Business Development
Klumpp, M. / Koppers, C.
Integrated Business Development
FOM Fachhochschule fr Oekonomie & Management
ild Institut fr Logistik- & Dienstleistungsmanagement
Schriftenreihe Logistikforschung
Band 7, Dezember 2009
ISSN 1866-0304
Essen
The authors thank Sascha Bioly for correction references to this publication.
II
Contents
List of abbreviations ...................................................................................................... II
List of figures ............................................................................................................... III
Abstract ....................................................................................................................... III
1.
1.1.
Objectives ......................................................................................................... 1
1.2.
Tasks ................................................................................................................ 3
1.3.
2.
2.1.
2.2.
3.
3.1.
3.2.
Results .............................................................................................................. 9
4.
Conclusions ..................................................................................................... 13
References ................................................................................................................. 14
List of abbreviations
ASME
BD
Business Development
CEO
cp
compare
Diss.
dissertation
e.g.
ECR
ed.
edition
eds.
editor(s)
et al.
ETO
Engineer To Order
FOM
i.e.
IT
information technology
KCL
Kompetenz-Centrum Logistik
M&A
Mio.
Million(en)
MP3
Mrd.
No.
number
OEM
RFID
SCM
SME
USP
Vol.
volume
III
List of figures
Figure 1: Ansoffs Product Market Expansion Grid (cp. Ansoff, 1958, 392). .................. 1
Figure 2: Business Development Objectives and Starting Points. ................................. 2
Figure 3: Approaches to Growth (cp. Dlfner, 2001, 146; Bleicher, 1979, 130). ............ 3
Figure 4: Value Chain (cp. Porter, M. E., 1999, 66)....................................................... 4
Figure 5: Top-level Business Development Process (cp. Kind, 2004, 64). .................... 5
Figure 6: Action Research Cases by Industry and Company Size. ............................... 9
Figure 7: Risk Ranking from Action Research Case Studies. ...................................... 10
Figure 8: Instruments and Time Frame of Business Development. ............................. 11
Figure 9: Important Factors in Business Development. ............................................... 12
Figure 10: Qualification Areas of Personnel in Business Development. ...................... 12
Abstract
Business Development traditionally has an incorporated focus on marketing and marketing models as well as marketing competencies among business development managers. However, the discussed case studies results and trends in business and market
behaviour point to the fact that in the future only an integrated model of business development (including logistics, supply and quality management models and activities,
respectively personnel) can provide significant competitive advantages especially to
global companies. This is described in detail in the following paper and put together as
an integrated business development model in order to enhance practical efficiency efforts and results in day to day business development.
1.
1.1.
The increasing instability of consumer preferences and the growing intensity and sophistication of competition forces firms to analyse further opportunities. Exploiting existing competencies and exploring new competencies depict the possibilities a firm has
in order to seek for growth (cp. Kwaku, 2005, 61). Many forms are facing more than
one opportunity with potential for growth - therefore it is important to prioritize. Nowadays it seems like the term business development is spread within most global corporations. While there might be individual definitions in the minds of various practitioners
the concept of business development has only little connotation within scientific literature. Definitions range from rather operational sales related objectives to a more strategic and general approach of doing business. One thing they all have in common is
that through business development functions opportunities for growth are to be analysed and - if found to be worthwhile - realised. Many times New Venture Management
is used as a synonym (cp. Stahl, 2002, 13). A venture here means any product or service which is new within the portfolio of an enterprise. For the following the definition
by EADES who describes business development as the creating of new opportunities
through new and different approaches is set as the basis forming definition of this paper (cp. Eades, 2003, 71).
Business development therefore many times aims at a change in the current portfolio
and can be seen as a innovation in regards to technologies or business models (cp.
Siemer, 1991, 12). But business development is not limited to expanding a firms portfolio, also reducing a portfolio can be a task business development. All of this is done
in order to through the realization of potentials achieve growth. Looking at one of the
most commonly used theoretical concept the Product Market Expansion Grid by ANSOFF there
Existing Markets
New Markets
Existing
Products
New
Products
Figure 1: Ansoffs Product Market Expansion Grid (cp. Ansoff, 1958, 392).
Growth through market penetration is typically covered by traditional marketing organizations. But it is especially opportunities in the field of market development and
diversification that fall into the area of business development functions. Hence business development is characterized by certain characteristics (cp. Karger/Murdick,
1972, 1; Stahl, 2002, 13):
Figure 3: Approaches to Growth (cp. Dlfner, 2001, 146; Bleicher, 1979, 130).
A firm, especially start-up and young businesses, will first of all try to grow through
their core business as this is where the initial know-how will be found. With increasing
product differentiation firms will come to a point where they feel that functions, whose
main task is to analyze further opportunities for growth, are needed to realize them
accordingly (cp. Koenig, 2003, 128). These firms are to be found in phase V (cp. figure
3).
1.2.
Tasks
In order to obtain the just described objectives the following tasks can be captured in
the context of business development. Modern business development involves the
total integration of the enterprise and the deliberate linking of its services and products with all the value networks, strategic partners, and constituencies (Rainey,
2006, 15).. In addition to the fed of the product and technology pipeline another task of
business development lays in the commercialization of these products and technologies as well as seeking new opportunities through cooperation with partners or setting
up new business models (cp. Kind, 2004, 56). When looking at the just described
tasks it is obvious that business development is highly involved in the strategic processes of a firm. But it may also highly influence the strategy of a firm depending on the
characteristics of an opportunity that is analyzed by the business development func-
tions. Still the final decision of pursuing an opportunity lies in the hands of top management who will also approach business development team with ideas that they feel
are worth investigating.
1.3.
PORTER has established through his 'value chain' and his definiton of primary and
secondary activities a framework for gaining competitive advantages. According to
this concept competitive advantages can be maximized through constant optimization
of primary activities. This means maximizing the creation of value while minimizing
costs. For doing so each activity along the chain needs to be carefully analyzed.
Typical process
Within the following the process in place in order to achieve the objectives and fulfil
the tasks of business development are described. This may vary from firm to firm and
also needs to be customized according to the individual market set-up. For this reason
the following process can only be seen as a top-level example.
Responsibility for each phase is held by the business development team. Within each
phase certain work packages are defined that need to be done. And for which the
business development team may also have to consult with external experts, e. g. marketing research agencies, consultancies. The output of each phase is typically reviewed by senior management who decides whether the project moves on into the
next phase or is not worth any further investment. It is for good reasons that this process is very similar to processes executed by venture capital investors as the investments grow tremendously from phase to phase. The similiarity is obvious when comparing due diligence analyses and the ones taking place within business development
projects (cp. Kind, 2004, 64).
a.) Idea: For each project a team consisting of internal experts of this subject will be
chosen and put together by the business development during the idea phase. This
initial phase sets the foundation for any project. Here any opportunity is to be analysed
in order to have certain pre-defined criteria available for review. With the type of opportunities possibly varying from new technologies to a complete new market approach it is easy to see that there may be difficulties in having each project delivering
the same set of parameters and ratios. Nevertheless it is for the same reason that this
discipline is also needed: Only through such a structured and replicable set up of each
phase opportunities can be compared to each other and this is necessary in order to
prioritize limited resources.
b.) Concept: Once an opportunity has passed the initial idea-phase, the business development team can then work on analyzing and reviewing the details which will con-
stitute a concept of how this opportunity contributes to the firms performance and
budget objectives and how it can be executed in terms of bringing it to market. To give
some concrete examples (cp. Koenig, 2003, 129; Taylor/Brunt, 2001, 278):
Strategic considerations
c.) Feasibility: A formal investigation on the feasibility of an opportunity can be conducted once a concept has been laid out. All activities needed before a successful
carry-out of the opportunity are encompassed in the phase of the feasibility. Hence
this is typically the phase where most time is spent within a business development
project. Example activities may be (cp. Koenig, 2003, 129; Taylor/Brunt, 2001, 278):
Funding possibilities
Market research
Pilot testing
Risk assessment
As a result the feasibility analysis should provide data that the opportunity meets
stated requirements or where it does not meet the stated requirements and what
needs to be done in order for it to do so.
The phases of Concept and Feasibility can not be seen completely isolated, e. g. an
opportunity which had shown promising deliverables in the idea as well as in the concept phase will not be dropped right away just because it didnt pass the feasibility
assessment. It is more likely that this will lead to another review of the concept and
how certain criteria can be changed within in the concept so that it might be more feasible for a firms resources.
2.2.
McKinsey together with the Supply Management Institute of the European Business
School conducted a global survey in which the performance of the respondents companies against recognized best practises in supply management and purchasing was
analyzed (Reinecke, Spiller, Ungermann, 2007). The following correlation was found:
The financially top performing companies were chracterized by certain principles they
obeyed within their internal organizations. One of these principles is integrating and
involving purchasing operations into business planning processes and thus ensuring
the alignment to corporate strategy. Cross-functional collaboration can lead to a performance improvement of up to twelve percent according to the survey. In order to
apply these results it needs to be further analyzed in which phases of the business
development process an integration of logistics functions would be most efficient.
Typically it can be observed that when it comes to the feasibility phase input from logistics is needed. This is coherent with other findings and concepts in logistics and
supply chain management (cp. e.g. Arndt, 2004; Bak, 2006; Baumgarten, 2008;
Blanchard, 2007; Christopher, 2006; Doganzo, 2003; Gpfert, 2004; Grant et al.,
2007; Jones, 2006; Kersten et al., 2006; Klumpp, Jasper, 2007; Kuhn, Hellingrath,
2004; Lee, 2005; McCormack et al., 2002; Pfohl et al., 2007; Saiz et al., 2006; Speh,
2008).
In practise this is not rarely focussed on rather operational topics than on a strategic
integration. But previous best practises from top performing global firms have shown
that it is important to involve these functions from the very beginning of business development processes taking place. For example taking the case of the Apple ipod success story. It was not marketing functions that came up with the idea of providing portable MP3 players to the masses but purchasing who paid attention to the trends they
were facing on the side of their suppliers and furthermore were also involved in the
strategic outlook of the company (cp. Leendertse, 2007, K01).
As this case proves functions of supply chain management can be of successful contribution to the entire process of business development when being involved rather
from the beginning, meaning the idea phase.
But this is not just about involving SCM functions right from the start but also the mindset and expectations one has from SCM in general. Quoting once more the survey by
McKinsey it was also striking that the purchasing executives of the top performing
companies felt that their CEOs expected more from them than just meeting a cost
saving objective. Whereas the same target group but from low performing firms felt
that they were rather seen as support function by their CEO (Reinecke, Spiller,
Ungermann, 2007, 7).
3.
3.1.
The following case studies were collected through an online questionnaire in 2008 by
KCL/ild. The main topics were risks, quality, capacity management in logistics as well
as business development. Questions combined ranking of given answers and free text
answers for each topic providing for a broad range of feedback possibilities. Research
was conducted in an online interview tool of KCL (Kompetenz-Centrum Logistik at
FOM University of Applied Sciences Essen) with an empirical research institute
(inomic), open from 15th of April to 5th of May 2008 (20 days). The short research
period prevents for the main representativity problem with most online surveys: The
proliferation danger of invited contacts through mail spreading is limited. Business
contacts of FOM/KCL in different industries were invited as described below (case
characteristics, figure 4).
Turnover (2007)
- (not reported)
- (not reported)
1-50
Service Industries
25
Service Industries
51-250
28
Textile Industries
501-5,000
30
Textile Industries
> 5,000
> 1 Mrd.
31
Textile Industries
32
501-5,000
> 1 Mrd.
33
Industry Products
501-5,000
10
36
11
37
Defense Industries
> 5,000
> 1 Mrd.
12
38
Industry Products
13
39
Service Industries
14
40
Service Industries
> 5,000
15
42
No
Case
Id
21
Food Industries
23
24
Industry
16
43
Service Industries
17
45
51-250
18
46
Industry Products
> 5,000
> 1 Mrd.
19
47
Service Industries
20
48
Service Industries
501-5,000
21
49
22
50
Service Industries
501-5,000
> 1 Mrd.
23
51
Industry Products
501-5,000
24
53
251-500
25
54
Defense Industries
501-5,000
26
55
Food Industries
501-5,000
27
56
Defense Industries
501-5,000
28
57
Defense Industries
501-5,000
29
58
Service Industries
> 5,000
> 1 Mrd.
30
59
Industry Products
> 5,000
> 1 Mrd.
31
60
Service Industries
501-5,000
10 - 100 Mio.
32
61
Defense Industries
> 5,000
> 1 Mrd.
33
62
Service Industries
1-50
1 - 10 Mio.
Altogether there are 33 business cases reported for the study. In eight out of the 33
cases the respondents were with industry logistics service providers, four respondents
identified themselves to an industry OEM and further four represented trading companies. Therefore a broad range of experts and perspectives can be assumed.
3.2.
Results
The following figure 7 shows the risks that firms feel opposed to. Interestingly the risk
assessment obtained by the respondents ranked risks that are related to logistics,
10
supply chains and procurement, compare (c), (d), (e) and (j), among the most important risks.
Percentage of
Maximum Ranking Points
118
69,41%
116
68,24%
111
65,29%
100
58,82%
96
56,47%
93
54,71%
g Image Risks
92
54,12%
h Political Risks
82
48,24%
Id
Risk
78
45,88%
49
28,82%
From a working capital perspective it can be observed that (c) a possible price decrease in sales markets can result in consequences from economic loss valuation to
the shipping duration or stock volume as central logistics indicators. And (d) price increases in procurement markets also increase working capital values and therefore
the economic impact of shipping times and stock volumes is escalated. Risk (e) as
service risk is imminent in transportation processes as information provided may in1
Only 17 of all 33 respondents completed the full 10 point risk ranking, therefore a hypothetical ranking
point sum of 10 times 17 is possible. This would indicate that if all respondents would have ranked one
single risk the most important risk this one would have achieved 170 points.
11
crease transparency and reduce this specific risk position and vice versa. And (j) external security risks are a problem of contingency planning in international logistics
urging global forwarders and carriers to provide alternative transport solutions in any
such event. Altogether the described risks show the importance of increased logistics
efficieny and therefore optimal capacity management as all of these risk positions will
increase with rising capacity problems and goods waiting for transportation.
Moreover the following figure 8 describes the represented activities and the historical
background in business development: Different activities and instruments are used
and the institutional history of business development may be described as young.
No
Activities in BD
Increasing
focus on BD
Yes, since 2
years.
No.
Entwicklung vorhandener und neuer Geschftsbereiche
Anpassung Personal & Knowledge Kundenmanagement
Yes, since 10
years.
Yes, since 2
years.
No.
Yes, since 10
years.
Yes, since 2
years.
12
The following figure 9 is describing different key factors as recognized by the case
study forms and develops an attribution of the named factors to the business development phases as described beforehand.
Factor
SpecificaPertions
centage
a)
Idea
55
76,39%
Product Quality
53
73,61%
52
72,22%
51
70,83%
Flexibility
51
70,83%
45
62,50%
44
61,11%
Sales Potential
36
50,00%
b)
Con.
c)
Fea.
d)
Imp.
Qualification Areas
Specifications
Percentage
Sales
18,18%
18,18%
Production Management
12,12%
Logistics
12,12%
Supply Management
12,12%
Law
9,09%
9,09%
Marketing
6,06%
4.
13
Conclusions
The following thesis may represent the subsequent thoughts about the presented research results from the literature analysis and case studies in order to pave the way
for further research on business development:
This leads to the following general annotation: Nothing can be done in less than no
time and at less than no cost and in many cases companies are closing in on these
limits (cp. Larsson, 2004, 22). Keeping this quote by LARSSON in the back of ones
mind it is obvious that firms and organizations will come closer to definite limits of their
obvious business development opportunities. Rigorously involving also other functions
of supply chain management in addition to the typical business development driving
forces derived from sales and marketing will inceasingly decide about strategic competitiveness.
14
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