Eloho Ifinedo, Mitro Kivinen and Tiina Koskelainen STUDY CASE: MULTIASISTENCIA TJTSE50: GroupAssignment February 12, 2010 JYVÄSKYLÄN YLIOPISTO TIETOJENKÄSITTELYTIETEIDEN LAITOS
2 TABLE OF CONTENTS 1 INTRODUCTION: THE MULTIASISTENCIA GROUP...3 1.1 History...3 1.2 Need for change...3 1.3 The frame for analysis...4 2 ANALYSIS OF THE BUSINESS NETWORK USING CSOFT METHOD...6 2.1 Customers...6 2.2 Service...6 2.3 Organization...7 2.4 Finance...9 2.5 Technology...10 3 VALUE MODELLING...12 4 APPLYING THE AGENCY THEORY TO MULTIASISTENCIA...15 4.1 Agency cost...15 4.2 Decision Information Costs...16 5 REFERENCES...17
3 1 INTRODUCTION: THE MULTIASISTENCIA GROUP 1.1 History The Multiasistencia Group was founded in 1983. Its main idea was to offer a household repair service to small businesses and private customers (plumbers, glaziers, constructors, etc.). Repair services were carried out through a nationwide network of self-employed trade professionals. Quality of service has been the key issue in the company s culture. In 1986, the company started to offer the repair management service to American Express card holders in the Madrid region, and got 20,000 end customers at once. After that Multiasistencia focused it sales activity on signing deals with corporate clients that would subcontract their service. The service deal is called the Comprehensive Claim Management Service (CCMS), and it included pre-defined prices, transparent conditions, establishing service performance and quality assurance procedures. It also guaranteed response time and provided 6-month warranty for the work done. In 1996, Multiasistencia created a new bundle of services focused on Bank and Assurance sector. International expansion program began the same year with the UK and France. The International Control Center located in Madrid providing outsourcing services to corporate clients. Customer Service Representatives (CSRs) were the coordinators of the whole repair management process and also the system users. 1.2 Need for change In 1999, some service problems began to appear in Multiasistencia. There were technical problems due to updating their computing system, but there were also problems with ensuring response times and work quality. Increase in end customer calls was dramatic, but the process was mainly manual. They have both a resource allocation and a productivity problem with CSR. Both Multiasistencia s organization and operational model were reaching their limit. They tried to speed up the CCMS process and also started a system called mental salary for stressing CSR s personal responsibility, but neither of those
4 ways was successful. They have to start consider how to control a lot of fragmented operations in a more professional, more automatic and faster way. The central issue in the Multiasistencia case was need for using information technology to automate the process of managing contact with corporate clients and end customers by electronic channels. The main process of the firm, the CCMS, needed re-engineering. The key priority was the network of professionals. Multiasistencia set up an Internet Portal, and offered advice how to start a company that would meet the requirements they set. They also helped trade professionals access the technology by promoting special offers on PCs, internet access and cell phone services. It was a requirement for Trade Professionals to start franchise in order to be a part of network. In other words they lost some degree of freedom to gain the benefits of the network itself. The trade professional franchises constitute the network of professionals helping Multiasistencia to meet the contractually defined timetables also during peak periods. Multiasistencia created new Control Center and reduced its staff to 375 CRSs who managed the entire CCMS process by having access to information in real time. They had greater decision-making capacity and a higher level of responsibility which increased employee satisfaction. In addition, Control Center was integrated with three other Contact Centers which acted as back-up centers to ensure service availability during peak periods. 1.3 The frame for analysis We decided to analyze the case Multiasistencia using the CSOFT model (Heikkilä & al 2005.) The CSOFT model enables us to discuss about the Multiasistencia business network and gives us structure for comprehensive analysis. In order to gain understanding about the reasoning behind the Multiasistencia business network, we did use Value Modeling and Agency Theory. The first was used when we analyzed how the NW was creating value and the latter one
5 when we did asses the different influential powers as potential problems in the network. The result of each analysis is discussed in its own chapter, chapters 2 4.
6 2 ANALYSIS OF THE BUSINESS NETWORK USING CSOFT METHOD 2.1 Customers The main customers of the business network are insurance policy holders, small businesses and individual persons needing repair services. For Multiasistencia there are both non-direct end customers and direct end customers. The main customers of the focal company are companies offering insurances and small businesses needing repair services Banking and insurance companies and credit card companies are served with different set of services that their customers, who on the other hand are receiving same service as the small businesses. Secondary customers of the focal company are trade professionals and individual persons needing repair services. Even though the trade professionals are main suppliers for the focal company, they also receive CCB (Customer care and billing) services from the focal company, thus makes the them customers too. The direct end user customers receive same service as non-direct end customers. Curiously enough, the end-customer is mostly "owned" by the company offering the insurance, but all CRM is being done by Multiasistencia. Then the customer data becomes the asset of Multiasistencia instead of the owner of the customer. 2.2 Service The main service of the business network is taking care of (household) repairs of the end customers. The promise is to offer service: With set price
7 With a quick delivery With guarantee The main services of the focal company are: taking care of arranging repairing and related process taking care of the claiming process, lowering further damage and CCB for trading professionals. The actual Value Modeling discusses about the service in depth in the chapter 3. 2.3 Organization In the Multiasistencia it is possible to find two different networks or organizations. The picture below shows the extent of the different network or organization.
8 In the first network the network of trading professionals is delivering the physical service to the end customers. Multiasistencia is taking care of work distribution planning, assignment, management of work and billing. In second network the network of trading professionals is delivering the physical service to the end customers. Multiasistencia is taking care of work distribution planning, assignment, management of work and billing. In the first case, Multiasistencia is taking care of the whole claim management and in second case the insurer is taking case of the claim management. The insurance company owns the end-customer but the Multiasistencia manages customership, i.e. takes care of operational Customer Relation Management (CRM).
9 2.4 Finance There are at least two distinct business models for the focal company in the case. The business models are dependent on the different two network structures discussed in previous paragraph 2.3. In the business case with direct end-customers, Multiasistencia assigns work from direct end-customers to a Trading Professional, and it charges a royalty of 10-14%. In the business case with insurer s end-customers, Multiasistencia assigns work from an insurer and gets a fee per user per event. This was in year 2005 in average 133 Euro per managed claim. This model was altering from 1999 to 2005. Multiasistencia did set up a franchise for the Trading professionals. The costs and revenues related to the franchise were not mentioned, however it is very typical that a franchise owner a) sets the prices, i.e. cover's its margins, b) charges for the right to use the franchise brand and model and c) can charge management fee. The trading professionals received benefits through added revenue, more stable income flow, savings in CCB costs, in terms of lesser paperwork and thus more time to do the billable work and saved transaction costs, no need to market nor sales related costs. Insurance offering companies did gain cost savings. The 1996 figures of cost savings for corporate clients were 4 M, the case is not specific if combined or per one (Multiasistencia's revenue 50 M ) Insurance companies had also cost savings in loss adjustment costs, 60% year 2004, because of dynamic mobile picture based assessment. Another saving was in electronic invoicing related processes, 40%year 2004.
10 Insurance companies get more value through increased end-customer loyalty because of BI (business intelligence) and increased end-customer satisfaction. 2.5 Technology The network business model in the Multiasistencia case is strongly based in underlying technical transaction, claim and work assignment management platform. The platform manages all value creating core processes and assists in supporting processes too. The creation of the service platform was mandatory for Multiasistencia to ensure the scalability of the networks in an efficient way. The platform is based in Internet technologies and is thus widely available to all members in the network. Multiasistencia offers the platform software as a service (SAAS) and thus acts as the focal company in the network as the Application Service Provider (ASP) for the whole network. The platform provides also access via a variety of different methods: either through a GUI or through an API and as a Web Service. With the platform, Multiasistencia is able to offer services to other network nodes: Customer Care and Billing (CCBS) for trade professionals, Full or partial claim management for insurance companies, Business intelligence BI and DW analysis services for the insurance companies and Even white brand service offering for consumers. Deployment of the technology did require heavy investments from both Multiasistencia and the Trade Professionals. The system did require acquisition of new PC's and Mobile devices with fixed and mobile Internet connections. Also heavy training was needed during the commissioning.
11 The new technology did put pressure onto the insurance companies to move from paper-based offices to fully integrated e-systems. The investment led even to unexpected results: the TP's were innovative in adopting new possibilities and that led to new innovations.
12 3 VALUE MODELLING Actors in the business network were Multiasistencia, corporate clients (such as banks, insurance companies), trade professionals and end customers. The main goal of a business model is to answer the question: who is offering what to whom and expects what in return (Gordijin, Akkermans & van Vliet). It explains the creation and addition of value in a stakeholder network, as well as the exchange of value between stakeholders. The exchange of value between business network s actors: 1. Multiasistencia -> Trade Professionals - customers (intermediate end customer s needs for repair services) i.e. revenue - the Franchise Internet Portal - advice on starting business
13 - help access the technology (special offers for PCs and internet access) - management applications - billing service including direct payment - promoted meetings 2. Multiasistencia -> Corporate clients - CCMS service deal - trade professionals services - custom-designed services (customer care help-lines, comprehensive management of repairable or cash settlement claims, managing loss-adjusters and recoveries) - real time information about repair processes through Internet Portal - possibility to supervise Service Level Agreements (SLA) - collaboration; digital signature, electronic invoice - management of loss adjuster reports (a desk-top audit over the internet with the digital photos) - analytical CRM based on a Data Warehouse - comparative information (information relating to the business of the client company to be compared to the average for the sector) 3. Multiasistencia -> End customers - intermediate repair services from trade professionals (i.e. lower transaction costs) - less trouble in finding suitable trade professionals (i.e. lower transaction costs) - pre-defined prices, quality assurance, guaranteed response time, 6- month warranty 4. Trade professionals -> Multiasistencia - household repair services
14 - network of professionals -> a sufficient number of professionals to meet the contractually defined timetables - commission from directly pointed out customer deals - commission from directly pointed out customer deals 5. Corporate clients -> Multiasistencia - end customers (intermediate end customer s needs) - payments 6. End customers -> Multiasistencia - payments - information about user behavior through various contact channels (telephone, cell phones, Internet and personal contacts) 7. Trade professionals -> End customers - household repair services - inform in real time (SMS) about states of claim 8. Corporate clients -> End customers - intermediate household repair services According to Mr. Añón, Multiasistencia s Spain General Manager, information management is a key element in their business and in the relationships they have with their clients because it has improved credibility and added value to their business relationships. The Multiasistencia Group has developed their processes in SSM sense. They have perceived real problems and tried systematically solve those problems. They are in constant interplay with their environment by listening needs of corporate clients, end customers and trade professionals. In collaboration with its corporate clients Multiasistencia has introduced process innovations like the management of loss adjuster reports. The new, seamless Internet application made the complete management of the CCMS process possible. IT played also fundamental role in redefining the network of trade professionals.
15 4 APPLYING THE AGENCY THEORY TO MULTIASISTENCIA The agency theory views the firm as an agency relationship built on a set of contracts among self interested agents (employees). The divergence of interests between the principal (MA management team) and the agents (TPs and CSRs) can breed numerous problems which is costly to the firm (MA). (Gurbaxani & Whang, 1991). 4.1 Agency cost Agency cost: One of the most important issues MA had since its foundation was how best to increase TP loyalty. An example is the lack of satisfaction due to a quality issue in the repair, since MA offered a 6 months warranty, it had to send an employee or TP to reassess the problem and then carried out the right repair at MA s expense. This is a clear indication of the discrepancies between the objectives of the principal (MA management team) and those of the agents (TP). 1. Monitoring Cost: CSR evaluated each other in a quarterly poll and those scoring the highest points received the attitude bonus. 2. Monitoring Cost: CSR had to keep calling on to the TP just to keep in track about the progress of the work. It took multiple calls per one needed fix. 3. Bonding Cost: A revolutionary system called the Mental Salary was put in place by MA to stress personal responsibility without direct supervision for which a bonus of 20% was offered. This bonus was in order to achieve MA s objectives, employee s attitude and professionalism in terms of CSR performance measures (waiting times, errors and time per call). Comment on Agency cost: MA designed packages for employee compensation which was directly linked to performance.1999/2000 MA experienced some problems associated with these monitoring and bonding costs which was increase in level of mistakes and stress among the CSR. This led to worsening of the labour climate as the mental salary which was initially designed to increase productivity was being perceived as a big brother mechanism. This is one of the downsides of the monitoring cost.
16 4.2 Decision Information Costs All decisions are made by the top MA managers but the CSR s and TP s have better access to local information. The associated cost of processing information arises due to the need to process information upward in the hierarchy. 1. Communication Costs: The CSRs managed the telephone process by being responsible for the predictive control of quality (The new control center). The CSRs also managed the CCMS process by having access to information in real time and this equipped them with greater decision making capacity and higher level of responsibility. This led to considerable increase in employee and in the end customer satisfaction. 2. Documentation Costs: In 1990 s, the main stream insurance companies still relied on paper-based systems which was a slow and expensive way to make decisions affecting premium and policies. Average claim cycle completion was 30days which was below customer expectation. This resulted in tedious compilation of monthly repair orders, invoicing and payment issues which also led to delay in TP payment. 3. Opportunity Costs due to poor information: Poor information ranges from incomplete or partial information to inaccurate or wrong information. In 2000 (The Glass Ceiling), MA attracted new corporate clients which led to a dramatic increase in end customer calls. However, the process was manual, based on telephone contacts and their information system was used mainly for data entry. The system hence provided only partial information about repair status to the CSR.
17 5 REFERENCES Faber, Ballon, Bouwman, Haaker, Rietkerk & Steen. (2003). Designing business models for mobile ICT services. Gordijin, Akkermans & van Vliet. (). Business Modelling is not Process Modelling. Gurbaxani & Whang. (1991). The Impact of Information Systems on Organizations and Markets. Heikkilä, Heikkilä & Tinnilä. (2005). The Role of Business Models in Developing Business Networks.