Director of Sales and Marketing. Interview with LSP E’s Head Sales Contract Logistics. Interview with LSP G’s Head of Sales and Marketing. Interview with LSP H’s Head of Service Center Logistics; company brochure. LSP I’s Annual Report 2004. Interview with LSP L’s Managing Director.

Interview with LSP M’s Managing Director and Management Trainee. Interview with LSP B’s Head of Marketing.

LSP F’s company brochure; interview with LSP F’s Managing Director Logistics Services. LSP J’s company presentation. LSP A’s strategy paper.

LSP C’s company brochure; company values. LSP K’s webpage.

Statements emphasizing simple and open communication processes. Statements emphasizing transparency through IT connectivity. Statements emphasizing special communication states. Information exchange policies with detailed examples from research cases LSP

The above examples are summarized in Table 36. It shows that more than 50% of LSPs’ information exchange policies are characterized by simple and open communication processes. Three LSPs emphasize transparency through IT connectivity. LSP A is unique in that the provider explicitly publishes a strategy paper for stakeholders. LSP C

6 Š Empirical results

198

forces joint provider-customer teams and LSP K even serves from the customer’s location.

Information Exchange Policy

LSP

D

E

G

H

I

L

M

B

F

J

A

C

K

Simple and open communication processes Transparency through IT connectivity Strategy paper for stakeholders Joint LSP-customer team Joint location

Note: The light grey, medium grey and dark grey colors refer to the colors and lines in Table 35.

Table 36:

Overview of research cases LSPs’ information exchange policies

The interview partners described contacts to customers and partners as being close and very personal. This is in accordance with SMEs’ ‘shirt-sleeved’ way of doing business. Open dialogue at any time and on every company level reinforces confidence in the other party. Feedback meetings take place regularly with conflicts being brought into the open. This applies to all LSPs studied in-depth except for LSP K. For example, while LSP C builds a common team of its own staff and employees from the customer to ensure a best-in-class communication, LSP K states, that communication is restricted to necessary integration even though having a joint location. Overall, communication is the key means for creating trust as the basis for successful long-term business relationships. It gives the impression that a re-integration of services into the customers’ organization is easily possible at any stage and reduces customers’ fears. In summary, the Information Processing Hypothesis is to be rejected. The reservation expectation misperception can be explained by the:

8. Principle of Open Communication and Collaboration: Open communication and collaboration, for example through ECR, create trust and lead to successful long-term business relationships. The tautology of ‘open relationships’, i.e. transparency, as well as ‘joint communication’, describes the cause for trust as the result.

6 Š Empirical results

199

6.1.2.6 The partner relationship misperception By definition of the business model as research framework, the component Relationships was outlined as companies’ systems, relationships and networks to customers and partners. The related Complementarity and Reliability Hypothesis refers to strong networks of LSPs which are mutually beneficial and characterized by reliable collaboration. For the examination of this hypothesis I asked my interview partners from the LSPs to provide insights into relationships and cooperation behavior. Figure 70 and Figure 71 present the most important answers. These answers do not lay any claim to completeness of possible statements concerning cooperation. Almost 80% of the LSPs collaborate with partners to close internal resources gaps and thus be able to fulfill customer needs. Close to half of the LSPs have access to a network, while one LSP is even organized as a network. Network partners are either required to provide services in addition (for volume) or to provide additional types of services (for service scope). For example, if an LSP that offers warehousing services needs more space, it may store goods in a partner’s warehouse (volume). If an LSP with core competences in transportation needs IT solutions for its offer to its customer, it may collaborate with a provider focusing on IT offerings (service scope). Roughly 30% of the LSPs prefer to make their own investments and acquisitions in the case of service requirements. Threequarters of the LSPs that shared this view are operating with partners, although LSP C does not rely on partners or networks at all. LSP K is also restrained in partnering and networking. Interview partners shared further information about their cooperation behavior. LSP F, for example, acquired former partners when realizing that advantages through ownership outweighed those through partnerships. LSP K’s partnering and networking is directed by customer requirements. LSP A is convinced that cooperations are subject to failure if undertaken for new market entry. From all interviews, the contact persons from LSPs A and F most emphasized the issue of cooperation behavior. They consider partnerships to be important to some extent and for a certain timeframe but simultaneously indicate that ownership in resources is their long-term strategy.

6 Š Empirical results

200

Cooperation behavior Partners

LSP

A

B

C

D

E

F

G

H

I

J

K

L

M

™

10 77% 6

46%

Preference on own investments and acquisitions

4

31%

Acquisition of former partners

1

8%

Customers direct partnering and networking

1

8%

Cooperations for market entry are subject to failure

1

8%

Network

*

Legend:

*

Statements/experience made. Not stated/not applicable. LSPs most emphasizing cooperation behavior. LSPs restrained in partnering and networking. Organization as network .

Figure 70: Research cases LSP’s behavior in terms of cooperation with partners (by LSP)

Statements/ experience made

Not stated/ not applicable

77%

23%

Partners Network

46%

Preference on own investments and acquisitions

54%

31%

69%

Acquisition of former partners

8%

92%

Customers direct partnering and networking

8%

92%

Cooperations for market entry are subject to failure

8%

92%

Figure 71: Research cases LSP’s behavior in terms of cooperation with partners (by statement)

In fact, two opponent positions at the LSPs became obvious. With the customers’ business becoming global, it has proven to the majority of the potential Hidden Champions that partnerships or networks are the most competitive advantage. However, with some of the LSPs having had negative experiences with their partners, the view was reversed. The interview partner from LSP A even stated that roughly one-quarter of orders are not fulfilled in a satisfying manner by its partners. Their partners deliver services either too late or in poor quality, e.g. by causing transport damages. Consequently, some of the activities are covered via additional investments. The quality of partners defines the sustainability of partnerships. While some of the LSPs have managed to build a network of excellent partners, other have not. Finally, the need for

6 Š Empirical results

201

capacity decides about investments or networking. Substantial business volume constitutes investments or acquisitions for reducing the risk of partners’ cancellation of the relationships. In this context, previous partners are also subject to being taken over. Three further examples prove these developments identified at the LSPs studied indepth (Table 37). LSP GEFCO Deutschland GmbH Müller – Die lila Logistik AG

Geis Group

Views and behavior on relationships and networks with partners Only those providers can be truly successful that work out a direct network access. However, SMEs in logistics can not afford the costs for establishing a European network of at least 1.5 bn EUR. In these cases the solution is forming cooperations and alliances with other providers.50 For Müller, Poland should become a starting platform for new business in all of Eastern Europe. However, the LSP did not rely on cooperations or alliances but made strong investments. In 2007 three million EUR were invested in the logistics service center in Gliwice and in several project starts of the Polish subsidiary. The German Geis Group took over Bischoff Spedition. Prior to the acquisition, both LSPs were partners within the packaged goods cooperation IDS Logistik.

Source Lauenroth, L. 2006a, p. 1.

N.A. 2007b, p. 3.

Lauenroth, L. 2006b, p. 1.

Table 37: Views and behavior in the industry on relationships and networks with partners

In summary, the Complementarity and Reliability Hypothesis is valid in part only. Partner relationship misperception can be explained by the:

9. Principle of Strategic Self-Sufficiency: Although having a strong network of partners, LSPs value being self-sufficient. Potential Hidden Champions are able and willing to make their own strategic investments in order to remain autonomous. This ensures reliable and outstanding service provision for customers at all times.

6.1.2.7 Formality as a norm Relating to the business model component Exchange Mechanism, the Rules Hypothesis was formulated. It states that a value network of customers and partners is characterized by clear formal agreements. Also, systems interfaces ensure transparency, which is required for mutual trust (Section 5.1.2.7).

50

Reproduced and translated statement from Oliver Gross, CEO, GEFCO Deutschland GmbH.

202

6 Š Empirical results

The issue of Exchange Mechanism was covered in a minor section in the LSPs’ questionnaire and in the interviews at the LSPs. Here, the interview partners were asked to give some statements on visibility into process steps relating to service/operations, customer, partner, technology, knowledge and capital management. Only a few statements were made as several comments from previous sections also apply (in particular from Section 5.1.2.5 on the Information Processing Hypothesis and from Section 6.1.2.5 in which the Principle of Open Communication and Collaboration was presented). Accordingly, this section adds only a few more insights, in particular on Exchange Mechanisms with customers. Overall, the research cases LSP fix clear agreements in contracts with customers about achieving cost savings, administration fee payments or profit sharing. Despite these clear contractual settings, fears remain among the customers regarding becoming transparent, losing control and handing over core competences. However, potential Hidden Champions have recognized that trust is a fundamental factor for collaboration which is not only simply created by defining rules and norms. Even more, the studied LSPs create a cooperative atmosphere with LSP and customer having matching goals. In this sense, connectivity and visibility through information technology is important. For example, LSPs apply ‘open book’ procedures or create visibility across the supply chain. In Table 38 some further examples show this finding.

6 Š Empirical results Origin of example Long-term survey of McKinsey & Company and SPL Outsourcing of procurement by Schiesser, one of the leading German underwear manufacturers Interview with representative from Customer XIII

Table 38:

203 Statement on Exchange Mechanism The key for success in logistics management is integrated utilization of IT. Polished IT and a trustworthy partner are keys for success in outsourcing. For both Schiesser and its LSP, Gebrüder Weiss Group, all processes are transparent and chronologically represented. Both the LSP and the customer have the possibility to see the current status of orders. We fixed clear agreements in contracts relating to quality and service delivery. If our LSP’s (LSP H) service delivery is poor, the LSP is subjected to indemnity. This is the case for example if warehouse space is not available for a specifically defined time. But whilst clearly fixed rules are the basis, the strength of our LSP is its way of fair collaboration.51

Source Neumann and Delfmann et al. 2000, p. 68. N.A. 2003c, p. 16, p. 18.

Interview with Customer XIII’s representative.

IT and contractual settings as norm in collaboration (examples)

In summary, the Rules Hypothesis is to be confirmed. This can be explained by the:

10. Principle of Mutual Trust: The formal process of defining rules and norms is the basis for trust. Moreover, potential Hidden Champions create a social atmosphere of joint partners with common targets.

6.1.3 Misperceptions on Financials 6.1.3.1 The market leadership misperception The Significant Turnover Hypothesis was formulated with reference to the business model component Performance Measurements. Here, findings on the relationship between market leadership and significant turnover in the logistics industry are presented. As stated in Section 5.1.3.1, the survey on the ‘Top 100’ in logistics, which is revised and updated every few years (see for example, Klaus and Kille 2006), ranks LSPs according to turnover figures. This key publication about the European logistics industry was used to check the positions of the research cases LSP in detail. The result is that if listed at all, the positions of these LSPs are insignificant. Only two LSPs are within the top ten in their home country and only three LSPs are within the top hundred 51

Statement reproduced and translated from German.

204

6 Š Empirical results

in Europe. The modest weightiness of the logistical SMEs studied in this dissertation can be explained by two factors. First, LSPs studied in-depth do not focus on high volume business connected with achieving high turnover.52 Second, their core business is so specific that a comparison is infeasible. For example, LSP A is one of the market leaders in Europe in its specific sector and LSP B is also a European market leader in one specific sector. LSP D even created a new market for LSPs with an outstanding business solution. Restricted to its home country, LSP G is a major ocean freight forwarder while its market share in total logistics is below five percent in the country. LSP H is a European market leader in container local traffic and LSP I is the number four globally in its specific solutions offered. LSP K is intensively connected and committed with all its resources to one global customer, i.e. LSP K is the customer’s integrator. With their niche strategy, most of the LSPs were able to continuously increase turnover figures, as Figure 72 shows. Market leaders in specific niche areas increase their turnover in the course of time by growing with their customers, as in the case of host of the studied providers (LSPs A, B, C, D, G, H, and M). For others turnover decreased and increased again (LSPs E and F, with LSP E’s decrease being caused by losing one customer with a high share on turnover). Only LSP I’s turnover decreased during the past three years.53

52

This can be explained by limited turnover as criterion for a Hidden Champion in particular. Turnover figures for LSP J, K and L are not available or the figure is not applicable in the case of the provider-provider entity. 53

6 Š Empirical results

¨ Turnover Growth Over Previous Year (in %)

205

60 50 Legend:

40

Group I

30 20

Ø13.1% (2004)

10 0 2000 -10

2001

2002

2003

2004

2005

2006

Year

Group II

= = = = = = = = = =

LSP A LSP B LSP C LSP D LSP E LSP F LSP G LSP H LSP I LSP M

-20

[Turnover figures for LSP J, K and L are not available or the figure is not applicable in the case of the provider-provider entity.]

Figure 72: Turnover development of research cases LSP (Figures from companies’ publications and questionnaires)

In the above figure, two groups of LSPs can be identified for further differentiation. I marked them symbolically but not exactly with the two black eclipses. For assignment to group, the most recent growth rate was decisive. Thus, Group I contains those LSPs that managed to achieve turnover growth beyond the 2004 average of 13.1%. The respective LSPs are D, E, G, H, and M. In Group II LSPs A, B, C, F, and I are summarized. Their turnover growth was below the 2004 average. Obviously, potential Hidden Champions are leaders relative to their strongest competitors in their targeted niche areas but they are not market leaders in respect to high volume business in the logistics industry as a whole. In fact, potential Hidden Champions play an active role in defining the rules in logistical niche areas. They offer cost-effective and efficient solutions which they adapt flexibly to customer needs. Thus, their positive development of turnover is derived by intensifying existing customer relationships and not by broadening their customer base. In summary, the Significant Turnover Hypothesis is to be rejected. The market leadership misperception can be explained by the:

6 Š Empirical results

206

11. Principle of Niche Sovereignty: Potential Hidden Champions remain hidden in terms of market leadership. In fact, they are not characterized by market leadership but by segment leadership, i.e. by niche sovereignty. They are either European market leaders in a specific sector, European market leaders in their newly created industry segment by innovations, market leaders in providing a specific mode of transportation, market leaders in providing a specific solution or leaders in outperforming all competitors in all requests for proposals of one customer.

6.1.3.2 The willingness to take risks misperception The final micro hypothesis, the Risk Aversion Hypothesis, refers to the business model component Rewards. It states that logistical SMEs struggle to earn high margins as they are more risk averse than LSEs. Finally, in this section some insights are given on the business results. The logistics industry in general and privately owned logistical SMEs in particular are very reserved in terms of publishing financial data. Accordingly, six of the thirteen LSPs studied in-depth were not disposed to provide information about business results. The other seven LSPs are profitable. Four of them, however, reported declining profits in recent years (LSPs C, E, I and K). The remaining LSPs B, G and L did not indicate that they are struggling, for example due to increasing pressures from environmental conditions in the industry (Section 2.2.2). The LSPs’ publication behavior and information on business result are shown in Figure 73 and Table 39.

6 Š Empirical results

207

13

6

3 7 4 Total number of in-depth studied LSPs

Number of LSPs hiding results

Number of LSPs without LSPs with LSPs with indication of declining profits positive results declining profits in recent years

Figure 73: Publication behavior of research cases LSP in terms of business result

State of Rewards No insights on business results

LSP

A D F H

J M B G L C E

I

K

Positive results/profits in recent years No indication of declining profits in recent years Indication of declining profits in recent years

Table 39:

Information about business results by research cases LSP

The limited information about potential Hidden Champions’ “premium for the risk of uncertainty” as designated by Drucker (Section 5.1.3.2) does not allow an ultimate conclusion. Based on preceding findings and experience from visiting the LSPs and conducting interviews, it can be concluded that LSPs with individualized and outstanding service offerings are profitable and do not struggle to survive. The reason is that potential Hidden Champions are not risk averse because they are open to offer specialized and new services that require risky investments. Representatively, Table 40 presents three examples of LSPs that heavily invested in assets in order to offer individualized solutions to selected customers. In addition, established long-lasting customer relationships reduce LSPs’ risks and secure positive business results over time.

6 Š Empirical results

208 Example

LSP / Logo

1

Quehenberger Logistik AG

2

Reichhart Logistik Group

3

Rieck Holding GmbH & Co. KG

Table 40:

Country

Risk-taking through investment With Logotec, Quehenberger has a valueadding logistics solution offering for the entire supply chain of high-tech companies. For example, Quehenberger is the LSP for Xerox. Investments in cranes or special lifting devices, such as stair climbing trucks for delivering and preparation of equipment for use, were required. Services provided include unpacking, placing, installing, training as well as removing old equipment and packaging material. Reichhart invested in its own logistics center (80 employees, 180,000 storage places, roughly 100,000 different articles in stock) for the LSP’s largest customer, Stahlgruber, a motor vehicle parts wholesaler. Besides commission, Reichhart provides all distribution services, not only to Stahlgruber’s locations but also directly to customers, with its own vehicles. Investments in new locations with a focus on air freight (near the airports of Frankfurt/Main and Berlin Tegel). The reason for these investments is that frequent customers increasingly operate internationally and Rieck was afraid of losing these customers to LSEs that are able to provide global logistics services.

Source N.A. 2006c, pp. 42-43.

Reimann, S. 2006, p. 7.

N.A. 2006d, p. 13.

LSPs’ risk-taking through investments for individualized and outstanding service offerings

In summary, the Risk Aversion Hypothesis is to be rejected. The willingness to take risks misperception can be explained by the:

12. Principle of Customer Granularity: Customer granularity refers to focusing on one or a few established customer relationships in one or several sectors. This strong key customer focus is risky for potential Hidden Champions. In order to fulfill key customers’ needs, investments for individualized operations are made. However, it is exactly this approach which generates turnover and thus profits.

6.2 Summary of the micro analysis The common view in the area of logistics does not apply to SMEs and in particular not to potential Hidden Champions. The results of the empirical study reject six of the formulated micro hypotheses in full, a further six micro hypotheses in part and confirm only one micro hypothesis. Logistical SMEs’ and potential Hidden Champions’ business models are designed according to specific business principles. Before making

6 Š Empirical results

209

an evaluation of the macro hypotheses, a summary of this first part of the results is presented in the Table 41.

6 Š Empirical results

210 1

Value Proposition

Single Source Hypothesis

LSPs’ primary aim ought to be becoming the sole partner for their customers with overall responsibility for all of their customers’ comprehensive logistics processes. Managing a customer’s total supply chain leads to increased value for that customer. The striving for single source misperception

Principle of Incrementalism

Potential Hidden Champions are able to enhance their position with their customers over time due to a strong commitment to service excellence. Outstanding performance based on considerable dedication of the management to its employees increases both customer trust and the outsourced logistics activity spectrum. LSPs’ relationships to customers are characterized by an open dialogue regarding process and service mobilization.

2 Segmentation Hypothesis

Transaction Hypothesis

Target Group LSPs offer Total Integration concepts to carefully selected sectors. They are able to serve the target sectors more effectively by better meeting needs and/or more efficiently by having lower costs. Besides, they are experts in knowing their customers and they are highly familiar with their customers’ sector. Customers do not search for establishing mutually beneficial relationships with sector specialists. Moreover, customers select their LSPs mainly based on general objective factors such as pricing and geographical scope. The sector specifity and selection misperception

Principle of Scope

LSPs’ strategic and core capabilities are transferable across sectors. Such transfer reduces risks and enhances the LSPs’ position in contract negotiations with customers.

Principle of Intangible Service

While price and quality are considered as basic preconditions in the LSP selection process, customers’ decisions are based on two factors influencing the method of collaboration: First, customers’ choices are made from convenience perspectives and second, LSPs’ deep capabilities and resources for engaging in service provision are decisive.

3

Business Purpose

Commodity Trap Hypothesis

Smaller LSPs are suffering or are trapped in low margin transportation business. The damnation to low margin business misperception

Principle of Gradual Conquest

First, potential Hidden Champions consider the low margin transportation business as an initiator for further business only. They follow the strategy of conquering service offering scope gradually. Second, they also stimulate progress of their Core Ideology towards an Envisioned Future in the course of business operations.

6 Š Empirical results

4

211

Product/Service

Cherry Picking Hypothesis

In the high-margin advanced services logistics business, selected industry incumbents compete with new entrants coming from outside the traditional logistics industry. The competition misperception

Principle of Customer Favor Striving

Traditional and New Breeds of providers do not merely initiate competition amongst providers. They independently focus on meeting their customers’ needs in the best way possible.

5

Market

Global Standard Hypothesis

Small and medium LSPs are able to manage today’s global logistics processes. They are present with their personal locations all over the world. The global standard misperception

Principle of Customer Proximity

LSPs do not target global standards in service delivery. Single customer relationships define market coverage through company locations or through complementary local partnerships.

6

Input Factors

Virtual Logistics Hypothesis

Customers’ trust in and desire for a one-stop-solution offer requires LSPs to be heavily non-asset-based. In contrast to the historically asset-intensive transportation providers, successful LSPs are today intangible assets based and have hardly any tangible assets, thus relying on the provision of virtual logistics solutions. The asset misperception

Principle of Entrepreneurship

Potential Hidden Champions’ leaders are entrepreneurs who force innovative, more advanced solutions. In doing so, they manage to transform the asset portfolio barely unnoticeably. As a result, their business tends to be intangible assets based relating to low margin services. Also, they are open to invest in tangible assets to offer high-margin services, which are often innovative new solutions designed for specific customer needs. The key asset for this development is the staff, which is brought up to follow the spirit of the leadership.

7

Organization

Complexity Hypothesis

Smaller providers struggle in adapting their organization to changing market requirements. Their ‘execution system’ lacks the resilience required for a flexible response to customer needs and might show instability. The prevalence of complex internal settings misperception

Principle of Simple and Fast Decision Making

Potential Hidden Champions’ organizational structure is kept as simple as possible. Their flat hierarchy simplifies and speeds up decision making.

6 Š Empirical results

212

8

Communication

Information Processing Hypothesis

There is a correlation between qualitative information processing of an LSP with its customer and company size. Accordingly, smaller providers whose customers are usually similar in size are typically private and reserved in terms of communicating company data. They process information only if required. Effective and regular qualitative information exchange and processing is only offered by larger scale providers. The reservation expectation misperception

Principle of Open Communication and Collaboration

Open communication and collaboration, for example through ECR, create trust and lead to successful long-term business relationships. The tautology of ‘open relationships’, i.e. transparency, as well as ‘joint communication’, describes the cause for trust as the result.

9

Relationships

Complementarity and Reliability Hypothesis

LSPs have a strong network with other providers. In this network, partners’ assets and services are regarded as complementary and provide mutually beneficial cooperation opportunities. The network is thus characterized by reliability in collaboration. The partner relationship misperception

Principle of Strategic SelfSufficiency

Although having a strong network of partners, LSPs value being self-sufficient. Potential Hidden Champions are able and willing to make their own strategic investments in order to remain autonomous. This ensures reliable and outstanding service provision for customers at all times.

10

Exchange Mechanism

Rules Hypothesis

Exactly-defined rules and clear contracts are the norm and the most effective way to guarantee effective performance. Mutual trust is enhanced by integrating systems and through greater transparency, but formal contracts dominate and define the relationship. ---

Principle of Mutual Trust

The formal process of defining rules and norms is the basis for trust. Moreover, potential Hidden Champions create a social atmosphere of joint partners with common targets.

11

Performance Measurements

Significant Turnover Hypothesis

Market leadership is typically defined in terms of turnover. This applies in particular to LSEs, since high turnover offers the opportunity of economies of scale. The market leadership misperception

Principle of Niche Sovereignty

Potential Hidden Champions remain hidden in terms of market leadership. In fact, they are not characterized by market leadership but by segment leadership, i.e. by niche sovereignty. They are either European market leaders in a specific sector, European market leaders in their newly created industry segment by innovations, market leaders in providing a specific mode of transportation, market leaders in providing a specific solution or leaders in outperforming all competitors in all requests for proposals of one customer.

6 Š Empirical results

213

12

Rewards

Risk Aversion Hypothesis

Smaller LSPs are more risk averse due to size disadvantages and therefore struggle in earning highly-lucrative margins. The willingness to take risks misperception

Principle of Customer Granularity

Customer granularity refers to focusing on one or a few established customer relationships in one or several sectors. This strong key customer focus is risky for potential Hidden Champions. In order to fulfill key customers’ needs, investments for individualized operations are made. However, it is exactly this approach which generates turnover and thus profits.

Legend: No.

Table 41:

(Sub-)Component of Business Model

Micro Hypothesis

Content of Micro Hypothesis

Confirmation/Rejection of Micro Hypothesis Rejection Partial Rejection/ Partial Confirmation Confirmation Business Principle

Common Industry Misperception

Content of Business Principle

Overview of (Sub-)Components of Business Model, Micro Hypotheses, Evaluations, Common Industry Misperceptions and Business Principles

6 Š Empirical results

214

6.3 Evaluation of the macro hypotheses and common industry misperceptions This section presents empirical results and insights from analyses on the Customer Centricity Hypothesis, the Partnership Hypothesis and the Size Compatibility Hypothesis. Similar to the evaluation of the micro hypotheses in Section 6.1, data and other information for the evaluation of the macro hypotheses are mainly from the thirteen research cases LSP. In addition, insights from other potential Hidden Champions from the ‘Top 100+ Company List’ were supplemented. For strengthening arguments, customers’ perspectives are further included at selected stages. 6.3.1 The customers’ lacking attention misperception: Customers as activators for innovation and/or business growth The first macro hypothesis, the Customer Centricity Hypothesis, states that LSPs’ behavior is so self-centered that they overlook providing customer value in favor of succeeding in Integrated Supply Network Management. Therefore, this section analyzes Total Integration in the context of a classical provider-customer relationship. This requires not only looking at the business model of the external LSP (‘business model in logistics’), but also including perspectives from the customer’s business model (‘logistics in business model’) as well as the adaptability of the LSP to the customer’s business model. If appropriate, findings from the research on the micro hypotheses are considered as well. 6.3.1.1 Confidence and performance as a basis for innovation and business growth One of the key insights from literature research and personal interviews is that in successful relationships LSPs actively involve customers in their business activities. Potential Hidden Champions focus on collaboration for developing innovative service solutions and for the expansion of the service spectrum. Figure 74 presents six typical examples.

Logo

Figure 74: Customers as activator for innovations and business growth (examples) Customer initiated innovative rail logistics/ wagon techniques; LSP was the first private operator in rail business in Germany.

ARS Altmann AG Automobillogistik

ARS Altmann (ed.) 2005, p. 10.

Simon Hegele (ed.) 2004, p. 8.

Rollout and new delivery of Kérastase boutiques (installation completely at drugstore) based on customer‘s demand.

Simon Hegele Gesellschaft fuer Logistik und Service mbH

Kloss 2005, p. 10.

N.A. 2004a, p. 8.

Practical experience.

Source

Simon Hegele (ed.) 2005, pp. 4-5.

[Statements by Michel Reichert, Director FM Logistic].

For warehousing and pan-European distribution of tasty sauces: selection of batches for shipments is performed by an order-picking robot which was specially developed; a pallet can be prepared for shipment in only ten minutes (daily output is 100 pallets). Repair solution jointly developed and introduced: construction of a repair center to which customers can either send their mobile computer, bring it to a UPS store or to a Toshiba partner; fast repair at the center: customers receive their computers latest after four days (instead of 14). Pooling for food retail: each vehicle is loaded with articles from various manufacturers (thus fully-loaded trucks on the road); customer‘s search for cost savings resulted between five to ten percent (while contributing to clean air).

Innovation initiated by customer

Joint project “Refurbished Systems”: preparation of used appliances in medical technique (offering the total service chain: disassembly, total preparation cycle, final assembling).

Country

Simon Hegele Gesellschaft fuer Logistik und Service mbH

FM Logistic

UPS Supply Chain Solutions (UPS)

Gebrüder Weiss GmbH/ Gebrüder Weiss Group

LSP

Logo

BMW

L‘Oréal

Siemens Medical Solutions (Siemens)

Auchan

Carrefour

Toshiba

Bischofszell Nahrungsmittel AG (Migros)

Customer

Country

6 Š Empirical results 215

216

6 Š Empirical results

In the above examples customers play an active role in the LSPs’ business activities. The molding of customers’ key position is strongly connected to confidence and performance. Previous analyses on the micro hypotheses strengthen the importance of performance and quality to the extent of the service offering and business growth (as for example presented in the Principle of Incrementalism which resulted from the analysis on the Single Source Hypothesis). The importance of trust is emphasized repeatedly (for example in the Principle of Open Communication and Collaboration or enhancement of trust by systems integration in the Rules Hypothesis). As other studies also found (see for example Morgan and Hunt 1994, p. 31), confidence is the central element for strengthening the relationship with the customer. Potential Hidden Champions’ customers do not lack required attention: even more customers are in the center of business activities. This can be explained by the:

Ia. Principle of Gradual Service Extension: Confidence and excellent performance are the two prerequisites for building relationships. If both apply, customers increasingly accept their LSP and gradually offer to take over additional services. Thereby, customers actively contribute to logistics innovations and service extensions.

6.3.1.2 The reality of balanced responsibilities: The dream of Total Integration In the previous section confidence and performance were identified as prerequisites for customers’ readiness to increasingly outsource logistics services. This presupposes that LSPs are open to transforming from a traditional SME in logistics into an LSP with an advanced service offering. By means of that, LSPs are able to meet growing customer needs and to provide Total Integration offerings. Table 42 contains the statements of the interview partners from the LSPs studied in-depth. These views exemplarily show attitudes and expectations in terms of service scope developments, in particular towards Total Integration.

6 Š Empirical results

LSP A B C D

E

F G H

I J K L M

217

Attitudes and expectations in terms of service scope developments (statements from the interview partners) For example, we extended the transportation service offering for Customer I, a large global automotive group, gradually. Total Integration is the responsibility of customers. Business development is a joint process of customer and LSP. Our consulting department is an outstanding element of collaborative integration. For example, our relationship with a large global producer of medical systems (Customer X) started roughly twenty-five years ago with transportation services. Today, the service offering covers a large part of the supply chain. Increasing dovetailing of LSP and customer in service fulfillment, which no longer occurs at the LSP’s location only but may also be either performed at the customer’s property or within a joint entity for a limited time period. The service spectrum enhances and new niches are entered as the LSP develops with customers’ requirements changing over the course of the years. For example, we supplemented the operative services at a liquor and juice producer by value-added services at a later stage of the relationship. At the beginning of a relationship, customers are not aware of needs an LSP can fulfill. Requirements become obvious over the course of time. For example, our relationship with a large chemical company started more than thirty years ago. While in the beginning only transportation services were provided, contract logistics services were added at a later stage. Our company developed from a facility constructor towards a manager of integrated solutions. Small companies are unable to offer total solutions. Total Integration fails if the LSP is strongly connected to one customer. It may be successful if many customers are managed while there are no close connections to selected customers. Customers consider LSPs as consultants. For example, roughly ten years after starting our relationship with a garden machinery company, we introduced assembling services in addition. For example, a German toy distributor and a producer of high value bicycles increased the service spectrum outsourced to us over the course of time.

Table 42:

Statements from interviews at LSPs about service scope developments

Also, attitudes and expectations from customers relating to Total Integration offerings were captured during the interviews at customers’ sites. Table 43 shows that more than fifty percent of the customers are convinced that Total Integration has to remain within their own responsibility. 31% of the interview partners stated that LSPs lack the abilities required for such a service scope and that integration by customers keeps competition alive. Furthermore, some interview partners referred to customers’ influences on LSPs’ service scope developments and customers’ low readiness to handover full responsibility. Total Integration by customers is considered a means to securing knowhow and preserving core competences as well as intransparency.

6 Š Empirical results

218

Statement

Customer

I

II

III

IV

V

VI

VII

VIII

IX

X

XI

XII

XIII

Total Integration is customers’ role Total Integration by LSPs is impossible/ LSPs lack ability for Total Integration Customers take care of keeping competition alive/consider Total Integration disadvantageous Customers define direction of service scope developments Customers are not yet ready for handing over Total Integration to LSPs Customers value core competence, know-how and intransparency Statement by customer made. Statement not made by customer.

Table 43:

Attitudes of customers in terms of Total Integration offerings by LSPs

From empirical statements the first conclusion is that LSPs’ service scope develops in two sequences. LSPs first establish a strong position in one segment, i.e. reinforce the service offerings in a single supply chain activity. Then adaptation occurs either with regard to business scope/service extension (offering advanced services, i.e. VAS and/or strategic services besides operative services) or with regard to global scope/geography (i.e. specific single service offering in a region is provided internationally in future as well). This finding is to be presented in more detail.

Accordingly, business growth imperative is achieved by total business unit management and shall be called actual integration by ‘vertical supply chain conquest’ (top part in Figure 75). Causes for expansion in ‘depth’ of the service offering are mainly based on ‘hard factors’ such as costs and quality. LSPs which are strong in service provision for selected business units shall be called logistics commodity providers (e.g. LSPs A and H).

From the other point of view, while customers gain confidence in the course of their relationship with their LSP, they extend the scope of outsourced activities. By increasingly taking over additional tasks, LSPs extend the scope of supply chain integration horizontally. This is spoken of in terms of service flow management and virtual integration, as Total Integration is not achieved in full. LSPs pursue a ‘horizontal supply chain conquest’ (below part in Figure 75). Causes for expansion in ‘breadth’ of the service offering are mainly based on ‘soft factors’ such as experience. LSPs D, F and M are representatives for virtual integration.

6 Š Empirical results

Service Flow Management: Virtual Integration (‘Horizontal Supply Chain Conquest’)

Procurement

…

Business Scope

Research & Development

Product Design

Global Scope

…

Process Development

Procurement

Inbound Manufacturing/ Logistics/ Product Raw Material Transformation Supply

Business Scope

… …

Business Scope

…

Global Scope

…

Global Scope

Business Unit Management: Actual Integration (‘Vertical Supply Chain Conquest’)

219

Inbound Manufacturing/ Logistics/ Product Raw Material Transformation Supply

Marketing

Outbound Logistics/ Delivery

Sales

AfterSales Service

Figure 75: Actual Integration versus Virtual Integration

The dilemma that SMEs in logistics approach a sequential service extension with vertical extension occurring before horizontal extension is the first finding in this section. Insights gained repeatedly confirm that LSPs first expand in-depth of a specific activity within the service scope offered before they grow and extend their service scope to other areas of the customer’s supply chain. In other words, existing services are reinforced before expanding the service scope in breadth within a defined area of the customer’s supply chain.

From interview partners’ replies and other research experience, a second conclusion on the first macro hypothesis can be drawn. Despite LSP attempts to creep into the customer’s supply chain over the course of time, the aim is an optimal balance of sharing supply chain responsibility between LSP and customer with Total Integration by the LSP not being achieved in full. The customer’s role is that of a total integrator defining and allocating exact roles and responsibilities. Customers define modules of activities for third parties and plan how they fit best within the supply chain. The customer is a systems leader with the task of putting modules together instead of focusing on one-stop-concepts. In other words, the approach is not to find one logistics champion but the right LSP for the right business. This finding very strongly refutes the dream of one LSP offering Total Integration and also explains why supply chain compliance remains with the customer. Moreover, potential Hidden Champions focus on customer needs and align their business model to customer requirements.

220

6 Š Empirical results

In summary, although LSPs have managed to increase their position in their customers’ supply chains, the integration promise failed. The imagining of LSPs being customers’ total integrators is a dream, not reality. Nevertheless, potential Hidden Champions do not neglect customers as a source of value creation. This finding can be explained by the:

Ib. Principle of Role Complementarity: Successful LSP-customer relationships are characterized by balancing responsibility for the customer’s supply chain, i.e. the relationship is characterized by clarity in complementary roles. Total Integration through LSPs is limited to a defined part of the supply chain and amounts to a certain extent of the service scope only. The overall lead remains at the customer, who is in the role of the supply chain integrator.

6.3.1.3 Escaping the commodity trap While the dream seems to have burst, reality is to be considered as shelter for three issues, with the third being more important than the first two. Firstly, there is nothing wrong with having a few experts, i.e. supply chain partners, as the Total Integration concepts hold many dangers for both the external LSP and the customer. Secondly, there is nothing wrong with taking over the responsibility of a part or parts of the supply chain only, with specialization and concentration on core competencies being crucial for business success. Thirdly, innovation and business growth imperative are an approach out of the commodity trap. Earlier empirical studies like on companies in the commodity chemicals sector by Robinson et al. (Robinson and Clarke-Hill and Clarkson 2002, p. 149, p. 163) and by Anderson and Narus (Anderson and Narus 2004, p. 190 et seqq.) found that companies seek methods of differentiation by offering additional value-added services and of value creation through market offerings which are bundles of services, programs and systems. In Table 44, three typical examples of approaches of LSPs in escaping the commodity trap through innovation and business growth imperative are presented.

6 Š Empirical results LSP

Innovation(s) 54

midiData /

F

M

Table 44:

221

midiData’s specialization is on high-tech logistics. The LSP’s service scope covers the whole supply chain from picking up products from manufacturers’ plants to ready-to-use installation. For example, site placement of copy machines is one of the services offered. LSP F searched for an alternative for a joint venture solution. The LSP no longer only provides services at its personal locations but also moves to the customer’s location, as is the case with a large Northern European furniture producer for example. LSP M developed assembling solutions for a large garden machinery company. By establishing a crane gadget in the LSP’s warehouse, roofs can be fixed onto tractors.

Innovations in logistics (examples)

From empirical research and practical experience I found that in contrast to potential Hidden Champions, LSEs with their commodity offer are captives to existing solutions and thus subject to the commodity trap. While LSEs concentrate on marketing their commodity offer, this approach ‘kills’ innovation and prevents the introduction of new solutions. Securing and forcing product innovations instead of Total Integration focus is the solution for SMEs operating in the area of logistics to escape the commodity trap (Figure 76). Moreover, potential Hidden Champions are not only innovative but also respond quickly with new solutions for new customer needs. This finding can also be explained by potential Hidden Champions’ continuous alignment in drawing attention to customers and can be summarized by the:

Ic. Principle of Continuous Innovation: Potential Hidden Champions are innovators instead of commodity providers or generalists.

54

midiData was taken over by Wincanton beginning of 2005.

6 Š Empirical results

High

222

Securing Product Innovation

Low

Price

Process Innovation/ Optimization

Challenger

Normal Market Dynamics

Legend: LSEs – Captive to existing solutions. LSEs – Target Inter Position. Hidden Champions.

Commodity Trap Low

High

Quality/Adaptability/Flexibility

Figure 76: Logistics market dynamics (‘Commodity Syndrome’)

In summary, the Customer Centricity Hypothesis which emphasizes LSPs’ customer neglecting behavior does not apply to potential Hidden Champions. This finding can be explained by the three principles of Gradual Service Extension, Role Complementarity and Continuous Innovation. Potential Hidden Champions aim at gaining customers’ confidence and for achieving high performance. They target a cooperative form of collaboration in which responsibility is balanced between both parties. Unlike providing a commodity offering, potential Hidden Champions actively search for innovations with the customer at the center of business activities. Even in the case of business relationships working smoothly, potential Hidden Champions care for their customers intensively. They actively seek to increase customer benefits and foster the relationship. This is particularly important as outsourcing contracts are limited in terms of duration and public announcements taking place at the end of contract durations. The stronger the processes between customer and LSP are interlinked and the more individualized customer solutions are provided, the less likely customers will be to move to a new LSP. Otherwise LSPs’ only solution for not losing the assignment is making concessions regarding the price. 6.3.2 The collaboration misperception: The failure of collaborative integration in the absence of special conditions The Partnership Hypothesis states that an LSP is able to offer Total Integration services if forming a joint entity with the customer and possibly with other LSPs in addition. Thus, the content of analysis in this section is the joint business model of either a joint

6 Š Empirical results

223

venture or other legal form of a partnership like strategic cooperations or alliances between one or more LSPs and a customer. Overall and across industries, strategic alliances are rather the exception with Hidden Champions, as they conflict with their traditional attitude. Even in entering foreign markets, only 16.8% form alliances (Simon 2007, pp. 280-283). Simon’s finding is in contrast to Doz and Hamel, who claim that networks, coalitions, alliances and strategic partnerships are a necessity for the success of both industry giants and ambitious startups alike (Doz and Hamel 1998, p. ix). In this respect, the state in logistics was analyzed with the role of a collaborative entity as enabler for managing relations in integrated supply networks or developing and implementing new solutions as one subject in the interviews at LSPs. The interview partners were asked to provide insights about collaboration behavior (Table 45) and experience with joint ventures (Figure 77).

LSP research case

Collaboration with LSP

Collaboration with customer

N. A.

N.A.

A B C D E F G H I J K L M Legend:

Table 45:

JV(s) or JV(s) and other entities for collaboration like strategic cooperation(s) or network partnership(s)

Strategic cooperation(s) only

Collaboration behavior of LSP research cases

No collaborative entity

N.A. Not Applicable (LSP K is a JV)

6 Š Empirical results

224

The table above shows that with the exception of LSPs B and G, all of the LSPs have experience in collaboration either with competitive LSPs, their customers or both.55 Thereby, three-quarters (nine of twelve relevant LSPs) of the LSPs have experience in collaborating with other LSPs and six of the twelve relevant LSPs have experienced with joint ventures. Concerning collaboration with customers, five of the twelve relevant LSPs confirmed collaborative experience and one-third even entered joint ventures with customers.

13

1

5

3 2 4 2 Total number of in-depth studied LSPs

LSP is a JV

LSP without JV experience

LSP with >= 1 JV failure(s) and no JV any longer

LSP LSP with at with least 1 JV critical today comments on further existence of JV(s)

LSP with ‘neutral’ statement about JV existence

Figure 77: Experience with joint ventures of research cases LSP

Next, joint ventures were looked at in more detail. Overall, joint ventures turned out to be very disappointing, as Figure 77 demonstrates. Out of seven LSPs with joint venture experience, only two of the LSPs’ interview partners did not confirm the failure of a joint venture with an LSP or customer or did not make a critical statement on the further existence. Three LSPs’ joint ventures failed and there are no longer engagements in this respect. Only LSPs D’s and H’s customer joint venture continue to exist. LSPs D and H pointed out the major advantage of their collaborative entity. The interview partners stated that their customer joint ventures contribute to customer retention, which is

55

LSP K was taken out of the sample size due to being a joint venture.

6 Š Empirical results

225

particularly important if long-term investments as well as staff and knowledge transfers are required. For linking joint venture experience with performance at a later stage of this study when screening for Hidden Champions, the presentation in Figure 77 is adapted by assigning experience to LSPs (Table 46). Analysis requires looking at the perspectives of two groups, the critical LSPs (medium grey) and those behaving neutrally (dark grey).

LSP

JV experience

B

G

I

J

M

C

E

F

A

H

D

L

LSP without JV experience LSP with >= 1 JV failure(s) and no JV any longer LSP with critical comments on further existence of JV(s) LSP with “neutral” statement about JV existence

Table 46:

Joint venture experience by research cases LSP

The joint venture experience of the thirteen LSPs studied in-depth was verified by additionally reviewing the experiences with joint entities of the 95 other LSPs in the ‘Top 100+ Company List’. As Figure 78 shows, the LSPs confirm the percentage of experience with joint entities of the thirteen research cases LSP. Roughly fifty percent of the LSPs have formed joint entities so far.

108 13

48 95

47

Total number of LSPs studied

In-depth studied LSPs

LSPs studied in part

LSPs denying LSPs with or hiding collaborative colloborative entities’ entities’ experience experience

Figure 78: Experience with collaborative entities of the further 95 LSPs studied

6 Š Empirical results

226

In a next step, the 47 LSPs with collaborative entity experience were asked for the types of collaboration entered (Figure 79, several responses possible). Alliances were formed by five LSPs, joint foundations by six LSPs, partnerships by seven LSPs, participations by fifteen LSPs and cooperations by sixteen LSPs. Twenty-two LSPs explicitly stated experience with joint ventures, with half of them having one or two joint ventures only: five LSPs have had three to six joint ventures and only three LSPs have experience with more than six joint ventures. Three LSPs are a joint venture. A further evaluation of the joint ventures’ existence with answers from all twenty-two LSPs was not possible due to information reservation.

3

11 22

15

16 5

5

6

7

Alliance(s)

Joint foundation(s)

Partnership(s)

3 Participation(s)

Cooperation(s)

Joint venture(s)

LSP is joint venture

LSP with 1 or 2 joint ventures

LSP with LSP with more 3 to 6 joint than 6 joint ventures ventures

Figure 79: Collaborative entities of 47 potential Hidden Champions

Based on the above insights, the conclusion is that the Partnership Hypothesis is to be rejected in part. The hypothesis is to be rejected due to findings from empirical research. In particular, analysis of the research cases LSP shows that five of the seven LSPs with joint ventures cancelled their collaborative entity or are struggling to keep it going. In these cases the integration promise failed in the case of collaborative integration as well. The reasons for the failure of joint ventures are internally-based, in terms of lacking equality of rights, the missing fit in terms of business area or personnel view, the absence of precisely-defined rules and norms, the changed impact and leadership on performance as well as requirements on resources and capabilities. Also, external factors influence the success or failure of a joint venture. The reasons are mainly based on changing customer situations and developments in the competitive landscape. Table 47 presents exemplary reasons for the failure of joint ventures.

6 Š Empirical results Survey sample LSPs studied in-depth

227

LSP A

C E

Statement(s) • • • • • • • • • • •

F

• •

H

• •

I

• •

Further LSPs

M Vedes Logistik GmbH & Müller – Die lila Logistik AG Hoyer GmbH/ Hoyer Group

KN LeadLogistics Inc./Kuehne + Nagel International AG

Table 47:

• •

No clearly defined rules of the game in advance No profit sharing ‘Chains’ are not set tight enough Requirement of strong management capabilities (which got lost for the daily business of the group) Disparity with partners Extremely high cultural differences Difficulties in putting through the culture of the LSP Indifferences in relationship already in tender phase Covering business areas of the future (which should be integrated totally in the group) Partners’ ambitions on which benefits the LSP shall not gain (e.g. in the case of being listed on the stock market) Cancellation of customer relationship in the case of customers insourcing logistics or being taken over Occurrence of personal differences after new responsibilities in joint venture management Aiming for leadership by the LSP (in particular due to investments) Business area implicates LSP’s core business and does not supplement in weak areas Overlaps due to close relationship/group affiliation in the past Danger of limiting business with other partners if close cooperation with one or a few selected competitors Joint venture business with high probability for worsened service quality levels Business activity is not suitable for collaboration Changed joint venture frame conditions: impossibility of meeting profit targets with the expected turnover decreases

• Changing market dynamics • Confirmation of strategy to strongly grow outside Central Europe/to have global activities led to the acquisition of the remaining joint venture shares/full ownership in Hoyer-Odfjell) • Capital share of 45 percent acquired, resulting in a majority stake (95 percent) in PT Kuehne + Nagel Sigma Trans, Indonesia

Source Interview

Interview Interview

Interview

Interview

Interview

Interview Müller – Die lila Logistik AG (ed.). 2005, p. 1.

Hoyer (ed.) 2005b, p. 10, p. 29.

Kuehne + Nagel International AG (ed.). 2005, p. 142; Kuehne + Nagel International AG (ed.). 2006, p. 116, p. 152.

Reasons for the failure of joint ventures (examples)

Empirical research findings suggest several prerequisites for the success of collaborative entities. Joint ventures are advisable only if the following eight special conditions apply (Figure 80):

228

6 Š Empirical results

x Mutuality: Both the LSP and the customer have the responsibility for up to the total supply chain. x Adaptation: LSP and customer align their business models to the best of the joint entity. x Equalization: LSP and customer have equal opportunities and threats. Equitable deal structures, mutual investments, continual improvements or creative partnering form the basis of trust. x Respect: By equal consideration of all partners’ needs, ‘soft’ obstacles for sustainable and longer-term relationships are surpassed. x Independence: While commitments must be made in the short-term when forming a joint venture, the independence of partners has to be secured in the long-term. The reason is that over the course of time the joint venture may become stuck. Joint venture partners that are characterized by a loss of independence may keep to a minimum efforts which are required for the joint entity to leave the position of being trapped. x Freedom: Both partners agree on and fix an exit option for both parties. By doing so, joint venture partners are not ‘prisoners’ of an entity which failed in achieving results and goals. x Maturation: Joint venture partners invest on an ongoing basis in collaboration and integration resources, capabilities and skills if required. x Openness: If required, joint venture partners collaborate with other LSPs as well. Collaboration with other partners and their integration is a solution for vertical extension of the service scope, e.g. in the case of service extension in geography/new market entries.

6 Š Empirical results

229

Openness

Adaptation

Maturation

Equalization Mutuality

Freedom

Respect

Independence

Figure 80: Eight special conditions for joint venture success

In summary, despite the analysis resulting in a partial rejection of the Partnership Hypothesis, collaboration with partners and customers has always been important (see for example Ohmae 1989, p. 144; Ohmae stated that globalization makes alliances necessary “as vehicle for customer-oriented value.”). Therefore, the Partnership Hypothesis is to be confirmed in part as well. In logistics, collaboration is essential for managing needs. Struggling and failure is caused by lacking attention to required special conditions. Successful partnerships require people to increase learning and developing skills for collaboration. Partnerships are often characterized by the LSP’s business model dominating with the customer controlling. Although Total Integration by collaboration does not seem to be a solution nor sustainable in the long-term, collaboration between LSPs and customers is essential for managing logistics needs and for creating short-term customer value. This partial collaboration misperception can be explained by the:

II. Principle of Reliable Execution: Collaboration is successful if the partners stick to special conditions and to agreements made. Through collaboration, customer value is created and LSPs manage to intensify customer relationships.

230

6 Š Empirical results

6.3.3 The power of smallness misperception: Issue of size The Size Compatibility Hypothesis states that company size is a limiting factor for logistical SMEs’ ability to provide Integrated Supply Network Management solutions. The hypothesis states that if at all, SMEs are able to provide Total Integration solutions only to small or medium-sized customers. Thereby, access to networks is indispensable as SMEs in logistics lack the resources required for service fulfillment. Section 6.3.3 deals with the role of company size for Total Integration offerings. 6.3.3.1 Similarity in company size is a wish but not reality For verification of the Size Compatibility Hypothesis, interview partners from the customers and LSPs were asked to provide their views on the role of company size in collaborations. Their replies were also compared with the actual state of company sizes in collaborations. According to the majority of the interviews of customers, company size of the LSP is an important factor for collaboration. While almost half of the customers claim that size matters in principal, the same number is convinced that it is indirectly important. The arguments of the first group relate to advantages in terms of collaboration, adaptability and independency if LSPs are similar in company size, e.g. similarity allows negotiations to be conducted at eye level. The other group also prefers working with an LSP similar in size but demands that the LSP has to be large enough to meet geographic needs, to adapt and to grow with customer needs and to be able to integrate the customer proactively. Only one customer stated that the LSP is chosen independently of company size but by the best-in-class solution (Table 48).

6 Š Empirical results

Role of size

231

Arguments

Customer

Collaborative Advantage Size matters in principal

Adaptability Advantage

Size does not matter in principal

Table 48:

XII

Similar way of collaboration if of similar company size Higher commitment if similar in size

VI X XI

Flexibility to needs requires specific size LSPs fit customers into existing system Unlike LSPs, SMEs grow with customer

III

VIII

Restriction of business volume at LSP

LSP has to be large enough to meet geographic needs

IV VII IX

Defence of good position in a region Locations’ closeness to customer’s Closeness to production sites necessary

LSP has to be large enough to adapt and grow with customer needs

V XIII

Ability to grow with customer required Service portfolio extension if needed

LSP has to be large enough to integrate customer proactively

I

Importance of joint business for LSP

Case-specific best-in-class choice

II

Decisions depending on location/project

Independency Advantage

No clear statement on principal importance of size/ size matters indirectly

Content of respective customer statement

Customers’ interview partners views on the role of the LSP’s company size

The research cases LSP were not asked specifically for their views on the role of company size for collaboration. However, more than half of the interview partners, i.e. seven of the total of thirteen, addressed the issue by themselves. Roughly 85% of these interview partners (from LSP B, F, G, I, L and M) argued that size conformity is required. The reasons for conformity are based on adaptability and organizational advantages. LSP B referred to improved communication as an organizational advantage, to higher readiness for individualization of solutions and to higher effectiveness for customers. Increased flexibility, e.g. resulting in faster response, is an issue for LSPs F and M, with the latter also stating higher commitment, better possibilities for mutual involvement in the other party’s business and organizational advantages. For LSP G, size conformity is a prerequisite for business success while for LSP I it is required for adaptability to geographic scope. According to LSP L, more demanding tasks can be implemented and managed only with size similarity. LSP E’s interview partner emphasized size irrelevancy for the reason that partner selection is considered as an issue of decision makers. Overall, like customers’ interview partners, LSPs’ interview partners also pointed out the need for being able to grow with the customer besides focusing on niches for business success.

6 Š Empirical results

232

Unlike both customers and LSPs interview partners’ emphasis on size conformity, the majority of potential Hidden Champions’ customers are not similar in size in reality (Figure 81). Size conformity is even not at all applicable if the customers’ groups are considered. Roughly 92% of the logistical SMEs studied in-depth work for LSEs. The result changes slightly if applying the size classification to the customers’ specific division which is in charge of the logistics collaboration. The interview partner of Customer XII (a German small/medium-sized division of a large US group) confirms the allowableness of this view by stating that “outsourcing is not a group decision”. In practice, responsibility for logistics is in the hands of single divisions, e.g. at the US group it is a management task of the country boards. Taking divisions’ sizes of my case studies, customers are small and medium in size in slightly more than fifty percent of the cases. With close to half of the customers still being classified as LSEs, the conclusion is that SMEs in the area of logistics approach large LSPs’ target group (Figure 82). In practice, the competitive area of LSEs and SMEs is no longer restricted to small- and medium-sized customers but enhanced to the area of large customers (either in full in the case of Group consideration or in part with division consideration). In summary, similarity in company size is a wish but not reality.

Size Classification applied to Group 13

1

I II III IV V VI VII VIII IX X XI XII XIII

VIII

Total (number of) in-depth studied customers

Thereof small-/ mediumsized customers

12 I II III IV V VI VII IX X XI XII XIII Thereof large customers

§ 92% of customers are LSEs

Size Classification applied to Division 13

7

I II III IV V VI VII VIII IX X XI XII XIII

IV V VIII X XI XII XIII

Total (number of) in-depth studied customers

Thereof small-/ mediumsized customers

6 I II III VI VII IX Thereof large customers

§ 54% of customers are LSEs

Figure 81: Comparison of company sizes of collaborating potential Hidden Champions and customers

6 Š Empirical results

Size Classification applied to Group Size LSP

233

Size Classification applied to Division Legend:

Size Small Medium Large Customer

Small Medium Large*

Small Medium Large*

Size LSP

Size Small Medium Large Customer

Main relationships logistics SMEs and customer sizes Main relationships logistics LSEs and customer sizes Minor importance/ hardly any relationships Competitive area * Not subject of analysis

Figure 82: Competitive areas by size of LSP and size of customer

Further examples from the ‘Top 100+ Company List’ as well as experience from practice confirm that SMEs in logistics compete with logistical LSEs for customers. Potential Hidden Champions manage to enter niche areas of large customer companies. They are successful in creating special business relationships. Just to mention three examples:

x

Example 1: From 2002 onwards, the Dutch LSP Ewals Cargo Care B.V. developed a

strategy for positioning in the one-stop-solution offering market. Besides business redirection, information technology had to be verified, resulting in the establishment of the e-Logistics Control subsidiary and in implementing Quintiq. This allows the managing of all product flows between Scania locations in Benelux, France and Scandinavia (Quintiq (ed.) N.Y., pp. 1-2). x Example 2: For large customers in food retail like Carrefour or Auchant, French family business FM Logistic applies a pooling solution, i.e. trucks are loaded with goods from various producers in order to have fully-loaded trucks (Kloss 2005, p. 10). x Example 3: The German Reichart Logistik Gruppe is a specialist for outsourcing projects in the automotive sector with BMW being the LSP’s third largest customer (Reimann 2006, p. 7). From the other point of view, LSEs also do not necessarily concentrate on large customers but penetrate SMEs’ markets. For example, LSEs acquire SMEs for entering the contract logistics market segment or they offer selected mass customized solutions if many small customers can be targeted. With LSEs, clear operation systems and ad-hoc feature procedure customization is transferred to small- and medium-sized customer companies despite dealing with some cultural aspects. The examples of Kuehne + Nagel

6 Š Empirical results

234

International AG, A.P. Møller - Mærsk A/S and Panalpina World Transport demonstrate this market approach: x Example 1: Through the acquisition of ACR, Kuehne + Nagel International AG attained regional expansion in Europe as well as a significant strengthening of its contract logistics business in sectors in which it had previously hardly been present (Jung and Hornborstel 2006, p. 7). x Example 2: At the Swiss Panalpina World Transport, the SME segment accounts for around three-quarters of turnover (Panalpina World Transport (ed.) 2005, p. 4). x Example 3: The Danish A.P. Møller - Mærsk A/S has no particular concentration of customers and is not especially dependent on certain customers (A.P. Møller - Mærsk A/S 2005, p. 29).

Small

Medium

Size LSP

Large

Figure 83 presents SMEs’ and LSEs’ market penetration approaches.

Market Approach LSEs in logistics

Market Dominance LSEs in logistics

Legend:

Mass Customization*

*

Market Market Dominance Approach SMEs in logistics Hidden Champions Hidden Champions & Others

Small

Medium

Niche Area

Market approach to some extent if many small customers Existing market Approached market Direction of market penetration

Size Customer

Large

Figure 83: Market penetration approaches of SMEs and LSEs in logistics

The above analysis on the correlation between company size of the LSP and company size of the customer is the wish of both parties, but it is not reality. Both SMEs and LSEs attack the other’s key market. SMEs offer services in niche areas while the LSE approach is mass customization. In other words, SMEs are convinced about their niche service offering. They are self-confident in targeting customers independently of size. This power of smallness misperception can be explained by the:

6 Š Empirical results

235

IIIa. Principle of Courage and Self-Confidence: Potential Hidden Champions are convinced about their abilities to work for large customer companies. They are willing to be confronted with large-scale project challenges.

6.3.3.2 Company size and survival In previous sections, the importance of the ability to manage global logistics processes for Total Integration was emphasized repeatedly, in particular in Sections 5.1.2.2 and 6.1.2.2 on the Global Standard Hypothesis and its evaluation. According to the Principle of Customer Proximity, potential Hidden Champions do not primarily target global standards in service delivery. Research experience suggests a development process in the course of important customer relationships. Moreover, four development phases in relation to size of the LSP and geographic scope were identified (Figure 84). In Phase 1, small LSPs provide their services to customers locally. Some of these LSPs manage to escape this weak, i.e. low, margin position and expand their services to a region through either internal growth or by acquisitions. These LSPs have extensive networks for European and worldwide service provision as well (Phase 2). These LSPs are successful up to a critical medium company size in Phase 2, i.e. they are Hidden Champions. However, they struggle if they grow further through expansion by forming joint ventures (Phase 3) and, eventually, they are even subject to acquisition by LSEs (Phase 4). The figure demonstrates that only two types of LSP will remain competitive in Integrated Supply Network Management in the long-term and thus survive. These are the LSEs in logistics (Phase 4) and the Hidden Champions (Phase 2). All other LSPs small and medium in size are either subject to lagging (Phase 1), to failure (Phase 3) or to takeover by large LSPs (Phase 4).

6 Š Empirical results

Large

236

LSE in logistics as acquirer/ SMEs in logistics as subject to acquisition

Medium

Size of LSP

Legend: Growth through expansion by forming joint venture(s)

SMEs Hidden Champions Failed Champions LSEs

Small

Hidden Champions

Critical Development Stage

SMEs

Growth through expansion Initial/ by own power historical (internal growth business or acquisitions)

Local/ Region

Growth through expansion by networking

Home-Country/ Continent/ Nation Multi-Continent

World

Geography Figure 84: Relation between size of LSP and geography: four development phases

It is a challenging if not inextricable task for LSPs below a critical company size to offer a comprehensive service spectrum on a European or even worldwide level. For long-term survival in logistics and success in Integrated Supply Network Management in particular, logistical SMEs strongly depend on excellent logistics networks. The importance of networks is strengthened as LSPs have to deal with uncertainty in sustainability of customer relationships, with irregular or unforeseen orders and with low customer retention. For example, the interview partner from Customer X stated that while in the 1980s contract durations were longer than twenty years, contracts are today signed for a very short period of time. Figure 85 presents current contract durations which confirms that continuation of customer relationships and thus long-term survival is under regular reassessment.

6 Š Empirical results

237

Customer

Contract duration in years 1

2

4

5

6

7

8

9

10

Dependency from investments

I II

3

Transportation

Dependency from complexity of services

III

Legend: Usual contract duration

IV V

Exceptions

VI VII

Extension option

VIII IX X

One contract with 7 years’duration plus extension option one year; other contract for 10 years

Frame contract with annual price negotiation

XI XII XIII

Figure 85: Duration of contracts with customers

In such an uncertain business environment it is the compelling task for SMEs in logistics to efficiently use capacities and resources. Proponents of Hidden Champions’ initiatives for building networks by bundling services, capacities and know-how (for example Baumgarten 2001b, p. 15) refer to high flexibility, kept autonomy, gathered regional strengths or high synergy effects as advantages in the competition with LSEs. In some cases networks are the only solution if asset ownership is not an option to pursue. For example, SMEs in logistics do not usually have the capital required to buy ships or planes for providing sea freight or air freight services. From the other point of view, the challenges with networks are for example slow decision processes in changing markets, majority decision on deployment or keeping pace with state-of-the art IT competence. The sustainability of these network initiatives will not only be defined by factors related to LSPs. Factors may either be related to customers’ and competitors’ strategic decisions and associated sector-specific or case-specific tasks. It is the customer securing competition in logistics as the interview partner of Customer I stated. Even if continuing to focus on niches, potential Hidden Champions are not immune to the trend towards consolidation. In summary, the Size Compatibility Hypothesis is to be rejected on the one hand but also to be confirmed on the other hand. As presented in Section 6.3.3.1, the hypothesis

6 Š Empirical results

238

is to be rejected for the reason that for being successful and for surviving in competition SMEs in logistics attack customer target groups of LSEs in logistics, i.e. potential Hidden Champions provide niche offerings to large customer companies. However, this section’s findings suggest confirming the Size Compatibility Hypothesis as company size of the LSP is an issue for survival. Observations in practice and research have shown that the two groups will continue to compete. The first group is represented by LSEs. They are commodity builders with their own networks which are either constructed through their own strengths or by acquisition of less successful autonomous SMEs in logistics. Hidden Champions are LSEs’ competitors. They are innovative niche specialists with access to networks, for example by forming cooperations. Other SMEs not acquired by LSEs either have to transform to Hidden Champions or they will be subject to liquidation. Their failure in Total Integration is a consequence of lacking the required company size and specialization (Figure 86).

Enterprises – Integrated Supply Network Management LSEs

SMEs Hidden Champions

Others Absorb

Mass customization

Strategy

Commodity builder

Role

Integration

Function

Niche specialist Innovation

Asset ownership

Network access

Market leader in scope

Market position

Market leader in niche

Price Duplication

Service scope Key competitive factor Key success factor

Die

Niche specialization

Network ownership

All services from a single source

Transform

Specified service scope from a single source Multi dimensions Flexibility & adaptability

Figure 86: Two surviving groups of LSPs in competition and distinction criteria

Again, the power of smallness is underestimated. The role of company size for survival of the LSP can be explained by the:

6 Š Empirical results

239

IIIb. Principle of Defense and Attack: Potential Hidden Champions manage to survive in competition. They defend a specific company size, i.e. a position of being small enough to remain independent and attack a growth position of being large enough to follow customers in international business.

6.4 Summary of the macro analysis Unlike in Section 6.1 and Section 6.2, the analysis in Section 6.3 targets the total business models of the LSP and the customer instead of single business model components. From observations and analysis, three core topics were identified – the function of the customer, the role of collaboration as well as company size of LSP and customer. Accordingly, three macro hypotheses were formulated with research resulting in a rejection of the Customer Centricity Hypothesis as well as the Size Compatibility Hypothesis and a partial rejection of the Partnership Hypothesis. Also, six business principles were identified (Table 49). As logistics has grown more complex, small- and medium-sized LSPs should consider these six principles in addition to the findings on single business model components in order to stay on the road to success.

240

6 Š Empirical results

Customer Centricity Hypothesis

Possible causes for the struggling of Integrated Supply Network Management are based on LSPs’ self-centred behavior. LSPs are concentrating too strongly on their own needs and requirements at the expense of customers’ needs. They simply underestimate the potential full value of customer knowledge and service, and do not develop the relationship required for business success. The customers’ lacking attention misperception

Principle of Gradual Service Extension

Confidence and excellent performance are the two prerequisites for building relationships. If both apply, customers increasingly accept their LSP and gradually offer to take over additional services. Thereby, customers actively contribute to logistics innovations and service extensions.

Principle of Role Complementarity

Successful LSP-customer relationships are characterized by balancing responsibility for the customer’s supply chain, i.e. the relationship is characterized by clarity in complementary roles. Total Integration through LSPs is limited to a defined part of the supply chain and amounts to a certain extent of the service scope only. The overall lead remains at the customer, who is in the role of the supply chain integrator.

Principle of Continuous Innovation

Potential Hidden Champions are innovators instead of commodity providers or generalists.

Partnership Hypothesis

With a joint (organizational) entity of an LSP and its customer, and possibly with other provider(s), overall supply chain responsibility can be achieved. Total Integration is envisaged and aimed for from the beginning of the partnership. The collaboration misperception

Principle of Reliable Execution

Collaboration is successful if the partners stick to special conditions and to agreements made. Through collaboration, customer value is created and LSPs manage to intensify customer relationships.

Size Compatibility Hypothesis

Integrated Supply Network Management is a comprehensive concept with limited scope for SMEs. If at all and at best, SMEs in logistics are able to provide Total Integration services for customers of similar size only. Although SMEs in logistics put efforts into overcoming their resource shortage, they are nevertheless very limited in full concept implementation. The power of smallness misperception

Principle of Courage and Self-Confidence

Potential Hidden Champions are convinced about their abilities to work for large customer companies. They are willing to be confronted with large-scale project challenges.

Principle of Defense and Attack

Potential Hidden Champions manage to survive in competition. They defend a specific company size, i.e. a position of being small enough to remain independent and attack a growth position of being large enough to follow customers in international business.

6 Š Empirical results

241

Legend:

Table 49:

Macro Hypothesis

Content of Macro Hypothesis

Confirmation/Rejection of Macro Hypothesis Rejection Partial Rejection/ Partial Confirmation Confirmation Business Principle

Common Industry Misperception

Content of Business Principle

Overview of Macro Hypotheses, Evaluations, Common Industry Misperceptions and Business Principles

7 Š In search of Hidden Champions: BMPS

242

7

In search of Hidden Champions: BMPS

In this chapter all definitions, explanations and findings of the previous chapters are systematically applied for the presentation of the key contribution and results of my research study: my Business Model Performance Scoring Framework (BMPS Framework). This chapter is structured in five major sections. In the first (7.1) I provide a brief overview of the content covered so far. I also show possible concepts for performance measurement in the area of logistics and arguments for the development of a specific framework that is applicable to a business model with all its components. Section 7.1 closes with basic information on my scoring. In the two following sections I score performance along the micro (Section 7.2) and macro (Section 7.3) perspective. Based on my scoring of both perspectives I present my BMPS Framework in Section 7.4, with Section 7.4.1.1 covering the micro perspective and 7.4.1.2 the macro perspective. Section 7.4.2 shows the findings achieved by applying my framework. On one level, the framework helps to identify success and failure business principles that impact the sustainability of SMEs in the industry. On another level, it helps to identify the Hidden Champions among my research cases. Moreover, the framework shows on which business model dimensions Potential Hidden Champions and Hidden Championship Failures – in contrast to Hidden Champions – put too much or too little emphasis, thus indicating starting points for improvements towards successful business operations and Hidden Championship. This is shown in Section 7.4.3. In a final major Section (7.5) I provide some comments on business principles. 7.1 Introduction to performance measurement and scoring In Section 3.2.3 I show my definition of a business model which is used to structure this study. The structure is first applied in the presentation of the hypotheses in Chapter 5 and then for the provision of the empirical results in Chapter 6. In Chapter 6 I present my research cases’ overall state on single business models dimensions only. At this stage no further explanations or evaluations are provided and Chapter 6 purely reflects the as-is situation at the LSPs studied in-depth. Therefore, some further work is necessary to make evaluations and to measure performance. This is the content of Chapter 7 in which I show a possibility for measuring performance based on a Business Model Scorecard. R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2_7, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

7 Š In search of Hidden Champions: BMPS

243

Before starting the process of scoring and measuring performance I reviewed the literature on what performance is, and how it can be measured. Thereby, I analyze existing concepts in terms of applicability to my work. Let me first start with some comments on the term itself. The word ‘performance’ is etymologically traceable to the old- and Anglo-French root ‘parfournir’ which means to execute, to complete or to reach (Harper Collins Publishers (ed.) 1991, p. 1158; Simpson and Weiner 1989, p. 543 et seq.). In English economic literature the term performance is not uniformly understood (Eccles and Nohria and Berkley 1992, p. 146; Emmanuel and Otley and Merchant 1990, p. 31; Ford and Schellenberg 1982, p. 50) and according to Eccles, “… the exact nature of performance is never entirely clear.” (Eccles and Nohria and Berkley 1992, p. 146). As a way out of the definition difficulties Otley argues that performance should not be defined tightly. In other words, its content is always discussable (Otley 1995, p. 49). While literature indicates a lack of a coherent view of the term performance, in reality performance requires a definition and measure. In companies’ definition of performance the usefulness and reasonableness from the view of the users is in the foreground. Measures are part of concepts which are either quantitative and/or qualitative (Figure 87). Performance measurement concepts which LSPs apply are, for example, AMR’s and the SCC’s quantitative methodologies or the MIT’s concept that defines four qualitative characteristics for supply chain excellence and success. HBS’s Balanced Scorecard typically contains both quantitative as well as qualitative measures. These four performance measurement concepts are briefly introduced in Table 50.

Supply-ChainTop-25Methodology (AMR) SCORModel (SCC)

Balanced Scorecard (HBS)

Four Characteristics for Excellence and Success in SCM (MIT)

Legend: Quantitative Qualitative Quantitative and Qualitative

Figure 87: Concepts for performance measurement in the area of logistics

7 Š In search of Hidden Champions: BMPS

244 Concept SupplyChain-Top25Methodology SCORModel

Institute/ Authors AMR

SCC

Balanced Scorecard

HBS/ Robert S. Kaplan and David P. Norton

Four Characteristics for Excellence and Success in SCM

MIT

Table 50:

Performance Measures • Return on Assets (ROA) • Inventory Turnover • Last twelve months’ development of income compared to the previous year • Four-level model based on five core management processes (Plan, Source, Make, Deliver, Return) • Metrics aligned to performance attributes/key objectives (Reliability, Responsiveness, Agility, Cost, Assets), e.g. - Perfect Order Fulfillment (Reliability) - Order Fulfillment Cycle Time (Responsiveness) - Downside Supply Chain Adaptability (Flexibility) - SCM Cost (Cost) - Return on Working Capital (Assets) • Each process can be further described by type (Planning, Execution, Enable) • Looking at the business from four perspectives: - Financial - Internal Business Process - Learning and Growth - Customer x For each perspective goals and relating measures are defined • Logistics supports and supplements the company strategy and is part of it • Logistics stands in effective relations to its own unmistakable operative business operations; it saves competitiveness future-oriented • Logistics must correspond to a balanced catalogue of performance aims as well as to key financial data • Logistics concentrates on some few guidelines and practices which confirm each other and support the operative procedure so that operative goals are accomplished optimally

Source(s) Straube and Cetinkaya 2008, p. 4. SCC N.Y. pp. 4-5, p. 8; SCC/Francis N.Y., p. 5.

Kaplan and Norton 1996, p. 75 et seqq.; Kaplan and Norton 1992, pp. 71 et seqq. Straube and Cetinkaya 2008, p. 4.

Quantitative and qualitative concepts for performance measurement

According to my analysis, each of the four concepts for performance measurement in logistics that is presented as an example in Table 50 has its strengths and weaknesses as summarized below. • AMR’s Supply-Chain-Top-25-Methodology provides clear performance figures. However, the concept’s weaknesses are that it uses only quantitative measures that have limited focus. Also, the concept does not provide starting points for improvements. • SCC’s SCOR-Model’s strength is that performance measures are oriented on customers’ expectations. However, it focuses on quantitative measures only, is strongly process-oriented and provides no starting points for improvements. • The Balanced Scorecard is an overall concept with quantitative and qualitative measures. Its advantage is the inclusion of the customer’s perspective. However, the model construction lacks orientation on business model dimensions, in particular on macro dimensions.

7 Š In search of Hidden Champions: BMPS

245

• MIT’s concept of the four characteristics for excellence and success in SCM is very strong in its field but focuses on qualitative measures only. Its construction is also not comprehensive in terms of micro and macro business model dimensions. In addition, no starting points for improvements are given. Overall, the four concepts for performance measurement lack hints for working on improvements for sustainability in competition and do not cover micro and macro dimensions of a business model comprehensively. These two reasons are past of the motivation to develop and present my own framework. However, to some extent the above four concepts offer more detailed measures which can be applied in addition to my BMPS Framework. For example, the BMPS Framework does not cover detailed quantitative measures like return on working capital as is the case in the SCOR-Model or the ROA which is used in AMR’s methodology. Hence, the four concepts presented have to be considered as supplementary concepts for performance measurement. The four concepts considered above are oriented on the past which is in particular true for quantitative measures. Consequently, success which can be proved today does not provide a guarantee for sustainability. Nevertheless, performance measurement concepts are important and have to be moved into focus more strongly. This is of particular importance as many LSPs have no or at least no operating key performance indicator system for the different operative and/or administrative corporate divisions (Boecker 2007, p. 9). Moreover, measuring success in logistics has been likened to determining the number of the grains of sand (Straube and Cetinkaya 2008, p. 4). A well structured concept helps to deal with the challenges. These two states as well as the prevailing restraint of LSPs in information sharing make it extremely important, but also difficult, to develop a performance measurement framework which satisfies scientific claims. However, the BMPS Framework with its comprehensive coverage should advance research in this area one decisive step ahead. In fact, literature lacks in the applicability of methods of scoring. As my study aims at the search for Hidden Champions in the area of logistics, some kind of scoring has to be conducted in order to judge the status of my research cases’ status in terms of Hidden Championship. According to my defined scoring process, I aimed to score each dimension of the micro as well as of the macro dimension for every research case. The basis for scoring forms

7 Š In search of Hidden Champions: BMPS

246

the data presented in Chapter 6. More specifically, I use the as-is status of the single research cases in the single micro and macro dimensions of a business model for scoring. I apply four score values that are 1, 2, 3 and 4, where the lower the number the higher the impact on business success. Therefore, the best score value is 1 indicating competitive advantage, while 4 is the lowest score value, indicating competitive liability. An overview of the scoring weights used for my Business Model Scorecard is presented in Table 51. Score Value (Number) 1 2 3 4

Table 51:

Score Value (Meaning) Excellent Good Acceptable Low

Competitive Status

Color

Competitive Advantage State of the Art/Competitive Benchmark Below Competitive Benchmark Competitive Liability

Scoring weights

7.2 Scoring performance along the micro dimensions The above defined scoring weights are then applied in the following sections on scoring performance along the micro (7.2) and macro dimensions (7.3). I start with scoring performance along the micro dimensions in this section. Thereby, I present a separate sub-section for each dimension of the business model’s micro layer. Each of these subsections starts with the representation of the as-is status on this dimension for every research case. I then define the criteria for assigning the score value to the molding of each LSP in that dimension. This is where I link each business model dimension’s molding to performance. Each sub-section finishes with a summary about my findings when scoring the single business model dimension for my research cases. However, in Section 7.2 linkages between all micro dimensions moldings and scoring results have not yet been made. This is the content of Section 7.4, whereas in Section 7.2 I concentrate on the presentation of scoring the single dimensions for each of my research cases. 7.2.1 Incrementalism The first scoring relates to the business model component Value Proposition. The respective hypothesis is the Single Source Hypothesis stating that LSPs aim for overall supply chain responsibility which also leads to increased customer value (Section 5.1.1.1). According to the empirical analysis and results (Section 6.1.1.1) LSPs tend to enhance their position gradually in the course of time. In the progress of the relationship

7 Š In search of Hidden Champions: BMPS

247

the research cases gain customers’ trust and conquer increasingly a part of their customers’ supply chain, while also securing their strong position achieved so far. I refer to this as the Principle of Incrementalism. Thereby, LSPs’ relationships to customers, employees and society is special. In particular their dialogues with customers are characterized by openness, and the dedication of the management to the employees is outstanding, both promoting a strong commitment to excellence in performance and quality. As a basis for scoring performance on the business model component Value Proposition I chose the research cases’ scope on stakeholder groups. Therefore, I checked for replies of my interview partners on value creation for each of the five stakeholder groups (customers, partners, employees, society and investors). For exemplary demonstration I present an extract of my database for LSP C (Table 52). LSP C’s focus on the stakeholder groups of customers, employees and society is indicated by an ‘x’, which leads to the total number of three stakeholder groups for which value is created. This process is applied to the other research cases as well wherein in case of one or more replies regarding a stakeholder group this is marked with an ‘x’ (Table 53). Stakeholder Group

Value Created (selected exemplary statements taken from database)

• Individualized solutions for individual customer needs and objectives • Flexible and responsive solution offerings • Achieved optimum service levels • Provision of real-time information and reports • Enhanced and strengthened customer relationships (working as one team) Partners [No statements made] Employees • Locations as safe, fair and ethical place to work Society • Execution of charity events and activities x Group foundation for environmental protection activities Investors [No statements made] Number of stakeholder groups for which value is created Customers

Table 52:

LSP C’s replies to value creation for stakeholder groups

Indication for Value Creation x

x x

3

7 Š In search of Hidden Champions: BMPS

248 LSP Value for customers Value for partners Value for employees Value for society Value for investors Number of stakeholder groups for which value is created Score Legend: Score:

A x

B x

x

C x

E x

F x

G x

x x

D x x x x

x

x

x x

H x x

I x

J*

K x

x x x

L x x x

M x x x

2

1

3

4

2

3

2

2

1

1

3

3

3

3

4

2

1

3

2

3

3

4

4

2

2

2

x = Indication for value creation by the research case for the stakeholder group. * = Value creation for customers is not applicable as LSP J is an association (network) of LSPs; therefore, LSP J has no direct access to customers. 1 = Excellent = Value creation for four to five stakeholder groups 2 = Good = Value creation for three stakeholder groups 3 = Acceptable = Value creation for two stakeholder groups 4 = Low = Value creation for only one stakeholder group

Table 53:

Value creation for stakeholder groups

Next, I counted the number of stakeholder groups for which my interview partners indicated value creation. I defined the score value as excellent if value is created for four to five stakeholder groups, as good if value is created for three stakeholder groups, as acceptable if value is created for two stakeholder groups and as low if value is created for one stakeholder group only. As a result, LSPs D, C, F, K, L and M are special as they create value for three (LSPs C, F, K, L and M) or four (LSP D) of the five stakeholder groups (Table 53). Table 53 also shows that value creation for customers is key in all research cases.56 The information from Table 53 is presented in Figure 88. It demonstrates more clearly the intensity of stakeholder focus which is an indicator for a specific type of LSP. I refer to a Provider-Oriented-Collaborator if the LSP focuses on partners as stakeholder group only as it is with LSP J. A Customer-Oriented-Collaborator targets value creation for customers and partners (LSP H), whereas a Customer-Centralizer puts the customer in the center of business activities (LSPs A, E, G, B and I). LSP L is a Resources-Carer that values customers, partners (for network as key resource) and employees (for human capital as resource) for business success. I refer to an ImageBuilder (LSPs C, F, K and M) if society (external image-building) and employees (internal image-building) are in the foreground besides the customers. I define LSP D as a Networker as this research case aims for value creation to a broad scope of stakeholders (customers, partners, employees and society). 56 LSP J is an exception. As an association (network) of LSPs, LSP J has no direct access to customers and therefore value creation for customers is not applicable.

7 Š In search of Hidden Champions: BMPS

249

Low

4

3

D

C F K M

Legend: C F K M

L

2

1

A E G H B I J

Intensity Stakeholder Focus

Number of Stakeholder Groups

5

Networker Image-Builder Resources-Carer Customer- Centralizer Customer-Oriented-Collaborator Provider-Oriented-Collaborator

High

Customers Partners Employees Society Investors

Stakeholder Group Figure 88: Types of LSPs according to stakeholder group scope

Figure 88 shows that there is no uniform behavior of my research cases in terms of the scope of value creation for stakeholder groups. About half of the LSPs target at least three stakeholder groups, thus having a low to medium intensity of stakeholder focus (LSPs D, C, F, K, M and L). The others concentrate more on a single or two stakeholder groups, thus having a medium to high intensity of stakeholder focus. This applies to Customer-Centralizer,

Customer-Oriented-Collaborators

and

Provider-Oriented-

Collaborators (LSPs A, E, G, H, B, I and J). In addition, Table 53 and Figure 88 also show that potential Hidden Champions are not under pressure to meet investors’ interests which allows them to shift efforts to the other stakeholders in full. For example, unlike companies that are listed on the stock exchange, potential Hidden Champions do not need to put a lot of efforts into pursuing strategies for satisfactory share price developments. Rather, they can focus on developing solutions to meet individualized customer needs. In summary, potential Hidden Champions aim to become a single source supplier for a part of the customers’ supply chain through excellent service provision. By doing so they become irreplaceable to customers, which is in particular applicable if LSPs mobilize their customers. Customer mobilization is a qualitative parameter which is difficult to score but necessary for incremental positioning at the customer. Potential

7 Š In search of Hidden Champions: BMPS

250

Hidden Champions are convinced that their chosen specific stakeholder group focus is a competitive advantage for achieving a strong position. 7.2.2 Scope My research on the business model component Target Group is about validating or refuting the Segmentation Hypothesis that states that LSPs focus on carefully selected sectors (Section 5.1.1.2).57 The result from Section 6.1.1.2 is that potential Hidden Champions transfer their strategic and core capabilities across sectors rather than focusing on specific sectors. For the scoring of Target Group as part of my Business Model Scorecard I use the information from Figure 50 in Section 6.1.1.2. In Table 54 the sector scope of my single research cases is presented. The table shows that only three of the research cases (LSPs A, K and L) focus on three or less sectors only, whereas LSPs E, G, J, B, H and M offer their services to more than ten sectors. I assign an excellent score value to LSPs that do not focus on specific sectors but target many, a good score value to LSPs that target more than ten sectors but not more than twenty, an acceptable score value if LSPs focus on five to ten sectors and a low score value if LSPs have a strong sector focus on up to five sectors. LSP Number of sectors Score Score:

A 2 4

B 14 2

C 7 3

D 8 3

E Many* 1

F 9 3

G Many* 1

H 18 2

I 6 3

J Many* 1

K 1 4

L 3 4

M 14 2

* = No specific sector focus, variety of sectors served; exact figure not available 1 = Excellent = No sector focus; targeting many sectors 2 = Good = Targeting more than ten sectors but no more than twenty 3 = Acceptable = Focus on five to ten sectors 4 = Low = Sector focus on up to five sectors

Table 54:

Number of sectors served by LSPs

The interesting finding is that potential Hidden Champions offer customized solutions which they can apply to customers from a variety of sectors. This is shown as the sector scope from nine of my thirteen research cases targets more than five sectors. Potential Hidden Champions’ competitive basis relies on solutions and processes rather than on

57

The Principle of Intangible Service which also resulted from the analysis of the business model component Target Group is not part of the Business Model Scorecard as the Principle of Intangible Service is based on the customers’ perspective.

7 Š In search of Hidden Champions: BMPS

251

sector-specific knowledge. They are flexible in offering services that go beyond basic needs of single sectors (Principle of Scope). The advantages of a broad sector scope are risk reduction and a favorable position in contract negotiations with customers. The latter is of particular importance as contract durations in the area of logistics are becoming shorter and shorter.58 To gain further insights and identification of differences in LSPs’ behavior I looked at the relationship between number of sectors served (Table 54) and average contract durations (Table 55). This relationship is presented in Figure 89. LSP Ø contract durations (years) 1 2 3 4

A >10

B 3

C -

D 5-7

E 1-21 3-52

F -

G -

H 3

I -

J n.a.3

K n.a.4

L 1

M 3-5

Average duration for contracts without investments Average duration for contracts with investments Not applicable as network Not applicable as joint venture

Table 55:

Average contract duration at LSPs

Average Contract Duration

Legend: Low and acceptable score in terms of sector scope Very good and excellent score in terms of sector scope

Many

A1

… 10 9

1

8 7

2

D

6 5 4

M

3

B

2

E2

L

1 1

2 3

3

E3 H

4

5

6

7

8

9 10 11 12 13 14 15 16 17

18 … Many

Sector Scope

Not applying to transportation services with short-term contract durations Durations for contracts without investments Duration for contracts with investments

Letters indicate LSP; LSPs C, F, G and I did not indicate their average contract durations; Presentation for LSP J (network) and K (joint venture) is not applicable

Figure 89: Relationship between sector scope and average contract duration

Above figure shows that in general LSPs with a narrow sector scope, i.e. LSPs that focus on less than ten sectors, have a higher average contract duration as in the case of LSPs A and D. LSPs B, E, H and M with a broad sector scope have a low average contract duration, i.e. their contract duration is five years at the maximum if investments are required. The key information from Figure 89 – either narrow sector scope and high average contract duration or broad sector scope and low average contract duration – is

58

Exceptions from short contract durations are made if large investments are required.

252

7 Š In search of Hidden Champions: BMPS

not confirmed by the position of LSP L only. In fact, these two groups disclose a tension between the decreasing contract durations in the industry and investments that are necessary for meeting the demands for logistics in the 2000s and onwards regarding a broadening of the service scope (Figure 9). Low or no investments at all might mean low competitiveness of the sector and hence high monopoly power. Moreover, it could also be a result of Hidden Champions’ selection of customers with whom they can invest. Thereby, contract renewal or extension is strongly related to investments made. With rising volume of investments LSPs negotiate for longer contract durations, thus initiating long-term and more intensive relationships to customers. Narrow sector scope with low average contract duration as in the case with LSP L is opposite to current demand and may be a possible cause of business failure. However, while renewals or extensions of contracts with low average duration also demonstrate customers’ satisfaction, this impedes for LSPs from developing and offering more individualized customer solutions as demanded. 7.2.3 Gradual Conquest Sections 5.1.1.3 and 6.1.1.3 cover the hypothesis and findings on the business model component Business Purpose. Thereby, the Commodity Trap Hypothesis states that SMEs in logistics are captives to the low margin transportation business. The result of the empirical research is that the transportation business is an initiator for further business and for offering additional services. In Section 6.1.1.3 the research cases are positioned in the logistics industry’s service offering portfolio and it is differentiated between LSPs that stimulate progress by adaptation in the course of their business operations and those that do not (Figure 55). According to the findings, more successful LSPs manage to leave the low margin transportation business and to provide individualized solutions or systems. In addition, they are open to change and have clear visions for managing these. These findings are the basis for scoring related to Business Purpose. As an example, the adaptation behavior of four LSPs and their assigned score value is presented in Table 56.

7 Š In search of Hidden Champions: BMPS

253

LSP

Adaptation behavior relating to Business Purpose

Score

B

The core business of LSP B is the organisation of product delivery as well as its coordinated and controlled passing to the customers. Moreover, LSP B added to its business purpose consultancy and financial service provider to its customers. LSP D is a service provider, partner and expert for all supply chain areas. Moreover, LSP D considers its business purpose in developing future oriented business strategies in the area of total logistics solutions. LSP E provides individualized solutions primarily for medium-sized customers. Moreover, transportation services as ‘core’ of the business purpose are advanced in the sense that LSP E creates access to a strong international LCL freight net to offer value-added services globally. The business purpose of LSP M is to offer customer specific and preferably integrated warehousing, transportation and distribution solutions. LSP M adapted its business ‘core’ and now describes itself as “full service 3PL+ partner”, with the plus symbolizing the ability to create pro-active problem solving concepts as well as to implement optimizations in the customers’ supply chains.

3

D

E

M

Table 56:

1

1

1

LSPs’ openness to adaptation and management of changes relating to Business Purpose (selected examples)

In Table 57, LSPs’ position relating to gradual conquest in the sense of moving into higher margin businesses and adaptation behavior is scored for each of the research cases as presented in Table 56. The basis for this scoring is the allocation of the LSPs as provided in Figure 55. LSPs D, E and M are the ones with the highest score. The reason is that these three LSPs manage to offer high-margin services besides having a strong change and adaptation behavior. For scoring, I assign a score value of 1 for an excellent business purpose and change behavior if the LSP’s core business purpose is on individualization and system, if there is a high commitment to change and adaptation and a strong readiness to expand the service offering gradually. I refer to LSPs with a score value of 1 as Service Operator. The score value is 2 if the LSP’s core business purpose is also on individualization and system but if there is low commitment to change and adaption and low readiness to expand the service offering gradually. These LSPs are System Operators. The assigned score value is 3, if LSPs’ core business purpose is transportation and technology. These LSPs – I refer to Flexible Technology Operators – have a high commitment to change and adaptation and a strong readiness to expand the service offering gradually. Rigid Technology Operators’ core business purpose is on transportation and technology. However, they are characterized by low commitment to change and adaptation and low readiness to expand the service offering gradually.

7 Š In search of Hidden Champions: BMPS

254 LSP Score for position in terms of business purpose and change behavior Score: 1 = 2= 3= 4=

Table 57:

A 2

B 3

C 2

D 1

E 1

F 2

G 4

H 2

I 4

J 4

K 2

L 4

M 1

Excellent business purpose and change behavior (Service Operator) Good business purpose and change behavior (System Operator) Acceptable business purpose and change behavior (Flexible Technology Operator) Low business purpose and change behavior (Rigid Technology Operator)

Scoring LSPs’ positions in terms of Business Purpose and change behavior

According to the Business Model Scorecard on Business Purpose, LSPs D, E and M obtain an excellent score (Service Operators). The reason is that these three LSPs manage to provide high-margin services and to adapt their business purpose and service portfolio gradually. LSPs D, E and M escape the commodity trap successfully. LSPs A, C, F, H and K are System Operators that provide high-margin services but lack in adaptation to future successful business models. The core business of the Flexible Technology Operator, LSP B, is low-margin transportation. However, LSP B is successful in managing change and adaptation of the service portfolio for achieving higher margins in future. The Rigid Technology Operators LSPs G, I, J and L are in the commodity trap. The core business of the four LSPs is in offering low-margin transportation services or highly competitive technology services. LSPs G, I, J and L do not indicate required efforts to change and adapt their business purpose for future success. In other words, LSPs G, I, J and L are in danger of future business failure if these LSPs do not adapt to more successful service portfolios, i.e. if they do not change their business purpose adequately. LSP B’s position is less critical than that of the other three as LSP B makes some adaptation efforts. Scoring the Business Purpose shows that Service and System Operators rather than Flexible and Rigid Technology Operators manage to escape the commodity trap. This is an important finding due to the trend towards increasing demand for individualized service offerings. 7.2.4 Customer Favor Striving For the business model component Product/Service I defined the Cherry Picking Hypothesis (Section 5.1.2.1) which states that in the high-margin advanced service business industry incumbents compete with new market entrants. My empirical research demonstrates the competition misperception and the Principle of Customer Favor Striving (Section 6.1.2.1), i.e. both incumbents and new entrants focus on meeting customer needs rather than on defeating competitors.

7 Š In search of Hidden Champions: BMPS

255

The key finding described in Section 6.1.2.1 is that potential Hidden Champions are strong in strategic and expanded value-added services while still offering basic valueadded and operative services by themselves. LSPs have to create and foster a service portfolio which allows very flexible adaptations in their offerings to meet individualized customer needs. In this section I will further analyze my findings and identify possible differences amongst my research cases in terms of the service portfolio. I begin with an overview (Table 58) which I will describe below. LSP Coverage operative services (percentage) Coverage basic value-added services (percentage) Coverage expanded value-added services (percentage) Coverage strategic services (percentage) Scoring operative services

A 100

B 25

C 50

D 50

E 75

F 100

G 100

H 100

I 0

J 75

K 0

L 100

M 75

67

83

50

33

33

100

83

83

0

17

17

67

17

20

20

20

40

40

40

20

80

40

20

0

20

60

33

67

67

33

33

33

33

33

33

0

67

0

0

1

4

3

3

2

1

1

1

4

2

4

1

2

Scoring basic value-added services

2

1

3

3

3

1

1

1

4

4

4

2

4

Scoring expanded value-added services Scoring strategic services

4

4

4

3

3

3

4

2

3

4

4

4

3

3

2

2

3

3

3

3

3

3

4

2

4

4

Value of portfolio strength for Customer Favor Striving Score

17

17

18

18

17

14

16

12

20

22

20

19

20

3

3

2

2

3

4

3

4

1

1

1

2

1

Score:

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 58:

= Customer Favor Striving with excellent deployment of services (value portfolio strength: >=20) = Customer Favor Striving with good deployment of services (value portfolio strength: 18-19) = Customer Favor Striving with acceptable deployment of services (value portfolio strength: 16-17) = Customer Favor Striving with low deployment of services (value portfolio strength: <16)

LSPs’ portfolio strength for Customer Favor Striving

First, I list the percentage coverage of the total number of services59 from each of the four categories of services (light grey rows in Table 58) based on the information from Figure 58 (Section 6.1.2.1). For example, LSP G offers all of the four services in the category operative services, i.e. transportation, transshipment, warehousing as well as freight forwarding, thus 100%. Regarding basic value-added services, LSP G offers customization and other warehouse value-add, transport planning and optimization, selection of transport mode, after-sales services/reverse logistics as well as financial settlement. However, LSP G does not provide the sixth type of service in this category

59 For single services of each category see also question 2.4.1. in the ‘Questionnaire/Interview Manual – Logistics Service Provider’ (Appendix 3).

256

7 Š In search of Hidden Champions: BMPS

which is production value-add and thus covers only roughly 83%. In terms of expanded value-added services LSP G only offers advanced IT services but not inventory management, inventory ownership, assembling, and facility management, that is 20% of the expanded value-added service types. Relating strategic services LSP G provides construction/optimization of the distribution network but not merge in transit as well as integration of global supply chains, equaling 33% of strategic service types only. Then, the coverage of each category was scored in the dark grey rows in Table 58. For operative services I assign the score 1 for a coverage of types of services between 76% to 100%, the score 2 for a coverage of 51% to 75%, the score 3 for a coverage of 26% to 50% and the score 4 for a coverage of 0% to 25%. The scores for basic value-added services are 1 for 81% to 100%, 2 for 51% to 80%, 3 for 26% to 50% and 4 for 0% to 25%. Expanded value-added services are scored as 1 if the coverage is between 81% to 100%, as 2 for 41% to 80%, as 3 for 21% to 40% and as 4 for 0% to 20%. The scores for strategic services are 1 for a coverage of 100%, 2 for a coverage between 67% to 99%, 3 for a coverage between 33% and 66% and 4 for a coverage between 0% to 32%. In the example of LSP G the scores are 1 for operative services, 1 for basic value-added services, 4 for expanded value-added services and 3 for strategic services. Finally, in the black row in Table 58 the scores per LSP were summed up with those of the expanded value-added services and strategic services taken double. The reason is that expanded value-added and strategic services are the ones that allow best adaptation to changing customer needs besides contributing to high margins. The resulting figure is the value of portfolio strength for Customer Favor Striving. The calculation for LSP G’s value is 1+1+4x2+3x2=16. Based on this figures the final scores are assigned. For values of 20 or higher the final score of the Business Model Scorecard is excellent (1), for the values 18 and 19 the score is good (2), for the values 16 and 17 the score is acceptable (3) and for values below 16 the score is low (4). According to this analysis, LSPs I, J, K and M are the LSPs with best prerequisites for excellent deployment of services while LSP F’s and H’s service portfolio are weakest for proactive Customer Favor Striving. Whilst in Table 58 the actual service portfolio of the LSPs is scored, in Table 57 LSPs’

7 Š In search of Hidden Champions: BMPS

257

position relating to gradual conquest of higher margin offerings as well as adaptation behavior is scored. The question is whether there are distinctions between potential Hidden Champions’ actual service portfolio (Actual Offering) and adaptation behavior (Active Deployment). To identify distinctions the scores from the evaluation on the third and fourth hypothesis are compared (Table 59). The distinctions are scored according to the definitions of scores below the table. LSP Active Deployment (Table 57) Actual Offering (Table 58) Score Comparison Score:

A 2 3 2

B 3 3 4

C 2 2 3

D 1 2 1

E 1 3 1

F 2 4 1

G 4 3 3

H 2 4 1

I 4 1 4

J 4 1 4

K 2 1 4

L 4 2 4

M 1 1 1

1 = Excellent

= Excellent in Active Deployment and Actual Offering or Active Deployment scored two levels higher than Actual Offering or Active Deployment scored excellent and one level higher than Actual Offering 2 = Good = Active Deployment scored one level higher than Actual Offering with Active Deployment not scored excellent 3 = Acceptable = Both Active Deployment and Actual Offering scored good or Actual Offering scored one level higher than Active Deployment 4 = Low = No scoring difference between Active Deployment and Actual Offering with both scores acceptable or low or Excellent or good Actual Offering and lower scored Active Deployment or Actual Offering scored two levels higher than Active Deployment

Table 59:

Comparison of the scores for Active Offering and Actual Deployment

The result of this comparison is that there are two groups of LSPs amongst the research cases. One group is active in Customer Favor Striving with a broad scope of service portfolio. This applies in particular to LSPs D, E, F, H, and M, as well as (with minor restrictions) to LSP A. Even if the current service portfolio is weak in terms of high margin offerings these LSPs are active in deploying their actual offering to best meet customer needs. The other group (LSPs B, I, J, K, and L as well as LSPs C and G) does not manage to make best use of the service portfolio. LSPs in this group fail to fully exploit their service offering to the best of Customer Favor Striving. 7.2.5 Customer Proximity In Section 5.1.2.2 the Global Standard Hypothesis, stating that SMEs have locations worldwide and are able to manage global logistics processes, is formulated for analyzing Market as the fifth business model (sub-)component. The analysis resulted in the global standard misperception. Findings are that potential Hidden Champions do not primarily focus on global operations but provide outstanding niche solutions in a specific region where they have a strong presence. Moreover, potential Hidden Champions’ market coverage by own locations or through complementary local

7 Š In search of Hidden Champions: BMPS

258

partnerships is defined by specific customer relationships. I refer to the Principle of Customer Proximity. In Table 60 the market coverage of the research cases is presented. The score is formed based on the quotient of the number of personal locations and the number of continents with personal locations. For example, LSP A has seven personal locations on three continents, resulting in an average of 2.3 locations on one continent. The table shows that only LSP B has an excellent presence with personal locations on its selected continents. LSPs F, H, and I have a good presence while the other nine LSPs have an acceptable or low presence on their selected continents only. LSP Number of personal locations

A 7

B 24

C 6

D 4

E 3

F 22

G 8

H 10

I 20

J 1

K 6

L 4

M 9

Number of continents with personal locations Average number of personal locations per continent Score

3

2

4

3

2

3

3

2

3

1

4

2

3

2.3

12

1.5

1.3

1.5

7.3

2.7

5

6.7

1

1.5

2

3

3

1

4

4

4

2

3

2

2

4

4

4

3

Score:

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 60:

= = = =

Excellent presence with personal locations on a continent (>=10 locations on a continent) Good presence with personal locations on a continent (between 5 and 10 locations on a continent) Acceptable presence with personal locations on a continent (between 2 and 5 locations on a continent) Low presence with personal locations on a continent (< 2 locations on a continent)

LSPs’ presence with personal locations on continents

In the context of increasing customer needs for global operations (Section 2.2.2) I further searched for differences amongst LSPs’ in terms of the relationship between portfolio strength (Table 58) and international presence (Table 60). The reason is that the

business

model

component

Product-Market-Offer

is

comprised

of

the

subcomponents Product/Service and Market (Table 10). Refering to literature in this context, Chatain and Zemsky address suppliers’ dilemma between choosing a broad scope to facilitate the establishment of relationships and choosing a narrow scope to minimize organizational trade-offs. They refer to specialist, generalist and hybrid as the three generic scope strategies (Chatain and Zemsky 2006). Unlike Chatain and Zemsky I do not target hybrids for complexity reasons as I include the dimension Market. As a result, I identified four distinctive types of LSPs when looking at the Product-MarketOffer (Figure 90).

7 Š In search of Hidden Champions: BMPS

International Presence

4

259

J, K C, D, L

E

International Specialists

3

2

International Generalists

M

A, G

I

F, H

Geographic-Focused Specialists

Geographic-Focused Generalists

B

1 1

2

3

4

Portfolio Strength LSP

A

B

C

D

E

F

G

H

I

J

K

L

M

Score portfolio strength (‘Actual Offering’)

3

3

2

2

3

4

3

4

1

1

1

2

1

Score international presence

3

1

4

4

4

2

3

2

2

4

4

4

3

Figure 90: Relationship between portfolio strength and international presence

LSPs have either a broad or narrow international presence. Also, they either have a broad service offering and thus potential Hidden Champions are generalists, or they have a narrow service offering and are thus specialists. If the LSPs are assigned to a matrix, LSPs C, D, J, K, L and M are International Specialists, LSPs A, E and G are International Generalists, LSP I is a Geographic-Focused Specialist and LSPs B, F and H are Geographic-Focused Generalists. In summary, SMEs in logistics are indifferent in terms of portfolio strength and international presence. Obviously, there is no clear success strategy in terms of geographic-focused/international specialists/generalists. 7.2.6 Entrepreneurship For the business model subcomponent Input Factors I defined the Virtual Logistics Hypothesis (Section 5.1.2.3) which states that LSPs’ assets have to be intangible, based on creating customers’ trust in and desire for one-stop-solutions. According to my research results (Section 6.1.2.3), potential Hidden Champions develop their tangible assets based low-margin services into intangible offerings and invest in tangibles for offering high-margin services. I refer to this as the asset misperception which is confirmed by potential Hidden Champions’ acting according to the Principle of Entrepreneurship. The reason for LSPs’ investment strategy is their innovation and

7 Š In search of Hidden Champions: BMPS

260

entrepreneurial striving which results in the provision of innovative individualized customer solutions. For a more detailed analysis of the research cases’ asset ownership, I use road transportation and assembling for a presentation by examples. Regarding the scoring for road transportation a score of 1 is assigned if the LSP does not offer road transportation, a score of 2 is assigned if the LSP uses subcontractors only, a score of 3 is assigned if the LSP uses subcontractors and its own vehicles and the score of 4 is assigned if the LSP uses own vehicles only. The scoring for assembling is 1 if the LSP has its own assembling appliances and the score is 4 if assembling is out of the LSP’s business scope.60 The average of the resulting two scores for road transportation and assembling is the score for the Business Model Scorecard. The scores are rounded, e.g. for 3.5 the value of 4 is used. According to the scoring, LSP A, F, G, H and M are the only five LSPs with good asset ownership which is required for successful provision of advanced services in the sense of innovative individualized customer solutions. LSP Road transportation Assembling Score Score:

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 61:

A 3 1 2

B 2 4 3

C 4 4 4

D 3 3 3

E 4 1 3

F 3 1 2

G 2 1 2

H 3 1 2

I 1 4 3

J 4 4 4

K 1 4 3

L 3 4 4

M 3 1 2

= Excellent asset ownership for advanced services provision = Good asset ownership for advanced services provision = Acceptable asset ownership for advanced services provision = Low asset ownership for advanced services provision

Evaluation of asset ownership applied on road transportation and assembling

At this stage, I link the scoring result from Table 61 with insights on performance gathered from Table 39 in Section 6.1.3.2. If the profitable LSPs do not indicate declining profits in recent years, performance is scored with 1. In the case of declining profits, performance is scored with 2. For all other LSPs that provided no insights on performance the result situation is scored 3.

60 There is no scoring in-between (score 2 or 3) as the research cases either have their own assembling appliances or they do not consider assembling as part of their business scope.

Score of Result’s Situation

7 Š In search of Hidden Champions: BMPS

3

261

A, F, H, M D E, I, K

C

G

B

L

2

3

4

2

1 1

J

Score of Asset Ownership’s Situation

Figure 91: Relationship between asset ownership and performance

Due to logistical SMEs reservation in terms of publishing results, insights could be gathered from only seven LSPs. Three of them – LSPs G, B and L – reported profits without indication of declining profits in recent years. Their scores of the asset ownership’s situation differs from 2 to 4. According to the research results from Figure 63, LSPs B and L are asset-indifferent and LSP G is asset-intensive. The other four – LSPs E, I, K and C – have had a declining profit situation in recent years. Their scores of the asset ownership’s situation are acceptable or low. LSPs C, E and K are assetindifferent and LSP I is non-asset based (Figure 63). As far as the gap in performance data allows, the research cases indicate that profitable LSPs have acceptable or low scores of the asset ownership’s situation (circle in Figure 91) rather than excellent or good scores in the asset ownerhip’s situation (dotted circle in Figure 91). Due to poor data quality, the conclusion, that poorer scores in the asset ownership’s situation are connected with declining profits can not be proven and would be inadmissible. 7.2.7 Simple and Fast Decision Making Research and analysis on the seventh business model (sub-)component concentrates on organizational issues at LSPs. In Section 5.1.2.4 I present the Complexity Hypothesis according to which SMEs in logistics struggle in adapting their organization to respond flexibly to customer needs. According to my findings (Section 6.1.2.4), potential Hidden Champions prefer flat organizations as they allow fast decisions and direct

7 Š In search of Hidden Champions: BMPS

262

access at every organizational level for customers. I refer to the prevalence of complex internal settings misperception and the Principle of Simple and Fast Decision Making. Scoring the business model subcomponent Organization is based on qualitative statements from the interview partners. The assignment to the four scores is made according to the statements’ most equivalent content. Organizations are scored 1 if the organization is flat and allows direct communication. For the score of 2 the LSP’s management is five percent of the employees at the maximum. LSPs with many divisions and many subsidiaries are scored 3, and LSPs having difficulties with the matrix organization or claiming that they have weaknesses with the decentralized organization are scored 4. The result is shown in Table 62. According to this scoring, the organizations of LSPs J, K, L and M are excellent. LSP A

x x

B

x

C

x x

D E F G H

I J K L M Score:

x x x x x x x x x x x x x x x

Exemplary statements regarding Organization (reporting relationships, layers of management, span of control, etc.) Only three areas of responsibility (sales/branch offices/quality, logistics, finance/ holdings/personnel) Customer I claims that structures for decisions are not clear and the executive board members hinder the implementation of special projects Company is too large for collaboration with small customers who get lost in the organization Organization is broad rather than focused Customers specially value the separate consulting department that allows discussing individualized needs Many difficulties with the matrix organization Partly out-of-place managers Adaptations and connectivity to customers IT systems Challenges in integration of several subsidiaries Country organization implies several challenges Only four to five percent of total number of employees are managers Organizational challenges resulting from aggressive acquisition strategy (second most active acquirer in the national transport and logistics market) Dealing with the challenges of the matrix organization Decentralized organization is considered as weakness of the company Organization form is inefficient Flat organization Organization is aligned to single customer needs Flat organization with four levels at the maximum Flat organization Direct communication with customers

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 62:

= Flat organization allowing easy decision processes and easy access for customers = Organization that still allows easy decision processes and good access for customers = Organization deals with minor hurdles = Organization is struggling with many hurdles

Scoring LSPs’ organizations

Score 2

3

2 4 3 3 2 4

4 1 1 1 1

7 Š In search of Hidden Champions: BMPS

263

Research regarding the Complexity Hypothesis includes the validation or refutation of whether an enhanced geographic scope requires adequate organizational capabilities and whether meeting the demand for a broader service scope results in higher internal complexity. Starting from this, LSPs’ scores in terms of geographic and product/service scopes are compared with the scores relating to organization (Table 63). LSP Score portfolio strength for Customer Favor Striving (7.2.4) Score presence with personal locations on continents (7.2.5) Score organizations (7.2.7)

Table 63:

A 3

B 3

C 2

D 2

E 3

F 4

G 3

H 4

I 1

J 1

K 1

L 2

M 1

3

1

4

4

4

2

3

2

2

4

4

4

3

2

3

2

4

3

3

2

4

4

1

1

1

1

Comparison of the scores for Product-Market-Offer and Organization

Table 63 leads to following four outcomes – of which three apply to the research cases – that are presented in Figure 92. • If the score for Organization is two or three points higher than that for Product/Service, i.e. if Organization is scored excellent or good and Product/Service is scored acceptable or low only, then I speak in terms of Organizational Advantage for Product/Service. This outcome does not apply to the research cases. • If the score for Organization is two or three points lower than for Product/Service, than I speak of in terms of Organizational Deficit for Product/Service. According to this analysis, LSPs D and I are struggling. In other words, D’s and I’s score is excellent or good in terms Product/Service but organizational hurdles hinder from full exploitation of their outstanding offering. • If the score for Organization is two or three points higher than for Market, i.e. if Organization is scored excellent or good and Market is scored acceptable or low only, then I speak in terms of Organizational Advantage for Market. This applies to LSPs C, J, K, L and M. • If the score for Organization is two or three points lower than for Market, then I speak in terms of Organizational Deficit for Market. At LSPs B, H and I organizational hurdles hinder them from taking full advantage of an outstanding geographic coverage.

7 Š In search of Hidden Champions: BMPS

264

Legend:

SCORE

4 3 2 1 A

B

C

D

E

F

G

H

I

J

K

L

M

Product/Service Market Organization Organizational Advantage for Market Organizational Deficit for Market Organizational Deficit for Product/Service

LSP Figure 92: Organizational Advantage and Organizational Deficit for meeting demands regarding Product/Service and Market

Overall, the comparison shows that LSPs B, D, H and I have an excellent or good product/service and/or market offer but they might struggle in exploiting its competitive advantage in full due to organizational hurdles. The comparison further indicates that LSPs C, J, K, L and M have an excellent or good organization that allows an approach to a more successful product/service and market strategy. 7.2.8 Open Communication and Collaboration Empirical research regarding the business model subcomponent Communication is about searching for validation or refutation of the Information Processing Hypothesis (Section 5.1.2.5). This hypothesis states that smaller LSPs whose customers are usually similar in size are typically reserved in terms of communicating company data whereas effective and regular qualitative information exchange and processing is offered by logistical LSEs. Research results in the reservation expectation misperception (Section 6.1.2.5). According to findings, potential Hidden Champions apply the Principle of Open Communication and Collaboration. They manage to create customers’ trust which is the key prerequisite for long-term business relationships. At this stage, the role of communication for business success is further analyzed by scoring the information exchange policies of the research cases. In addition to the information from Table 35 and Table 36 in Section 6.1.2.5 I use qualitative statements from the interview partners as indicators for the scores. An assignment is made according to the statements’ most equivalent content. LSPs achieve a score of 1 if the LSP lives key interaction principles, keeps an open dialogue or brings conflicts out into

7 Š In search of Hidden Champions: BMPS

265

the open. Score 2 equals to interactive decision making with frequent and regular personal contacts. If statements indicate close contacts in general only, a score of 3 is assigned. LSPs with communication policies restricted to give necessary integration are assigned a score of 4. According to this scoring, the information exchange policies of LSPs A, C, G, H and I are scored excellent (Table 64). LSP

Exemplary statements on information exchange

Score

A

x It is the LSP’s policy, to provide required data and services at any time at every location to the respective responsible employee x Interaction with customers is a company value x Publication of a strategy paper for stakeholders x Access to sales figures at any time through the communication, information and service system x Creation of one team consisting of LSP’s and customer’s employees x No regular contact to customers but easy contact if demanded x Conversation with the customer takes place twice per month if services are provided at the customer’s location x Conversation with the customer takes place once per month if services are provided at the LSP’s location x Annual meetings with the customer for reviewing past collaboration and fixing future collaboration x Standard offering for customers is the warehouse management system that steers data exchange between customer and LSP centrally x Philosophy is living open dialogues for customer’s trust and confidence x Interaction with customers as key principle x Open dialogues x Conflicts are brought out into the open x Value statement for open and clear communication x Advocating open dialogues x Proactive communication with customers x Daily contact of the managing director to companies’ managers and their inclusion into decision processes x Transparency through IT connectivity x Communication is restricted to necessary integration x Assignment of dedicated contact persons to each customer x Personal meetings of the owner with key customers

1

B C D E

F G H

I

J

K L M Score:

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 64:

3 1 3 2

3 1 1

1

2

4 3 2

= Interaction, open dialogue, active solving of conflicts = Interactive decision making, frequent and regular personal contacts = In general close contacts = Necessary integration only

Scoring information exchange

At this stage, a final comment on the link between information exchange behavior and performance is made. As presented in Table 39 in Section 6.1.3.2, LSPs B, G and L have had positive results without indicating decreases in recent years. While LSPs B’s and L’s information exchange is scored acceptable, only LSP G is excellent in communication. In contrast, LSPs C, E, and I have excellent or good scores in information exchange but their profits have declined in recent years. LSP K as the

266

7 Š In search of Hidden Champions: BMPS

fourth LSP indicating declining profits has a low score on the business model subcomponent Communication. However, the low willingness of LSPs to indicate data on results does not allow a final statement about a clear indication of a relationship between communication and performance. 7.2.9 Strategic Self-Sufficiency In Section 5.1.2.6 the Complementarity and Reliability Hypothesis was formulated for empirical research on the business model component Relationships. It states that LSPs have a strong network with other LSPs which is characterized by reliability in collaboration. Assets and services are complementary and provide mutually beneficial cooperation opportunities. The key finding which is presented in Section 6.1.2.6 is that potential Hidden Champions have a strong network of partners but they also secure their independence by own investments. By doing so, a reliable and outstanding service provision can be guaranteed at any time. I refer to the partner relationship misperception and the Principle of Strategic Self-Sufficiency. Based on this research outcome the score on the business model component Relationships consists of the scoring for networking and independence. It is based on the information from Figure 70 in Section 6.1.2.6. Networking is scored based on three indicators for LSPs cooperation behavior. These indicators are ‘Partners’, ‘Network’ as well as ‘Cooperations for market entry’ (not being subject to failure). Independence is scored based on Figure 70’s cooperation behavior indicators ‘Preference on own investments and acquisitions’, ‘Acquisition of former partners’ as well as ‘Customers direct partnering and networking’ (not being applicable). The score is 1 if three of the indicators apply, 2 if two of the indicators apply and 3 if only one indicator applies. The score value of 4 is given only if none of the indicators was stated. The average of scoring networking and independence is the final value for the Business Model Scorecard on the component Relationship with figures being rounded, e.g. for 2.5 the value is 3. The proceeding in scoring is shown through the example of LSP F. Relating to networking, LSP F stated making use of partners and not having had the experience that cooperations are subject to failure. Thus, two of the three indicators apply, which is a score of 2 for networking. Relating to independence, LSP F prefers its own investment

7 Š In search of Hidden Champions: BMPS

267

and acquisitions. LSP F has acquired former partners and did not confirm on customers direct partnering and networking. Thus, LSP F’s score is 1 as three of the indicators for independence apply. The sum of the scores for networking and independence is three, which is divided by two and due to rounding the final score is 2. As a result, a good relation between a strong network and independence can be found at LSPs D, E, F, I, J, L and M (Table 65). LSP Scoring networking Scoring independence Score Score:

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 65:

A 3 2 3

B 2 3 3

C 3 2 3

D 1 3 2

E 1 3 2

F 2 1 2

G 2 3 3

H 2 3 3

I 2 2 2

J 1 3 2

K 3 4 4

L 1 3 2

M 1 3 2

= Excellent relation of strong network and independence = Good relation of strong network and independence = Acceptable relation of strong network and independence = Weak relation of strong network and independence

Scoring the relation between networking and independence

An interesting point is whether there is a relationship between the scores for networking and the scoring on the business model component Product-Market-Offer. Therefore, I compare LSPs’ portfolio strength for Customer Favor Striving, LSPs’ presence with personal locations on continents and networking. The scores are shown in Table 66 and the comparisons are also shown in Figure 93. LSP

A

B

C

D

E

F

G

H

I

J

K

L

M

Score portfolio strength (Table 58)

3

3

2

2

3

4

3

4

1

1

1

2

1

Score presence with personal locations on continents (Table 60) Score networking (Table 65)

3

1

4

4

4

2

3

2

2

4

4

4

3

3

2

3

1

1

2

2

2

2

1

3

1

1

Table 66:

Comparison of scores for networking and Product-Market-Offer

7 Š In search of Hidden Champions: BMPS

268

SCORE

4

Legend: Product/Service Market Networking Product/Service Network Redundancy Market Network Redundancy Product/Service Self-Sufficiency

3 2 1 A

B

C

D

E

F

G

H

I

J

K

L

M

LSP Figure 93: Redundancy and Self-Sufficiency of Product-Market-Offer in the context of networking

The figure shows that LSPs D, E, J, L and M have a Market Network Redundancy in the sense that although these LSPs have an excellent network they are not able to score excellent or good in market coverage. Once more this view confirms the finding from Section 6.1.2.6 on potential Hidden Champions’ Principle of Strategic Self-Sufficiency, i.e. the partner relationship misperception. LSPs E, F, and H have excellent or good networking scores but fail in transformation to Product/Service in which their scores are acceptable or low (Product/Service Network Redundancy). Only LSP K manages to have an excellent Product/Service offering with acceptable networking. LSP K is selfsufficient relating to Product/Service (Product/Service Self-Sufficiency). In a similar way to the above comparison, the relationship between scores for independence and the scoring on the business model component Product-Market-Offer is in focus (Table 67 and Figure 94). LSP Score portfolio strength (Table 58)

A 3

B 3

C 2

D 2

E 3

F 4

G 3

H 4

I 1

J 1

K 1

L 2

M 1

Score presence with personal locations on continents (Table 60) Score independence (Table 65)

3

1

4

4

4

2

3

2

2

4

4

4

3

2

3

2

3

3

1

3

3

2

3

4

3

3

Table 67:

Comparison of scores for independence and Product-Market-Offer

7 Š In search of Hidden Champions: BMPS

269

Legend:

SCORE

4 3 2 1 A

B

C

D

E

F

G

H

I

J

K

L

M

Product/Service Market Independence Product/Service Independence Overextension Market Independence Overextension Product/Service Network Advantage Market Network Advantage

LSP Figure 94: Independence Overextension and Network Advantage of Product-Market-Offer in the context of independence

Figure 94 shows that LSPs J, K and M have a network advantage in terms of Product/Service (Product/Service Network Advantage) and LSP B in terms of market coverage (Market Network Advantage). At LSP C networking would be useful for better market coverage, i.e. LSP C is characterized by Market Independence Overextension. By networking LSP F could improve Product/Service offerings (Product/Service Independence Overextension). By summarizing the above considerations three groups of potential Hidden Champions relating to the business model components Product-Market-Offer and Relationships can be identified (Figure 95). First, there are the Networkers (LSPs B and C), second, the Individualists (LSPs D, E, H and L) and third, the Matchers (LSPs F, J, K and M) that all approach both networking and independence. This summary shows that amongst all research cases only LSPs B and C are true networkers and thus the finding from Section 6.1.2.6 regarding the partner relationship misperception is reinforced.

7 Š In search of Hidden Champions: BMPS

270

LSP

Networking

Issue

A

B

C

D

E

F

G

H

I

J

K

L

M

Product/Service Network Redundancy Market Network Redundancy Product/Service Self-Sufficiency

Independence

Product/Service Independence Overextension Market Independence Overextension Product/Service Network Advantage Market Network Advantage

Legend:

Networker: LSPs B and C Individualist: LSPs D, E, H and L Matcher: LSPs F, J, K and M No statement possible: LSPs A, G and I

Figure 95: Three groups of actors in terms of the business model components Product-Market-Offer and Relationships

7.2.10 Mutual Trust For the business model component Exchange Mechanism the Rules Hypothesis is formulated (Section 5.1.2.7). According to this hypothesis, exactly defined rules and clear contracts are the norm and the most effective way to guarantee effective performance. Mutual trust is enhanced through systems’ integration and transparency. My research findings which are presented in Section 6.1.2.7 validate this hypothesis. I refer to the Principle of Mutual Trust for the prevailance of the formal process of defining rules and norms as basis for trust. The research cases’ behavior in terms of Exchange Mechanism and visibility is scored based on statements from the interview partners which are given in part 2.10 in the ‘Questionnaire/Interview Manual – Logistics Service Provider’. Due to its qualitative aspect scoring is difficult and mainly based on personal evaluation from insights gathered during the visits at the LSPs’ sites, from interviews and from published information. The assignments are made according to the statements’ best fit with indicators defined through the examples. Hence, a score of 1 is assigned for total customer integration and full visibility. The LSP’s Exchange Mechanism is scored 2 if transparency is ensured in all processes. A score of 3 is assigned if visibility is secured through interactive contact and limited to relevant areas. Score 4 applies if only information technology is deployed for information exchange or possibilities for

7 Š In search of Hidden Champions: BMPS

271

personal exchange are given. As Table 68 shows, Exchange Mechanism and visibility of LSPs A, D and E are excellent and good at LSPs B, C, I, K and M. LSP A B C D E F G H I J K L M Score:

Examplary description of information exchange

Score

x x x x x x x x x x x x x x x

1

Goal is the integration of customers into platform concepts Transparency into all processes Broad scope in information technology Creation of visibility across the supply chain Visibility for customers from anywhere in the world through latest technology Common SAP solution for data exchange between customers and LSP ‘Open book’ policy Necessary data exchange through WMS solution Honest communication of necessary information Reference to EDI only Interactive contact with customers One division with focus on creating transparency and processing real-time information Universal tracking and tracing Use of centralized and decentralized systems End-to-end visibility of all material and finished products moving within a supply/ distribution chain x Assignment of dedicated contact persons to each customer x Regular performance reports provide clear insights into all activities and disclose possibilities for further improvements 1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 68:

2 2 1 1 4 4 3 2 4 2 4 2

= Excellent in Exchange Mechanism/visibility (total customer integration, full visibility) = Good in Exchange Mechanism/visibility (full transparency into processes) = Acceptable in Exchange Mechanism/visibility (visibility to relevant areas through interactive contact) = Low in Exchange Mechanism/visibility (basic information technology, personal exchange)

Scoring Exchange Mechanism and visibility

Throughout this study the importance of trust is emphasized. For example, trust is part of the Virtual Logistics Hypothesis in Section 5.1.2.3. Most importantly, trust is considered as a key element for Total Integration and thus it is the core issue for the Principle of Incrementalism in Section 6.1.1.1 and for the Principle of Customer Favor Striving in Section 6.1.2.1 which is applied with regard to the business model subcomponent Product/Service. Now the question is whether there is a relationship between Exchange Mechanism and Product/Service (Table 69).

LSP Score Exchange Mechanism (Table 68) Score portfolio strength (Table 58) Exchange Mechanism scored higher than Product/Service Exchange Mechanism scored lower than Product/Service Exchange Mechanism and Product/Service with identical score

Table 69:

A 1

B 2

C 2

D 1

E 1

F 4

G 4

H 3

I 2

J 4

K 2

L 4

M 2

3

3

2

2

3

4

3

4

1

1

1

2

1

Comparison of the scores for Exchange Mechanism and Product/Service

272

7 Š In search of Hidden Champions: BMPS

The outcome is indifferent as there is one group of LSPs that have a higher score on Exchange Mechanism than on Product/Service (LSPs A, B, D, E, and H). The other group (LSPs G, I, J, K, L and M) has lower scores in Exchange Mechanism despite having excellent (LSPs I, J, K and M) or good (LSP L) scores on Product/Service. Four of the seven LSPs which have managed to achieve profits in recent years (B, C, E, G, I, K and L, Table 39) belong to the latter group with Exchange Mechanism scoring lower than Product/Service (LSPs G, I, K and L). Although due to data restrictions in terms of publishing performance figures an overall valid statement is not possible, there is the tendency to refute a relationship between an excellent or a good score in Exchange Mechanism and an excellent or a good score in Product/Service and excellent or good performance. 7.2.11 Niche Sovereignty For the eleventh business model (sub-)component, Performance Measurements, the Significant Turnover Hypothesis was formulated (Section 5.1.3.1). Total turnover is used as possible indicator for market leadership. The outcome of my empirical research (Section 6.1.3.1) is that potential Hidden Champions remain hidden in terms of market leadership measured in terms of turnover (market leadership misperception) but they are characterized by niche sovereignty (Principle of Niche Sovereignty). Potential Hidden Champions define their niches either by concentration on a specific sector, by creation of a new industry segment through innovative solutions, by focusing on a specific mode of transportation or specific solutions, or they define one specific key customer as their niche. Within the targeted niche successful LSPs manage to increase turnover in the course of time and to foster their excellent position in the niche. The Business Model Scorecard on the component Performance Measurements is about scoring the development of turnover at the research cases. The score is 1 if turnover increases in the course of time. A score of 2 is assigned if the LSP manages a successful turnaround, i.e. increases turnover again after a decrease. If the turnover figure is not available or not applicable for comparison with other LSPs, score 3 is applied. For decrease of turnover in the course of time the LSP is scored 4 on the business model component Performance Measurements. Figure 72 from Section 6.1.3.1 is the basis for scoring. For example, the turnover growth of LSP A is indicated as positive for 2004 over 2003 by the peach lozenge in Figure 72 while the turnaround in turnover

7 Š In search of Hidden Champions: BMPS

273

development at LSP E is shown by the orange rectangle that was below 0 in 2003 and above 20% in 2004. As Table 70 shows, LSPs A, B, C, D, G, H, and M have an excellent turnover development. LSPs E and F have managed to successfully cope with a turnaround in turnover development, thus scoring 2. From the research cases only LSPs J, K and L with acceptable scores as well as LSP I with a low score do not fulfill the prerequisite for a Hidden Champion in terms of the business model component Peformance Measurements. LSP Score Score:

A 1 1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 70:

B 1

C 1

D 1

E 2

F 2

G 1

H 1

I 4

J 3

K 3

L 3

M 1

= Positive development of turnover = Successful turnaround in turnover development = Turnover remains hidden or is not applicable for comparisons = Negative development of turnover

Scoring development of turnover (Based on information from Figure 72)

Now the question has to be answered whether there is a possible relationship between turnover development and adaptability in Business Purpose as well as Customer Favor Striving. Therefore, the scores of the three related business model (sub-)components Business Purpose, Product/Service and Performance Measurements are compared in Table 71 and in Figure 96. LSP Score Business Purpose (7.2.3) Score Product/Service (7.2.4) Score Performance Measurements (Table 70)

Table 71:

A 2 3 1

B 3 3 1

C 2 2 1

D 1 2 1

E 1 3 2

F 2 4 2

G 4 3 1

H 2 4 1

I 4 1 4

J 4 1 3

K 2 1 3

Comparison of the scores for the components Business Purpose, Product/Service and Performance Measurements

L 4 2 3

M 1 1 1

7 Š In search of Hidden Champions: BMPS

274

Legend:

SCORE

4 3 2 1 A

B

C

D

E

F

G LSP

H

I

J

K

L

M

Turnover development Adaptability in business purpose Customer favor striving Strong relationship with both parameters Strong or medium relationship with both parameters Strong or medium with one and low relationship with the other parameter

Figure 96: Relationship between turnover development and adaptability in Business Purpose as well as Customer Favor Striving

The comparison shows that at LSPs C, D, E, L and M turnover development strongly correlates with adaptability in Business Purpose for better meeting customer needs and with Customer Favor Striving. Here the scores differ only slightly, i.e. by one level at the most. Still for LSPs A, B, F, J and K there is a strong (scores differ one level only) or medium (scores differ two levels) correlation of turnover development with the two components. At LSPs G, H and I at least one of the two compared parameters, i.e. adaptability in Business Purpose and Customer Favor Striving, does not correlate with the score on turnover development. As a result, however, with proof from ten of the thirteen research cases, there is a correlation between turnover development and the LSPs’ approach in adapting their Business Purpose to meeting customer needs. 7.2.12 Customer Granularity The Risk Aversion Hypothesis in Section 5.1.3.2 – which is formulated regarding the business model component Rewards – states, that smaller LSPs are more risk averse due to size disadvantages and therefore struggle in earning high margins. However, my research finding is that potential Hidden Champions take risks by focusing on a few strong and established key customers from one or several sectors. This approach is risky for logistical SMEs as it includes making heavy investments to offer individualized customer solutions. With this approach they manage to increase turnover and profits in the course of time as reward for their successful business relationships (Section 6.1.3.2). I refer to the willingness to take risks misperception and the Principle of Customer Granularity regarding this research finding.

7 Š In search of Hidden Champions: BMPS

275

Now the profit development of the research cases is scored in Table 72. A score of 1 is assigned to LSPs that have succeeded in increasing profits in the course of time. LSPs that are still profitable but also reported decreasing business results are scored with 2. If the LSP is constrained in publishing any figures of its business results the score is 3 and for unprofitable LSPs a score of 4 is assigned. Table 39 in Section 6.1.3.2 is the basis for scoring. LSP Score Score:

A 3 1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 72:

B 1

C 2

D 3

E 2

F 3

G 1

H 3

I 2

J 3

K 2

L 1

M 3

= Profitable LSP = Profitable LSP but also with decreasing profits in the course of time = LSP not disposed to provide result figures = Unprofitable LSP

Scoring business result

According to the scoring and as far as data are available, LSPs B, G and L are most successful in terms of the business model component Rewards as they have managed to raise profits increasingly in the course of time. LSPs C, E, I and K are also profitable but they have also had to deal with profit decreases. All other LSPs have not been willing to provide any information about their business result. 7.2.13 Conclusions on scoring the micro dimensions In the above sections (7.2.1 to 7.2.12) the twelve dimensions of a business model’s micro layer are scored. The resulting Business Model Scorecard for the micro layer is shown in Table 73. Business model’s micro dimension Score Value Propostion (Table 53) Score Target Group (Table 54) Score Business Purpose (Table 57) Score Product/Service (Table 58) Score Market (Table 60) Score Input Factors (Table 61) Score Organization (Table 62) Score Communication (Table 64) Score Relationships (Table 65) Score Exchange Mechanism (Table 68) Score Performance Measurements (Table 70) Score Rewards (Table 72)

Table 73:

A 3 4 2 3 3 2 2 1 3 1 1 3

B 4 2 3 3 1 3 3 3 3 2 1 1

Business Model Scorecard for the micro layer

C 2 3 2 2 4 4 2 1 3 2 1 2

D 1 3 1 2 4 3 4 3 2 1 1 3

E 3 1 1 3 4 3 3 2 2 1 2 2

F 2 3 2 4 2 2 3 3 2 4 2 3

LSP G 3 1 4 3 3 2 2 1 3 4 1 1

H 3 2 2 4 2 2 4 1 3 3 1 3

I 4 3 4 1 2 3 4 1 2 2 4 2

J 4 1 4 1 4 4 1 2 2 4 3 3

K 2 4 2 1 4 3 1 4 4 2 3 2

L 2 4 4 2 4 4 1 3 2 4 3 1

M 2 2 1 1 3 2 1 2 2 2 1 3

276

7 Š In search of Hidden Champions: BMPS

At this stage I would like to address three issues. First, while scoring is based on the empirical research results that are presented in sections 6.1.1, 6.1.2 and 6.1.3, it is sometimes difficult to carry out due to the weight of qualitative statements. For example, a finding of my research on the business model component Value Proposition is, that customer mobilization through the LSP which is a single source supplier for a part of its customer’s supply chain, is decisive to the LSP having become irreplaceable to customers. However, customer mobilization is a qualitative statement that is very difficult to score. Nevertheless, scoring has been done according to all information provided and insights gained during the interviews and visits at the research cases’ sites. These difficulties have to be dealt with on several dimensions but are solved by defining scoring rules as precise and adequately as possible. Second, while scoring the micro layer of the business model, Total Integration as the key issue and origin for this research study had to be kept in focus. For this reaon scoring single dimensions is no longer sufficient and further comparisons have to be made and relationships amongst dimensions have to be derived. These comparisons and relationships are chosen and conducted due to their relevancy for Total Integration. An overview of them is presented in Table 74.

7 Š In search of Hidden Champions: BMPS Business model’s micro dimension Value Proposition Target Group Business Purpose Product/Service

Market

Input Factors Organization

Communication Relationships

Exchange Mechanism

Performance Measurements

Rewards

Table 74:

Comparison / Relationship

277 Result

[No comparisons are made / No relationships are derived] [No comparisons are made / No relationships are derived] [No comparisons are made / No relationships are derived] Comparison of the scores for Active Indifferent behavior at the research cases – Offering and Actual Deployment two groups with either: x Deploying the actual offering for meeting customer needs best x Not making best use of the service portfolio Relationship between portfolio Indifferent behavior at the research cases – strength and international presence four groups: x International Specialists x International Generalists x Geographic-Focused Specialists x Geographic-Focused Generalists Relationship between asset Profitable LSPs have rather acceptable or low ownership and performance scores of the asset ownership’s situation Comparison of the scores for Indifferent behavior at the research cases – Product-Market-Offer and three outcomes: Organization x Organizational Deficit for Product/Service x Organizational Advantage for Market x Organizational Deficit for Market [No comparisons are made / No relationships are derived] Comparison of scores for networking Indifferent behavior at the research cases – and Product-Market-Offer three outcomes: x Market Network Redundancy x Product/Service Network Redundancy x Product/Service Self-Sufficiency Comparison of scores for Indifferent behavior at the research cases – independence and Product-Marketfour outcomes: Offer x Product/Service Network Advantage x Market Network Advantage x Market Independence Overextension x Product/Service Independence Overextension Comparison of the scores for Indifferent behavior at the research cases – Exchange Mechanism and two groups with: Product/Service x Exchange Mechanism scored higher than Product/Service x Exchange Mechanism scored lower than Product/Service Comparison of the scores for the Indifferent behavior at the research cases – components Business Purpose, four groups: Product/Service and Performance x Strong relationship with both parameters Measurements x Strong or medium relationship with both parameters x Strong or medium with one or low relationship with the other parameter [No comparisons are made / No relationships are derived]

Overview of conducted comparisons and relationships amongst selected micro dimensions

Table 74 shows that there are tensions every LSP faces when aiming to become a Total Integration provider. These tensions are dealt with indifferently in the research cases. In this context, Dodd and Favaro also identified three tensions every company independent

278

7 Š In search of Hidden Champions: BMPS

of industry faces, which are Profitability Versus Growth, Short Term Versus Long Term and Whole Versus Parts (Dodd and Favaro 2006, pp. 62 et seqq.). The authors’ key finding is that if companies ignore the common bond which underlies a tension, good performance on one objective will inevitably lead to a poor performance on the other objective. According to the authors, customer benefit is the common bond between profitability and growth, sustainable earnings between short-term and long-term, and diagonal assets between whole and parts (Dodd and Favaro 2006, pp. 71-74). The conclusion I draw from my scoring of the business model’s micro layer, and summarizing key objectives for Total Integration, is that LSPs which aim at becoming such a provider also face three specific tensions. I refer to the first tension as Scope Versus Focus, which primarily tangents LSPs’ Product-Market-Offer. Independence Versus Networking is the second tension which is for example implied in managing the trade-off between asset ownerhip and outsourcing services to other LSPs. Finally, it is the tension between Performance Versus Sustainability that LSPs have to deal with. This is of particular interest as the industry is traditionally characterized by low margins and strong activities regarding mergers and acquisitions. In conclusion, the comparisons and relationships as summarized in Table 74 disclose a strong indifference in the research cases’ behavior in managing the tensions characteristic for Total Integration. Analyzing the micro layer of a business model does not result in an unique perspective of the research cases’ strengthening of common bonds between objectives. Therefore, there is a need to look at the macro layer and to conduct additional scoring and evaluations. 7.3 Scoring performance along the macro dimensions While in Section 7.2 the micro dimensions are scored, in Section 7.3 scoring of the macro dimensions is conducted, i.e. relating the overall business model of the LSP and the customer. Again each sub-section starts with a summary containing the hypothesis, misperception and business principle. The weights used for scoring the macro dimensions correspond to the weights used for micro dimensions’ scoring as defined in Table 51.

7 Š In search of Hidden Champions: BMPS

279

7.3.1 Gradual Service Extension, Role Complementarity, and Continuous Innovation The first hypothesis on the macro layer is formulated regarding the legal relationship between the LSP and the customer. In the focus of the hypothesis are the business models of both parties covering the question of how the business model of the LSP fits with the business model of the customer (Figure 27). I refer to ‘macro’ as the legal relationship with the customer as a third, i.e. external party, is involved in the analysis. It does not primarily focus on dimensions inside the LSP but rather includes the ‘Function of Customer’ for Total Integration. In Section 5.2.1 failure of Integrated Supply Network Management is the given reason in the Customer Centricity Hypothesis which states that LSPs are self-centred in behavior and focus too strongly on their own requirements while neglecting customers’ needs. It further states that LSPs simply underestimate the potential full value of customer knowledge and service, and do not develop the relationship required for business success. However, empirical research resulted in the insight of the misperception relating to lacking attention to customers. For arguments I identified in Section 6.3.1 the business principles of Gradual Service Extension (confidence and excellent performance increase customers’ readiness to outsource additional services gradually

while

they

actively

contribute

to

logistics

innovations),

Role

Complementarity (successful LSP-customer relationships are characterized by balancing responsibility for the customer’s supply chain, i.e. the relationship is characterized by clarity in complementary roles with a defined part of the supply chain for the LSP and the overall lead at the customer) and Continuous Innovation (potential Hidden Champions are innovators rather than commodity providers or generalists). First, the scoring related to the LSP case studies’ behavior in terms of Gradual Service Extension is carried out. LSPs are assigned a score of 1 if their key strength is adapting to customers’ needs and growing with their customers from the beginning of a customer relationship, proven and intensively demonstrated over years. A score of 2 is given if LSPs make strong efforts in extending their service offerings, not from the beginning but from a later stage of their relationships to customers. LSPs with limited business activities in extending service offerings, in particular with focus on basic value-added services, are scored with 3. If LSPs do not demonstrate any efforts in Gradual Service

7 Š In search of Hidden Champions: BMPS

280

Extension they are assigned a score of 4. The assignment of the LSPs is basically made according to examples and the overall impression gathered during the in-depth empirical research of the selected LSPs (Table 75). LSP

Representative examples for behavior in terms of Gradual Service Extension

Score

A

Relationship with a tractor manufacturer for almost twenty years; in the beginning the key service was only to deliver tractors to dealers; later on also inventing and delivering retrofitting services for all types of tractors as well as dispatching accessories to the dealers Philosophy to develop from an LSP with customer-specific SCM solutions to an LSP with customer-specific Customer Relationship Management (CRM) solutions, i.e. aiming for customer retention through value-added services like financial services Partner for a large brewery in the United Kingdom for ten years; apart from transportation only operates and manages a distribution center One of the core strengths is an ongoing adaption of the service offering to customer needs Strong efforts to grow with customers; for example for a writing tools producer the LSP prints text onto pencils, fills ink into pens or adds tags and wrapping Partner for a liquor producer for close to ten years; key service has been transportation of bottles but increasingly inclusion of the LSP into the production process; for example adding CDs to bottles for special Christmas sales besides transportation Transportation partner for a Swiss engineering company; value-added services have been supplemented but target only the distribution offering Partner for the chemical industry for more than thirty years; while in the beginning transportation was the single service, provided contract logistics offerings have been supplemented in the course of time LSP suffers from short contract duration with customers, i.e. investments in e.g. automation for service scope extension are considered to be not lucrative Core business has been to manage a transportation network only that enhances the geographic reach for its partners Most significant intensity for service extension by developing from an external partner to an internal full-service LSP in the course of time Strong concentration on the core business of transportation and movement services but with some efforts for service extension by basic value-added service offerings like packing services Strategy to grow with the customers; for example start of a relationship with a premium bicycle producer ten years ago with offering transportation services only; three years later warehousing services were added; currently the customer does not expect to further increase the outsourcing spectrum

2

B

C D E F

G H

I J K L

M

Score:

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 75:

3

3 1 1 2

3 2

4 4 1 3

3

= Overall excellent behavior in Gradual Service Extension = Overall good behavior in Gradual Service Extension = Overall acceptable behavior in Gradual Service Extension = Overall weak behavior in Gradual Service Extension

Scoring Gradual Service Extension

Empirical research provides the insights that LSPs D, E and K are outstanding in terms of adapting their service portfolios to customer requirements. In the course of their relationships to customers LSPs A, F and H have also extended their service portfolios. While LSPs I and J neglect portfolio revisions better meet customer needs, the remaining LSPs’ (B, C, G, L and M) efforts in gradual service extension are limited.

7 Š In search of Hidden Champions: BMPS

281

In a next step scoring is conducted for the state of Role Complementarity. Table 76 provides examples which are representative of the overall state of LSPs’ relationships to their customers. In general, an assignment of scores is difficult due to lack of measurable parameters and thus scoring is primarily based on practical insights. If the relationship of LSP and customer is characterized by clearly assigned roles and responsibilities the assigned score is 1 and it is 2 if there are already some restrictions. The score is 3 if clarity in operative and integrative responsibilities is missing. Role Complementarity is scored 4 if there are no indicators for cooperation in Total Integration services. LSP

Representative examples for behavior in terms of Role Complementarity

Score

A

Key focus on transportation with clearly assigned role from Customer I; the global automotive group dedicated the transportation part of its supply chain to LSP A whose responsibility includes also all related value-added services Clear agreement on customers being responsible for Total Integration Highly adhering to joint collaborative integration Within almost three decades of collaboration clearly assigned roles and responsibilities for Customer X’s supply chain Dovetailing of LSP and customer in managing supply chain parts Active approach by the LSP to fill an important part of the customer’s supply chain Role allocation is not clearly defined from the beginning of the partnership but develops in the course of time Close and interactive contacts with customers for process developments and definitions as key competitive strength; clarity in complementary roles partially missing LSP’s role is to manage integrated solutions Clear focus on network management with viewing customers as the only ones able for Total Integration The clear assignment to Total Integration is considered to be disadvantageous against assigning complementary roles for LSP and customer Assignment of operative service parts of the customers’ supply chain; LSP lacks in fulfilling customers’ expectations for consulting services In principle clear role dedications but fragile in stability in the course of the relationship

1

B C D E F G H I J K L M Score:

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 76:

2 1 1 3 3 3 3 2 4 4 3 2

= Overall excellent in Role Complementarity = Overall good in Role Complementarity = Overall acceptable in Role Complementarity = Overall weak in Role Complementarity

Scoring Role Complementarity (examples for arguments based on Table 42 in Section 6.3.1.2)

According to insights gathered during empirical research, LSPs A, C and D target Role Complementarity very strong. Also, LSPs B, I and M are focusing on Role Complementarity but with minor restrictions in collaborative behavior. With LSPs J and K rejecting cooperation for integrative services, all remaining LSPs’ (E, F, G, H and L) relationships with customers are characterized by very limited efforts in Role Complementarity.

7 Š In search of Hidden Champions: BMPS

282

The third business principle identified during research on the Customer Centricity Hypothesis is Continuous Innovation. LSPs are assigned a score of 1 for excellent innovation capital if they find outstanding specialized solutions for very specific customer needs. A score of 2 is assigned for good, a score of 3 for acceptable and a score of 4 for low innovation capital. Scoring is based on the overall, i.e. prevailing state of innovation at the LSPs discovered during empirical research (Table 77). LSP

Representative examples for behavior in terms of Continuous Innovation

Score

A B C D E F G H I J K L

Solutions for repairing Special concept for pharma logistics (cooling logistics) Europe’s leading RFID implementation program Outstanding innovative total solutions Specialized assembling offerings Convenience offerings like assembling or recycling Alternative transportation offerings Specialized assembling offerings Offering leasing options Premium service offering for transportation of temperature controlled and sensitive goods Highly flexible reactions on customers’ volatile needs Networking for being flexible to respond to the growing investor based business in the home country Specialized assembling offerings

1 2 4 1 1 3 4 1 1 4 3 2

M Score:

1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 77:

1

= Overall excellent innovation capital = Overall good innovation capital = Overall acceptable innovation capital = Overall weak innovation capital

Scoring Continuous Innovation (based on the part ‘Innovation capital’ in question 2.6.2.2. of the ‘Questionnaire/Interview Manual – Logistics Service Provider’)

Insights gained from the LSPs have shown that close to half of the research cases LSPs (A, D, E, H, I and M) are excellent innovators. Eight of the thirteen LSP research cases have excellent or good (in addition LSPs B and L) innovation capital. The remaining five LSPs fail to offer innovative solutions or only offer new services that are already common in the industry. In Table 78 individual scores on the three business principles identified when doing research on the Customer Centricity Hypothesis are summarized and the average score for each of the LSPs is added.61 This shows that LSPs A and D address attention to

61 If the average figure was .4 or less it was rounded down to the lower integer number and if the average figure was .5 or over it was rounded up to the next higher integer number.

7 Š In search of Hidden Champions: BMPS

283

customers in an excellent manner, followed by LSPs B, E, H, I and M which still put lots of effort into paying attention to customers. While lack of attention to customers applies wholly to LSP J, this also applies to some extent to LSPs C, F, G, K and L. LSP Score Gradual Service Extension Score Role Complementarity Score Continuous Innovation Average score on the Customer Centricity Hypothesis

Table 78:

A 2 1 1 1

B 3 2 2 2

C 3 1 4 3

D 1 1 1 1

E 1 3 1 2

F 2 3 3 3

G 3 3 4 3

H 2 3 1 2

I 4 2 1 2

J 4 4 4 4

K 1 4 3 3

L 3 3 2 3

M 3 2 1 2

Summary of the scores on business principles identified in research on the Customer Centricity Hypothesis

In summary, half of the research cases’ business model fits excellently or well with the business model of the customer. These LSPs successfully manage to exploit the legal relationship with the customer, i.e. dragging out a ‘macro’ dimension, in the sense of company externals for surviving in the area of logistics and enhancing business relationships. 7.3.2 Reliable Execution A joint business model of LSP(s) and customer is the second perspective I analyze regarding a business model’s macro layer. I refer to ‘macro’ as the analysis is no longer LSP internal only but also includes customers and other LSPs, i.e. external parties. In other words, the ‘Role of Collaboration’ is in focus. In Section 5.2.2 the Partnership Hypothesis is formulated stating that overall supply chain responsibility can be aimed for from the beginning of the partnership that is based on a joint (organizational) entity of an LSP and its customer, and possibly with other LSPs. However, empirical research has shown that collaboration works only to some extent which I refer to as the collaboration misperception. Collaboration works if the business principle of Reliable Execution is followed (Section 6.3.2). For successful collaboration, partners have to stick to special conditions and to make agreements. Through collaboration, customer value is created and LSPs manage to intensify customer relationships. Now, I score Total Integration attempts through partnerships in Table 79. Assignment to scores is based on the results from Table 45 in Section 6.3.2. LSPs receive a score of 1, if they have entered into joint ventures with LSPs and customers or have formed other entities for collaboration like strategic cooperations or network partnerships. A score of

7 Š In search of Hidden Champions: BMPS

284

2 is assigned if joint venture experience has been made with either LSPs or customers or if only strategic cooperations have been formed with both LSPs and customers. For experience restricted to strategic cooperations with either LSPs or customers the score is 3, and it is 4 if no collaborative entities have been formed so far or if the LSP is already a joint venture itself. LSP A B C D E F G H I J K L M Score:

Collaboration behavior of LSP research cases regarding the provision of integration services JVs with LSPs; no collaborative entities with customers Neither collaboration with LSP nor with customer stated JV with LSP; no collaborative entities with customers JVs with LSPs; JV with customer Strategic cooperation with LSP and partner in networks; JV with customers No collaborative entities with LSPs; JV with customer Neither collaboration with LSP nor with customer stated JVs and cooperations with LSPs; JVs and partnerships with customers Cooperations in supply chain development and management consulting with LSPs only; no collaborative entities with customers Cooperations with LSPs and partner in networks only; no collaborative entities with customers [Not applicable as LSP K is a JV] JV with LSP, cooperations and partnerships with LSPs; no collaborative entities with customers Cooperations with LSPs and partner in networks; cooperations with customers 1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 79:

Score 2 4 2 1 1 2 4 1 3 3 4 2 2

= Very strong efforts for collaboration in order to provide integration services = Strong efforts for collaboration in order to provide integration services = Acceptable efforts for collaboration in order to provide integration services = No efforts at all for collaboration in order to provide integration services

Scoring Reliable Execution

The above table shows that LSPs D, E and H have undertaken very strong efforts for collaboration with both customers and LSPs in order to provide integration services. The efforts of LSPs A, C, F, L and M are strong. Partnership is not a key point for LSPs I and J with a score of 3 as well as for LSPs B, G and K that are scored 4 (the latter for the reason, that it is a JV itself, which does not state any collaborative behavior). Thus, for roughly two third of the research cases collaboration with LSPs and customers is important for offering strategic, i.e. integrative services. 7.3.3 Courage and Self-Confidence as well as Defense and Attack The third macro view relates to company size. Size is important in the external perspective as for example in competition. The factor of size is implied also in Hidden Championship that is restricted to small- or medium-sized LSPs in contrast to LSPs that are large in size. For this reason, my empirical research is conducted in order to verify

7 Š In search of Hidden Champions: BMPS

285

the Size Compatibility Hypothesis that I formulated for the analysis of the issue of size (Section 5.2.3). The hypothesis states that Integrated Supply Network Management is a comprehensive concept with limited scope for SMEs. If at all and at best, SMEs in logistics are able to provide Total Integration services only for customers of similar size. Although SMEs in logistics put efforts into overcoming their resource shortage, they are nevertheless very limited in full concept implementation. My result on the Size Compatibility Hypothesis is the power of smallness misperception (Section 6.3.3) with potential Hidden Champions’ business principles Courage and Self-Confidence (conviction and willingness to be confronted with large-scale project challenges) as well as Defense and Attack (defense of a specific company size, i.e. a position of being small enough to remain independent and attack a growth position, i.e. being large enough to follow customers in international business). Now potential Hidden Champions’ Courage and Self-Confidence in approaching large customers is scored. According to the EU Commission’s definition, customers are considered to be large if they have 250 or more employees, if their turnover exceeds 50 m. euros and if their yearly accounting balance is higher than 43 m. euros (IfM 2004, p. 4). The research cases LSP are assigned a score of 1 if almost only large customers are served. Their score is 2, if there is a dominance of large customers in the portfolio supplemented by small- and medium-sized companies. For LSPs that have a balanced mix of small/medium and large-sized customers the assigned score is 3 while LSPs that serve only small- and medium-sized customers are scored with 4 (Table 80).

7 Š In search of Hidden Champions: BMPS

286 LSP A B C D E F G H I J K L M Score:

Courage and Self-Confidence (customer portfolio) Core industry segment of automotive is characterized by large customers (>80% of customers are automotive manufacturers) Customer list is dominated by large OEMs Customer list is dominated by large customers Portfolio with hardly any small- or medium-sized customers Avoidance of dependency on a specific customer, i.e. at the most 10% of turnover generation by one customer; both small/medium as well as large customers are served Customer reference list dominated by large global players Mainly local, small- or medium-sized customers served Main customer groups are large forwarders, industrial and trading companies, automotive manufacturers or airlines Both small/medium and large customers in reference portfolio Small-/medium-sized customers/partners only Large customers only served Only small- and medium-sized customers are served Customer portfolio is characterized by a mix of customers’ sizes 1 = Excellent 2 = Good 3 = Acceptable 4 = Low

Table 80:

Score 1 2 2 1 3 2 4 1 3 4 1 4 3

= Primarily services for large customers only = Dominance of large customers = Balanced mixed customer portfolio (small/medium and large customers) = Prevailing small- and medium-sized customers

Scoring Courage and Self-Confidence

According to Table 80, the most courageous and self-confident LSPs are A, D, H and K (score of 1) followed by LSPs B, C and F (score of 2). LSPs E, I and M (score of 3) and LSPs G, J and L (score of 4) are reserved in approaching large customers with their service offerings. Finally, LSPs are scored in terms of applying the business principle of Defense and Attack (Table 81). This principle states that potential Hidden Champions survive in competition for the reason that they manage to defend their independence while expanding to be able to operate globally. LSPs are scored excellent if they manage to defend their independent position and manage to create prerequisites for growth for being successful in global business. If LSPs have minor lacks in creating attacking prerequisites their score is good. If they fail in natural growth and thus lack prerequisites for attacking LSEs in logistics their score is acceptable. LSPs that lose their independent or reviewable small- and medium company size are scored low. The parameter used for assignment is LSPs’ turnover development as presented in Figure 72, i.e. excellent scored LSPs’ turnover growth is beyond the 2004 average of 13.1% while it is below for acceptable scored LSPs (Table 81).

7 Š In search of Hidden Champions: BMPS LSP Score Reliable Execution Score:

A 3

287 B 3

C 3

D 1

E 1

F 4

G 4

H 4

I 3

J 2

K 4

L 2

M 1

1 = Excellent = Defense of independent position and creation of attacking prerequisites (turnover growth beyond the 2004 average of 13.1%; Figure 72) 2 = Good = Defense of independent position but with minor lacks in creating attacking prerequisites 3 = Acceptable = Failure in natural growth (turnover growth below the 2004 average of 13.1%; Figure 72), thus lacking attacking prerequisites 4 = Low = Loss of independent or reviewable small/medium company size

Table 81:

Scoring Defense and Attack

According to Table 81 above, LSPs D, E and M are the ones most likely to survive in competition (score of 1), followed by LSPs J and L (score of 2). In terms of securing the competitive position the situation is precarious for LSPs A, B, C and I (score of 3) and even critical for LSPs F, G, H and K. 7.3.4 Conclusions on scoring the macro dimensions Sections 7.3.1, 7.3.2 and 7.3.3 present the scoring of a business model’s macro layer. The Business Model Scorecard for the macro layer is summarized in Table 82. Business model’s macro dimension Average score Legal Relationship: business model LSP and business model customer (Table 78) Score Legal Relationship: joint business model LSP and customer (Table 79) Average score Size (from Table 80 and Table 81)

Table 82:

62

LSP G H 3 2

A 1

B 2

C 3

D 1

E 2

F 3

2

4

2

1

1

2

4

2

3

3

1

2

3

4

I 2

J 4

K 3

L 3

M 2

1

3

3

4

2

2

3

3

3

3

3

2

Business Model Scorecard for the macro layer

Table 82 shows that LSP D scores excellently in all macro dimensions. Also LSPs A, E and M perform overall well in the macro layer. However, the analysis also shows poorly performing LSPs, in particular LSPs G, J and K. The remaining ones are somewhere in between. As a conclusion, scoring the macro layer as summarized in Table 82 discloses a strong indifference in the research cases’ behavior in managing macro dimensions for Total Integration. A similar conclusion – indifferent behavior among all potential Hidden Champions – is drawn from the Business Model Scorecard for the micro layer. This is an indicator for Hidden Champions and Hidden Championship Failures to be among all LSP research cases. Therefore, I had to further develop my BMPS Framework which is shown next.

62 If the average figure was .4 or less it was rounded down to the lower integer number and if the average figure was .5 or over it was rounded up to the next higher integer number.

7 Š In search of Hidden Champions: BMPS

288

7.4 The BMPS Framework Chapter 7 started with a section about the definition of performance in literature and the presentation of existing concepts for performance measurement. A brief evaluation of these example concepts shows that there is a need for a comprehensive framework which covers a business model in full and provides starting points for improvements. Filling this gap is the role of my BMPS Framework. 7.4.1 Developing the BMPS Framework The BMPS Framework consolidates all findings obtained so far in analogy to the structure of the whole research approach. As indicated in the previous section, the objective of developing this framework is to provide a comprehensive tool for SMEs in logistics that helps to evaluate their business models and to define strategies that increase sustainability in the competitive environment. The BMPS Framework is a simplified approach that discloses potential sources for business failure and demonstrates holes for business opportunities. The hypothesis for the BMPS Framework is that Hidden Champions outperform other SMEs in certain business model components or perhaps in a group of them as well as in certain macro dimensions. For validation of this hypothesis, the results from the LSP research cases are consolidated and evaluated. Thereby, the development of the BMPS Framework is based on a systematic pattern. The micro and macro hypotheses from Chapter 5 are linked with the representation of the as-is situation in both perspectives in Chapter 6 and with the scoring results from Section 7.2 and Section 7.3. The structure of this study, i.e. the application of an identical order throughout the research study on single dimensions, is presented for one micro and one macro dimension in Table 83. Perspective (Business Model Component*) Micro (Input Factors) Macro

Section/ Hypothesis

Section 5.1.2.3/ Virtual Logistics Hypothesis Section 5.2.2/ Partnership Hypothesis

Section/ Misperception and Principle Resulting from the Representation of the As-Is-Situation Section 6.1.2.3/ The asset misperception/ Principle of Entrepreneurship Section 6.3.2/ The collaboration misperception/ Principle of Reliable Execution

Section of Scoring Performance

Section 7.2.6

Section 7.3.2

* Applicable to the micro dimensions only.

Table 83:

Demonstration of the systematic structure of this study for developing the BMPS Framework

7 Š In search of Hidden Champions: BMPS

289

The identification of potential Hidden Champions’ business principles is the result of Chapter 6 in which empirical research findings on the hypotheses from Chapter 5 are represented. Figure 97 provides an overview of these findings.

Gradual Service Extension

Defense and Attack

Niche Sovereignty

Customer Granularity

Incrementalism Scope Legend:

Courage and SelfConfidence

Mutual Trust

Strategic Self-Sufficiency

Potential Hidden Champions’ Business Principles

Open Communication and Collaboration Simple and Fast Decision Making Reliable Execution

Gradual Conquest

Role Complementarity

Customer Favor Striving

Entrepreneurship

Micro Layer: Business Model Category “Ambitions & Aims“ Business Model Category “Implementation“ Business Model Category “Measures & Financials“ Macro Layer: Function of Customer Role of Collaboration LSP‘s Size

Customer Proximity

Continuous Innovation

Figure 97: Potential Hidden Champions’ business principles

These business principles form the dimensions of the BMPS Framework. Based on the fundamental distinction between the micro and macro perspective, the BMPS Framework consists of two layers covering these two perspectives. The framework’s micro perspective is presented in Section 7.4.1.1 and Section 7.4.1.2 deals with the macro perspective. 7.4.1.1 The BMPS Framework’s micro perspective The first step for the development of the BMPS Framework’s micro perspective is to consolidate single scoring results on each micro hypothesis for all of the business model (sub-)components, i.e. for all related identified business principles (Table 84). This table forms the basis for the graphical presentation of the micro perspective of the BMPS Framework in terms of business principles’ roles for sustainability in competition (Figure 98).

Table 84:

Legend:

Grey (Business Principle) Black (Business Principle) White (LSP)

Business Principle Incrementalism Scope Gradual Conquest Customer Favor Striving Customer Proximity Entrepreneurship Simple and Fast Decision M aking Open Communication and Collaboration Strategic Self-Sufficiency M utual Trust Niche Sovereignty Customer Granularity

Business Principle \ LS P Incrementalism Scope Gradual Conquest Customer Favor Striving Customer Proximity Entrepreneurship Simple and Fast Decision M aking Open Communication and Collaboration Strategic Self-Sufficiency M utual Trust Niche Sovereignty Customer Granularity ™ S core Values

29

28

30.0833

26.2500

2.7500 ø S cores A, D, E, M

1.2500

2.2500 2.5000 1.2500 2.2500 3.5000 2.5000 2.5000 2.0000 2.2500 1.2500

Mean A, D, E, M

27

E 3 1 1 3 4 3 3 2 2 1 2 2

32

F 2 3 2 4 2 2 3 3 2 4 2 3

1.0175

0.8321 ø S tandard Deviation

1.0682

0.9473 1.1266 1.1983 1.1094 1.0377 0.8006 1.1929 1.0377 0.6602 1.1983

S tandard Deviation

28

G 3 1 4 3 3 2 2 1 3 4 1 1

Scores

2.0349

1.6641 ø 2*S tandard Deviation

2.1364

1.8947 2.2532 2.3966 2.2188 2.0755 1.6013 2.3859 2.0755 1.3205 2.3966

2*S tandard Deviation

30

H 3 2 2 4 2 2 4 1 3 3 1 3

33

J 4 1 4 1 4 4 1 2 2 4 3 3

32

K 2 4 2 1 4 3 1 4 4 2 3 2

34

L 2 4 4 2 4 4 1 3 2 4 3 1

1.0859

-0.8864

0.3553 0.2468 -1.1466 0.0312 1.4245 0.8987 0.1141 -0.0755 0.9295 -1.1466

4.4141

3.3864

4.1447 4.7532 3.6466 4.4688 5.5755 4.1013 4.8859 4.0755 3.5705 3.6466

Mean A, D, E, M Mean A, D, E, M ./. 2*S tandard + 2*S tandard Deviation Deviation

32

I 4 3 4 1 2 3 4 1 2 2 4 2

= Business principle relating to potential Hidden Champions' business model component for competitive advantage = Business principle relating to potential Hidden Champions' business model sub-component for competitive failure = Indication for Hidden Championship

2.4551

383

2.1667 ø S cores A-L

1.9167

1.8462

2.2308 ø Mean A-M

24

2.7500 2.5833 2.5833 2.4167 3.0833 2.9167 2.5000 2.0833 2.5833 2.5000

Mean A-L

28

D 1 3 1 2 4 3 4 3 2 1 1 3

2.6923 2.5385 2.4615 2.3077 3.0769 2.8462 2.3846 2.0769 2.5385 2.4615

Mean A-M

28

C 2 3 2 2 4 4 2 1 3 2 1 2

29 ™ S core Values

35 33 32 30 40 37 31 27 33 32

䌥 A-M

B 4 2 3 3 1 3 3 3 3 2 1 1

A 3 4 2 3 3 2 2 1 3 1 1 3

M 2 2 1 1 3 2 1 2 2 2 1 3 22

290 7 Š In search of Hidden Champions: BMPS

Overview of LSP research cases’ scores related to the micro perspective’s business principles, their means and standard deviations

7 Š In search of Hidden Champions: BMPS

Customer Granularity Niche Sovereignty

Mutual Trust

291

Incrementalism 24 26 28 30 32 34 36 38 40

Strategic SelfSufficiency

Gradual Conquest

Customer Favor Striving

Customer Proximity

Open Communication and Collaboration

Legend: Business principle indicating competitive advantage Business principle indicating competitive failure Total score value of business principle from the LSP research cases

Scope

Entrepreneurship Simple and Fast Decision Making

Figure 98: The micro perspective of the BMPS Framework: business principles’ roles for sustainability in competition

Table 84 and Figure 98 provide insights relating to two perspectives. First, the overview discloses the business principles which matter, i.e. the business principles most responsible for competitive advantage and those most responsible for competitive failure. While an outstanding low average score value of a business principle is an indicator of competitive advantage, outstandingly high average score values give a signal for potential competitive failure. Thus, on the one hand, it is Niche Sovereignty (grey business principle in Table 84 and Figure 98) which is based on the business model component Performance Measurements from the business model category Financials (Table 10), that most contributes to competitive advantage. Open Communication and Collaboration also makes a good contribution to competitive advantage but this business principle is not such an ‘outlier’ as Niche Sovereignty and therefore, it shall be neglected here. On the other hand, Customer Proximity and Entrepreneurship are the business principles responsible for competitive failure, i.e. Market and Input Factors are the two business model subcomponents from the category Implementation (Table 10) that are most critical for Hidden Championship (black business principles in Table 84 and Figure 98).

292

7 Š In search of Hidden Champions: BMPS

Second, the above consolidation provides an indicator for Hidden Championship which might apply to LSP M. With LSP M’s total score value of 22 (Table 84), it significantly differs from the higher total score values of the other LSPs. Therefore, LSP M is an ‘outlier’. While the lower the total score value the more highly the LSP is evaluated, this does not necessarily imply that all of the other LSPs are not Hidden Champions. Nevertheless, LSP M’s business model is of special interest when researching business principles of SMEs in logistics and searching for the sources of success and long-term survival in the industry. With an average score value of each 33.3 for the business model components of the category Ambitions & Aims as well for the business model subcomponents of the category Implementation these two categories have a higher total score value than the category Financials with 26.5 as average score value (Figure 98). This, however, is not surprising as the analysis started after a pre-selection of potential Hidden Champions, i.e. knowledge about an LSP’s poor performance led to its exclusion from empirical reseach (Chapter 4). Since LSP M seems to be very robust and special, LSP M’s moldings in the different dimensions shall be distinguished from the other twelve LSPs’ average total score values for all dimensions (Figure 99). In Figure 99 the moldings of LSP M are shown by the grey line and the average from the other twelve LSPs is shown by the black line.

7 Š In search of Hidden Champions: BMPS

Customer Granularity Niche Sovereignty

Mutual Trust

293

Incrementalism 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2

Strategic SelfSufficiency

Scope Gradual Conquest

Customer Favor Striving

Customer Proximity

Open Communication and Collaboration

Entrepreneurship Simple and Fast Decision Making

Legend: LSP M Ø LSPs A-L

Figure 99: Comparison of LSP M’s with the other LSPs’ moldings relating to the micro perspective’s business principles’ roles for sustainability in competition

The figure shows that LSP M is stronger than the average of the other LSPs (LSPs A to L) in eleven of the twelve dimensions measured in terms of the difference between LSP M’s scores in all single dimensions with the average scores in the single dimensions of LSPs A to L. The differences, i.e. higher scores are 0.8, 0.6, 1.6, 1.4, 0.1, 1.0, 1.5, 0.1, 0.6, 0.7 and 0.9 credits in the order of the first eleven dimensions and a lower score of 0.8 in the twelfth dimension.63 Differences of at least 1.0 credits are an indicator of LSP M’s most outstanding business principles in comparison to the average of the other twelve LSPs. Accordingly, the most outstanding business principles are Gradual Conquest (difference of 1.6 credits), Simple and Fast Decision Making (difference of 1.5 credits), Customer Favor Striving (difference of 1.4 credits) as well as Entrepreneurship (difference of 1.0 credits). In other words, LSP M’s business model (sub-)components that contribute most to an LSPs’ competitive advantage are Business Purpose, Organization, Product/Service and Input Factors. A further comparison of the score values of LSP M and the average of LSP A to L leads to a second group of advantageous business principles which includes Niche Sovereignty, Incrementalism,

63 The values for the differences are based on the comparisons of the values in columns ‘M’ and ‘Mean A-L’ in Table 84 for each business principle.

7 Š In search of Hidden Champions: BMPS

294

Mutual Trust, Scope as well as Strategic Self-Sufficiency. The scoring difference of the advantageous business principles is between 0.6 to 0.9 credits. The third group covers business principles which are neglected by LSP M. In particular, the comparison of LSP M’s moldings in micro dimensions with the average of the other twelve LSPs shows that LSP M’s score is lower (by 0.8 credits) only in the twelfth dimension with its business principle of Customer Granularity. Also, Customer Proximity as well as Open Communication and Collaboration with the minimum scoring difference of 0.1 each are two further neglected business principles of LSP M. Figure 100 shows LSP M’s attaching of significance to the business principles and thus business model (sub-)components.

Significance

Business Principle

Related Business Model (Sub-)Component

Most outstanding

Gradual Conquest Simple and Fast Decision Making Customer Favor Striving Entrepreneurship

Business Purpose Organization Product/Service Input Factors

Advantageous

Niche Sovereignty Incrementalism Mutual Trust Scope Strategic Self-Sufficiency

Performance Measurements Value Proposition Exchange Mechanism Target Group Relationships

Neglected

Customer Proximity Open Communication and Collaboration Customer Granularity

Market Communication Rewards

Figure 100: LSP M’s attaching of significance to business principles in the micro perspective

Most interesting from above finding is that the overall analysis of business principles of the LSP research cases resulted in Entrepreneurship as being one of the two business principles indicating competitive failure (Table 84 and Figure 98). However, Entrepreneurship is one of the four most outstanding business principles and characteristics of LSP M’s specialty. The above findings, which disclose in particular the significance of business principles and their respective business model (sub-)components, i.e. that the application of descriptive statistics leads to the identification of the Hidden Champions have to be further verified. By calculation of the mean, of the standard deviation as well as the

7 Š In search of Hidden Champions: BMPS

295

normal (Gaussian) distribution the statistical significance of LSP M, for which Hidden Championship is indicated above, can be examined. These calculations also enable the identification of potentials for Hidden Championship of specific types of LSPs according to the segmentation in Figure 37.

Applying descriptive statistics requires the definition of the formulas for calculation of the mean, the standard deviation and the normal (Gaussian) distribution. Additionally, the formula for the variance is required for the reason that the standard deviation is the square root of the variance.

The mean is calculated by dividing the sum of a set of quantities by the total number of the set’s quantities. The value is also called arithmetic mean or average and in this study it is denoted with the letter x with a bar above it. The formula for the mean is šത ൌ

σ୶ ୬

where the symbol 䌥is used for summation and n for the number of data which is normally called the sample (Karris 2007, p. 1-15 et seq.). The variance Ɂଶ is defined by the following formula, whereas n equals the number of data, i.e. observations in the sample, š୧ equals the i-th observation in the sample and šത equals the mean (based on ଵ

തሻଶ. As stated above the square root of Ɂଶ is Winston 2007, p. 288): Ɂଶ ൌ ୬ିଵ σ୧ି୬ ୧ିଵ ሺš୧ െ š called standard deviation (Karris 2007, p. 9-14; Winston 2007, p. 288). Thus, the formula for the standard deviation which is denoted as į is: Ɂ ൌ ξɁଶ . The normal distribution, also called Gaussian distribution,64 is usually presented in standardized form. In this study it is denoted by Z with the formula  ൌ

୶౟ ି୶ ஔ౦

where Ɂ୮ is the standard

deviation for a business principle of a particular LSP (based on Karris 2007, p. 10-13). Then š is zero and the standard deviation as well as variance are one. Figure 101 presents the standardized normal curve and the areas within 1, 2, and 3 standard deviations from š taken as zero. In this study the scores (Table 84) are normalized, i.e. the normal distribution is calculated for each LSP and each of its business principles. Thus for each LSP the summation can be formed from the values calculated for each business principle. This result is used to distinguish the LSPs according to their status in terms of Hidden 64

Carl Friedrich Gauss (1777-1855) was a German mathematician (Dunnington and Gray and Dohse 2004, p. 8; O’Connor and Robertson 2008, p. 1 of 6).

296

7 Š In search of Hidden Champions: BMPS

Championship. I defined the following classification mechanism and use this as heuristic or ad-hoc classification for Hidden Champions, Potential Hidden Champions and Hidden Championship Failures. The basic idea is that a total value below -1 might be an indicator for a Hidden Champion. As the area between -3į and +3į equals approximately 99.73% and between -1į and +1į approximately 68.27%, the area for Hidden Championship is roughly 15.7%.65 In Figure 101 the respective area is indicated by the bar in grey color. Furthermore, Potential Hidden Champions’ value is between -1 and 0. In Figure 101 the respective area is indicated by the bar in white color. A positive total value, i.e. positive sum of the twelve calculated normal distributions for each business principle, might indicate potential failure in Hidden Championship. In Figure 101 the respective area is indicated by the bar in black color. Figure 101 further indicates high probability for Hidden Championship in the area between -3 and -1, medium probability for Hidden Championship in the area between -1 and +1 and low probability for Hidden Championship in the area between +1 and +3. Accordingly, the probability for Hidden Championship is 16%.66

65

(99.73-68.27)/2 = 15.73. 99.73 percentage points minus 68.27 percentage points equals 31.46 percentage points. Half of this result (15.73 percentage points) is added to 68.27. The resulting 84 percentage points indicate the probability not being a Hidden Champion.

66

7 Š In search of Hidden Champions: BMPS

0,4 0,35 0,3 0,25 f(Z) 0,2 0,15 0,1 0,05

297

x¯ = 0 f(Z) = Probability density function of the normal distribution x = Mean ¯ Z, į = Standard deviation

-3 -3į

-2 -2į Hidden Champions

-1 -1į

0 Z

Potential Hidden Champions

+1 1į

+2 2į

+3 3į

Failed Hidden Championships

High probability for Medium probability for Low probability for Hidden Championship Hidden Championship Hidden Championship

Area between -1į and +1į equals to approximately 68.27% of the total area; one standard deviation: -1į < Z < +1į Area between -2į and +2į equals to approximately 95.45% of the total area; two standard deviations: -2į¯< Z¯< +2į Area between -3į and +3į equals to approximately 99.73% of the total area; three standard deviations: -3į¯< Z¯< +3į

¯ ¯

Figure 101: The standardized normal curve (Based on Karris 2007, pp. 10-13 et seq.)

The means, standard deviations and normal (Gaussian) distributions were calculated (Table 84 and Table 85) by using Microsoft Excel. According to the above described assignment of LSPs in terms of their status relating to Hidden Championship, the results are (Table 85) that LSPs A, D, E, G and M are Hidden Champions, LSPs B and C are Potential Hidden Champions and LSPs F, H, I, J, K and L are expected to fail in becoming Hidden Champions. In summary, by using normal distribution the statistical significance of LSP M is confirmed, i.e. LSP M is a Hidden Champion. This status also applies to LSP A, D, E and G if analyzing the micro dimension only. For the remaining LSPs Hidden Championship is questionable (LSPs B and C) or can not be proven (LSPs F, H, I, J, K and L).

Table 85:

Legend:

Grey (LSP) White (LSP) Black (LSP)

™ Normalized S cores

B

C

D

E

0.3248 1.3804 -0.7308 -1.7864 0.3248 1.2973 -0.4780 0.4097 0.4097 -1.3656 -0.3852 0.4494 -0.3852 -1.2197 -1.2197 0.6240 0.6240 -0.2774 -0.2774 0.6240 -0.0741 -2.0014 0.8895 0.8895 0.8895 -1.0568 0.1922 1.4412 0.1922 0.1922 -0.3224 0.5159 -0.3224 1.3541 0.5159 -1.0377 0.8895 -1.0377 0.8895 -0.0741 0.6991 0.6991 0.6991 -0.8156 -0.8156 -1.2197 -0.3852 -0.3852 -1.2197 -1.2197 -0.7921 -0.7921 -0.7921 -0.7921 0.1440 0.9245 -1.4792 -0.2774 0.9245 -0.2774 -1.0184 -0.3855 -0.7687 -1.4514 -2.2816

A

= Hidden Champion = Potential Hidden Champion = Hidden Championship Failure

Incrementalism Scope Gradual Conquest Customer Favor Striving Customer Proximity Entrepreneurship Simple and Fast Decision Making Open Communication and Collaboration Strategic Self-Sufficiency Mutual Trust Niche Sovereignty Customer Granularity

Business Principle \ LS P

-0.7308 0.4097 -0.3852 1.5254 -1.0377 -1.0568 0.5159 0.8895 -0.8156 1.2839 0.1440 0.9245 1.6667

F

0.3248 -1.3656 1.2839 0.6240 -0.0741 -1.0568 -0.3224 -1.0377 0.6991 1.2839 -0.7921 -1.4792 -1.9124

G

0.3248 -0.4780 -0.3852 1.5254 -1.0377 -1.0568 1.3541 -1.0377 0.6991 0.4494 -0.7921 0.9245 0.4897

H

Normal (Gaussian) Distribution I

1.3804 0.4097 1.2839 -1.1787 -1.0377 0.1922 1.3541 -1.0377 -0.8156 -0.3852 2.0164 -0.2774 1.9043

J

1.3804 -1.3656 1.2839 -1.1787 0.8895 1.4412 -1.1607 -0.0741 -0.8156 1.2839 1.0802 0.9245 3.6888

K

-0.7308 1.2973 -0.3852 -1.1787 0.8895 0.1922 -1.1607 1.8531 2.2137 -0.3852 1.0802 -0.2774 3.4081

L

-0.7308 1.2973 1.2839 -0.2774 0.8895 1.4412 -1.1607 0.8895 -0.8156 1.2839 1.0802 -1.4792 3.7018

M

-0.7308 -0.4780 -1.2197 -1.1787 -0.0741 -1.0568 -1.1607 -0.0741 -0.8156 -0.3852 -0.7921 0.9245 -7.0413

298 7 Š In search of Hidden Champions: BMPS

Normal (Gaussian) distribution for business principles in the micro perspective

7 Š In search of Hidden Champions: BMPS

299

7.4.1.2 The BMPS Framework’s macro perspective In a further step single scoring results on each macro hypothesis, i.e. for all business principles identified for the macro perspective, are consolidated (Table 86). As in the micro perspective the resulting table forms the basis for the graphical presentation. Figure 102 shows the results of the macro perspective of the BMPS Framework.

Table 86:

Legend:

Grey (Business Principle) Black (Business Principle) White (LSP)

Business Principle Gradual Service Extension Role Complementarity Continuous Innovation Reliable Execution Courage and Self-Confidence Defense and Attack

Business Principle \ LS P Gradual Service Extension Role Complementarity Continuous Innovation Reliable Execution Courage and Self-Confidence Defense and Attack ™ S core Values

8.6667

2.4231

Mean A, D, E

D 1 1 1 1 1 1 6

1.3333 1.6667 1.0000 1.3333 1.6667 1.6667 ø S core Value A, D, E

Mean A-M

C 3 1 4 2 2 3 15

2.4615 2.4615 2.1538 2.3846 2.3846 2.6923 ø Mean A-M

B 3 2 2 4 2 3 16 Mean Other

F 2 3 3 2 2 4 16

16.3000

2.8000 2.7000 2.5000 2.7000 2.6000 3.0000 ø S core Value Other

E 1 3 1 1 3 1 10

I 4 2 1 3 3 3 16

2.1001 2.1001 2.5621 2.2418 2.3859 2.3643

2*S tandard Deviation

H 2 3 1 1 1 4 12

1.1462

2.2923

ø S tandard ø 2*S tandard Deviation Deviation

1.0500 1.0500 1.2810 1.1209 1.1929 1.1821

S tandard Deviation

G 3 3 4 4 4 4 22

Scores J 4 4 4 3 4 2 21

-0.7667 -0.4334 -1.5621 -0.9085 -0.7192 -0.6976

Mean A, D, E ./. 2*S tandard Deviation

= Business principle relating to potential Hidden Champions' component for competitive advantage = Business principle relating to potential Hidden Champions' component for competitive failure = Indication for Hidden Championship

32 32 28 31 31 35 ™ S core Values 189

䌥 A-M

A 2 1 1 2 1 3 10

L 3 3 2 2 4 2 16

3.4334 3.7667 3.5621 3.5751 4.0525 4.0309

Mean A, D, E + 2*S tandard Deviation

K 1 4 3 4 1 4 17

M 3 2 1 2 3 1 12

300 7 Š In search of Hidden Champions: BMPS

Overview of LSP research cases’ scores related to the macro perspective’s business principles, their means and standard deviations

7 Š In search of Hidden Champions: BMPS

301

Gradual Service Extension 28 30 Defense and Attack

32

Role Complementarity

34 36

Courage and SelfConfidence

Continuous Innovation

Reliable Execution Legend: Indicator for competitive advantage Indicator for competitive failure Total score value from the LSP research cases

Figure 102: The macro perspective of the BMPS Framework: business principles’ roles for sustainability in competition

As in the micro perspective the tabular and graphical presentation for the macro perspective on scoring results (Table 86 and Figure 102) provide insights relating to two perspectives. First, the presentations demonstrate the macro perspective’s business principles’ contribution to competitive advantage and failure. The business principle of Continuous Innovation (grey business principle in Table 86 and Figure 102) has an outstanding low average score and is thus the business principle with the highest contribution to competitive advantage. Second, an indicator for potential competitive failure is an outstanding high average score of a business principle. According to the above Table 86 and Figure 102, it is the business principle of Defense and Attack (black color in both presentations) that is responsible for competitive failure, i.e. that is most critical for Hidden Championship. Further, scoring of the business principles in the macro perspective further indicates which LSPs might be Hidden Champions. The total score values from LSPs A, D and E are significantly lower than that of the other LSPs (Table 86). This might be an indicator for excellence in macro perspective business behavior. However, this finding alone does not allow the conclusion that the other LSPs are not Hidden Champions.

7 Š In search of Hidden Champions: BMPS

302

Looking at the differences in behavior of LSPs A, D and E in comparison to the other LSPs is of particular interest in the search for Hidden Champions in logistics in order to identify their success business principles. Therefore, the average of LSPs A’s, D’s and E’s moldings in each dimension of the macro perspective are distinguished from the other LSPs’ average total score values for every dimension (Figure 103). In Figure 103 the average moldings of LSPs A, D and E are shown by the grey line and the average from the other LSPs is shown by the black line.

Defense and Attack

Gradual Service Extension 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0

Courage and SelfConfidence

Role Complementarity

Continuous Innovation

Reliable Execution Legend: Ø LSPs A, D, E Ø Other LSPs

Figure 103: Comparison of LSPs A’s, D’s and E’s with the other LSPs’ moldings relating to the macro perspective’s business principles’ roles for sustainability in competition

Figure 103 presents clearly the finding that LSPs A, D and E outperform the other LSPs in all macro dimensions. The average values of LSPs A’s, D’s and E’s scores for business principles in the macro perspective exceed the average values of the other LSPs in all six dimensions. Measured in terms of each dimensions’ difference between LSPs A’s, D’s and E’s average values with the other LSPs’ average values, the exceeding values for LSPs A, D and E are 1.5, 1.0, 1.5, 1.4, 0.9 and 1.3 credits in the order of the six dimensions from Table 86.67 If applying the systematic introduced in

67 For each business principle, the values for the differences are based on the comparisons of the values in the columns ‘Mean A, D, E’ and ‘Mean Other’ in Table 86.

7 Š In search of Hidden Champions: BMPS

303

Section 7.4.1.1 in which differences of at least 1.0 credits indicate Hidden Champions’ most outstanding business principles, this applies to all business principles from the macro perspective except for the principle of Courage and Self-Confidence. The latter business principle’s total scoring difference is 0.9 and thus it is an advantageous business principle which is defined for a difference of 0.6 to 0.9 credits. According to the systematic in Section 7.4.1.1, Hidden Champions do not have neglected business principles in the macro perspective. Most interestingly from the first insight gained through scoring in the macro perspective is that the overall analysis of business principles resulted in Defense and Attack as being a business principle which might indicate competitive failure (Table 86 and Figure 102). However, Hidden Champions also consider Defense and Attack as one of the five most outstanding business principles. The above insights gained have to be further verified by application of descriptive statistics (in analogy to the micro perspective). By calculation of the mean, standard deviation and normal distribution the statistical significance of LSPs A, D and E for Hidden Championship can be examined. The definitions of the parameters for calculation are presented above when applied to the micro perspective. In particular, the standardized normal curve in Figure 101 with its definitions of LSPs’ status in Hidden Championship applies to the macro perspective as well. The approach to application of descriptive statistics for analysis of the BMPS Framework’s macro perspective is similar to the approach used in the micro perspective’s analysis. Using Microsoft Excel, single scores for all business principles in the macro perspective and for every LSP are presented in the Table 86. The average scores (three columns with ‘Mean’ in Table 86) and į (column ‘Standard Deviation’ in Table 86) for each of the six business principles were calculated. The results were used to calculate the normal distribution for each business principle of each LSP (Table 86). Finally, the summation was formed from the six individual values for normal distribution for each LSP. Resulting from descriptive statistics in the macro perspective there are the two groups of LSPs which are Hidden Champions and Failed Hidden Champions. Unlike in the micro

304

7 Š In search of Hidden Champions: BMPS

perspective’s analysis the results do not leave room for restrictions in and possibilities for Hidden Championship. In other words, according to macro perspective results, there are no Potential Hidden Champions as total value of none is between -1 and 0. Therefore, there are two groups of LSPs according to descriptive statistics in the macro perspective. The one group, LSPs A, D, E, H and M, is that of the Hidden Champions (Table 87, grey LSPs), as their total values of the normal distribution are below -1 (see definition in Figure 101). All other LSPs’ (the other group) total value for normal distribution is positive, which indicates Hidden Championship Failure (Table 87, black LSPs). For definition of Hidden Championship status see Figure 101.

Table 87:

Legend:

Grey (LSP) Black (LSP)

™ Normalized S cores

A

-0.4395 -1.3919 -0.9007 -0.3431 -1.1607 0.2603 -3.9757

B

0.5128 -0.4395 -0.1201 1.4412 -0.3224 0.2603 1.3322

= Hidden Champion = Hidden Championship Failure

Gradual Service Extension Role Complementarity Continuous Innovation Reliable Execution Courage and Self-Confidence Defense and Attack

Business Principle \ LS P

C

0.5128 -1.3919 1.4412 -0.3431 -0.3224 0.2603 0.1568

D

E

-1.3919 -1.3919 -1.3919 0.5128 -0.9007 -0.9007 -1.2353 -1.2353 -1.1607 0.5159 -1.4316 -1.4316 -7.5121 -3.9308

-0.4395 0.5128 0.6605 -0.3431 -0.3224 1.1062 1.1745

F

0.5128 0.5128 1.4412 1.4412 1.3541 1.1062 6.3683

G

-0.4395 0.5128 -0.9007 -1.2353 -1.1607 1.1062 -2.1172

H

Normal (Gaussian) Distribution I

1.4652 -0.4395 -0.9007 0.5490 0.5159 0.2603 1.4500

J

1.4652 1.4652 1.4412 0.5490 1.3541 -0.5856 5.6890

K

-1.3919 1.4652 0.6605 1.4412 -1.1607 1.1062 2.1205

L

0.5128 0.5128 -0.1201 -0.3431 1.3541 -0.5856 1.3309

M

0.5128 -0.4395 -0.9007 -0.3431 0.5159 -1.4316 -2.0863

7 Š In search of Hidden Champions: BMPS

Normal (Gaussian) distribution for business principles in the macro perspective

305

7 Š In search of Hidden Champions: BMPS

306

7.4.2 Results from the BMPS Framework The analysis of the BMPS Framework’s micro perspective (Section 7.4.1.1) and macro perspective (Section 7.4.1.2) results in two major outcomes which I call research values. The first research value concerns the identification of success and failure business principles impacting sustainability of SMEs in logistics. The second research value relates to the identification of LSPs’ status in terms of Hidden Championship. Figure 104 summarizes my findings.

Model Perspective Research Value I: Impact of Business Principles Research Value II: Status of Hidden Championship

Success Business Principles Failure Business Principles Hidden Champions

BMPS Micro

Macro

Niche Sovereignty

Continuous Innovation

Customer Proximity Entrepreneurship A, D, E, G, M

Defense and Attack

A, D, E, H, M

Potential Hidden Champions

B, C

---

Hidden Championship Failures

F, H, I, J, K, L

B, C, F, G, I, J, K, L

Figure 104: Overview of research results

In terms of my ‘Research Value I’ the success business principles, i.e. business principles that most contribute to Hidden Championship are Niche Sovereignty (micro perspective) and Continuous Innovation (macro perspective). Customer Proximity and Entrepreneurship are the two failure business principles identified through the micro perspective’s analysis while in the macro perspective Defense and Attack is the business principle contributing most to failure. These success and failure business principles were identified by examination of all LSP research cases, i.e. potential Hidden Champions. The second research value of this study relates to the status of Hidden Championship, i.e. to the differentiation between Hidden Champions, Potential Hidden Champions and Hidden Championship Failures. The micro perspective’s analysis led to the identification of LSPs A, D, E, G and M as Hidden Champions as well as LSPs B and C as Potential Hidden Champions. LSPs F, H, I, J, K and L are expected to fail in

7 Š In search of Hidden Champions: BMPS

307

becoming Hidden Champions. Based on the macro perspective’s analysis LSPs A, D, E, H and M are Hidden Champions and all other LSPs have failed in becoming a Hidden Champion in logistics. As the results from the micro and macro perspectives’ analysis are slightly different relating to the second research outcome, it is necessary to consolidate the status of Hidden Championship from the micro and macro perspective (Figure 105).68 The consolidation shows that only those LSPs are true Hidden Champions which are overall excellent. This means that true Hidden Championship is identified both in the micro and macro perspectives’ analysis. This applies to LSPs A, D, E and M whereas LSP A is an LSP from the category medium-sized sector specialists, LSPs D and E are assetintensive contract logistics providers and LSP M is a land carrier. LSPs are assigned to the category of Potential Hidden Champions if they were either identified as Hidden Champion or Potential Hidden Champion in one perspective only. This applies to LSPs B, C, G and H. While LSPs G (Hidden Champion according to micro perspective’s analysis, Hidden Championship Failure according to macro perspective’s analysis) and H (Hidden Champion according to macro perspective’s analysis, Hidden Championship Failure according to micro perspective’s analysis) are overall excellent in one perspective, LSPs B and C are Potential Hidden Champions from the micro perspective only and Hidden Championship Failures according to macro perspective’s analysis. Finally, LSPs F, I, J, K and L are Hidden Championship Failures or false Hidden Champions. They are overall poor performers in both the micro and macro perspective.

68

LSPs are assigned to the matrix based on the overview of research results in Figure 104.

7 Š In search of Hidden Champions: BMPS

Hidden Champion Hidden Champion- Potential ship Failure Hidden Champion

Macro Perspective

308

AD EM

H

Legend: Hidden Champion Potential Hidden Champion

FIJ KL BC

G

Hidden Championship Failure

Hidden Champion- Potential Hidden ship Failure Hidden Champion Champion

Micro Perspective Figure 105: LSPs’ status of Hidden Championship after consolidation of findings from the micro and macro perspectives’ analysis

Now it is of interest to answer the question about the differences in business behavior of Hidden Champions in comparison to Potential Hidden Champions and Hidden Championship Failures. Therefore, the mean, i.e. average scores for each of these three groups and for each business principle were calculated. The means are presented in Table 88 for the micro perspective and in Table 89 for the macro perspective.

Table 88:

Legend:

Grey (LSP/Mean) White (LSP/Mean) Black (LSP/Mean)

Incrementalism Scope Gradual Conquest Customer Favor Striving Customer Proximity Entrepreneurship Simple and Fast Decision M aking Open Communication and Collaboration Strategic Self-Sufficiency M utual Trust Niche Sovereignty Customer Granularity

Business Principle \ LSP 1 3 1 2 4 3 4 3 2 1 1 3

D 3 1 1 3 4 3 3 2 2 1 2 2

E 2 2 1 1 3 2 1 2 2 2 1 3

M

= Hidden Champion = Potential Hidden Champion = Hidden Championship Failure

3 4 2 3 3 2 2 1 3 1 1 3

A

Mean A, D, E, M 2.3 2.5 1.3 2.3 3.5 2.5 2.5 2.0 2.3 1.3 1.3 2.8 4 2 3 3 1 3 3 3 3 2 1 1

B 2 3 2 2 4 4 2 1 3 2 1 2

C 3 1 4 3 3 2 2 1 3 4 1 1

G 3 2 2 4 2 2 4 1 3 3 1 3

H

Scores Mean B, C, G, H 3.0 2.0 2.8 3.0 2.5 2.8 2.8 1.5 3.0 2.8 1.0 1.8 2 3 2 4 2 2 3 3 2 4 2 3

F 4 3 4 1 2 3 4 1 2 2 4 2

I 4 1 4 1 4 4 1 2 2 4 3 3

J 2 4 2 1 4 3 1 4 4 2 3 2

K 2 4 4 2 4 4 1 3 2 4 3 1

L

Mean F, I, J, K, L 2.8 3.0 3.2 1.8 3.2 3.2 2.0 2.6 2.4 3.2 3.0 2.2

7 Š In search of Hidden Champions: BMPS 309

Hidden Champions’, Potential Hidden Champions’ and Hidden Championship Failures’ average scores (means) in the micro perspective’s business principles

Table 89:

Legend:

Grey (LSP/Mean) White (LSP/Mean) Black (LSP/Mean)

Gradual Service Extension Role Complementarity Continuous Innovation Reliable Execution Courage and Self-Confidence Defense and Attack

Business Principle \ LSP 1 1 1 1 1 1

D 1 3 1 1 3 1

E 3 2 1 2 3 1

M

= Hidden Champion = Potential Hidden Champion = Hidden Championship Failure

2 1 1 2 1 3

A

Mean A, D, E, M 1.8 1.8 1.0 1.5 2.0 1.5 3 2 2 4 2 3

B 3 1 4 2 2 3

C 3 3 4 4 4 4

G 2 3 1 1 1 4

H

Scores Mean B, C, G, H 2.8 2.3 2.8 2.8 2.3 3.5 2 3 3 2 2 4

F 4 2 1 3 3 3

I 4 4 4 3 4 2

J 1 4 3 4 1 4

K 3 3 2 2 4 2

L

Mean F, I, J, K, L 2.8 3.2 2.6 2.8 2.8 3.0

310 7 Š In search of Hidden Champions: BMPS

Hidden Champions’, Potential Hidden Champions’ and Hidden Championship Failures’ average scores (means) in the macro perspective’s business principles

7 Š In search of Hidden Champions: BMPS

311

By presenting the means from Table 88 in Figure 106, three business principles turned out to be of outstanding interest to Hidden Champions in the micro perspective. These principles are Gradual Conquest, Mutual Trust and Niche Sovereignty.

Customer Granularity

Incrementalism 1.0 1.5

Scope

2.0 Niche Sovereignty

Gradual Conquest

2.5 3.0 3.5

Mutual Trust

Customer Favor Striving

4.0

Strategic SelfSufficiency

Customer Proximity

Open Communication and Collaboration

Entrepreneurship Simple and Fast Decision Making

Legend: Ø Hidden Champions (LSPs A, D, E, M) Ø Potential Hidden Champions (LSPs B, C, G, H) Ø Hidden Championship Failures (LSPs F, I, J, K, L)

Figure 106: Comparison of performance in the micro perspective by status of Hidden Championship

The presentation of the average values for the macro dimension’s business principles from Table 89 shows that Hidden Champions outperform the other LSPs in all macro dimensions. Thereby the focus of Hidden Champions is on Continuous Innovation, Reliable Execution and Defense and Attack (Figure 107).

7 Š In search of Hidden Champions: BMPS

312

Gradual Service Extension 1.0 1.5 2.0 Defense and Attack

2.5

Role Complementarity

3.0 3.5 4.0

Courage and SelfConfidence

Continuous Innovation

Reliable Execution Legend: Ø Hidden Champions (LSPs A, D, E, M) Ø Potential Hidden Champions (LSPs B, C, G, H) Ø Hidden Championship Failures (LSPs F, I, J, K, L)

Figure 107: Comparison of performance in the macro perspective by status of Hidden Championship

The priorities of business principles in the micro and macro perspectives at Hidden Champions as presented in Table 88, Table 89, Figure 106 and Figure 107 are summarized in Figure 108. The figures after the name of the business principle in this presentation indicate the average score of the business principle at Hidden Champions. I have defined business principles as success business principles if their average score value is up to 1.5. These business principles are targeted with first priority at Hidden Champions. Average score values from 1.6 to 2.5 indicate second priority business principles while all others are of third priority. The summary shows that in contrast to the findings in Table 84 and Figure 98 on success business principles of potential Hidden Champions, identified Hidden Champions’ success business principles are also Gradual Conquest and Mutual Trust besides Niche Sovereignty in the micro perspective. In Table 86 and Figure 102 Continuous Innovation was identified as success business principle in the macro perspective when analyzing potential Hidden Champions. Figure 108 shows that identified Hidden Champions also focus on Reliable Execution and Defense and Attack.

7 Š In search of Hidden Champions: BMPS

Significance

First Priority (score up to 1.5)

Second Priority (score from 1.6 to 2.5)

Third Priority (score from 2.6 and beyond)

313

Business Principle (Micro Perspective)

Gradual Conquest Mutual Trust Niche Sovereignty

Business Principle (Macro Perspective)

1.3 1.3 1.3

Open Communication and Collaboration 2.0 Incrementalism 2.3 Customer Favor Striving 2.3 Strategic Self-Sufficiency 2.3 Scope 2.5 Entrepreneurship 2.5 Simple and Fast Decision Making 2.5 Customer Granularity Customer Proximity

Continuous Innovation Reliable Execution Defense and Attack

1.0 1.5 1.5

Gradual Service Extension Role Complementarity Courage and Self-Confidence

- 1.8 - 1.8 - 2.0

- 2.8 - 3.5

Figure 108: Priority of business principles at Hidden Champions

This leads me to the key success parameter which I refer to as the Survival Hypothesis.

Survival Hypothesis: First, Hidden Champions follow the strategy of conquering service offering scope increasingly while stimulating business progress in the course of operations. By defining rules and norms they create trust and establish strong partnerships. Moreover, they are segment leaders (micro perspective). Second, Hidden Champions are innovators which successfully collaborate with customers by sticking to special conditions and agreements. They survive in competition by defending an independent position and attacking in international business (macro perspective).

7.4.3 Identification of starting points for improvements at non-Hidden Champions Hidden Champions may be referred to as ‘best-in-class’ organizations that are a framework worth aiming for by other LSPs. Therefore, this study continues with comparing the average scoring results from the Hidden Champions LSPs A, D, E and M with the score values of single Potential Hidden Champions (Figure 109) and Hidden Championship Failures (Figure 110). The average score value of the Hidden Champions is indicated by the grey line with the grey squares in both figures while the LSP in

7 Š In search of Hidden Champions: BMPS

314

comparison is represented by the black line with the black squares. The business principles are listed starting left with the least prioritized at Hidden Champions in the order taken from Figure 108. Business principles in which the compared LSP performs weakly are marked by a dark grey circle. They indicate an initiating point for improvements in order to transform into a Hidden Champion. Contrary, business principles in which the LSP in comparison overperforms, i.e. in which the LSP puts too much effort into implementation, are indicated by a dark black circle. Here are initiating points for reduction of activities.

Potential Hidden Champion LSP B Potential Hidden Champion LSP C

LSP G

Potential Hidden Champion LSP H Legend:

Continuous Innovation

Reliable Execution

Defense and Attack

6

-100%

6 4

+ 2*Standard Deviation

2

Business Principle

0 -2

4

+ 2*Standard Deviation

2

Business Principle

0 -2

./. 2*Standard Deviation

./. 2*Standard Deviation

Performance Score

Performance Score

6

6

4

4

+ 2*Standard Deviation

2 -2

+ 2*Standard Deviation

2

Business Principle

0

Performance Score

Business Principle

0 -2

./. 2*Standard Deviation

Performance Score 6

6 4

4

+ 2* Standard Deviation

2 -2

Business Principle

0 -2

./. 2*Standard Deviation

Performance Score

+ 2*Standard Deviation

2

Business Principle

0

./. 2*Standard Deviation

Performance Score 6

6 4

+ 2*Standard Deviation

2

Business Principle

0 -2

Average of Hidden Champions

Gradual Service Extension

Performance Score

Performance Score

./. 2*Standard Deviation

Potential Hidden Champion

Role Complementarity

Courage and Self-Confidence

Gradual Conquest

Mutual Trust

Niche Sovereignty

Macro Open Communication and Collaboration

Incrementalism

Customer Favor Striving

Strategic Self-Sufficiency

Scope

Entrepreneurship

Customer Proximity

Business Principle

Simple and Fast Decision Making

Micro

Customer Granularity

Layer

./. 2*Standard Deviation

LSP in comparison

Underperformance in business principle

4 2 0 -2

+ 2*Standard Deviation

Business Principle ./. 2*Standard Deviation

Overperformance in business principle

Figure 109: Comparison of performance of Hidden Champions with Potential Hidden Champions’

7 Š In search of Hidden Champions: BMPS

Hidden Championship Failure

Hidden Championship Failure

Hidden Championship Failure

Hidden Championship Failure

Hidden Championship Failure

-2

Legend:

Continuous Innovation

Reliable Execution

Defense and Attack

Gradual Service Extension

./. 2*Standard Deviation

Performance Score 6

6 4

4

+ 2*Standard Deviation

2

+ 2*Standard Deviation

2

Business Principle

-2

Business Principle

0 -2

./. 2*Standard Deviation

./. 2*Standard Deviation

Performance Score

Performance Score

6

6

4

4

+ 2*Standard Deviation

2

Business Principle

-2

+ 2*Standard Deviation

2

Business Principle

0 -2

./. 2*Standard Deviation

Performance Score

./. 2*Standard Deviation

Performance Score

6

6

4

4

+ 2*Standard Deviation

2

Business Principle

0 -2

./. 2*Standard Deviation

Performance Score

+ 2*Standard Deviation

2

Business Principle

-2

./. 2*Standard Deviation

Performance Score

6

6

4

+ 2*Standard Deviation

2

Business Principle

-2

Average of Hidden Champions

Role Complementarity

Business Principle

0 -2

./. 2*Standard Deviation

Performance Score

+ 2*Standard Deviation

2

Business Principle

0

LSP L

4

+ 2*Standard Deviation

2

0

LSP K

Courage and Self-Confidence 6

4

0

LSP J

Gradual Conquest

Performance Score

6

0

LSP I

Mutual Trust

Performance Score

0

LSP F

Niche Sovereignty

Macro Open Communication and Collaboration

Incrementalism

Customer Favor Striving

Strategic Self-Sufficiency

Scope

Entrepreneurship

Customer Proximity

Business Principle

Simple and Fast Decision Making

Micro

Customer Granularity

Layer

315

./. 2*Standard Deviation

LSP in comparison

Underperformance in business principle

4 2 0 -2

+ 2*Standard Deviation

Business Principle ./. 2*Standard Deviation

Overperformance in business principle

Figure 110: Comparison of performance of Hidden Champions with Hidden Championship Failures’

The above two figures show in which business principles Potential Hidden Champions and Hidden Championship Failures underperform and in which they outperform in comparison to Hidden Champions. For example, the first graph about the micro perspective of the Hidden Championship Failure LSP J (third LSP in Figure 110) reveals that LSP J’s performance is better than Hidden Champions’ in terms of Simple and Fast Decision Making, Scope, Strategic Self-Sufficiency and Customer Favor Striving. However, in comparison LSP J’s performance is weak in all other micro dimensions. In the macro perspective LSP J performs more poorly than Hidden Champions in each dimension. Alternatively, starting points for improvements towards Hidden Championship are illustrated in Table 90 to Table 98. In Table 90 to Table 93 grey lines indicate dimensions in which the Potential Hidden Champions (LSPs B, C, G and H) outperform Hidden Champions and black lines indicate dimensions in which they perform more

7 Š In search of Hidden Champions: BMPS

316

poorly (indicated with average values differing more than 1.0). Similarly, the black lines in Table 94 to Table 98 show Hidden Championship Failures’ (LSPs F, I, J, K and L) weakest dimensions and their over-emphasized dimensions are marked in grey (also indicated with average values differing more than 1.0).

Comparison for LSP B Business Principle

Mean A, D, E, M

B

Customer Proximity Customer Granularity Simple and Fast Decision M aking

3.5 2.8 2.5

1 1 3

Entrepreneurship

2.5

3

2.5 2.3 2.3 2.3 2.0 1.3 1.3 1.3

2 3 3 4 3 1 2 3 2 2 3 3 4 2

Scope Micro Strategic Self-Sufficiency PerspecCustomer Favor Striving

tive

Incrementalism Open Communication and Collaboration Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Role Complementarity

Macro Gradual Service Extension PerspecDefense and Attack tive Reliable Execution Continuous Innovation

Table 90:

2.0 1.8 1.8 1.5 1.5 1.0

Comparison of LSP B’s performance with Hidden Champions’

(Mean - B) U 2.5 1.8 -0.5 -0.5 0.5 -0.7 -0.7 -1.7 -1.0

0.3 -0.7 -1.7

0.0 -0.2 -1.2 -1.5 -2.5 -1.0

7 Š In search of Hidden Champions: BMPS

317

Comparison for LSP C Business Principle Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Micro Strategic Self-Sufficiency PerspecCustomer Favor Striving tive Incrementalism Open Communication and Collaboration Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Role Complementarity Macro Gradual Service Extension PerspecDefense and Attack tive Reliable Execution Continuous Innovation Table 91:

Mean A, D, E, M

C

(Mean - C) U

3.5 2.8 2.5

4 2 2

-0.5 0.8 0.5

2.5 2.5 2.3 2.3 2.3 2.0 1.3 1.3 1.3

4 3 3 2 2 1 1 2 2 2 1 3 3 2 4

-1.5 -0.5 -0.7 0.3 0.3 1.0 0.3 -0.7 -0.7 0.0 0.8 -1.2 -1.5 -0.5

2.0 1.8 1.8 1.5 1.5 1.0

-3.0

Comparison of LSP C’s performance with Hidden Champions’

Comparison for LSP G Business Principle Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Micro Strategic Self-Sufficiency Perspec- Customer Favor Striving tive Incrementalism Open Communication and Collaboration Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Role Complementarity Macro Gradual Service Extension PerspecDefense and Attack tive Reliable Execution Continuous Innovation Table 92:

Mean A, D, E, M

G

3.5 2.8 2.5 2.5 2.5 2.3 2.3 2.3 2.0 1.3 1.3 1.3

3 1 2 2 1 3 3 3 1 1 4 4 4 3 3 4 4 4

2.0 1.8 1.8 1.5 1.5 1.0

Comparison of LSP G’s performance with Hidden Champions’

(Mean - G) U 0.5 1.8 0.5 0.5 1.5 -0.7 -0.7 -0.7 1.0 0.3 -2.7 -2.7 -2.0 -1.2 -1.2 -2.5 -2.5 -3.0

7 Š In search of Hidden Champions: BMPS

318

Comparison for LSP H Business Principle

Mean A, D, E, M

H

3.5 2.8 2.5 2.5 2.5 2.3 2.3 2.3 2.0 1.3 1.3 1.3 2.0

2 3 4 2 2 3 4 3 1 1 3 2 1

Reliable Execution

1.8 1.8 1.5 1.5

3 2 4 1

Continuous Innovation

1.0

1

Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Strategic Self-Sufficiency

Micro PerspecCustomer Favor Striving tive

Incrementalism Open Communication and Collaboration Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence

Role Complementarity Gradual Service Extension

Macro PerspecDefense and Attack tive

Table 93:

(Mean - H) U 1.5 -0.2 -1.5

0.5 0.5 -0.7 -1.7

-0.7 1.0 0.3 -1.7

-0.7 1.0 -1.2

-0.2 -2.5

0.5 0.0

Comparison of LSP H’s performance with Hidden Champions’

Comparison for LSP F Business Principle

Mean A, D, E, M

F

3.5 2.8 2.5 2.5 2.5 2.3 2.3 2.3

2 3 3 2 3 2 4 2

Open Communication and Collaboration Niche Sovereignty

2.0 1.3

3 2

-0.7

M utual Trust Gradual Conquest Courage and Self-Confidence

1.3 1.3

4 2 2

-0.7 0.0

Role Complementarity Gradual Service Extension

1.8 1.8 1.5 1.5 1.0

Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Micro Strategic Self-Sufficiency Perspec- Customer Favor Striving tive Incrementalism

Macro PerspecDefense and Attack tive

Reliable Execution Continuous Innovation

Table 94:

2.0

Comparison of LSP F’s performance with Hidden Champions’

(Mean - F) U 1.5 -0.2 -0.5 0.5 -0.5 0.3 -1.7

0.3 -1.0 -2.7

3 2 4

-0.2

2 3

-0.5 -2.0

-1.2 -2.5

7 Š In search of Hidden Champions: BMPS

319

Comparison for LSP I Business Principle

Mean A, D, E, M

I

3.5 2.8 2.5 2.5 2.5 2.3 2.3

2 2 4 3 3 2 1

Incrementalism Open Communication and Collaboration

2.3

4

2.0

1

1.0

Niche Sovereignty M utual Trust

1.3 1.3 1.3

-2.7

2.0 1.8

4 2 4 3 2

1.8 1.5 1.5 1.0

4 3 3 1

Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Micro Strategic Self-Sufficiency Perspec- Customer Favor Striving

tive

Gradual Conquest Courage and Self-Confidence Role Complementarity

Macro Gradual Service Extension PerspecDefense and Attack tive Reliable Execution Continuous Innovation

Table 95:

(Mean - I) U 1.5 0.8 -1.5

-0.5 -0.5 0.3 1.3 -1.7

-0.7 -2.7 -1.0

-0.2 -2.2 -1.5 -1.5

0.0

Comparison of LSP I’s performance with Hidden Champions’

Comparison for LSP J Business Principle Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Strategic Self-Sufficiency

Micro Perspec- Customer Favor Striving tive

Incrementalism Open Communication and Collaboration

Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Role Complementarity Macro Gradual Service Extension PerspecDefense and Attack

tive

Table 96:

Reliable Execution Continuous Innovation

Mean A, D, E, M

J

3.5 2.8 2.5 2.5 2.5 2.3

4 3 1 4 1 2

2.3 2.3 2.0 1.3 1.3 1.3 2.0 1.8 1.8 1.5

1 4 2 3 4 4 4 4 4 2

-0.5

1.5 1.0

3 4

-1.5 -3.0

Comparison of LSP J’s performance with Hidden Champions’

(Mean - J) U -0.5 -0.2 1.5 -1.5

1.5 0.3 1.3 -1.7

0.0 -1.7 -2.7 -2.7 -2.0 -2.2 -2.2

7 Š In search of Hidden Champions: BMPS

320

Comparison for LSP K Business Principle Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope

Micro Strategic Self-Sufficiency Perspec- Customer Favor Striving tive Incrementalism Open Communication and Collaboration Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Role Complementarity Gradual Service Extension

Macro PerspecDefense and Attack tive

Reliable Execution Continuous Innovation

Table 97:

Mean A, D, E, M

K

3.5 2.8 2.5 2.5 2.5 2.3 2.3 2.3 2.0 1.3 1.3 1.3

4 2 1 3 4 4 1 2 4 3 2 2

2.0 1.8 1.8 1.5 1.5 1.0

1 4 1 4 4 3

(Mean - K) U -0.5 0.8 1.5 -0.5 -1.5 -1.7

1.3 0.3 -2.0 -1.7

-0.7 -0.7 1.0 -2.2

0.8 -2.5 -2.5 -2.0

Comparison of LSP K’s performance with Hidden Champions’

Comparison for LSP L Business Principle Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Micro Strategic Self-Sufficiency Perspec- Customer Favor Striving tive Incrementalism Open Communication and Collaboration Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Role Complementarity Macro Gradual Service Extension PerspecDefense and Attack tive Reliable Execution Continuous Innovation Table 98:

Mean A, D, E, M

L

3.5 2.8 2.5 2.5 2.5 2.3 2.3 2.3 2.0 1.3 1.3 1.3

4 1 1 4 4 2 2 2 3 3 4 4 4 3 3 2 2 2

2.0 1.8 1.8 1.5 1.5 1.0

Comparison of LSP L’s performance with Hidden Champions’

(Mean - L) U -0.5 1.8 1.5 -1.5 -1.5

0.3 0.3 0.3 -1.0 -1.7 -2.7 -2.7 -2.0 -1.2 -1.2

-0.5 -0.5 -1.0

7 Š In search of Hidden Champions: BMPS

321

These findings from above comparisons can also be summarized showing Potential Hidden Champions’ and Hidden Championship Failures’ overall emphasized dimensions and weaknesses (Table 99 and Table 100). Dimensions with an average interval to Hidden Champions’ moldings of at least +/-1 indicate the most interesting findings. They are marked in grey if the LSP outperforms Hidden Champions and in black if performance is weak in the respective dimension. For each of the business principles the sum of the means was calculated in Table 99 for Potential Hidden Champions and in Table 100 for Hidden Championship Failures. This leads to the following results: In the micro perspective Potential Hidden Champions are relatively stronger in the dimensions Customer Granularity and Customer Proximity. They are relatively weaker in Mutual Trust and Gradual Conquest. Obviously Potential Hidden Champions emphasize too strongly on Customer Proximity as it is a third priority business principle of Hidden Champions (Figure 108). In the macro perspective Potential Hidden Champions are relatively weaker in the business principles of Defense and Attack, Continuous Innovation as well as Reliable Execution. Here, the interesting point is that Continuous Innovation is a first priority business principle at Hidden Champions (Figure 108). Hidden Championship Failures overall do not outperform Hidden Champions in any dimension, neither in the micro nor in the macro perspective. In the micro perspective Hidden Championship Failures are relatively weaker in Gradual Conquest, Mutual Trust and Niche Sovereignty. The critical dimension here is Niche Sovereignty which is a first priority business principle at Hidden Champions (Figure 108). Hidden Championship Failures are relatively weaker in every macro dimension except relating to Courage and Self-Confidence. Overall, the above comparison within the BMPS Framework also helps to identify starting points at Non-Hidden Champions for improvements towards becoming a Hidden Champion. These starting points, however, are not further developed here.

7 Š In search of Hidden Champions: BMPS

322

Business Principle Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Micro Strategic Self-Sufficiency PerspecCustomer Favor Striving tive Incrementalism Open Communication and Collaboration Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Role Complementarity

Macro Gradual Service Extension PerspecDefense and Attack tive Reliable Execution Continuous Innovation

Business Principle Customer Granularity Customer Proximity Scope Open Communication and Collaboration Niche Sovereignty Micro Simple and Fast Decision M aking PerspecEntrepreneurship tive Strategic Self-Sufficiency Customer Favor Striving Incrementalism M utual Trust Gradual Conquest Courage and Self-Confidence Gradual Service Extension

Macro Role Complementarity PerspecReliable Execution tive

Continuous Innovation Defense and Attack

Table 99:

(Mean - B) U 2.5 1.8 -0.5 -0.5 0.5 -0.7 -0.7 -1.7 -1.0 0.3 -0.7 -1.7 0.0 -0.2 -1.2 -1.5 -2.5 -1.0

䌥㻌㼛 㼒㻌U B, C, G, H 4.2 4.0 2.0 2.0 1.2 -1.0 -1.0 -2.8 -2.8 -2.8 -5.8 -5.8 -1.0 -1.4 -1.8 -5.0 -7.0 -8.0

(Mean - C) U -0.5 0.8 0.5 -1.5 -0.5 -0.7 0.3 0.3 1.0 0.3 -0.7 -0.7 0.0 0.8 1.2 -1.5 -0.5 -3.0

(Mean - G) U 0.5 1.8 0.5 0.5 1.5 -0.7 -0.7 -0.7 1.0 0.3 -2.7 -2.7 -2.0 -1.2 -1.2 -2.5 -2.5 -3.0

(Mean - H) U 1.5 -0.2 -1.5 0.5 0.5 -0.7 -1.7 -0.7 1.0 0.3 -1.7 -0.7 1.0 -1.2 -0.2 -2.5 0.5 0.0

䌥㻌㻛 㻌㻠 1.1 1.0 0.5 0.5 0.3 -0.3 -0.3 -0.7 -0.7 -0.7 -1.5 -1.5 -0.3 -0.4 -0.5 -1.3 -1.8 -2.0

Potential Hidden Champions’ strongest and weakest dimensions (Values from columns ‘Means - X’ are taken from Table 90 to Table 93)

䌥 4.0 4.2 -1.0 -1.0 2.0 -2.8 -2.8 -2.8 2.0 1.2 -5.8 -5.8 -1.0 -1.8 -1.4 -8.0 -5.0 -7.0

7 Š In search of Hidden Champions: BMPS

Business Principle Customer Proximity Customer Granularity Simple and Fast Decision M aking Entrepreneurship Scope Micro Strategic Self-Sufficiency PerspecCustomer Favor Striving tive Incrementalism Open Communication and Collaboration Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Role Complementarity Macro Gradual Service Extension PerspecDefense and Attack tive Reliable Execution Continuous Innovation

Business Principle Customer Granularity Simple and Fast Decision M aking Customer Favor Striving Customer Proximity Strategic Self-Sufficiency Micro Scope PerspecIncrementalism tive Open Communication and Collaboration Entrepreneurship Niche Sovereignty M utual Trust Gradual Conquest Courage and Self-Confidence Gradual Service Extension Macro Reliable Execution PerspecRole Complementarity tive Defense and Attack Continuous Innovation

(Mean - F) U 1.5 -0.2 -0.5 0.5 -0.5 0.3 -1.7 0.3 -1.0 -0.7 -2.7 -0.7 0.0 -1.2 -0.2 -2.5 -0.5 -2.0

䌥㻌㼛 㼒㻌U  F, I, J, K, L 3.0 2.5 2.5 1.5 -0.5 -2.5 -2.5 -3.0 -3.5 -8.5 -9.5 -9.5 -4.0 -5.0 -6.5 -7.0 -7.5 -8.0

323

(Mean - I) U 1.5 0.8 -1.5 -0.5 -0.5 0.3 1.3 -1.7 1.0 -2.7 -0.7 -2.7 -1.0 -0.2 -2.2 -1.5 -1.5 0.0

(Mean - J) U -0.5 -0.2 1.5 -1.5 1.5 0.3 1.3 -1.7 0.0 -1.7 -2.7 -2.7 -2.0 -2.2 -2.2 -0.5 -1.5 -3.0

(Mean - K) U -0.5 0.8 1.5 -0.5 -1.5 -1.7 1.3 0.3 -2.0 -1.7 -0.7 -0.7 1.0 -2.2 0.8 -2.5 -2.5 -2.0

(Mean - L) U -0.5 1.8 1.5 -1.5 -1.5 0.3 0.3 0.3 -1.0 -1.7 -2.7 -2.7 -2.0 -1.2 -1.2 -0.5 -0.5 -1.0

䌥 1.5 3.0 2.5 -3.5 -2.5 -0.5 2.5 -2.5 -3.0 -8.5 -9.5 -9.5 -4.0 -7.0 -5.0 -7.5 -6.5 -8.0

䌥㻌㻛 㻌㻡 0.6 0.5 0.5 0.3 -0.1 -0.5 -0.5 -0.6 -0.7 -1.7 -1.9 -1.9 -0.8 -1.0 -1.3 -1.4 -1.5 -1.6

Table 100: Hidden Championship Failures strongest and weakest dimensions (Values from columns ‘Means - X’ are taken from Table 94 to Table 98)

7.5 Comment on business principles In Section 7.4 all my previous research and empirical analysis is consolidated in my BMPS Framework. The dimensions of my framework are aligned to the business principles identified in Chapter 6 (Figure 97). From scoring the micro perspective across all potential Hidden Champions the business principle of Niche Sovereignty contributes to competitive advantage while the business principles of Customer Proximity and Entrepreneurship indicate competitive failure. From scoring the macro perspective across all potential Hidden Champions the business principle Continuous Innovation contributes to competitive advantage while the business principle of Defense and Attack indicates competitive failure. After identification of the Hidden Champions (LSPs A, D, E and M) by applying descriptive statistics, I analyzed Hidden Champions’

324

7 Š In search of Hidden Champions: BMPS

priority on business principles. Accordingly, Hidden Champions outstandingly target Gradual Conquest, Mutual Trust and Niche Sovereignty in the micro perspective and Continuous Innovation, Reliable Execution as well as Defense and Attack in the macro perspective. I use these findings to compare the average score values from Hidden Champions with those from Potential Hidden Champions and Hidden Championship Failures (Section 7.4.3). The comparisons result in a clear outcome. Accordingly, Hidden Championship Failures are relatively weaker in all micro and macro layers’ business principles which are the key focus of Hidden Champions. The result is similar for Potential Hidden Champions, except for the micro layer’s business principle of Niche Sovereignty which is also in focus at Potential Hidden Champions. A final comment on Hidden Champions’ behavior in managing the tensions identified for the area of logistics in Section 7.2.13 summarizes the starting points for Potential Hidden Champions and Hidden Championship Failures for managing the turnaround towards Hidden Championship. I assigned Hidden Champions’ key business principles to the three tensions identified for the area of logistics. First, Hidden Champions manage the tension Scope Versus Focus with Gradual Conquest and Niche Sovereignty. Hidden Champions conquer the service offering scope gradually while aiming for segment leadership. Second, they manage the tension Independence Versus Networking with Continuous Innovation as well as Defense and Attack. Hidden Champions are innovators rather than commodity providers or generalists who strongly depend on networking with partners. Hidden Champions defend a specific company size that is small enough to remain independent but that also allows attacking a growth position to be large enough to conduct international business. Third, Hidden Champions manage the tension Performance Versus Sustainability with Mutual Trust and Reliable Execution. They stick to rules and norms aiming for a common social atmosphere and put strong efforts into collaboration to create customer value and performance (Figure 111). While managing these tensions, Hidden Champions survive in competition by successfully dealing with the challenges in today’s industry despite not being total integrators.

7 Š In search of Hidden Champions: BMPS

Gradual Conquest Scope Versus Focus Niche Sovereignty

325

Continuous Innovation Independence Versus Networking Defense and Attack

Mutual Trust Performance Versus Sustainability Reliable Execution

Figure 111: Hidden Champions’ business principles for managing tensions in today’s area of logistics (Based on Dodd and Favaro 2006, p. 65)

8 Š Conclusions

326

8

Conclusions

This final chapter offers a closing remark on the Total Integration promise which has been both discussed by the academic literature for years and is also presented as the next stage of practice by my LSP research cases as well as by the industry. My first main result underlines the failure of this aim. My second contribution concerns the development of a framework for LSPs which allows me to identify superior performance amongst them. In particular, I show that the definition of a Hidden Champion by its creator is too broad. The addition of the precise BMPS Framework then allows the identification of the high performers amongst this class of SMEs. Finally, my third contribution consists in a comment on the outlook on the future of logistics. My point is that current champions are not total integrators. Thus there is a gap in the current market offer, which also identifies an opportunity for a new type of logistics actors to fill this gap. 8.1 My main point: fallacy of Total Integration The Total Integration discussion has been often related to the emergence of new market entrants (Section 4.3). At the beginning of this study my intention was to start research from a comprehensive typology of LSPs. As a typology covering both traditional companies as well as new market entrants was not available, though the latter types have featured strongly in discussions in the context of Total Integration, I worked on a segmentation of LSPs. From this comprehensive typology I eliminated those types not relevant to Total Integration and continued my research with the remaining types of LSPs. By applying the BMPS Framework an answer was expected to the question whether the type of LSP matters, i.e. whether Hidden Championship is restricted to long-term operating LSPs which are still more old-established in type (traditional companies, Figure 37) or to those with a less traditional type today (new market entrants, Figure 37). The answer is that, as the summary from the results in Chapter 7 (Table 101) shows, the type does not matter. Although all Hidden Champions are traditional companies, the situation is indifferent for Potential Hidden Champions and Hidden Championship Failures with a mixture of traditional companies and new market entrants. R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2_8, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

8 Š Conclusions LSP A D E M B C G H F I J K L

Legend:

327

Type of LSP Medium-sized sector specialist Asset-intensive contract logistics provider Asset-intensive contract logistics provider Land carrier In-house provider Specialist logistics subsidiary Medium-sized haulage carrier Asset-intensive contract logistics provider Medium-sized sector specialist Non-asset-intensive contract logistics provider Provider-provider entity Provider-customer entity Air & ocean carrier

Dark grey (LSP/line) Light grey (LSP/line) Black (LSP/line)

Category of type of LSP Traditional company (transportation company) Traditional company (haulage contractor) Traditional company (haulage contractor) Traditional company (haulage contractor) New market entrant New market entrant Traditional company (haulage contractor) Traditional company (haulage contractor) Traditional company (transportation company) Traditional company (haulage contractor) New market entrant New market entrant Traditional company (haulage contractor)

= Hidden Champion = Potential Hidden Champion = Hidden Championship Failure

Table 101: Assignment of Hidden Championship status to category of type of LSP

While my research results do not confirm the arguments from discussions in literature and practice that new market entrants have good prerequisites for offering Total Integration solutions and thus will shape the future in the area of logistics, success or failure obviously depends on business principles’ focus. My research shows that SMEs are sustainable. The identified Hidden Champions concentrate on Gradual Conquest, Mutual Trust as well as Niche Sovereignty in the micro perspective at first priority. In the macro perspective first priority is on Continuous Innovation, Reliable Execution as well as Defense and Attack. The micro perspective’s business principles of Customer Granularity and Customer Proximity are third priority business principles while all other are of second priority (Figure 108). Although there is a tendency to aim towards at an increasingly broader scope at Hidden Champions, which is particularly obvious in Gradual Conquest as a first priority business principle, Total Integration is not a key focus point. Even more, trust and excellence in service execution characterize these LSPs which are also sovereign and operate independently in their strongly defended niche. Hidden Champions go this way and find value by operating according to these business principles though a first way to summarize my previous chapters is the statement that the Total Integration concept proves to be more myth and dream than reality. Extensive observations and analysis in the course of this study provided evidence for the fallacy of Total Integration. For justification of this result some explanatory statements by LSPs and customers studied, on causes pertaining to the relationship between these two parties as well as originating in environmental conditions are given in Figure 112.

LSPs

Customers

Relationship

Environment

• Fear of dependency from dominant LSP (increased power of LSP, pressure on client, loss of know-how, etc.) • Fear of losing control (over orders, processes, functions, decisions, etc.) • Fear of losing proximity to market and clients • Fear of transparency • Fear of misuse of sensitive data to competition (related to future contract negotiations and collaboration of LSP with competitors) • Fear of misuse of financial issues (e.g. costs, valuation) • Lacking trust in partner (in terms of misuse, competencies, approaching permanently new improvements, etc.) • Initial prejudice in terms of ability for providing optimal services in all areas and all regions, in terms of new business model of LSP, in terms of complexity and size of changes as well as in terms of evaluation and pricing of individualized services y Lacking possibility for reintegration/change of LSP or Customer difficulties in doing so

Environment • Failure in managing complexity of process integration • Text adequately including standardization of IT systems • Demand for competitive markets • Disagreements in terms of longer-term contract duration and contract • Demanding performance in niches arrangements • Misconceptions about allocation of roles as well as about sharing risks, cost savings and profits • Lacking willingness for agreement and cooperation, including willingness to share information • Different company structures • Legal hurdles • High uncertainty

Relationship

• Lacking trust (e.g. fear of high losses due to sudden cancellation of contract as large investments are necessary even though contract duration is relatively short) • Fear of dependency from dominant client • Large financial resources are required to reduce conflicts of aims which emerge when working for more than one client • Costs for possible takeover of staff as well as partly high transaction costs • Overburdening of the financial strength in case of wrong calculations in the concept phase • Winning and keeping highly qualified staff • Fear of failure if moving into new and unknown business terrain • Simultaneously offering forwarding and consulting is a challenge as the LSP is exposed to different cultures, different people and a different management within a single company LSP

328 8 Š Conclusions

Figure 112: Explanatory statements justifying the fallacy of Total Integration

8 Š Conclusions

329

In logistics, it would be desirable to think of LSPs as the single point of contact (‘onestop-shop’) for a customer’s total supply chain. However, according to final additional interview comments, manufacturers have their own departments with responsibility for logistics strategy, management and Total Integration while LSPs are assigned to particular and well defined areas of the supply chain only. Manufacturers prefer to hand over logistics activities to several LSPs. They define sub-processes which are treated and outsourced separately in order to reduce risks. Thus, if at all, LSPs are the single point of contact for a part of the supply chain only with an extensive network of partners fulfilling total supply chain activities. Such a network may become a complex healthy business ecosystem of excellent partners. Let me recall the findings from Figure 5169 in Chapter 6 relating to the criteria for the selection of LSPs. Interview partners at customer companies replied that service execution is the primary decision trigger, i.e. a basic precondition, while convenience aspects and capabilities are decisive for the final decision. Both convenience and capabilities can be secured through ecosystems. In their final remarks supplementing the answers to all given questions, customer companies’ interview partners emphasized that it is high performance in the sense of high quality service execution that customers value most (applicable to eight customer companies). Next comes LSPs’ sticking to promises as well as flexibility (applicable to four customer companies each). Two interview partners pointed to an insignificance of the service spectrum in particular and another two mentioned experience. One representative of a customer company mentioned the importance of specialization and another emphasized outperforming rivals (Figure 113). These supplementing statements confirm that at present Hidden Champions force performance in service execution. Total Integration as service is still a dream.

69

The figure’s findings are based on the answers from the interview partners at the customer companies on question 2.3 (‘Please indicate the importance of criteria for the selection of a logistics service provider’) in the ‘Questionnaire/Interview Manual – Customer’ (Appendix 4).

8 Š Conclusions

330

[Number of customers; customers’ names in Roman numbers; no statements from customer III]

8

I II IV VII IX X XI XII Performance

4

4

IV V VII VIII

VI IX X XIII

Sticking to promises

Flexibility

2

2

I II

VI XIII

Insignificance of service spectrum

Experience

1 II

1 X

Specialization Outperforming rivals

Figure 113: Research cases customers’ most valued attributes of LSPs according to final remarks of interview partners

8.2 Market and competitive implications: SMEs can not be neglected in any serious study of the LSP industry This study is an answer to the strong dominance of research and investigation of LSEs in the area of logistics, which particularly applies to research institutions like Analytica (2005), eyefortransport (2004) or Transport Intelligence (2004). My research does not include looking at LSEs but is a very detailed analysis of the neglected group of SMEs in the area of logistics. Research findings are derived and presented based on very special data from selected research cases, overcoming very strong information restrains prevailing at LSPs small- or medium in size. As a result, I identified four Hidden Champions among my research cases. I also present Potential Hidden Champions’ and Hidden Championship Failures’ positions and specialties and show starting points for managing the turnaround towards Hidden Championship. Hidden Championship status does not guarantee long-term survival, particularly in cases of unforeseen external influences like ecological disasters or financial crisis. However, it is a strong basis for future defense and attack of a strong position in the industry. SMEs in logistics, particularly Hidden Champions, manage to defend a very strong position in competition with LSEs in the industry. Figure 114 shows the opposing positions of the two groups. Both are characterized by specific characteristics: LSEs are increasingly getting larger. This is an important implication and pertains to industry structure. LSEs’ strength is in system and network businesses, e.g. for CEP,

8 Š Conclusions

331

packaged goods or container navigation. LSEs are dominant in such businesses with high importance of full-coverage presence and exploitation of high fix capacities. In other words, LSEs offer commodity services. Thereby, large takeovers like the acquisition of Exel by Deutsche Post DHL in December 2005 that led to market leadership in contract logistics (Deutsche Post AG (ed.) 2006, cover page, p. 22) might be considered as ‘extrusion competition’ or ‘extrusion fight’ for SMEs in logistics. SMEs’ service offerings, however, are characterized by customization. In particular Hidden Champions focus very strong on individualization and customer orientation in niche markets. They provide highly individualized contract logistics offerings out of a standardized service portfolio which is often location-bound. Unlike LSEs, SMEs develop customer-specific solutions while often renouncing synergies in favor of customer uniqueness, entering into potentially considerable risks or accumulation of capital. This is only possible due to SMEs’ flat hierarchies which also provide them with the ability to adjust quickly to customer demands like unforeseen orders and incidents. In logistics one threat to SMEs originates in logistical LSEs’ market penetration approach (see also Figure 83). Since LSPs increasingly adapt a more various contract logistics business for customers independent of size, the degree of standardization of know-how increases. Contract logistics develops towards a commodity business which leads to higher price sensitivity. Thus integration is becoming a commodity business, i.e. a large-scale business with cost focus. Squeezing of the integration position by LSEs and SMEs as one might initially think, rather probably does not work for the reason that LSEs’ core is commodity business, while for SMEs it is customization. Consequently, there is no room for an integration service offering by Hidden Champions which strongly focuses on individualization, i.e. which offers customized but not industrialized solutions. In Figure 114 this threat is numbered one. My research leads to a further conclusion about an implication to the industry. In future, other parties like internal departments of the customer company or network organizations claim their position in the integration business in replacement of the convergence to full integration (threat number two in Figure 114). When managing logistics through internal departments control remains inside the company while

8 Š Conclusions

332

physical parts that are not the company’s core competence are outsourced to third parties. It is the search for an optimal balance of keeping management skills with some logistics activities inside and outsourcing the other activities. I refer to this as keeping at least a Managing Control Tower that is responsible for the key coordination mechanism. Management is an issue of soft factors causing inefficiencies. As it is hard to manage soft factors, management has to be kept inside the company. LSPs and customers have to operate complementarily. Otherwise LSPs will struggle as customers have the logistics, i.e. strategic, knowledge, while logistics provides the activities. Key competition for Total Integration is expected not to be between LSEs and SMEs in logistics but between a group which I call New Breed and SMEs. The reason is that LSEs do not offer customized solutions to the same extent as SMEs.

Integration

1

LSEs

2

SMEs

Customization

Commodity

New Breed

Figure 114: Threats for SMEs in future logistics

In my research I could not identify the link for the principal possibility of SMEs taking over the integration function as stated at the beginning of this study. The market does not supply this need while the gap for this service offering still exists. Possibly, there is an option to close this gap by a ‘bridge’ which is the function of this New Breed of emerging market players (see dark grey triangle in Figure 115). This breed of players can be virtual players, virtual supply chain managers, supply chain architects, logistics brokers, logistics intermediaries, logistics consultants, investors or contract negotiators. They are responsible for ‘enterprise diagnostics’ and their roles are selecting, controlling, monitoring and coordinating. For example, they select and control suppliers, negotiate supply chain contracts and design supply chains. This New Breed of players might also play a major role in shaping the future of logistics in addition to the traditional other groups of LSEs, SMEs and customers as reflected in Figure 115.

8 Š Conclusions

333

While the New Breed of players is responsible for enterprise diagnostics, LSEs are onestop-operators that provide basic operative services as well as integration support. SMEs offer solutions for niches and buy network services where required. As they are not dependent on a network they have a free choice of services and thus are able to offer their customers the most appropriate solution each time. This helps them offer transformed solutions which they innovate after having thought of customers’ needs beyond origin needs. They manage to serve more customers with more individualized solutions. These solutions will allow them to reach out to markets that they have not been able to reach out to before. Surviving and long-term successful SMEs, that is Hidden Champions, stick to performance. Their function is that of a performance barrier. In addition, some customers do high-level in-house management. A large share of integration and one-stop-concepts remains in the responsibility of customers, i.e. of their logistics departments. Customers’ function is that of a control barrier.

LSEs

SMEs New Breed

Customers Logistics orchestration

Figure 115: The future of logistics and its competitive groups

In conclusion, the future of the area of logistics might be shaped by a collaborative striving for perfecting of the supply chain by in-house customizers (customers), niche experts (SMEs), operational integrators (LSEs) as well as complex skilled organizers (New Breed). The development of my BMPS Framework is a methodological contribution which has been instrumental in obtaining the above conclusions.

334

8 Š Conclusions

8.3 Future research In future, Total Integration will also be a focus of interest. However, the concept as discussed does not work as it is not keeping up with most recent industry developments and needs. Also, academics’ discussions about the concept as company comprehensive SCM concept were misleading. In practice this view is reduced to logistics chains in the narrower sense of each single customer. Thus Total Integration as company comprehensive SCM is replaced by modularization of supply chain areas. Service offerings are delivered industrialized, i.e. standardized core services for a specific supply chain area are supplemented by specialized extension modules. Future research will have to focus on this.70 Due to this expectation on the future of logistics, the industry will be shaped by intelligent combined concepts of LSEs with their standardized networks, of SMEs with their individual contract logistics solutions, of customers with logistics assembly tasks as well as of the New Breed of actors. SMEs are sustainable in the area of logistics. The logistics business will become increasingly a collaborative business with logistical SMEs and other single players achieving success by operating no longer only independently but by becoming an active part of this collaborative construct. Consequently, a new joint business model in the sense of a Network Enterprise Model of the four groups of market participants, i.e. customers, LSEs, SMEs as well as New Breed, has to be subject of future research. In future, not only single companies but whole supply chains compete with each other. A further research process should also be to review developments in the industry. The dynamic in the industry has not yet been well explored. For this reason timeframes need to be discovered by comparing the status in the industry, e.g. for the periods from 1990 to 2000, from 2000 to 2005 and a five year period following this study. Although SMEs have to deal with structural disadvantages in competition they are highly important for the national economy today and in future. While examples from 70 In academic literature, for example, the concept of mass customization with related economies of customer integration has come into focus of interest (see for example Lampel and Mintzberg 1996; Piller 2006; Piller 2003; Piller and Moeslein/Reichwald 2002; Pine 1993; Schenk et al. 2001; Zipkin 2001). With mass customization differentiation possibilities of customization are combined with efficiency of mass production (Tseng and Piller 2003, p. 6). In the context of the developments in today’s logistics industry the concept of mass customization should be applied to future research.

8 Š Conclusions

335

global giants in other industries have already proven vulnerable (e.g. in the automotive industry the failed acquisition of Chrysler by Daimler) in logistics giants stumble too (e.g. the withdrawal of Deutsche Post DHL from DHL in the US). The importance of SMEs in logistics will increase and future research progress in the industry can not afford to neglect this area any longer. This includes reviewing the applicability and suitability of the BMPS Framework I developed in this study. Market players must perform for survival in competiton. The Business Model Scorecard and the BMPS Framework help to identify the winners who can develop micro and macro dimensions. A comparison of the position of the LSPs, e.g. in 1990 and currently is necessary and conclusions have to be made for the future. For example, an open issue is whether identified Failed Hidden Championships will also remain so. Further, an answer to the question about how long Hidden Champions remain in niches is required. Another area of interest is the life-cycle of Hidden Champions, which would involve answering questions about how Hidden Champions grow, mature or die, including whether Hidden Champions can collapse from one day to another. My empirical research, for which I use the approach of hypotheses generation and also analysis by research cases, should be further extended by including a broad scope of number of LSPs in the analysis to achieve statistical significance. While being a Hidden Champion is a blessing, potential Hidden Championship is a Winner’s Curse (Thaler 1992) for others. For example, LSP K became ‘too successful’. Its key customer feared losing direct control over its logistics functions, creating dependency as well as benefits for competitors. LSP K was also too strongly connected to its key customer and thus limited in external market success due to this tight connection. For these reasons the joint venture LSP K has been cancelled. This is just one example of the highly sensitive and critical area of Hidden Championship in logistics which leaves great scope for future research.

Appendices

337

Appendices

Appendix 1:

Overview of approaches to business models

Appendix 2:

Overview of approaches to strategy

Appendix 3:

Questionnaire/Interview Manual Logistics Service Provider

Appendix 4:

Questionnaire/Interview Manual Customer

R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

338

Appendix 1: Overview of approaches to business models

Appendix 1: Overview of approaches to business models

Appendix 1: Overview of approaches to business models

339

340

Appendix 1: Overview of approaches to business models

Appendix 1: Overview of approaches to business models

341

342

Appendix 1: Overview of approaches to business models

Appendix 1: Overview of approaches to business models

343

344

Appendix 1: Overview of approaches to business models

Appendix 1: Overview of approaches to business models

345

346

Appendix 1: Overview of approaches to business models

Appendix 1: Overview of approaches to business models

347

348

Appendix 1: Overview of approaches to business models

Appendix 1: Overview of approaches to business models

349

350

Appendix 1: Overview of approaches to business models

Appendix 2: Overview of approaches to strategy

Appendix 2: Overview of approaches to strategy

351

352

Appendix 2: Overview of approaches to strategy

Appendix 2: Overview of approaches to strategy

353

354

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 1 -

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 2 -

355

356

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 3 -

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 4 -

357

358

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 5 -

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 6 -

359

360

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 7 -

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 8 -

361

362

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 9 -

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 10 -

363

364

Appendix 3: Questionnaire/Interview Manual Logistics Service Provider

- Page 11 -

Appendix 4: Questionnaire/Interview Manual Customer

Appendix 4: Questionnaire/Interview Manual Customer

- Page 1 -

365

366

Appendix 4: Questionnaire/Interview Manual Customer

- Page 2 -

Appendix 4: Questionnaire/Interview Manual Customer

- Page 3 -

367

368

Appendix 4: Questionnaire/Interview Manual Customer

- Page 4 -

Appendix 4: Questionnaire/Interview Manual Customer

- Page 5 -

369

Bibliography

371

Bibliograhpy 4flow (ed.). N.Y. 4flow, Beratung. Abrahamson, E. and Fairchild, G. 1999. Management Fashion: Lifecycles, Triggers, and Collective Learning Processes. In Administrative Science Quarterly. Vol. 44. December 1999, pp. 708-740. Adams, W. and Brock, J. W. 1988. Warum Grossfirmen traege werden: Unternehmensgroesse und Effizienz. mi-Poller, Verlag Moderne Industrie. Landsberg/Lech, August 1988. Aden, D. 2004. Automobil-Logistik: Netzwerke statt Insel-Loesungen. In Baumgarten, H. and Darkow, I.-L. and Zadek, H. (ed.). 2004. Supply Chain Steuerung und Services. Logistik-Dienstleister managen globale Netzwerke – Best Practices. Springer. Berlin, p. 183-187. Aden, D. 2000. One-Stop-Shopping ist die Devise. In Handelsblatt. No. 201. 18 October 2000, p. B3. Afuah, A. 2004. Business Models: A Strategic Management Approach. McGraw-Hill. New York, 2004. Afuah, A. and Tucci, C. L. 2003. Internet Business Models and Strategies: Text and Cases. Second edition. McGraw-Hill. New York, 2003. Afuah, A. and Tucci, C. L. 2001. Internet Business Models and Strategies: Text and Cases. McGraw-Hill. New York, 2001. Aharoni, Y. 1993. In search for the unique: can firm-specific advantages be evaluated?. In Journal of Management Studies 30. 1 January 1993, pp. 31-49. Alt, R. and Zimmermann, H.-D. 2001. Preface: Introduction to Special Section Business Models. In Electronic Markets. Vol. 11. No. 1. 2001, pp. 3-9. Amit, R. and Zott, C. 2001. Value Creation in e-Business. In Strategic Management Journal. No. 22. 2001, pp. 493-520. Amit, R. and Zott, C. 2000. Value Drivers of e-Commerce Business Models. INSEAD Working Paper 2000/54/ENT/SM. Revised Version of 2000/06/ENT/SM. Fontainebleau, 30 July 2000. Analytica (ed.). 2005. Who’s Who in European Logistics 2005: A Statistical Analysis Benchmarking Europe’s Leading 3PLs. Hertfordshire, 2005. Anderson, J. C. and Narus, J. A. 2004. Business Market Management: Understanding, Creating and Delivering Value. Second edition. Pearson Prentice Hall. Upper Saddle River/New Jersey, 2004. Anderson, J. C. and Narus, J. A. 2003. Selectively Pursuing More of Your Customer’s Business. In MIT Sloan Management Review. Vol. 44. Issue 3. Cambridge/MA. Spring 2003, pp. 42-49. Andrews, K. R. 1987. The Concept of Corporate Strategy. Third edition. Irwin. Homewood/IL, 1987. Andrews, K. R. 1980. The Concept of Corporate Strategy. Second edition. Irwin. Homewood/IL, 1980. Andrews, K. R. and Bower, J. L. and Hamermesh, R. G. and Porter, M. E. 1987. Business Policy: Text and Cases. Sixth edition. Irwin. Homewood/IL, 1987. R. M. Neubauer, Business Models in the Area of Logistics, DOI 10.1007/978-3-8349-6533-2, © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2011

372

Bibliography

Andriani, P. 2001. Diversity, knowledge and complexity theory: some introductory issues. In International Journal of Innovation Management. Vol. 5. No. 2. June 2001, pp. 257-274. Ansoff, H. I. 1988. The New Corporate Strategy. John Wiley & Sons. New York, 1988. Ansoff, H. I. 1965. Corporate Strategy: Business Policy for Growth and Expansion. McGraw-Hill. New York, 1965. Antweiler, W. 2001. The EURO Europe’s New Currency. http://fx.sauder.ubc.ca/ euro/euro.html, 7 December 2001. A.P. Møller - Mærsk A/S (ed.). 2009. Annual Report 2008. Copenhagen 2009. A.P. Møller - Mærsk A/S (ed.). 2005. Annual Report 2004. Copenhagen, 31 March 2005. Appel, F. and Chiavi, R. and Flickinger, B. 2005. Press Conference DHL Logistics. Presentation, 13 April 2005. Applegate, L. M. 2001. E-Business-Models: Making Sense of the Internet Business Landscape. In Dickson, G. W. and DeSanctis, G. (ed.). 2001. Information Technology and the Future Enterprise: New Models for Managers. Prentice Hall. Upper Saddle River/New Jersey. 2001, pp. 49-101. Applegate, L. M. and Austin, R. D. and McFarlan, F. W. 2002. Creating Business Advantage in the Information Age. McGraw-Hill. New York, 2002. Arinaitwe, S. K. 2006. Factors Constraining the Growth and Survival of Small Scale Businesses. A Developing Countries Analysis. In The Journal of American Academy of Business. Vol. 8. Issue 2. Cambridge. March 2006, pp. 167-178. Arretz, M. and Jungmichel, N. 2008. 2020: Wettbewerb um Klimaschutz in der Logistik. DVZ Sonderbeilage. Zukunft der Logistik. In DVZ. 26 February 2008, p. 5. ARS Altmann AG (ed.). 2005. Kurzportrait. Wolnzach, April 2005. Atteslander, P. 1991. Methoden der empirischen Sozialforschung. Sixth edition. Walter de Gruyter & Co.. Berlin and New York. 1991. Ayers, J. B. 2002. A Primer on Supply Chain Management, pp. 5-17. In Ayers, J. B. (ed.) 2002. Making Supply Chain Management Work: Design, Implementation, Partnerships, Technolgy, and Profits. Auerbach Publications. Boca Raton, 2002. Bade, D. J. and Mueller, J. K. 1999. New for the millennium: 4PL. In Transportation & Distribution. February 1999, pp. 78-80. Bain, J. S. 1968. Industrial Organization. Second edition. John Wiley & Sons. New York, 1968. Bain, J. S. 1956. Barriers to New Competition: Their Character and Consequences in Manufacturing Industries. Harvard University Press. Cambrigde/MA, 1956. Barney, J. B. 2002. Gaining and Sustaining Competitive Advantage. Second edition. Prentice Hall. Upper Saddle River/NJ, 2002. Barney, J. B. 1996. Gaining and Sustaining Competitive Advantage. Addison-Wesley. Reading, 1996. Barney, J. 1991. Firm Resources and Sustained Competitive Advantage. In Journal of Management. 1991. Vol. 17. Issue 1, pp. 99- 120.

Bibliography

373

Barney, J. B. 1986. Strategic Factor Markets: Expectations, Luck and Business Strategy. In Management Science. Vol. 32. Issue 10. October 1986, pp. 12311241. Bartlett, C. A. and Ghoshal, S. 1992. Managing across Borders: New Organizational Responses. In The Best of MIT’s Sloan Management Review, Special issue 1992. Vol. 29. No. 1. Sloan Management Review Association. 1992. Cambridge/MA. 1992, pp. 3-13. Baumgarten, H. and Darkow, I.-L. 2002. Logistikprozesse. Management von Logistikprozessen. In Baumgarten, H. and Wiendahl, H.-P. and Zentes, J. (ed.). 2002. Logistik-Management: Strategien – Konzepte – Praxisbeispiele. Vol. 1. Springer. Berlin. October 2002. Chapter 2-03, pp. 1-18. Baumgarten, H. and Kasiske, F. and Zadek, H. 2002. Logistik-Dienstleister – Quo vadis? – Stellenwert der Fourth Logistics Provider (4PL) –. In Logistikmanagement. Vol. 4. No. 1. 2002, pp. 27-40. Baumgarten, H. and Thoms, J. 2002. Trends und Strategien in der Logistik: Supply Chains im Wandel. Technical University Berlin/Bundesvereinigung Logistik. Berlin, 2002. Baumgarten, H. and Zadek, H. 2002. Struktur des Logistikdienstleistungsmarktes. In Baumgarten, H. and Wiendahl, H.-P. and Zentes, J. (ed.). 2002. LogistikManagement. Springer. Berlin and Heidelberg and New York. October 2002, Chapter 9.01.01. Baumgarten, H. 2001a. 4PL in der Praxis. Auf halbem Weg. In Logistik Heute. Vol. 23. November 2001, pp. 36-38. Baumgarten, H. 2001b. Allein schafft es kaum noch einer. Mittelstandsinitiativen koennen Ausweg sein. In DVZ. Vol. 55. No. 124. 16 October 2001, pp. 14-15. Baumgarten, H. and Walter, S. 2000. Trends und Strategien in der Logistik 2000+: Eine Untersuchung der Logistik in Industrie, Handel, Logistik-Dienstleistung und anderen Dienstleistungsunternehmen. Berlin, 2000. Baumgarten, H. and Wolff, S. 1999. The Next Wave of Logistics: Global Supply Chain e-fficiency. Berlin and Boston/MA, 1999. Bellman, R. and Clark, C. E. and Malcolm, D. G. and Craft, C. J. and Ricciardi, F. M. 1957. On the construction of a multi-stage, multi-person business game. In Operations Research. Vol. 5. Issue 4, pp. 469-503. Bettis, R. A. 1998. Commentary on “Redefining Industry Structure for the Information Age” by J. L Sampler. In Strategic Management Journal. Vol. 19. 1998, pp. 357-361. Bibby Distribution (ed.). 2006. Nisa Today’s. http://www.bibbydist.co.uk, 10 January 2006. Black, J. 2003.Oxford Dictionary of Economics. Oxford University Press. Oxford. Second edition 2002/reissued with corrections and a new cover 2003. Blair, M. M. and Wallman, S. M. H. 2001. Unseen wealth: report of the Brookings Task Force on Intangibles. R. R. Donnelley and Sons. Harrisonburg, 2001.

374

Bibliography

Blom, F. and Harlander N. A. 2003. Logistik-Management: Der Aufbau ganzheitlicher Logistikketten in Theorie und Praxis. Second edition. expert verlag. Renningen, 2003. BMWi/Bundesministerium fuer Wirtschaft und Technologie (ed.). 2009a. Mittelstand: Leistung durch Vielfalt. Berlin, March 2009. BMWi/Bundesministerium fuer Wirtschaft und Technologie (ed.). 2009b. Gesamtwirtschaftliche Bedeutung. http://lexikon.bmwi.de. Berlin, 13 November 2009. Boecker, E. 2007. Erfolg durch Kennzahlen sichern. In DVZ. Vol. 61. No. 83. 12 July 2007, p. 9. Boehler, H. 1985. Marktforschung. W. Kohlhammer. Stuttgart. Berlin. Koeln. Mainz. 1985. Bonoma, T. V. 1985. Case Research in Marketing: Opportunities, Problems, and a Process. In Journal of Marketing Research. Vol. XXII. May 1985, pp. 199-208. Bowersox, D. J. and Closs, D. J. and Cooper, M. B. 2002. Supply Chain Logistics Management. McGraw-Hill/Irwin. New York, 2002. Boyson, S. and Corsi, T. M. and Dresner, M. E. and Harrington, L. H. and Rabinovich, E. 1999. Logistics and the Extended Enterprise: Benchmarks and best practices for the manufacturing professional. John Wiley & Sons. New York, 1999. Brandenburger, A. M. and Nalebuff, B. J. 1996. Co-opetition. Doubleday. New York, May 1996. Buehner, R. (ed.). 2001. Management-Lexikon. Oldenbourg. Wissenschaftsverlag GmbH. Muenchen/Wien, 2001. Bundesamt fuer Gueterverkehr. 2005. Marktbeobachtung Gueterverkehr: Sonderbericht zum Strukturwandel im Gueterkraftverkehrsgewerbe. Cologne, 1 February 2005. Bundesvereinigung Logistik (ed.) and BearingPoint (ed.). 2003. Studie Supply Chain Collaboration 2003: Unternehmensuebergreifende Zusammenarbeit. KAT International AG. Bremen and Frankfurt/Main. 2003. Bunnell, D. and Luecke, R. A. 2000. The e-Bay phenomenon: business secrets behind the world’s hottest Internet company. John Wiley & Sons, Inc. New York, 2000. Burgelman, R. A. 2002. Strategy Is Destiny: How strategy making shakes a company’s future. The Free Press. New York, 2002. Campbell, A. and Birkinshaw, J. and Morrison, A. and van Basten Batenburg, R. 2003. The Future of Corporate Venturing. In MIT Sloan Management Review. Fall 2003, pp. 30-37. Caves, R. E. and Porter, M. E. 1977. From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition. In Quarterly Journal of Economics. Vol. 91. 1977, pp. 241-261. CEVA Group Plc (ed.). 2009. Annual Report 2008. Leicestershire, 2009. Chandler, A. D., Jr. 1990. Scale and Scope: The Dynamics of Industrial Capitalism. Harvard University Press. Cambridge/MA and London, 1990.

Bibliography

375

Chandler, A. D. 1966. Strategy and Structure: Chapters in the History of the Industrial Enterprise. Third printing. The M.I.T. Press. Cambridge/MA and London, April 1966. Chandler, A. D. 1962. Strategy and Structure: Chapters in the History of the Industrial Enterprise. The M.I.T. Press. Cambridge/MA, 1962. Chatain, O. and Zemsky, P. 2006. The Horizontal Scope of the Firm: Organizational Tradeoffs versus Buyer-Supplier Relationships. INSEAD Working Paper Series. 2006/12/ST. 9 February 2006. Chemical Week (ed.). 2003. 2004 Logistics, Transportation & 3PL Service Directory. In Chemical Week. 24/31 December 2003, pp. 19-22. Chesbrough, H. W. 2003. Open Innovation. Harvard Business School Press. Boston/MA, 2003. Chesbrough, H. W. and Rosenbloom, R. S. 2002. The role of the business model in capturing value from innovation: evidence from Xerox Corporation’s technology spin-off companies. In Industrial and Corporate Change. Vol. 11. No. 3. 2002, pp. 529-555. Christensen, C. R. and Andrews, K. R. and Bower, J. L. and Hamermesh, R. G. and Porter, M. E. 1987. Business Policy: Text and Cases. Sixth edition. Richard D. Irwin. Homewood/IL, 1987. Chu, S.-Y. and Fang, W.-C. 2006. Exploring the Relationships of Trust and Commitment in Supply Chain Management. In The Journal of American Academy of Business. Vol. 9, Issue 1, pp. 224-228. CMA CGM (ed.). 2009. The Group. http://www.cma-cgm.com/en/AboutUs/ Presentation/Default.aspx, 30 May 2009. Collins, J. C. and Porras, J. I. 1996. Building Your Company’s Vision. In Harvad Business Review. September-October 1996, pp. 65-77. Copacino, W. C. 1997. “Fourth-Party Logistics”: Beyond 3PL. In Logistics Management. April 1997, p. 43. Council of Supply Chain Management Professionals (ed.)/Vitasek, K. 2009. Supply Chain Management Terms and Glossary. Lombard/IL, March 2009. Covin, J. G. and Slevin, D. P. 1991. A Conceptual Model of Entrepreneurship as Firm Behavior. In Entrepreneurship: Theory and Practice. Fall 1991, pp. 7-25. Coyne, K. P. and Dye, R. 1998. The Competitive Dynamics of Network-Based Businesses. In Harvard Business Review. January-February 1998, pp. 99-109. Cross, W. 1999. Dictionary of Business Terms. Prentice Hall. Paramus/NJ, 1999. Dachser (ed.). 2009. e-Mail from Bernadette Abel. 23 September 2009. Datamonitor (ed.). 2008a. Global Logistics. Industry Profile. New York/London/Frankfurt/Sydney, December 2008. Datamonitor (ed.). 2008b. Logistics in Europe. Industry Profile. New York/London/Frankfurt/Sydney, December 2008. Datamonitor (ed.). 2008c. Logistics in Germany. Industry Profile. New York/London/Frankfurt/Sydney, December 2008. Datamonitor (ed.). 2008d. Logistics in the United States. Industry Profile. New York/London/Frankfurt/Sydney, December 2008.

376

Bibliography

Datamonitor (ed.). 1999. European Logistics 1999: Opportunities in a Consolidating Market. London, 1999. Davenport, T. H. 1993. Process Innovation: Reengineering Work through Information Technology. Ernst & Young Center for Information Technology and Strategy. Harvard Business School Press. Boston/MA, 1993. Davenport, T. H. and Harris, J. G. and Kohli, A.K. 2001. How Do They Know Their Customers So Well?. In MIT Sloan Management Review. Winter 2001. Vol. 42. Issue 6. Cambridge/MA, pp. 63-73. Davis, G. B. and Olson, M. H. 1985. Management Information Systems: Conceptual Foundations, Structure, and Development. Second edition. McGraw-Hill. New York, 1985. Day, G. S. 2003. Creating a Superior Customer-Relating Capability. In MIT Sloan Management Review. Vol. 44. Issue 3. Cambridge/MA. Spring 2003, pp. 7782. Delfmann, W. (ed.)/Wickinghoff, C. 1999. Performance Measurement in der Logistik: Grundlagen, Konzepte und Ansatzpunkte einer Bewertung logistischer Prozesse. University of Cologne. Seminar for General Science of Business Management, Business Planning and Logistics. Work Report. No. 100. Cologne, November 1999. Deutsche Bahn AG (ed.). 2009. 2008 Annual Report. Berlin, 2009. Deutsche Post AG (ed.). 2009. Annual Report 2008. Bonn, 2009. Deutsche Post AG (ed.). 2006. Annual Report 2005. Bonn, 2006. Deutsche Post AG (ed.). 2005. Think Globally, Act Locally. Annual Report 2004. Bonn, 2005. Dodd, D. and Favaro, K. 2006. Managing the Right Tension. In Harvard Business Review. December 2006, pp. 62-74. Doz, Y. L. and Hamel, G. 1998. Alliance Advantage: The Art of Creating Value through Partnering. Harvard Business School Press. Boston/MA, 1998. Drea, J. T. and Hanna, J. B. 2000. Niche Marketing in Intrastate Passenger Rail Transportation. In Transportation Journal. Spring 2000, pp. 33-43. Drucker, P. F. 1999a. Management. Butterworth-Heinemann. First published 1974. Oxford, 1999. Drucker, P. F. 1999b. The Practice of Management. Butterworth-Heinemann. First published 1955. Oxford, 1999. Drucker, P. F. 1964. Managing for Results: Economic Tasks and Risk-taking Decisions. Harper & Row. New York, 1964. Drucker, P. F. 1954. The Practice of Management. Harper & Brothers Publishers. New York, 1954. DSV A/S (ed.). 2009. 2008 Annual Report. Brøndby, March 2009. Dunnington, G. W. and Gray, J. and Dohse, F.-E. 2004. Gauss: Titan of Science. Reprint of 1955 edition. The Mathematical Association of America. Washington/DC, 2004. DVZ (ed.) 2005. Die Profite liegen im Netz. In DVZ. Vol. 59. No. 67. 7 June 2005, p. 5.

Bibliography

377

Dyer, J. H. and Singh, H. 1998. The Relational View: Cooperative Strategy and Sources of Interorganizational Competitive Advantage. In Academy of Management Review. Vol. 23. Issue 4, pp. 660-679. Eccles, R. G. and Nohria, N. and Berkley, J. D. 1992. Beyond the hype. Rediscovering the essence of management. Harvard Business School Press. Bosten/MA, 1992. Edvinsson, L. and Malone, M. S. 1997. Intellectual Capital. HarperBusiness. London, 1997. Ehner, P. and Heng, S. and Heymann, E. 2008. Logistik in Deutschland: Wachstumsbranche in turbulenten Zeiten. Deutsche Bank Research. Aktuelle Themen 432. Frankfurt/Main, 2 October 2008. Eisenhardt, K. M. 1989. Building Theories from Case Study Research. In Academy of Management Review. Vol. 14. No. 4, 1989, pp. 532-550. Emmanuel, C. and Otley, D. and Merchant, K. 1990. Accounting for management control. Second edition. Chapman and Hall. London, 1990. Eriksson, H.-E. and Penker, M. 2000. Business Modeling with UML: Business Patterns at Work. Wiley Computer Publishing. John Wiley & Sons. New York, 2000. European Commission/Eurostat (ed.). 2009. Panorama of Transport. Collection: Statistical Books. Theme: Transport. Luxembourg 2009. Ewing, J. 2004. Hidden Champions: The little-known European companies that are conquering the world. In Business Week. Business Week Online. http://www.businessweek.com, 26 January 2004. Eyefortransport (ed.). 2004. The North American 3PL Market – A strategic analysis of the latest market opportunities and trends 2004. London, July 2004. Eyefortransport (ed.). 2003. Germany resolves toll disagreement with EU. http://www.eyefortransport.com. 28 August 2003, p.1. Ferdows, K. and Lewis, M. A. and Machuca, J. A. D. 2004. Rapid-Fire Fulfillment. In Harvard Business Review. November 2004, pp. 104-110. Fiege, H. 2002. Auf dem Pruefstand. In DVZ. Logistik. Special edition for the 19th German Logistics Congress from 16 to 18 October 2002 in Berlin. Vol. 56. Issue 123, p. 15. Findeis, M. 2007. Mit Barcode Gewinn machen. In DVZ. Vol. 61. No. 74. 21 June 2007, p. 13. Fine, C. H. 1998. Clockspeed: Winning Industry Control in the Age of Temporary Advantage. Perseus Books. New York, 1998. Finnlines (ed.). 2006. Annual Report 2005. Helsinki. 14 February 2006. Fleisch, E. 2001. Das Netzwerkunternehmen: Strategien und Prozesse zur Steigerung der Wettbewerbsfähigkeit in der “Networked economy”. Springer. Berlin, 2001. Ford, J. D. and Schellenberg, D. A. 1982. Conceptual Issues of Linkage in the Assessment of Organizational Performance. In Academy of Management Review. Vol. 7. No. 1. 1982, pp. 49-58.

378

Bibliography

Foster, T. 1999. 4PLs: The next generation for supply chain outsourcing?. In Logistics Management. April 1999, p. 35. Fraunhofer ATL and HypoVereinsbank (ed.). 2004. Mittelstand und Kontraktlogistik: Chancen und Risiken mittelstaendischer Logistikdienstleister in der Kontraktlogistik. Nuremberg, November 2004. Fraunhofer ATL and HypoVereinsbank (ed.). 2003. Mittelstandskooperationen auf dem Pruefstand - Chancen und Risiken mittelstaendischer SystemStueckgutkooperationen in Deutschland. Nuremberg, October 2003. Frazelle, E. 2002. Supply chain strategy: the logistics of supply chain management. McGraw-Hill. New York, 2002. Fritzen, J. M. 2005. Warum geht der Trend zu kuerzeren Laufzeiten bei Dienstleistungsvertraegen?. In LOG.. 1/2005, p. 12. GCI and Capgemini and Intel. 2006. 2016: The Future Value Chain, 2006. Gericke, J. 2003. Etappen bis zum 5PL. In Logistik Heute. 4/2003, pp. 36-37. Ghemawat, P. 1991. Commitment: the dynamic of strategy. The Free Press. New York, 1991. Godfrey, P. C. and Hill, C. W. L. 1995. The Problems of Unobservables in Strategic Management Research. In Strategic Management Journal. Vol. 16. 1995, pp. 519-533. Goepfert, I. 2002. Im Netzwerk kommen die Kleinen ganz groß raus. In DVZ. Vol. 56. No. 71, 15 June 2002. p. 9. Google (ed.). 2009. Results for “Hidden Champions”. http://www.google.com, 9 August 2009. Gooley, T. B. 2002a. Brave new world for 3PLs?. In Warehousing Management. March 2002, pp. 9-10. Gooley, T.B. 2002b. One-Stop Shopping. In Logistics Management. November 2002, pp. 45-50. Gordon, B. H. 2003. The Changing Face of 3rd Party Logistics. In Supply Chain Management Review. March-April 2003. Vol. 7. Issue 2, pp. 50-57. Grant, R. M. 2002. Contemporary Strategy Analysis: Concepts, Techniques, Applications. Fourth edition. Blackwell Publishers. Malden/MA and Oxford, 2002. Grant, R. M. 1998. Contemporary Strategy Analysis: Concepts, Techniques, Applications. Third edition. Blackwell Publishers. Malden/MA and Oxford, 1998. Guanggao. 2009. 50 A shares “hidden champions” has been underestim. In in china. http://www.inchina.us, 14 September 2009. Gulati, R. and Nohria, N. and Zaheer, A. 2000. Strategic Networks. In Strategic Management Journal. Special Issue: Strategic Networks. Vol. 21. No. 3. March 2000, pp. 203-215. Guth, W. D. and Ginsberg, A. 1990. Guest editors’ introduction: corporate entrepreneurship. In Strategic Management Journal. Vol. 11. 1990, pp. 5-15. Hagel III, J. and Rayport, J. F. 1997. The Coming Battle for Customer Information. In Harvard Business Review. January-February 1997, pp. 53-65.

Bibliography

379

Hagel III, J. and Singer, M. 1999. Net Worth. Shaping Markets When Customers Make the Rules. Harvard Business School Press. Boston/MA, 1999. Hamel, G. 2000. Leading the revolution. Harvard Business School Press. Boston/MA, 2000. Hamel, G. and Prahalad, C. K. 1994. Competing for the future. Harvard Business School Press. Boston/MA, 1994. Hammer, M. and Champy, J. 1993. Reengineering the Corporation – A Manifesto for Business Revolution. HarperBusiness. New York, 1993. Handy, C. 1999. Trust and the Virtual Organization. In Tapscott, D. (ed.). 1999. Creating Value in the Network Economy. A Harvard Business Review Book. Harvard Business School Publishing. Boston/MA, pp. 107-120. Hapag-Lloyd AG (ed.). 2009. Facts & Figures. http://www.hapaglloyd.com/en/about_us/facts_and_figures.html, 30 May 2009. Harrigan, K. R. 1983. Research Methodologies for Contingency Approaches to Business Strategy. In Academy of Management Review. Vol. 8. No. 3. 1983, pp. 398-405. Harper Collins Publishers (ed.) 1991. Collins English Dictionary. Third edition. Harper Collins. Glasgow, 1991. Haussmann, H. and Holtbruegge, D. and Rygl, D. and Schillo, K. 2006. Erfolgsfaktoren mittelstaendischer Weltmarktfuehrer. Working Paper 3/2006. University of Erlangen-Nuremberg. Department of International Management. Nuremberg, 2006. Heaton, J. 2004. Testing new business models. The benefits of “insourcing”. In Solid State Technology. August 2004, p. 94, p. 96. Hedman, J. and Kalling, T. 2002. IT and Business Models: Concepts and Theories. Daleke Grafiska, Malmoe, 2002. Helmke, B. 2003. Know-how schlaegt pure Groesse. In DVZ. Vol. 57. No. 27. 4 March 2003, p. 3. Helmke, B. 2002. Komplexitaet fremdvergeben. In DVZ. Vol. 56. No. 143. 30 November 2002, p. 3. Helmke, B. 2001a. 4PL: Etablierte Logistiker im Vorteil. In DVZ. Vol. 55. No. 65. 31 May 2001, p. 5. Helmke, B. 2001b. Der 4PL hat schlanke Prozessketten im Visier. In DVZ. Vol. 55. No. 49. 24 April 2001, p. 3. Helms, M. M. (ed.). 2000. Encyclopedia of Management. Fourth edition. Gale Group. Farmington Hills/MI, 2000. Heriot-Watt Unversity/Logistics Research Centre (ed.)/McKinnon, A. and Palmer, A. and Edwards, J. and Piecyk, M. 2008. Reliability of Road Transport from the Perspective of Logistics Maangers and Freight Operators. Edinburgh, June 2008. Heyel, C. (ed.). 1982. The Encyclopedia of Management. Van Nostrand Reinhold Company. Third edition. New York, 1982. Hirn, W. and Neukirchen, H. 2001. Fabrik-Verkauf. In Manager Magazin. November 2001, pp. 294-304.

380

Bibliography

Hitt, M. A. and Freeman, R. E. and Harrison, J. S. 2001. The Blackwell handbook of strategic management. Blackwell Publishers. Oxford, 2001. Hodgson, G. M. 2003. Capitalism, Complexity, and Inequality. In Journal of Economic Issues. Vol. 37. No. 2. June 2003, pp. 471-478. Holweg, M. and Pil, F. K. 2001. Successful Build-to-Order Strategies Start With the Customer. In MIT Sloan Management Review. Fall 2001. Vol. 42. Issue 5. Cambridge/MA, pp. 74-83. Honold Logistik Gruppe (ed.). 2006. Honold Logistik Gruppe. http://www.honold.net, 10 June 2006. Hoyer (ed.). 2005a. Hoyer – Company Portrait. http://www.hoyer-group.com, 22 June 2005. Hoyer (ed.). 2005b. Company Report 2004. Hamburg. April 2005. HypoVereinsbank and Fraunhofer Institut (ed.) and Tripp, C. 2004. Mittelstand und Kontraktlogistik: Chancen und Risiken mittelstaendischer Logistikdienstleister in der Kontraktlogistik. Nuremberg, November 2004. IBC (ed.). 2005. IBM introduces world’s first supply chain outsourcing offering. http://www.logisticsit.com, 18 July 2005. IKB Deutsche Industriebank (ed.). 2008. Transport und Logistik: Kurzbericht zur Branche. Duesseldorf, December 2008. IKB Deutsche Industriebank (ed.). 2007. Transport und Logistik. Duesseldorf, December 2007. IKB Deutsche Industriebank (ed.). 2005. Transport und Logistik: Bericht zur Branche. Duesseldorf, December 2005. IKB Deutsche Industriebank (ed.). 2004. Transport und Logistik: Bericht zur Branche. Duesseldorf, September 2004. Infracor (ed.). 2007. References. http://www.infracor.de, 25 June 2007. Institut fuer Mittelstandsforschung Bonn/IfM Bonn (ed.). 2004. SMEs in Germany. Facts and Figures 2004. Bonn, 2004. International Monetary Fund (ed.). 2009. World Economic Outlook Database. October 2009. http://www.imf.org/external/pubs/ft/weo/2009/02/weodata/ index.aspx, 28 October 2009. Jahns, C. and Darkow, I.-L. 2006. Qualitaet kommt vor dem Preis. In DVZ. Special Edition. Vol. 60. No. 124, p. 1. Jenster, P. and Pedersen, H. S. and Plackett, P. and Hussey, D. 2005. Outsourcinginsourcing: can vendors make money from the new relationship opportunities?. John Wiley & Sons. Chichester, 2005. Jeong-ju, N. 2009. Korean ‘Hidden Champions’ Going Global. In Korea Times. http://www.koreatimes.co.kr, 28 April 2009. Jones, G. M. 1960. Educators, Electrons, and Business Models: A Problem in Synthesis. In The Accounting Review. 1960, pp. 619-626. JPMorgan Chase Vastera (ed.). 2005. Transaction Will Combine Vastera’s Global Trade Management Solutions With JPMorgan Chase’s Logistics and Trade Services Businesses. Press Release. http://www.vastera.com, 7 April 2005.

Bibliography

381

Jung, K.-P. and Hornborstel, B. 2006. Familienbetriebe oben auf der Einkaufsliste. In DVZ. Vol. 60. No. 7, p. 7. Kaplan, R. S. and Norton, D. P. 1996. Using the Balanced Scorecard as a Strategic Management System. In Harvard Business Review. January-February 1996, pp. 75-85. Kaplan, R. S. and Norton, D. P. 1992. The Balanced Scorecard – Measures That Drive Performance. In Harvard Business Review. January-February 1992, pp. 71-79. Karl Dischinger Logistikdienstleister (ed.). 2006. Homepage. http://www.dischinger.de/d/zahlen/index.htm, 10 June 2006. Karris, S. T. 2007. Mathematics for Business, Science, and Technology with MATLAB® and Excel® Computations. Third edition. Orchard Publications. Fremont/California, 2007. Kastl, M. and Roedl, B. (ed.). 2000. Going Global: Der Gang mittelstaendischer Unternehmen an den Weltmarkt. Frankfurter Allgemeine Zeitung. Frankfurt/Main, 2000. Kessler, U. 1992. Unternehmensgroesse, Innovation und Wertschoepfungswachstum: Eine empirische Untersuchung im Lichte der Schumpeterschen Innovationsdiskussion. Dissertation 1991. Peter Lang. Frankfurt/Main, 1992. Kille, C. 2009. Subject: AW: Marktvolumen Logistik. e-Mail, 15 June 2009. Kilov, H. 2002. Business Models: A Guide for Business and IT. Prentice Hall. Upper Saddle River/NJ, 2002. Klaus, P. and Kille, C. 2008. Die Top 100 der Logistik: Marktgroessen, Marktsegmente und Marktfuehrer in der Logistikdienstleistungswirtschaft. Edition 2008/2009. DVV Media Group/Deutscher Verkehrs-Verlag. Hamburg, 2008. Klaus, P. and Kille, C. 2007. Top 100 in European Transport and Logistics Services. Market Sizes, Market Segments and Market Leaders in the European Logistics Industry. Second, completely revised and updated edition. DVV Media Group/Deutscher Verkehrs-Verlag. Hamburg, 2007. Klaus, P. and Kille, C. 2006. Die Top 100 der Logistik. Marktgroessen, Marktsegmente und Marktfuehrer in der Logistikdienstleistungswirtschaft. Fourth edition. Deutscher Verkehrs-Verlag. Hamburg, 2006. Klaus, P. 2003. Die Top 100 der Logistik: Marktgroessen, Marktsegmente und Marktfuehrer in der Logistik-Dienstleistungswirtschaft – Deutschland und Europa. Third edition. Deutscher Verkehrs-Verlag. Hamburg, 2003. Klaus, P. and Mueller-Steinfahrt, U. 2000. Die “Top 100” der Logistik: Eine Studie zu Marktgroeßen, Marktsegmenten und den Marktführern in der LogistikDienstleistungswirtschaft – Ausgabe 1999. Deutscher Verkehrs-Verlag. Hamburg, 2000. Klaus, P. 1999. Logistik als “Weltsicht”. In Weber, J. and Baumgarten, H. (ed.). 1999. Handbuch Logistik: Management von Material- und Warenflussprozessen. Schaeffer-Poeschel. Stuttgart, 1999, pp. 15-32. Klaus, P. 1993. Die dritte Bedeutung der Logistik. Nuernberger Logistik-Arbeitspapier. No. 3. Nuremberg, May 1993.

382

Klein,

Bibliography

S. 1996. Interorganisationssysteme und Unternehmensnetzwerke: Wechselwirkungen zwischen organisatorischer und informationstechnischer Entwicklung. DeutscherUniversitätsVerlag. Wiesbaden, 1996. (At the same time: Dissertation. St. Gallen, 1995.) Klingsieck, R. 2008. Know-how fuer gewichtige Rollen. In DVZ. Vol. 62. No. 92. 31 July 2008, p. 9. Klingsieck, R. 2006. FM Logistic auf Kurs Europa. In DVZ. Vol. 60. No. 146. 7 December 2006, p. 12. Kloss, K. 2008. Der etwas andere Dienstleister. In DVZ. Vol 62. No. 82. 8 July 2008, p. 18. Kloss, K. 2005. Dem Michelin-Maennchen hinterher. In DVZ. Vol. 59. No. 135. 12 November 2005, p. 10. Kopczak, L. R. and Johnson, M. E. 2003. The Supply-Chain Management Effect. In MIT Sloan Management Review. Vol. 44. Issue 3. Cambridge/MA. Spring 2003, pp. 27-34. Kraemer, K. L. and Dedrick, J. and Yamashiro, S. 2000. Refining and Extending the Business Model With Information Technology: Dell Computer Corporation. In The Information Society. Vol. 16. 2000, pp. 5-21. Kubicek, H. 1977. Heuristische Bezugsrahmen und heuristisch angelegte Forschungsdesigns als Elemente einer Konstruktionsstrategie empirischer Forschung. In Koehler, R. 1977. Empirische und handlungstheoretische Forschungskonzeptionen in der Betriebswirtschaftslehre: Bericht über die Tagung in Aachen, März 1976. Carl Ernst Poeschel. Stuttgart, 1977, pp. 3-36. Kuehne + Nagel International AG (ed.). 2009. Annual Report 2008. Schindellegi, 2009. Kuehne + Nagel International AG (ed.). 2006. Annual Report 2005. Schindellegi, 2006. Kuehne + Nagel International AG (ed.). 2005. Annual Report 2004. Schindellegi, March 2005. Kuehner, M. 2002. Fourth Party Logistics Service Provider. In Supply Chain Management. Hannover. Issue 3. 2002, p. 23. Kuemmerlen, R. 2005. Aus zwei mach eins. In LogPunkt. Hamburg. Issue 1. 2005, pp. 46-47. Kuhr, M. 2003. Netzwerke fuer die Supply Chains in der Automobilproduktion und die Distribution von Fertigfahrzeugen. In Logistik Jahrbuch 2003. Verlagsgruppe Handelsblatt. Duesseldorf. 2003, pp. 134-136. Kumar, K. and Mahadevan, B. 2003. Evolution of Business Models in B2C ECommerce: The Case of Fabmall. Interview. In IIMB Management Review. December 2003, pp. 23-30. Kuss, A. 1987. Information und Kaufentscheidung. Methoden und Ergebnisse empirischer Konsumentenforschung. Walter de Gruyter. Berlin and New York, 1987. Lambert, D. M. and Stock, J. R. and Ellram, L. M. 1998. Fundamentals of Logistics Management. Irwin/McGraw-Hill. Boston/MA, 1998.

Bibliography

383

Lamnek, S. 1989. Qualitative Sozialforschung. Methoden und Techniken. Vol. 2. Psychologie Verlags Union. Munich. 1989. Lampel, J. and Mintzberg, H. 1996. Customizing Customization. In Sloan Mangement Review. Fall 1996, pp. 21-30. Landesbank Baden-Wuerttemberg (ed.). 2001. Branchenanalyse: Vom Transport zum Supply Chain Management. Lauenroth, L. 2006a. Trend zum eigenen Netz. In DVZ. Vol. 60. No. 69. 10 June 2006a, p. 1. Lauenroth, L. 2006b. Geis-Gruppe kauft Bischoff. In DVZ. Vol. 60. No. 71. 15 June 2006, p. 1. Learned, E. P. and Christensen, C. R. and Andrews, K. R. and Guth, W. D. 1965. Business Policy: Text and Cases. Irwin. Homewood/IL, 1965. Lee, H. L. 2000. Creating Value through Supply Chain Integration. In Supply Chain Management Review. September-October 2000, pp. 30-36. Lehman Brothers International (ed.). 2001. European Distribution & Logistics: Delivering Superior Returns. London, January 2001. Lemoine, W. and Dagnæs, L. 2003. Globalisation strategies and business organisation of a network of logistics service providers. In International Journal of Physical Distribution & Logistics Management. Vol. 33. No. 3. 2003, pp. 209-228. Lev, B. 2001. Intangibles: management, measurement, and reporting. R. R. Donnelley and Sons. Washington, D.C.. 2001. Lieb, R. and Hickey, M. E. N.A. The year 2002 survey: CEO perspectives on the current status and future prospects of the third party logistics industry in the United States. Boston/MA and Irving/TX, N.A. Loch, C. H. and Van der Heyden, L. and Van Wassenhove, L. and Huchzermeier, A. and Escalle, C. 2003. Industrial Excellence. Springer. Berlin, 2003. Lowe, D. 2002. The Dictionary of Transport and Logistics. London 2002. Lutz, H. 2003. Omnipotentes IT-System ist nicht in Sicht. In DVZ. Vol. 57. No. 43. 10 April 2003, p. 10. Macharzina, K. 1999. Unternehmensfuehrung: das internationale Managementwissen; Konzepte – Methoden – Praxis. Third edition. Gabler. Wiesbaden, 1999. Magee, J. F. 1960. The Logistics of Distribution. In Harvard Business Review. Vol. 38. No. 4. July-August 1960, pp. 89-101. Magretta, J. 2002a. What Management Is: How it works and why it’s everyone’s business. The Free Press. New York, 2002. Magretta, J. 2002b. Why Business Models Matter. In Harvard Business Review. May 2002, pp. 86-92. Mahadevan, B. 2000. Business Models for Internet-Based E-Commerce: An Anatomy. In California Management Review. Vol. 42. No. 4. Summer 2000, pp. 55-69. Malone, T. W. and Laubacher, R. J. 1998. The Dawn of the e-Lance Economy. In Harvard Business Review. September-October 1998, pp. 144-152. Markides, C. C. 2000. All the right moves: a guide to crafting breakthrough strategy. Harvard Business School Press. Boston/MA, 2000.

384

Bibliography

Markides, C. and Geroski, P. 2003. Colonizers and Consolidators: The Two Cultures of Corporate Strategy. In strategy+business. Issue 32. Reprint Number 03306, Autumn 2003. Mason, E. S. 1939. Price and Production Policies of Large-Scale Enterprise. In American Economic Review. Vol. 29, pp. 61-74. McKinsey&Company (ed.)/Schween, K. 2003. European Contract Logistics – Performance Trends and Strategic Implications. Presentation. eyefortransport. European 3PL Summit. 15 October 2003. Merkel, H. and Heymans, J. 2003. Logistik als Koordinationsaufgabe in unternehmensübergreifenden Versorgungsketten. In Merkel, H. and Bjelicic, B. 2003. Logistik und Verkehrswirtschaft im Wandel: Unternehmensuebergreifende Versorgungsnetzwerke veraendern die Wirtschaft. Franz Vahlen. Munich. 2003, pp. 3-19. Meyer, M. and Weingaertner, S. and Doering, F. 2001. Kundenmanagement in der Network Economy: Business Intelligence mit CRM und e-CRM. Friedr. Vieweg & Sohn Verlagsgesellscahft mbH. Braunschweig and Wiesbaden. 2001. Miles, R. E. and Snow, C. C. and Miles, G. 2000. The Future.org. In Long range planning. No. 33. 2000, pp. 300-321. Mintzberg, H. 1988. Opening up the definition of strategy. In Quinn, J. B. and Mintzberg, H. and James, R. M. 1988. The Strategy Process: Concepts, Contexts, and Cases. Prentice Hall. Englewood Cliffs/NJ, 1988, pp. 13-20. Mitchell and Company (ed.) 2004. Building and Implementing Better Business Models. http://www.mitchellandco.com, 29 March 2004. Mitchell, D. W. and Bruckner Coles, C. 2004a. Business model innovation breakthrough moves. In Journal of Business Strategy. Vol. 25. No. 1. 2004, pp. 16-26. Mitchell, D. W. and Bruckner Coles, C. 2004b. Establishing a continuing business model innovation process. In Journal of Business Strategy. Vol. 25. No. 3. New York. 2004, pp. 39-49. Mitchell, D. W. and Bruckner Coles, C. 2003a. The ultimate competitive advantage: secrets of continually developing a more profitable business model. BerrettKoehler Publishers. San Francisco, 2003. Mitchell, D. W. and Bruckner Coles, C. 2003b. The ultimate competitive advantage of continuing business model innovation. In Journal of Business Strategy. Vol. 24. No. 5. New York. 2003, pp. 15-21. Mitchell, D. W. and Bruckner Coles, C. 2003c. Business Model Innovation. In Executive Excellence. Vol. 20. Issue 4. Provo. April 2003, p. 18. Mitchell, D. W. and Bruckner Coles, C. 2003d. Learning Agendas: Business Models that Work. In Chief Learning Officer. Vol. 2. Issue 6. Michigan. October 2003, pp. 24-47. Moeller, J. 2005. Architekten der Netzwerke. In DVZ/Logistik – Eine Sonderbeilage zum 6. Logistics Forum am 23. /24. Februar 2005 in Duisburg. Vol. 59. No. 22, 22 February 2005, p. 9.

Bibliography

385

Moody, P. E. 2001. The Path to More, Better, Faster. In MIT Sloan Management Review. Spring 2001, p. 13. Morgan, R. M. and Hunt, S. D. 1994. The Commitment-Trust Theory of Relationship Marketing. In Journal of Marketing. Vol. 58. Issue 3. July 1994, pp. 20-38. Müller – Die lila Logistik (ed.). 2006. Portfolio. http://lila-logistik-node01.de, 21 August 2006. Müller – Die lila Logistik AG (ed.). 2005. Müller – Die lila Logistik AG verkauft Anteile am Joint Venture an VEDES. Press Release. Besigheim. 23 May 2005, p. 1. Mulvaney, J. E. and Mann, C. W. 1976. Practical Business Models. William Heinemann Ltd. London, 1976. N.A. 2008. “Uns traegt die Globalisierung“. In LogPunkt. No. 1. 2008, pp. 32-35. N.A. 2007a. Dachser setzt in Spanien auf Azkar. http://www.verkehrsrundschau.de, 10 January 2007. N.A. 2007b. Lila Logistik bleibt im Soll. In DVZ. Vol. 61. No. 66. 2 June 2007, p. 3. N.A. 2006a. DSV bietet fuer Frans Maas. In DVZ. Vol. 60. No. 3. 7 January 2006, p. 1. N.A. 2006b. Frans Maas: DSV gibt Gas. In DVZ. Vol. 60. No. 25. 28 February 2006, p. 2. N.A. 2006c. High-tech logistics – as intelligent as the machines. In International Transport Journal. No. 39-40. 2006, pp. 42-43. N.A. 2006d. Der Mittelstand geht in die Luft. In DVZ. Vol. 60. No. 105. 2 September 2006, p. 13. N.A. 2005a. Ryder. Company Profile. In Logistics Quarterly. October 2005, p. 15. N.A. 2005b. Brita nimmt die Logistik wieder selbst in die Hand. In DVZ. Vol. 59. No. 105. 3 September 2005, p. 5. N.A. 2004a. UPS will das hohe Wachstumstempo beibehalten. Gespraech mit Kurt Kuehn, Vorstandsmitglied des US-Integrators. In DVZ. Vol. 58. No. 140. 25 November 2004, p. 8. N.A. 2004b. Lieferkette komplett durchleuchtet. In Logistik Heute. Huss. Munich. Vol. 26. July-August 2004, pp. 32-33. N.A. 2003a. Lose Enden der Supply Chain. In DVZ. Vol. 57. No. 100. 21 August 2003, p. 5. N.A. 2003b. Geschaeftslage ist saisonal normal. In DVZ. Vol. 57. No. 129. 28 October 2003, p. 6. N.A. 2003c. Optimal im zweiten Anlauf. In Logistik Heute. Vol. 25. No. 3. March 2003, pp. 16-18. N.A. 2001a. Netzwerke der Klassenbesten. In DVZ. Vol. 55. No. 110. 13 September 2001, p. 6. N.A. 2001b. Oekosteuer belastet Lkw-Unternehmer. In DVZ. Vol. 55, No. 70. 12 June 2001, p. 1. N.A. 2001c. Oekosteuer ist Gift fuer deutsche Arbeitsplaetze. In DVZ. Vol. 55. No. 2. 4 January 2001, p. 1. Napolitano, R. 2002. Wrap products up in creativity, equity. In Marketing News. 11 November 2002, p. 16.

386

Bibliography

Neher, A. 2001. Vision oder Mythos?. In Logistik Heute. Vol. 23. Huss. Munich. September 2001, pp. 52-53. Neumann, C.-S. and Delfmann, W. et al. 2000. Erfolgreich mit IT. In Logistik Heute. Vol. 22. Oktober 2000, pp. 68-76. New, S. J. and Payne, P. 1995. Research frameworks in logistics: Three models, seven dinners and a survey. In International Journal of Physical Distribution & Logistics Management. Vol. 25. No. 10. August 1995 (revised), pp. 60-77. Nissen, V. and Bothe, M. 2002. Fourth Party Logistics – ein Ueberblick. In LogistikManagement. Vol. 4. Issue 1. 2002, pp. 16-26. Normann, R. and Ramírez, R. 1993. From Value Chain to Value Constellation: Designing Interactive Strategy. In Harvard Business Review. July-August 1993, pp. 65-77. O’Connor, J. J. and Robertson, E. F. 2008. Johann Carl Friedrich Gauss. Gauss biography. http://www-groups.des.st-and.ac.uk/~history/Biographies/Gauss. html, 4 December 2008. Ohmae, K. 1989. The Global Logic of Strategic Alliances. In Harvard Business Review. March-April 1989, pp. 143-154. Oster, S. M. 1999. Modern Competitive Analysis. Third edition. Oxford University Press. New York and Oxford, 1999. Oster, S. M. 1994. Modern Competitive Analysis. Second edition. Oxford University Press. New York and Oxford, 1994. Osterwalder, A. 2004. The business model ontology: a proposition in a design science approach. HEC, Université de Lausanne, Lausanne, 2004. Osterwalder, A. and Pigneur, Y. and Tucci, C. L. 2005. Clarifying Business Models: Origins, Present, and Future of the Concept. In Communications of the Association for Information Systems. Tutorial. Articles. Vol. 15. Lausanne, May 2005. Otley, D. 1995. Management Control, Organizational Design and Accounting Information Systems. In Ashton, D. and Hopper, T. and Scapens, R. W. (ed.). Issues in Management Accounting. Second edition. London et al.. 1995, pp. 45-63. Oxford University Press and Market House Books (ed.). 1998. The Oxford Dictionary for International Business. Second edition. Oxford/New York, 1998. Panalpina World Transport (Holding) Ltd. (ed.). 2009. Panalpina Annual Report 2008. Basel, 2009. Panalpina World Transport (ed.). 2007. Panalpina Annual Report 2006. A Passion for Solutions. Basel, 14 March 2007. Panalpina World Transport (ed.). 2005. Annual Report 2004. A Passion for Solutions. Basel, 19 April 2005. Penrose, E. T. 1959. The Theory of the Growth of the Firm. Oxford, 1959.

Bibliography

387

Pfohl, H. C. 2007. Kontraktlogistik als Gegenstand betriebswirtschaftlicher Theorien. In Stoelzle, W. and Weber, J. and Hofmann, E. and Wallenburg, C. M. (ed.). Handbuch Kontraktlogistik: Management komplexer Logistikdienstleistungen. Wiley. Weinheim. 2007, pp. 55-70. Pfohl, H. C. 2006. Trends und Strategien exzellenter Logistik. Ergebnisse von Studien zum europaeischen Supply Chain Management. Presentation. Stuttgart 2006. Picot, A. and Reichwald, R. and Wigand, R. T. 2001. Die grenzenlose Unternehmung: Information, Organisation und Management. Gabler. Fourth edition. Wiesbaden, 2001. Piller, F. T. 2006. Mass Customization: Ein wettbewerbsstrategisches Konzept im Informationszeitalter. Fourth edition. Deutscher Universitaets-Verlag. Wiesbaden, 2006. Piller, F. T. 2003. Mass Customization: Ein wettbewerbsstrategisches Konzept im Informationszeitalter. Third edition. Deutscher Universitaets-Verlag. Wiesbaden, 2003. Piller, F. T. and Moeslein, K./Reichwald, R. (ed.). 2002. From economies of scale towards economies of customer integration: Value creation in mass customization based electronic commerce. Working Report. Chair of General and Industrial Science of Business Management. Technical University of Munich. Munich, August 2002. Pine, B. J. II. 1993. Mass Customization: The New Frontier in Business Competition. Harvard Business School Press. Boston/MA 1993. Popper, K. R. 1973. Objektive Erkenntnis – Ein evolutionärer Entwurf. Hoffmann und Campe. Hamburg, 1973. Popper, K. R. 1969. Die Logik der Sozialwissenschaften. In Adorno, T. W. et al.. 1969. Der Positivismusstreit in der deutschen Soziologie. Hermann Luchterhand. Neuwied and Berlin. 1969, pp. 103-123. Porter, M. E. 1998. Competitive Strategy: Techniques for Analyzing Industries and Competitors. The Free Press. New York, 1998. Porter, M. E. 1996. What Is Strategy?. In Harvard Business Review. NovemberDecember 1996, pp. 61-78. Porter, M. E. 1991. Towards a dynamic theory of strategy. In Strategic Management Journal. Vol. 12. Winter 1991, pp. 95-117. Porter, M. E. 1985. Competitive Advantage: Creating and Sustaining Superior Performance. The Free Press. New York, 1985. Porter, M. E. 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors. The Free Press. New York, 1980. Porter, M. E. and Millar, V. E. 1985. How information gives you competitive advantage. In Harvard Business Review. Vol. 63. No. 4. July-August 1985, pp. 149-174. PR (ed.). 2006. DISPO Who is Who. Schachinger Logistik Holding GmbH & Co. KG, January 2006. Prahalad, C. K. and Ramaswamy, V. 2000. Co-opting Customer Competence. In Harvard Business Review. January-February 2000, pp. 79-87.

388

Bibliography

Quintiq (ed.). N.Y. e-Logistics Control bietet 4PL – mit Quintiq. Case Study. Mannheim. Rabinovich, E. and Windle, R. and Dresner, M. and Corsi, T. 1999. Outsourcing of integrated logistics functions. In International Journal of Physical Distribution & Logistics Management. Vol. 29. No. 6. 1999, pp. 353-373. Rappa, M. 2003. Managing the Digital Enterprise: Business Models on the Web. http://digitalenterprise.org/models/models.html, 4 August 2003. Razzaque, M. A. and Sheng, C. C. 1998. Outsourcing of logistics functions: a literature survey. In International Journal of Physical Distribution & Logistics Management. Vol. 28. No. 2. 1998, pp. 89-107. Reimann, S. 2006. Kontraktlogistiker der ersten Stunde. In DVZ. Sonderbeilage Logistikstandort Bayern. Vol. 60. Issue 62-63. 26 May 2006, p. 7. Reinartz, W. and Kumar, V. 2002. The Mismanagement of Customer Loyalty. In Harvard Business Review. July 2002, pp. 86-94. Resch, A. 2003. Klare Perspektive fuer die Kontraktlogistik. Welche SCM-Dienste kuenftig wichtig sind und nachgefragt werden. In DVZ. Sonderbeilage eLogistik/SCM. Vol. 57. Issue 52-53, p. 17. RFID Journal (ed.). 2004. Glossary of RFID Terms. http://www.rfidjournal. com/article/articleview/208. Melville/NY, 16 January 2004. Richter, P. 2002. Reden ist Gold. In Logistik Heute. Vol. 24. December 2002, p. 22. Riedel, U. and Sure, M. 2005. Fehlschlaege sind programmiert. In DVZ. Vol. 59. Issue 46. 19 April 2005, p. 5. Robinson, T. and Clarke-Hill C. M. and Clarkson, R. 2002. Differentiation through Service: A Perspective from the Commodity Chemicals Sector. In The Service Industries Journal. Vol. 22. No. 3. Frank Cass. London. July 2002, pp. 149166. Roland Berger Strategy Consultants (ed.)/Schwenker, B. and Boetzel, S. 2005. Growth through trust. Trust-based organization as an integrative concept. May 2005. Rosenblum, D. and Tomlinson, D. and Scott, L. 2003. Bottom-Feeding for Blockbuster Businesses. In Harvard Business Review. March 2003, pp. 52-59. Ryder (ed.). N.Y. Financial Highlights. 2004 at a Glance. Santos, J. and Spector, B. and Van der Heyden, L. 2009. Toward a Theory of Business Model Innovation within Incumbent Firms. INSEAD and Northeastern University. Faculty & Research Working Paper. Fontainebleau, 20 March 2009. Savall, H. and Zardet, V. 1997. Socio-Economic Management of the Firm: Or How to Renew Trust and Upgrade Performance. In Bidault, F. and Gomez, P.-Y. and Marion, G. (ed.). Trust: Firm and Society. Essays in Honour of Dr Roger Delay Termoz. Macmillan Press Ltd. Houndmills and London. 1997, pp. 133-152. SCC (ed.) N.Y. Supply-Chain Operations Reference-model. SCOR Overview. Version 8.0. Washington, D.C. SCC (ed.)/Francis, J. N. Y. Made to Measure: SCOR® and Supply Chain Metrics.

Bibliography

389

Schenk, M. and Seelmann-Eggebert, R. and Piller, F. T. (ed.). 2001. Mass Customization: Von Businessmodellen zu erfolgreichen Anwendungen. Documentation of the third German conference for mass customization. Frankfurt/Main, 8 November 2001. Schmeling, U. 2003. Die Restrukturierung greift. In Internationale Transport Zeitschrift. No. 49-50. Basel. 5 December 2003, p. 10 et seq.. Schmidt, B. 2006. Vom Transport zur Logistik. In DVZ. Vol. 60. No. 65. 1 June 2006, p. 14. Schneider, C. 2003. Erfolg durch uebergreifendes Denken. In DVZ. Vol. 57. No. 126. 21 October 2003, p. 16. Schnell, R. and Hill, P. B. and Esser, E. 1988. Methoden der empirischen Sozialforschung. Munich and Vienna and Oldenbourg, 1988. Schwietert, A. and Middeke, J.-J./Prognos AG (ed.). 1968. Unternehmensgroesse und internationale Wettbewerbsfaehigkeit: Eine Untersuchung ueber die Wettbewerbsposition der westdeutschen Verarbeitenden Industrie. Basel, July 1968. Selz, D. 1999. Value Webs: Emerging forms of fluid and flexible organizations. Thinking, organizing, communicating, and delivering value on the Internet. Dissertation. St. Gallen, 1999. Seuring, S. and Mueller, M. and Goldbach, M. and Schneidewind, U. 2003. Strategy and Organization in Supply Chains. Physica. Heidelberg, 2003. Simon, H. 2007. Hidden Champions des 21. Jahrhunderts: Die Erfolgsstrategien unbekannter Weltmarktfuehrer. Campus Verlag. Frankfurt/Main and New York, 2007. Simon, H. 1996a. Hidden Champions: Lessons from 500 of the World’s Best Unknown Companies. Harvard Business School Press. Boston/MA, 1996. Simon, H. 1996b. Die heimlichen Gewinner (Hidden Champions): Die Erfolgsstrategien unbekannter Weltmarktfuehrer. Campus Verlag. Frankfurt/Main and New York, 1996. Simon, H. 1996c. You Don’t Have to be German to be a “Hidden Champion”. In Business Strategy Review. London Business School. Vol. 7. Issue 2. 1996, pp. 1-13. Simon, H. 1992. Lessons from Germany’s Midsize Giants. In Harvard Business Review. March-April 1992, p. 115-123. Simon, H. 1990. “Hidden Champions“: Speerspitze der deutschen Wirtschaft. In Zeitschrift fuer Betriebswirtschaft. Vol. 60. Issue 9. September 1990, pp. 875890. Simon Hegele (ed.). 2005. 10 Jahre zusammen auf Erfolgskurs. Gemeinsames Grossprojekt “RS” von Simon Hegele und Siemens Medical. In flash. Information magazine of the Simon Hegele Group. Issue 1. 2005, pp. 4-5. Simon Hegele (ed.). 2004. L’Oréal – neue Projekte mit Zukunft und Performance. In flash. Information magazine of the Simon Hegele Group. Issue 2. 2004, p. 8. Simon-Kucher & Partners Strategy & Marketing Consultants (ed.). 2009. http://www.simon-kucher.com, 12 October 2009.

390

Bibliography

Simpson, J. A. and Weiner, E. S. C. (ed.). 1989. The Oxford English Dictionary – IX Look-Mouke. Second edition. Clarendon Press. Oxford, 1989. Simpson, J. A. and Weiner, E. S. C. (ed.). 1989. The Oxford English Dictionary – XI Ow-poisant. Second edition. Clarendon Press. Oxford, 1989. Skinner, W. 1974. The focused factory. In Harvard Business Review. May-June 1974, p. 113-121. Slywotzky, A. 1996. Value Migration. Harvard Business School Press. Boston/MA, 1996. SNCF (ed.). 2008. 2007 Annual and Ecomobility Report. Paris, June 2008. Staehle, W. H. 1999. Management: eine verhaltenswissenschaftliche Perspektive. Eighth edition. Vahlen. Muenchen, 1999. Staehler, P. 2002. Geschaeftsmodelle in der digitalen Oekonomie: Merkmale, Strategien und Auswirkungen. Second edition. Josef Eul Verlag. Lohmar 2002. Stalk, G. and Evans, P. and Shulman, L. E. 1992. Competing on Capabilities: The New Rules of Corporate Strategy. In Harvard Business Review. No. 92209. March-April 1992, pp. 56-68. Star Alliance (ed.). N.Y.a. The Star Alliance Network. Facts & Figures. N.L., N.Y. Star Alliance (ed.). N.Y.b. 10 Years Star Alliance from “the network for Earth” to the way the Earth connects. N.L., N.Y. Stekler, H. O. 1963. Profitability and size of firm. The Regents of the University of California. August 1963. Stommel, H. and Zadek, H. 2004. Collaboration Management. In Baumgarten, H. and Darkow, I.-L. and Zadek, H. (ed.). 2004. Supply Chain Steuerung und Services. Logistik-Dienstleister managen globale Netzwerke – Best Practices. Springer. Berlin, pp. 123-133. Stone, S. 1999. Are 4PLs for real? In Purchasing. 14 January 1999, p. 103. Straube, F. and Borkowski, S. 2008. Global Logistics 2015+: How the world’s leading companies turn their logistics flexible, green and global and how this affects logistics service providers. Special Edition 1. Berlin 2008. Straube, F. and Cetinkaya, B. 2008. Mangelnde Messbarkeit. In DVZ. Vol. 62. No. 47. 17 April 2008, p. 4. Straube, F. and Dangelmaier, W. and Guenthner, W. A. and Pfohl, H.-C. 2005. Trends und Strategien in der Logistik – Ein Blick auf die Agenda des LogistikManagements 2010. Bremen, 2005. Stubbs, D. 2003. “4PL: Threat or Opportunity?”. Presentation. EyeforTransport 3PL Summit. London, 14 October 2003. Sutton, J. 2005. Competing in capabilities: an informal overview. London School of Economics. Lecture Summary. Clarendon Lecture 2004. London, April 2005. Swisslog (ed.). 2006. Swisslog – Status: Investor Relations Presentation. Buchs, March 2006. Tapscott, D. and Ticoll, D. and Lowy, A. 2000. Digital Capital: Harnessing the power of business webs. Harvard Business School Press. Boston/MA, 2000. Tektas, O. O. and Kavak, B. 2008. Identifying Niche Market For SMEs. EABR & TLC Conference Proceedings. Rothenburg, 2008.

Bibliography

391

Thaler, R. H. 1992. The Winner’s Curse: Paradoxes and Anomalies of Economic Life. Princeton University Press. New Jersey, 1992. The Brookings Institution (ed.). 2001. Unseen Wealth: Report of the Brookings Task Force on Intangibles. R. R. Donnelley and Sons. Washington, D.C., 2001. Thomson Financial (ed.)./Handelsbanken Capital Markets (ed.). Rammer, S. et al. 2004. A. P. Møller-Mærsk. Equity-Research – Company Report. 23 November 2004. Timmers, P. 1999. Electronic Commerce: Strategies and Models for Business-toBusiness Trading. John Wiley & Sons. Chichester, 1999. Timmers, P. 1998. Business Models for Electronic Markets. In Electronic Markets. Vol. 8. No. 2. 1998, pp. 3-8. TNT (ed.). 2005. Logistics Dictionary: 2200+ words, terms, definitions and abbreviations used in the Logistics and Freight Forwarding business. Without place, 11 March 2005. Tolbert, P. S. and Hall, R. H. 2009. Organizations: Structures, Processes, and Outcomes, Tenth edition. Prentice Hall. Pearson Education. Upper Saddle River/NJ, 2009. Tomczak, T. 1992. Forschungsmethoden in der Marketingwissenschaft. Ein Plaedoyer fuer den qualitativen Forschungsansatz. In Marketing. Zeitschschrift fuer Forschung und Praxis. Vol. 14. Issue 2. II Quarter 1992. Franz Vahlen and C. H. Beck. Munich and Frankfurt, pp. 77-87. Tomic, I. 2005. Rendite bleibt unter Niveau. In DVZ. Vol. 59. No. 83. 14 July 2005, p. 11. Ton, Z. and Wheelwright, S. C. 2005. Exel plc – Supply Chain Management at Haus Mart. Harvard Business School case. Boston/MA, 16 May 2005. Tradisa (ed.). 2006. Mission. http://www.tradisa.es, 21 August 2006. Transport Intelligence (ed.). 2004. European Logistics Leaders 2004 – Ranking, analysis and profiles of the leading global and European logistics operators. Cambridge/UK, August 2004. Transport Intelligence (ed.). 2003. Logistics Leaders 2003 – Ranking, analysis and profiles of the leading European logistics operators. Cambridge/UK, February 2003. Tripp, C. 2005. Mit der Prozessbrille zum Erfolg. In DVZ. Supplement to the BVL Congress 2005. 19 October 2005, p. 5. Truszkiewitz, G. 2002. Insourcing logistischer Dienstleistungen als Supply Chain Strategie. In Supply Chain Management. III/2002, pp. 55-56. Tseng, M. M. and Piller, F. T. 2003. The Customer Centric Enterprise: An integrative overview on this book. In Tseng, M. M. and Piller, F. T. (ed.). 2003. The Customer Centric Enterprise: Advances in Mass Customization and Personalization. Springer. Berlin and Heidelberg. 2003, pp. 3-16. Ulrich, H. 1998. Praxisbezug und wissenschaftliche Fundierung einer transdisziplinaeren Managementlehre. In Spoun, S. and Mueller-Moehl, E. and Jann, R. 1998. Universitaet und Praxis. Tendenzen und Perspektiven wissenschaftlicher Verantwortung fuer Wirtschaft und Gesellschaft. Der

392

Bibliography

Universitaet St. Gallen zum 100-Jahr-Jubilaeum. Neue Zuercher Zeitung. Zuerich. 1998, pp. 159-168. Ulrich, H. 1984. Die Betriebswirtschaftslehre als anwendungsorientierte Sozialwissenschaft. In Dyllick, T. and Probst, G.. Management. Paul Haupt. Bern. 1984, pp. 168-199. Ulrich, H. 1981. Die Betriebswirtschaftslehre als anwendungsorientierte Sozialwissenschaft. In Geist, M. N. and Koehler, R. 1981. Die Fuehrung des Betriebes. Carl Ernst Poeschel. Stuttgart. 1981, pp. 1-25. Unyson Logistics (ed.). N.Y.. Special Services. Company Presentation. Urban, G. M. 2001. Design eines logistischen Netzwerks: Bericht eines Forschers und Praktikers aus der DaimlerChrysler AG. In Gronalt, M. (ed.). 2001. Logistikmanagement: Erfahrungsberichte und Konzepte zum (Re-)Design der Wertschoepfungskette. Gabler. Wiesbaden, pp. 13-20. Uyterhoeven, H. E. R. and Ackerman, R. W. and Rosenblum, J. W. 1977. Strategy and organization: Text and Cases in General Management. Richard D. Irwin. Homewood/IL. Revised edition. 1977. Van der Heyden, L. 2004. Private Discussion. Fontainebleau, 23 January 2004. Venkatraman, N. and Henderson, J. C. 1998. Real Strategies for Virtual Organizing. In Sloan Management Review. Fall 1998, pp. 33-48. VerkehrsRundschau (ed.) 2004. Branchenguide Verkehr & Logistik 2004/2005. In VerkehrsRundschau. August 2004, pp. 15-34. Viscio, A. J. and Pasternack, B. A. 1996. Toward a New Business Model. In Strategy + Business. Second Quarter 1996. http://www.strategie-business.com/research/ 96201, 26 July 2004. Vogel, J. 2001. The e-Logistic Opportunity: Chancen und Risiken von ElectronicLogistics aus der Sicht einer Investment Bank. Presentation. January 2001. Voigt, S. 2003. Mit Netzen Geld sparen. In Logistik inside. Special print. No. 10. Munich. 2003, pp. 1-2. Wansel, A. and Tittel, S. 2002. Integrierte Supply Chain in der Gefahrstofflogistik. In Supply Chain Management. Vol. 3. Hannover. 2002, pp. 37-43. Warner, M. (ed.). 2002. International Encyclopedia of Business and Management. Second edition. Thomson Learning. Vol. 1-8. London, 2002. Weber, J. and Bahke, A. and Lukassen, P. and Wallenburg, C. M./WHU and DHL (ed.). 2008. Erfolg in der Logistik: Beziehungen mit Logistikdienstleistern richtig gestalten. Vallendar, 2008. Weber, J. and Schmitt, A. and Engelbrecht, C. and Knobloch, U. and Wallenburg, C. M. 2002. E-Commerce in der Logistik: Quantensprung oder business as usual?: Ergebnisse einer explorativen Marktuntersuchung: Aktuelle Trends in der Logistik unter dem Einfluss von E-Commerce. Paul Haupt. Bern, 2002. Weber, J. and Stoelzle, W. and Wallenburg, C. M. and Hofmann, E. 2007. Einfuehrung in das Management der Kontraktlogistik. In Stoelzle, W. and Weber, J. and Hofmann, E. and Wallenburg, C. M. (ed.). 2007. Handbuch Kontraktlogistik: Management komplexer Logistikdienstleistungen. Wiley. Weinheim. 2007, pp. 35-54.

Bibliography

393

Weill, P. and Vitale, M. R. 2001. Place to Space: Migrating to eBusiness Models. Harvard Business School Press. Boston/MA, 2001. Welge, M. K. and Holtbruegge, D. 2006. Internationales Management: Theorien, Funktionen, Fallstudien. Fourth edition. Schaeffer-Poeschel Verlag. Stuttgart, 2006. Wereldsma, D. 2008. Welcome Pack: Global Distribution Sector Capgemini. Presentation, 20 May 2008. Wernerfelt, B. 1984. A Resource-based View of the Firm. In Strategic Management Journal. Vol. 5. Issue 2. 1984, pp. 171-180. WestLB Panmure (ed.). 2000. Logistik: Die E-Business Revolution. Duesseldorf. February 2000. Wiendahl, H.-P. 2002. Erfolgsfaktor Logistikqualitaet: Vorgehen, Methoden und Werkzeuge zur Verbesserung der Logistikleistung. Second edition. Springer. Berlin/Heidelberg, 2002. Wilson, R. 2005. 16th Annual State of Logistics Report. Security Report Card – Not Making the Grade. Washington, D.C., 27 June 2005. Wilson, R. and Delaney, R. V. 2001. 12th Annual “State Of Logistics Report”: Managing Logistics In A Perfect Storm. Washington, D.C., 4 June 2001. Winston, W. L. 2007. Microsoft Office. Excel 2007. Data Analysis and Business Modeling. Microsoft Press. Redmond/Washington, 2007. Woehe, G. and Doering, U. 2000. Einfuehrung in die Allgemeine Betriebswirtschaftslehre. Twentieth edition. Franz Vahlen. Munich, 2000. Woo, C. Y. 1984. Market-share leadership – not always so good. In Harvard Business Review. January-February 1984, pp. 50-54. Wytenburg, A. J. 2001. Bracing for the Future: Complexity and Computational Ability in the Knowledge Era. In Emergence. Vol. 3. Issue 2, pp. 113-126. Yin, R. K. 1989. Case Study Research. Design and Methods. Applied Social Research Methods Series. Vol. 5. Revised edition. Sage Publications. Newbury Park and London and New Dehli, 1989. Yip, G. S. 2004. Using strategy to change your business model. In Business Strategy Review. Vol. 15. Issue 2. Summer 2004, pp. 17-24. Zentes, J. and Morschett, D. 2003. Die Servicebausteine in der Logistik. In Merkel, H. and Bjelicic, B. (ed.). 2003. Logistik und Verkehrswirtschaft im Wandel: Unternehmensuebergreifende Versorgungsnetzwerke veraendern die Wirtschaft. Festschrift fuer Goesta B. Ihde. Franz Vahlen. Munich, 2003. Zipkin, P. 2001. The Limits of Mass Customization. In MIT Sloan Management Review. Spring 2001, pp. 81-87. Zott, C. and Amit, R. 2003. Business Model Design and the Performance of Entrepreneurial Firms. INSEAD-Wharton Alliance Center for Global Research & Development. Working Paper Series. 2003/94/ENT/SM/ACGRD 4. Revised Version of 2002/128/ENT/SM. Fontainebleau and Philadelphia, PA, 2003.