The customer perception and expectation

This section focuses on the customer perception and expectation to Damco, and is based on illustrative examples that highlight the customers’ business agenda.

Damco’s customers experience and articulate change and a need for development.

All the customers included in the analysis are large international companies with headquarters in different countries, and they all have a global footprint. Regardless of their industry, whether medical devices, IT products or fashion and retail, they all express that they are experiencing some degree of accelerated change in their environment and have a sense that their conditions for doing business are changing. In order to survive and adjust to the market, they seek to develop and change their business to adapt leading to changed and different requirements to their service provider(s). The changes they experience include changed business conditions, changed environmental requirements, changes in technology and changed perception in the importance of service. These will be discussed further below.

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Under the headline ‘Changing expectations – new dynamics and revisiting others’

(Appendix A, Customer presentation 2) a Damco customer highlights some key changes in the environment in which they operate. He articulates:

• Emerging countries – BRIC to N11?

• Technology – diversity, standardisation, simplification, gaps

• Demands on Green Environment

• Regulatory environment

The customer elaborates on these points in his presentation (Appendix 2, Customer presentation 2) and he points towards changes in the market, emphasising the increased importance and relevance of emerging markets, a point that he is very insistent about in subsequent interview as well (Appendix 2, Customer 2) He stresses that emerging markets offer new growth opportunities but also present a number of challenges, as few companies know how to approach these markets properly and be successful in the markets. For example, Africa is potentially a huge growth market, but it is a challenge to distribute goods in Africa, in part due to an underdeveloped infrastructure. Here he sees a potential for future cooperation among different companies combining their skills, knowledge and networks to achieve success in yet to be developed markets (Appendix A, Customer 2He further points out that the customers business is highly influenced by changes in technology, environmental and regulations. When asked by one of the workshop participants (one of the commercial talents) what kind of green information (implicit what kind of environmental information) is they would like to receive from DAMCO as their service provider, the customer answers, ‘it changes all the time’ (Appendix A, Customer presentation 2). Thus, the customer is interested in receiving information and services that are relevant to their particular challenges. Challenges which apparently are very dynamic (Appendix 2, Customer presentation 2) rather than asking for a standard ‘carbon foot print’ solution.

Environmental demands, and in particular sustainability, seem to be an increasingly important area to all of the customers included in this dissertation.

Sustainability is represented and understood in many forms and foci with the different customers. They have difficulty defining exactly what it means to them, some more than others, but one is left with the impression that it is a necessity for doing business today, since every customer interviewed for this project mentions

and highlights it independently. One customer points out that sustainability ‘makes them tick (Appendix 2, Customer presentation 3). He adds that an important business approach is to focus on sustainability. His company has chosen to focus on aspects of sustainability ranging from environmental sustainability over transportation, health and safety and diversity to recycling (Appendix A, Customer presentation 3). Another customer expands on this point, explaining that his company is focusing increasingly on sustainability, which ‘is important stuff nowadays’ (Appendix A, Customer presentation 3). Without explicating how the company actually addresses these sustainability concerns, he implicitly expresses why it is important: ‘If the company ends up in the media with one bad story, it can be devastating for the business’ (Appendix 2, Customer presentation 5).T his customer is in the fashion industry, and like most of the competition, the firm has devoted many resources to sustainability in recent years, yet they still find it challenging. For example, it has proved impossible to track development work in the Indian production facility (Appendix 2, Customer presentation 5). His comment thus aligns with comments from other customers (Appendix 2, Customer presentation 1-5). A fourth customer says that his company is in the process of defining what sustainability means to the company, yet what it actually means remains unclear, both to the workshop participants and to the researcher.

Nevertheless, he says that it involves environmental impact, social responsibility and business process improvements. In this sense, sustainability as articulated and prioritised with the Damco customer’s remains a very vague concept, although it is highlighted as an important part of the business and as something the company wants to be known for (Appendix A, Customer presentation 2). This indicates that most likely they do not know how to deal with sustainability, although they are aware that it is important, and therefore they are now trying to ‘figure it out’.

Technology development is another area of change experienced by the customers.

The customers describe how technology is impacting developments within their business in several ways. One customer explains that technology has had implication for their business model, which used to be based on warehouses and universal stores. The business is now developed into a high-end, high-tech online shopping solution with millions of US dollars in annual turnover. One implication of the changed business model is changes in their cooperation with logistics companies (e.g. Damco), as advanced supply chain and logistics solutions become essential when the business is structured around online shopping rather than around warehouses (Appendix 2, Customer presentation 3). Other customers

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describe the impact of changed technology. Also in businesses that are not organised around online shopping, the customers report that they are highly dependent on smart technological solutions as a way of reducing (transportation) costs, making life easier for their customer and managing sustainability (Appendix A, Customer presentation 1), which is being highlighted as essential to business.

The customers all experience that service is becoming increasingly important in comparison to physical goods to be successful in their industry. One customer says that their business is constantly changing, and that in recent years, like many other business, they have experienced a change in perception, from ‘product as king’ to an increased focus on the service that surrounds the product’ (Appendix A, Customer presentation 4). Another customer expands on this observation as he elaborates on the logistics and supply chain development within his own company.

He explains how it ‘..changed from moving containers to managing customer expectations. The container is a means to an end; what’s important is the customer’s expectations...’ (Appendix 2, Customer presentation 3). All the customers clearly articulate an expectation of, and a need for, more than ‘just’

transport, the product they buy, in their logistics solutions (Appendix A, Customer presentation 1-5; Customer 1-2). One of the customer frames it by highlighting:

‘... what used to be just transportation is changing. Those who need that service [transportation, ed.] need something else to understand their business-related problem...’ (Appendix A, Customer presentation 4). The experienced shift towards an increased focus on service, is similar to the shift described in Chapter 3 with the move from GD Logic to SD Logic. As proposed within SD Logic, this shift represents a new mindset, where companies increasingly depend on each other to do productive work due to changes in society and technology (Lusch & Vargo, 2009; Vargo & Lusch, 2004).

The customers’ experience of changes in business conditions and environmental demands along with an increased focus on service and customer experience has implications for their expectations to their service providers, suppliers and partners. This includes changes in their expectations to Damco as one of their service providers. In the past, their service providers, suppliers and partners have mainly been expected to act as subject-matter experts, which involve knowing best and being close to the customer. These expectations are still relevant, but they are not sufficient to differentiate one service provider from another (Appendix A, Customer presentation 2). Hence these parameters are not sufficient to potentially

create a competitive advantage for Damco (Chapter 3) Increasingly, the customer expects the working relationship to function as a partnership. This partnership more specifically implies that a partner is capable of helping the customer improve their business by understanding their business problem, challenging them, inspiring them, suggesting business innovation and basically acting as an extended arm of the customer’s business. One customer mentions that when they choose strategic partners they expect ‘an improved and more dialogue-based service/interaction, up to date technology, awareness of environmental sustainability, social responsibility, business process improvements and empowered employees who can challenge the customer and help them improve and innovate their business’ (Appendix A, Customer presentation 1). Another customer highlights the need for a partner who can act as an ‘... inspirational partner, delivering change... (Appendix A, Customer presentation 2). Thus, to act as a partner, the service provider is expected to act as a driver for customer internal change and growth. He elaborates by emphasising that past expectations are still relevant, just not sufficient. The customers describe that this expectation of a strategic relationship or partnership makes a difference when they evaluate and choose one service provider over another. Thus, if/when Damco embraces and collaborates with external stakeholders, including customers, they become sources of value and knowledge resources, which ensure/assist in ensuring Damco a sustainable competitive advantage (Lusch & Vargo, 2009; Vargo & Lusch, 2004).

Both the customers and Damco emphasise the strategic partnership as an essential way of doing business. A partnership is, however, a broad and somewhat vague concept; more specifically, the customers say that they expect to be challenged as well as receiving help to improve and innovate their business. While emphasising this need for being challenged through their strategic partnerships, they also request more of that kind of partners relationship and behaviour from Damco, as illustrated by the excerpts below:

‘... Innovation is the biggest challenge for a forwarder. We have received the same services for the past 10 years, PLEASE PROVOKE ME!!’ (Appendix A, Customer presentation 5).

‘... It is a partnership; we like to be challenged...’ (Appendix A, Customer presentation 4).

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‘... Don’t do as the rest; we want innovation, to be challenged, that is part of a partnership... (Appendix A, Customer presentation 3).

Above, we see how the customers describe the need for innovation, how they expect a service provider (forwarder) to be able to understand the customer’s business, entering into a partnership and contributing to their business by providing inspiration, innovation and investing in their relationship. It is no longer only about delivering a service but also about applying a strategic perspective to the customer’s business (Appendix A, Customer 2; Customer presentation 3;

Customer presentation 4; Customer presentation 5). The respondents present this as a necessity, and they want more of it. In this way, the boundaries between organisations are becoming more fragmented and less stable. On the one hand, Damco seeks to meet these expectations, which differ significantly from the expectations traditionally associated with buying a transportation solution from point A to point B. On the other hand, Damco is trying to figure out how to deal with the expectations. With the expectation of a strategic partnership and associated ways of working together by challenging, inspiring, innovating and re-scoping problems, what happens (with customers and Damco) becomes relevant to the organisation’s external relations and makes problems more interrelated and interdependent. Below, a customer reflects on the company’s expectations of its strategic partners:

‘We have changed expectations to our strategic partners, we expect customer service to exceed expectations, we expect service at both end of the svargo vaupply chain, Damco is a part of two ends that need to connect for the customer, Damco is part of a network. In general Damco is doing a good job, but it takes only one person to clear it all. I experienced it last week, and it is only because I know this company and its people really well.. ([... that we are still with them;

ed.]’ (Appendix A, Customer 1)

This customer describes how Damco’s internal processes and people are related to the customer’s business. As a global organisation, the customer’s business is affected by all their interactions with Damco – globally, disregarding the geographical touchpoint. It is the total experience with the Damco business that matters to them, how successful the business is in building a partnership with the entire customer organisation. This also means that Damco’s ability to utilise their collaborative meta-competences (Lusch et al., 2007) affects how successful they

are at doing business with the customers. One customer describes it rather simply in terms of expectations:

‘We have the same expectation to our service providers as we do to our internal staff, you need to be able to have high quality of work, make decisions, have clear communication and bring suggestions, take ownership and responsibility of problems. It is actually about managing external relationships. We depend on these relationships.’ (Appendix A, Customer presentation 5)

This customer emphasises how their business depends on external relations, similar to the relationship with their employees, and how their internal and external expectations do not differ. Both are crucial to their business and closely interlinked. This is becoming more and more common for Damco, and Damco increasingly experiences this interdependence. A large global customer wrote when renewing their contract:

‘...the success of our relationship lies with the capabilities of our associates. And this is one area we must continue to put strong emphasis on in the coming years.

Having highly capable, well trained, experienced associates who can handle the unique challenges the RETAIL(ed.) business presents, is the single most important factor in the success we will have together…’ (Appendix A, Email 5).

The partnership thus implies that boundaries between the organisations are becoming less stable, both in terms of ownership of problems, relevance of problems, ways of interacting and communicating as well as implications of decisions. This interdependency leads to an increased complexity, which is difficult to address within the traditional boundaries of the organisation and the traditional transactional approach, because people, organisations, problems, solutions etc. are interdependent. Hence, the strong focus on the partnership role.

The partnership requires a less transactional approach where problems, communication, responsibility and decisions are handled in a continuous process between multiple interests and stakeholders with both Damco and Damco’s customers. This way of working and creating business value represents a contrast to the typical transactional approach, where problems, communication, responsibility and decisions are handled in one particular transaction, by particular people who are relevant for that particular transaction. Thus, organisations become

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interrelated in different ways, and to a larger extent they are mutually dependent, both in creating success (value) for the respective businesses and in relation to how the success is created and defined. In this way, the value assumptions reflecting the partnership model of business are similar to the natural and open system logic (Thompson, 2003). Valuable resources are found outside the company in the shape of partnerships (e.g. customers, suppliers), they are dynamic and infinite and take active part in the value creation process, as we also saw in section 3.3. In this way, value and value creation becomes largely dependent on a collaborative and mutually dependent effort by both the customer and Damco.

This has implications for the way in which value is attributed and created and means that value must be understood in a relational perspective. In turn, this means that value for Damco is dependent on value for the customer, and vice versa.

Value for a Damco customer is not necessarily understood, defined or captured in a single transaction of moving a particular good from China to the USA. Rather, value for a Damco customer should be understood, defined and captured through a continuous process in which Damco takes an active role, acting continuously as a strategic partner for the customer. This requires an understanding of the customer’s problems (which goes beyond transportation issues) and the ability to act, communicate and make decisions, as if Damco were part of the customer’s business, yet all the while remaining an independent company. As we have seen in this chapter so far, the customer then experiences value creation, which are linked to value creation for Damco. This perspective on value and value creation as relational has a number of implications for ways of doing business – also in people processes such as talent management. We will return to the talent management implications in Chapter 6. First, we will turn towards Damco, which, like the customer, experiences a sense of change and a need for development.