CHAPTER 5 FINDINGS AND DISCUSSION
5.4 Divers, Advantages, and Disadvantages of Pioneer in Service Industry
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5.4 Divers, Advantages, and Disadvantages of Pioneer in Service Industry 5.4.1 Drivers
From the case results, we found that the main sources of advantages would be the preemption of assets, especially the spatial and the switching costs created among the firms’ suppliers in the value network. The different factors and indicators of the pioneer’s advantages and disadvantages are discussed below.
Technology leadership
Many researchers have suggested that the technology leadership in a service context is not a significant factor to achieve pioneer advantages. Our evidence from the cases was consistent with this argument. While the leadership in technology was not considered as the strong reason in our cases for achieving the sustained competitive advantages, they gave the first mover a certain amount of advantages at the beginning. More important drivers relied on subsequent actions on technological assets, such as the protection by patent deployment, continuous improvement in IT infrastructure, and experience of technological asset integration, which rendered the sustained advantages in the long term. For example, company C’s MMK appreciated the first mover advantages in terms of the increased revenue and new customers in stores resulting from the launch of the MMK in the beginning. However, the advantages soon eroded due to the follow-up introduction of similar MMKs from company A and company B that were able to adopt the MMK in a short time frame by the technology transfer from a cooperating company in Japan. However, since the patent deployment on the MMK related innovation, company C filed a patent lawsuit that impeded the progress of the competitors in the development of new services, thus, providing certain sustained competitive advantages.
Preemption of assets
From the cases previously discussed, the preemptive asset was an important driver for the advantages of the market shares, brand images, and reputations. Pioneers gained the advantage over competitors by choosing the most attractive niche in a perceptual space. The preemption of the spatial resource, such as market expansion across different domains, industries, and foreign countries, was suggested to be the most important driver for achieving the advantages in applying the inventor strategy. Furthermore, pioneers gained a differential advantage over competitors by preempting the best distribution channel, which provided rich service contacts to customers. The preemptive asset served as the driver advantage than could be utilized in later actions involving service innovation. By broadening the service into more domains and industries, it also accumulated a customer base from penetrating other markets.
Switching cost
The switching cost that was created among the suppliers included their partners and related business companies when the firms had the central role in the value network and were responsible for the coordination of transaction information and data unfolded by the flexible IT infrastructure.
Both firms in the industry aggressively acquired the central position in their service network
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structure. The firms in the convenience store industry were the coordinators of information from the product logistics, which helped to streamline the information process among the small business partners, thus, creating a certain effect that kept their partners in their value network. Furthermore, the tight relationship fostered the exclusive service provision for customers, which may create more benefits in the market shares and financial performances. Moreover, we suggest that the shift in the customer needs occurred often when the service provisions were homogeneously distributed, thus, provided no advantages to solidify the customer base. However, if firms were able to provide the unique application or service by exclusive contract with service suppliers, they were able to accumulate a customer base and customer loyalty. For example, company A introduced their MMK with several services, such as concert ticket booking and several product pre-orders, which helped them create the new customers over the rivals. They also introduced the e-Wallet payment tool that was utilized as an application to foster the customer base and lock in customers by the easy payment means and bonus point collecting for price discounts.
5.4.2 Advantages
The advantages from the technological assets in the IT-enabled service innovation may not emerge by nature, but may emerge by actions, such as patents and continuous improvements, which will provide advantages. Company C’s MMK presented evidence for patent deployments to render the sustained advantages for the protection of the services that embedded in the facilities. That is, if firms may find it difficult to sustain their competitive advantages from their technological assets, and may have to change their strategy by combining their assets, processes, and business domains to create the causal ambiguity and historical path-dependent assets that will render more advantages according to the resource-based view.
5.4.3 Disadvantages
The disadvantages of the pioneers were regarded as the opportunities and advantages for the late entrant. Among the disadvantages, the free-ride effects often occurred in the situations where pioneers provides the customer education on the adoption of a new service innovation and constructed the value network allowing more related business providers of services and products to participate. The market education increased the demand of the need and supply of services and technological assets, which created the proposer of service innovation that could be seized by late entrants with less costs for technology acquisitions and fast revenue collections. Furthermore, late comers could adjust their marketing and business operations according to what they learned from the pioneer’s evidence. By following a client into a new market, the early entrant has the advantage of having an existing demand for its services immediately on entry.
Generally, our research confirmed the argument of the driver of advantages in terms of the preemption of assets, especially the resource for markets obtaining advantages, and switching costs that occurred when firms had the central role in the service value network by the continually
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improving IT infrastructure. We disagreed that leadership in technology rendered sustained advantages due to the IT itself create less advantages rather the improvement on the IT-enabled service will render the advantages. With respect to pioneer’s advantages, we found that pioneers gained a head start on competitors if they successfully built their brand image or reputation by the different and unique service provisions. Lastly, the major disadvantages of pioneers was creating the free rider effect in terms of the service adoption of customers and technological asset provisions, thus, reducing the cost for late comers. The reexamination of the research findings and literature is presented in the Table 5.4.
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Table 5.7 Drivers, Advantages, Disadvantages of Pioneers in Service Context
Category Indicator Consistent Justification and Finding Added Case
Source of advantages Technology
Leadership
Learning or experience curve
X These IT are relatively easy to imitate and thus provide no lead time from learning curve. Many innovations are copied and adopted quickly.
But the continuous improvement and development on the services will make it hard to perfectly imitated because of the combined with other resource
MMK,NFC, App Platform, Mobile TV, LBS,
Micropayment
Success in patent X The patents provide protection and lead time at certain degree but not promise the sustained competitive advantages due to the nature of the IT-based asset is easy in imitation. Moreover, the service itself are more hard to imitated than the technology because it require more cooperation with external factor(e.g. partners, suppliers)
Company C MMK Company E
Preemption of assets
Input factor O Incumbent’s huge financial capital made them easy to adopt and invest more technological asset thus launch the service innovation quickly
Tight relationship appears important in convenience store industry
Company A EC Company E Company B Location of geographic O By preempting the best distribution channels, sales channels to form their own
monopolized market
Cross industry, countries cooperation extends the service reaches to customers.
Company G eBook
X Many firms undertook the vertical integration by acquiring these resource continuously
Convenience Store Telecomm Switching cost Suppliers O Switching cost and lock in effect more happened in the suppliers side in terms of the
exclusive contract which provide more exclusive service to customers.
Firms in both industry take central role in the value network in the terms of integration and coordination resource across partners by the IT infrastructure which make their partners rely on the IT to collaborate the commerce and transaction
Company A SMCS
□ The ability to provide monopolized services will have more potential to increase form the consumer preferences in turn their customer loyalty and retention as well
Company A eWallet Company B eWallet
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Performance Market Shares O The first introduction of service provision generates revenue in the absence of competitors.
O The preemptive of the geographic asset will provide more potential to create new market and loyal customer in the absence of competitors
Company G eBook Company A
Cost Advantages Cost on development X Pioneers do not enjoy the cost advantages because more often they incur the cost on new technology development and the risk from uncertainty in market.
Company C MMK Company F eBook
Differentiation Price premium X The prices of services maintain the same throughout industry The competition on prices reduction rarely happen in our cases
MMK, NFC, Mobile TV,
Brand image or reputation O Pioneers can gain a head start on competitors if they successfully build their brand image or reputation
Company C MMK Company A eWallet Company G Apps Platform Pioneer’s Disadvantages
free-ride effects Technology mature Market mature
O The first one will constructed the new service value network, market and lead to the show up of the related service suppliers to provide source for achieving services The customer’s adoption rate of new service increased as market evolved thus late entrant are more easily to obtain customers, revenue as soon as entering the market.
MMK, eWallet, LBS, Apps platform, NFC,
Shift in customer needs
Preference changes O Many service provision are quite homogenous thus lead to low customer loyalty The shift in customer needs only stems from the exclusive services, or service quality improvement provided by the late entrant.
Company C MMK Company E Apps platform Company B EC
Incumbent inertia
Technology asset lock in X Most firms actively launch service innovation and change the strategy resource configuration according to the needs in service innovation
Even the once government-owned company E, actively introduce the service innovation.
Company E, Company A
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