J ÖNKÖPING INTERNATIONAL BUSINESS SCHOOL. Business Developer. -What s behind the title? Master Thesis within Business Administration - PDF

J ÖNKÖPING INTERNATIONAL BUSINESS SCHOOL Business Developer -What s behind the title? Master Thesis within Business Administration Credits: 30 ECTS Author: Johannes Fyrpil Tutor: Anders Melander, Ph.D.

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J ÖNKÖPING INTERNATIONAL BUSINESS SCHOOL Business Developer -What s behind the title? Master Thesis within Business Administration Credits: 30 ECTS Author: Johannes Fyrpil Tutor: Anders Melander, Ph.D. Jönköping January 2012 Abstract Business development or to develop the business, sounds quite obvious what it is all about; to take it to the next level. But to take the business one step further can be done in many different ways and with this in mind the purpose of the study is to examine and increase the understanding of the phenomena business development. This was done by carrying out a qualitative study, and more specifically an exploratory one, to see what is behind the title of people working with business development. What do they do and how do they do it? The study shows a number of focus areas that are common among these business developers, mainly to find and exploit new opportunities. This lead them towards the main goal with their positions and what they do, namely to increase profitability and growth. What also got obvious during this study is that even though they carry similar titles, they have very different responsibilities. A pattern appears among the sample, that the bigger organizations seems to have a harder focus on business development while the smaller companies have more divers work tasks that goes beyond the scope of business development. Table of Contents 1. Introduction Purpose Theoretical framework Corporate entrepreneurship Business Development Strategy Relationships and modes of growth Questions Methods Research approach and methods Sampling Data collection Analysis Validity and reliability Critic of method Empirical findings Sandvik Material Technologies Realsec Leax MPR Saab North America Analysis and discussion Conclusion and further research Afterword References Figures Figur 1 As Seen in Chiesa & Manzini (1998)... 8 Figur 2 As seen in Chiesa & Manzini (1998)... 9 Figur 3 Interview subjects and company facts... 11 Business Developer -What s behind the title? Johannes Fyrpil 1 1 Jönköping International Business School, P.O Box 1026, SE Jönköping, Sweden. 1. Introduction When hearing the words business development or to develop the business, growth comes quickly to mind for most of us. But to grow is becoming a challenge as the world is evolving to become more and more globalized, and competition is not bound by geographic location, [n]o company has sufficient resources itself to satisfy the requirements of any customers (Håkansson & Ford, 2002, p.137). This requires organizations to be able to adapt more quickly to threats in markets they are present in (Ashkenas, DeMonaco, & Francis, 1998; Zahra, Hayton, Marcel, & O Neill, 2001; Zahra, Neck & Kelley, 2004). Growth is a big term and can indicate many different things, but as Nicholls-Nixon (2005, p. 77) mentions [g]rowth helps to establish legitimacy, achieve economies of scale, attract investment capital, and increase profitability and this is the desired end state one might get from growing. There are a number of different ways or modes to achieve this most wanted state of growth both internally and externally such as strategic renewal, acquisition, joint venture, and venture creation etc., but through these different modes one does not only grow if they are successful, but are also able to develop new knowledge and skills (Collins & Porras, 1996; Garvin & Levesque, 2006; Naldi, 2004; Roberts & Berry, 1985; Sharma & Chrisman, 1999; Stevenson & Jarillo, 1990; Thorén, 2007). According to Davis and Sun (2006) business development has received little attention in scholarly work even though its importance to firm growth, and Giglierano, Vitale and McClatchy (2011) mentions that due to the early stage this concept is in, no common language or definition has yet been agreed upon. The same is also true for the organizations practicing it, but the common understanding is that business development is about creating new revenue for the company (Davis & Sun, 2006). So who then are responsible for this development? The business development managers are today the one responsible in many organizations (Giglierano et al., 2011) and he or she might have titles such as Head of Business Development or Business Developer and others. These type of titles and positions are something that seems to be in vogue when looking at career sites and meeting people at events. But what does one do that possesses 1 such a position? What is part of the work description? Current literature on the subject suggests that [b]usiness developers are responsible for finding opportunities and preparing new business (Davis & Sun, 2006, p.148) and that the time-scale is more long-term than compared to marketing that covers a shorter time span (Davis & Sun, 2006). The study will focus on what the responsibilities people working with business development have, what they do and why they do it. So ultimately it is to explore what business development is as a concept from a business developer s point of view. 1.1 Purpose The purpose of this study is to examine and increase the understanding of the phenomena business development. 2. Theoretical framework The theoretical framework aims to broaden the knowledge that is required to understand the subject of business development. And as mentioned in the introduction business development is about creating new business and growth. This is also a big portion in corporate entrepreneurship (Kuratko, Montagno & Hornsby, 1990), which is first explained in this chapter followed by a section on business development and discusses the literature on the subject. This is then followed by a section on strategy, which is important as it guides the organization towards new ground (Porter, 1996) and a final section looking into theory concerning relationships and modes of growth which is mentioned to have an important part in business development by both Davis and Sun (2006) and Håkansson and Ford (2002). 2.1 Corporate entrepreneurship As business development is a form of corporate entrepreneurship (Davis & Sun, 2006) this is first to be explained in this theoretical framework. This particular subject has received increased attention both by scholars and by the business world (Garvin & Levesque, 2006; Naldi, 2004; Sharma & Chrisman, 1999; Stevenson & Jarillo, 1990; Thorén, 2007 and many more), but according to David and Sun (2006) not yet enough. The concept of corporate entrepreneurship had long been seen as impossible, as [e]ntrepreneurial and administrated ( bureaucratic ) economic activity have long been considered essentially opposite forms with little if any connection. (Burgelman, 1983, p. 1362), also mentioned by Stevelson and Jarillo (1990). In the cradle of corporate entrepreneurship Burgelman (1983) wrote about the connection between entrepreneurship and the organization, corporate entrepreneurship. He writes about how autonomous strategic behavior and strategic context influences the concept of corporate entrepreneurship, and how this concept influences the induced strategic behavior and the structural context. Burgelman (1983, p.1350) explains that autonomous strategic behavior provides the raw material the requisite diversity for strategic renewal. As such, autonomous strategic behavior is conceptually equivalent to entrepreneurial activity generating new combinations of productive resources in the firm. Kuratko, Montagno and Hornsby (1990, p. 49) state that [t]he implementation of corporate entrepreneuring or intrapreneurship is becoming an important activity for growth-oriented businesses. 2 Burgelman (1983) also mentions that top management should tolerate corporate entrepreneurship because it might broaden the firm s capabilities and can find synergies within the existing resources in the organization. Through these entrepreneurial activities it can help to increase competitiveness and might also help the firm to leave or enter different market segments. When Burgelman (1983) mentions the big potential that he sees in corporate entrepreneurship, I get quite surprised when he uses the word tolerates rather than encourage. One explanation can be that it is far from the daily routines needed to run a company even though it might generate a lot of advantages. It is not easy to have focus on both the current business and to seek out and nourish the new ones, Garvin and Levesque (2006, p. 102) suggest that companies must become Januslike, looking in two directions at once, with one face focused on the old and the other seeking out the new. This does not come easy for most organizations as new businesses needs to have a flexible and evolving structure and may not even be fully understood by the already existing businesses that are well defined, predictable and usually stands for the majority of a company s revenues (Garvin & Levesque, 2006; Lei & Slocum, 2005). With this in mind one can wonder if business development can be considered the second face that is looking into the future, a way for organizations to divide the focus between the present and the future. These differences can, according to Garvin and Levesque (2006), create a few challenges and they speak about three of them. First, most new businesses lack hard data, they are hard to forecast and it is not uncommon with large mistakes. Second, as new businesses require innovation and fresh ideas, it also requires unconventional people to lead these new businesses. But most the people suitable for leading these new businesses have a problem with separating good ideas from bad. The third is that most new businesses have a bad fit with most systems, above all systems for budgeting and human resource management, this bad fit is mostly due to the uncertainty of how the new businesses are going to evolve, so long term financing and staffing are hard to plan for. Most organizations response to these challenges is, according to Garvin and Levesque (2006), to strong. Organizations try to either keep the new businesses within the existing pipelines with a big chance of suffocating the new and much smaller organizations. This can occur when they do not get the support needed to evolve, the existing businesses ignore their existence and without this support they will lose traction and eventually disappear. Another way organizations react on new business creation is to make them a totally standalone unite without hard connections to the existing organization. This have the advantage of freedom and support with resources, the problem is when it is time to integrate the new venture in the existing organization. The new business have had time to create a culture of its own with its own routines that can be far from the ones of the mother organization. To get corporate entrepreneurship to work one must not use either of the extremes, but a balance of both ways as suggested by Garvin and Levesque (2006). One must not be afraid to develop the strategy by trial and error, within reason. And to use existing resources be maximize benefits from the new businesses, such as experienced leaders in key positions in new businesses to get support from the parent organization, existing distribution channels and existing business networks. Garvin and Levesque (2006) also suggest that one does not have 3 to be purely entrepreneurial all the time but that is also requires disciplined management, and use both old and new processes to benefit the most from new businesses. The globalization has made many markets change, forced technological change and driven companies to expand out on the international market in order to find growth and increased profitability (Zahra et al., 2001). This is according to Zahra et al. (2001) a good opportunity to expand not only within known technologies but also within unknown with the help of local players in either partnerships or through acquisition. This will help to improve current capabilities within the organization but at the same time create new ones and this is something that Zahra et al. (2001) state can be accomplished by applying corporate entrepreneurship, [c]ompanies use ICE (international corporate entrepreneurship) to acquire knowledge developed in other markets and then incorporate this knowledge into their operations (Zahra et al., 2004, p. 146). But [o]rganizational competencies can and do decay quickly, requiring managers to invest heavily in replenishing existing competencies and building new ones (Zahra et al., 2004, p. 166). But this is not done easily and just as Garvin and Levesque (2006) and Zahra et al. (2001) brings up some challenges that needs to be conquered in order for this type of international corporate entrepreneurship can work. First, top management must learn how to manage the new knowledge that comes from entrepreneurship within the organization, both formal and informal. Second, top management must also consider the foreign entities local identity when implementing the corporate culture. This local identity is crucial for the entrepreneurial behavior within the organization. Third, top management must also implement systems that will make knowledge learned through entrepreneurship available within the organization. This knowledge sharing could, according to Zheng, Yang and McLean (2010), increase the effectiveness of the organization. The fourth and final challenge is to find the right form of entrepreneurial behavior. With all these challenges, management has to find a balance between local responsiveness and integration when getting diversified during these expansions to a more international market (Zahra et al., 2001). 2.2 Business Development As mentioned in the introduction business development is about creating new revenue to the company from new sources (Davis & Sun, 2006), this could be both new markets and new products (Roberts & Berry, 1985). These new opportunities are likely sprung from different forms of collaboration, business success is viewed through the process of managing development (O Sullivan, 2002, p. 77). There is according to Roberts and Berry (1985) a way to increase the success rate of new business creation. They mention four different factors that all dependent on the relatedness to the existing business. The first one is the newness of technology to the firm, the second is the newness of a market, the third is the familiarity with a technology and the fourth and last one is the familiarity with a market (Robert and Berry, 1985, p. 3). These factors or categories help decide the mode of entry, just like the selection process mentioned by Chiesa and Manzini (1998), which focus on the objective, content of the collaboration and finally the typology of the potential partner, further explained in the relationships and modes of growth section. But the evaluation process mentioned by Roberts and Berry (1985) has a bigger 4 focus on relatedness to existing business rather than the criteria mentioned above by Chiesa and Manzini (1998). But these two ways does not exclude one another, but rather complement each other as they focus on different aspects of a future collaboration. It is found by Keil, Maula, Schildt and Zahra (2008) that collaboration with other organizations increases the innovativeness in the company significantly, but the benefits depend on relatedness of the partners (Keil, et al., 2008, p. 906). As markets evolve and requirements change, the companies playing in these markets have to change with it. It is proposed by Zook (2007) that no core business lasts forever and it is something we have all seen in our daily life. Zook (2007) gives the example of polaroid, who did not respond to the change of technology. But there are also examples of companies who have been able to respond to the change and adapted to new markets, such as Sony with the Walkman, it evolved from cassette to CD and to mp3 player. But it is also dangerous to try to pursue to many markets in a way to find the next core business, this will according to Zook (2007) spread the resources thin and risk weakening the organization. Zook (2007) also mentions that there is a risk that organizations leave their core markets to early and thus loose a big part of their revenue. To avoid any of these outcomes Zook (2007) suggests the evaluation of your current core business to see what status it is in, and also mentions that sometimes one have to shrink first in order to be able to grow. This is done by selling non-core business and if needed outsource the services still needed but not necessary to have in-house. This is in line with Grant and Baden-Fuller (2004, p. 61) who state that [a]s large companies have pulled back their corporate borders through outsourcing and divestment of non-core activities, they have increasingly cooperated with other companies in order to engage in activities and access resources outside their own boundaries. Business development is occurring more and more in project form as a way to focus the effort from the organization and all the different functions that might be included and even other companies in some cases (Burgers, Van Den Bosch & Volberda, 2008). The length of these projects depends on the scope and collaboration form selected. Davis and Sun (2006, p. 146) define business development as a capability comprised of routines and skills that serves to enable growth by identifying opportunities and guiding the deployment of resources to extend the firm s value-creation activities into technological or market areas that are relatively new to the firm. Giglierano et al. (2011, p.30) got similar results from his study and mentions that business development focuses on: Finding new opportunities Learning about the nature of opportunities and how to address them through direct contact with potential customer-partners Constructing a business model for addressing an opportunity Working with partners to address the opportunity Launching the effort to address the opportunity and learning from the experience One can put this in relation to innovation and according to Drucker (1985, p. 67) [m]ost innovations, however, especially the successful ones, result from a conscious, purposeful search for innovation opportunities. The same could be said about business opportunities, 5 business development is about searching for opportunities and explore them to see if they fit within the strategy of the company. Davis and Sun (2006) suggests a gated funnel process similar to a sales funnel, but instead to follow up deals they suggest one uses it to follow up opportunities. This is a way to structure the search in business development and a good way to know when to let an opportunity go and when an opportunity suites the company and its strategy. Business development is more long term and occurs before any marketing and sales people are aware of the opportunity (Davis and Sun, 2006). 2.3 Strategy To be successful is not as hard as to be successful over a long period of time, but to be that an organization needs a plan. And since business development according to Davis and Sun (2006) is something that occurs prior to marketing from a timeline perspective, the people working with business development must have a good idea of where the organization is heading. This is where strategy comes in, to point in a direction and according to Porter (1996, p. 75) [s]trategy is creating fit among a company s activities. The success of a strategy depends on doing many things well not just a few and integrating among them. If there is no fit among activities, there is no distinctive strategy and little sustainability. This definition from Porter (1996) shows the importance of a good fit, or a balanced portfolio to reach long term success. Porter (1996) also mentions that when decided upon a strategy one must be able to adapt it if circumstances change, the strategy has to be able to evolve in order for the organizations to adapt to the market. Th
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