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Journal of Management History

Customer relationship management: Barnard's foundations

Milorad Novicevic, Hugh Sloan, Allison Duke, Erin Holmes, Jacob Breland,

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To cite this document: Milorad Novicevic, Hugh Sloan, Allison Duke, Erin Holmes, Jacob Breland, (2006) "Customer relationship management: Barnard's foundations", Journal of Management History, Vol. 12 Issue: 3, pp.306-318, https:// doi.org/10.1108/17511340610670205

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Customer relationship management: Barnard’s foundations

Milorad Novicevic, Hugh Sloan and Allison Duke

University of Mississippi, Mississippi, USA

Erin Holmes

School of Pharmacy, University of Mississippi, Mississippi, USA, and

Jacob Breland

University of Mississippi, Mississippi, USA

Abstract

Purpose – The purpose of this paper is to delve into Barnard’s works to construct foundations of customer relationship management (CRM). Design/methodology/approach – The paper identifies Barnard’s insights on customer participation using a post-analytic method and uses them as inputs to the analysis of current CRM practices. Findings – As an outcome of the analysis, the paper identifies the practices that are likely to lead to more effective participatory behavior of customers. Research limitations/implications – Examining CRM from a historical perspective can open promising avenues for future research. Practical implications – CRM programs should incorporate the practice of customer relations management in order to provide managers with the knowledge base required for appropriate decision making. Originality/value – By placing contemporary discussions of CRM in its seminal historical context, scholars can draw upon a wealth of historical inputs to advance the study of how collaborations with customers can be nurtured effectively. Keywords Management history, Buyer-seller relationships, Industrial relations, Participative management Paper type Conceptual paper

Introduction Management researchers have traditionally viewed customers primarily as recipients

• f firm output that create revenue for the firm (Bateson, 2002; Brief and Bazerman,

2003). In contrast, researchers studying services management have claimed that customers can also be viewed as participants in the firm’s internal processes, and should be managed as valuable human resources of the firm (Bowen and Siehl, 1997; Bowen and Johnston, 1998). Customer participation as the firm’s virtual human resource base involves the “actions and resources supplied by customers for service production and/or delivery” (Rodie and Kleine, 2000, p. 111). When the firm can engage its customers to participate proactively as partial contributors of labor, such involvement may transform value chain activities of the firm (Applebaum, 2001; Bitner et al., 1997; Claycomb et al., 2001).

The current issue and full text archive of this journal is available at www.emeraldinsight.com/1751-1348.htm

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Journal of Management History

• Vol. 12 No. 3, 2006
• pp. 306-318

q Emerald Group Publishing Limited 1751-1348 DOI 10.1108/17511340610670205

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While the idea of engaging customers in the firm processes was first asserted by Barnard (1938) more than 60 years ago, it has gained particular significance over the last two decades with the advancement in network technologies for customer relationship management (CRM). CRM has sparked an ongoing theoretical debate in services industry research over the contingencies when customer participation in the service production and delivery increases service-system efficiency (Bowen and Schneider, 1985; Chase and Tansik, 1983; Eiglier and Langeard, 1977; Lovelock and Young, 1979; Mills et al., 1983). Also, the CRM practice has produced the influx of automatic teller machines (ATMs), self-service gas stations, and self-scanning check-outs in grocery and mass-merchandise stores, which all involve customer participation in the service transaction (Halbesleben and Buckley, 2004). The purpose of this paper is to delve into Barnard’s works to construct foundations

• f customer relationship management (CRM) using post-analytic method. First, we

explain the post-analytic method and apply it to identify seminal elements of CRM in Barnard’s works. Second, we build customer role configurations on Barnard’s

• foundations. Third, we illustrate the implications of customer relationship and role

management for conceptualization of customer labor relations originally proposed by

• Barnard. In conclusion, we discuss the enduring relevance of Barnard’s view of the

firm as a cooperative system of employees and customers for the emerging conceptualization of communities of practice. A post-hoc approach to Barnard’s works The determination of which specific contributions from Barnard’s works could be instrumental inputs to theorizing about conceptualization of CRM requires prior extraction of Barnard’s relevant ideas that are embedded in the historical material of his works. To perform this extraction, we cannot use a single method as a means of sorting out appropriate inputs solely in relation to this material. Rather, we must turn to the use of appropriate logical reasoning as a philosophical tool that can help us to sort out the historical material toward reconstructing concepts and their meanings from the past (Bevir, 2000a, b). Bevir (1999) argues that the logic of post-analytic philosophy allows us to reflect on the traditions of concepts that we inherit in the light of our current understanding and “thereby alter these traditions with our own reasoning.” In other words, we make sense of the traditional beliefs expressed in the old works/relics “by portraying the new beliefs as responses to the dilemmas confronting the old ones” (Bevir, 1999, p. 263). In this way, we strive to discover “the newness of the past” using our logical reasoning as a grammar of the concepts being explored (Anhkersmit, 2000). Therefore, we employ the post-analytic approach to Barnard’s works to discover, in an intellectually rigorous and philosophically informed way, the historical meaning that Barnard implicitly attributed to CRM. When applying the logic of post-analytic philosophy to Barnard and his works, we should interpret Barnard’s works beyond reading them as a text. Instead, we should focus on Barnard’s expressed beliefs as a tool for discovering what can be attributed to his intentions in his works. The boundary condition for our discovery process is that the two main criteria/norms of the post-analytic approach are to be met: (1) procedural individualism (i.e. narrow focus only on meanings that can be ascribed to Barnard and his readers); and

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(2) weak intentionalism (i.e. consistent interpretation of these meanings in terms of Barnard’s intentions derived from his expressed beliefs). Because this approach to Barnard emphasizes rational logical reasoning rather than phenomenological reflection, it is instrumental for theorizing based on the insights derived from Barnard’s expressed beliefs. DiMaggio (1995) argues that the post-analytic approach opens a path to post-hoc theorizing from Barnard’s contributions. Specifically, DiMaggio (1995, p. 396) emphasizes that “Barnard’s prose is often ambiguous and the book’s argument is undisciplined, both of which mean that a contemporary theorist seeking some sign that Barnard anticipated one of her or his best ideas has a target as wide as an aircraft carrier.” Moreover, DiMaggio points to the Nobel laureate Herbert Simon as an

• utstanding example of a great scholar who theorized mostly from Barnard’s insights.

Simon himself confirmed this with the assertion:

I built squarely on Barnard, and have always felt deeply indebted to him; science is a cumulative endeavor . . . the notions of contribution inducement equilibrium, authority and zone of acceptance were all developed from Barnard . . . most of the rest is highly Barnardian, and even those “novel” ideas are in no way inconsistent with Barnard’s view of organizations (from Simon’s interview given to Golembiewski, 1988, pp. 278-9).

Evidently, Simon tried and managed to make Barnard’s contributions scientifically formal and analytically accessible. In other words, Simon’s theorizing complemented Barnard’s practical insights because “Barnard proposed an analytical scheme for understanding the management process,” while “Simon was pushing for inductive science in management based on Barnard’s deductive scheme” (Mitchell and Scott, 1988, p. 367). It was not, therefore, surprising that Simon eventually proposed that theorizing based on the works of great classics should be recognized as one of the four fundamental paths for the logic of discovery in management studies (Klahl and Simon, 1999). Following this path suggested by Simon, we apply the post-analytic approach to identify Barnard’s key contributions of relevance for conceptualizing CRM. In the subsequent sections, we use this material and blend it with new insights to construct Barnard’s foundations of CRM and to develop recommendations for configuring customer roles and nurturing customer labor relations. Identifying CRM elements from Barnard’s works The idea that customers can be engaged to provide value-added to the service of the firm was originally proposed by Barnard (1938). In his Harvard Business Review article, Barnard (1940) developed foundations of CRM in response to Copeland (1940) critique that The Functions of the Executive prescribed “unfeasible” cooperation with

• customers. In this paper, Barnard recognized that organizational processes are to be

focused more on the cooperation to shape the organization’s service culture than on the job to shape the uncooperative tasks. Later, in Organization and Management, Barnard (1948) developed a more comprehensive version of this paper. In his critique, Copeland (1940), “among other things, questioned the inclusion of the activities of customers as parts of an organization” (Barnard, 1948, p. vi). Evidently, Copeland viewed an organization as encompassing only the individuals who are the

• actors. In contrast, Barnard viewed an organization as a coordinated system of
• activities. Influenced by Kurt Lewin, Barnard (1948, p. vii) conceptualized an

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• rganization as a “field concept in which activities take place in and are governed by a

field of forces, some human and social, some physical.” The simplest organized activities involve the exchange between two actors. This exchange requires cooperative acts of the exchanging parties in the form of their consent/agreement to transact. An “organization is a composite of such cooperative acts” (Barnard, 1948, p. 118). Based on the primary nature of its exchange process, each

• rganization is labeled in some discriminating way to communicate the “purpose or

convenience to be served – usually (superficially) what the organization does, or who most stably contributes to it. Hence, the X, Y, Z Steel Co., the Excelsior Department Store, or the suburban division. This emphasis in discriminating and labeling

• rganizations should not lead us to exclude some classes of cooperative acts. We may

think of the department store as a group of employees, as a physical plant, as a stock of goods, but it nevertheless remains a store because of the cooperative acts of customers” (Barnard, 1948, p. 118). The organization’s customers may contribute loyal cooperative acts in a spirited way, just as an organization’s employees might:

It is customary to use different names with the two categories of contributors to organization – employees and customers – such as “morale” as to employees and “goodwill” as to customers, but this is merely a matter of customary terminology that tends to conceal similarities without being based upon differences essential from the point of view of theory of cooperation (Barnard, 1948, p. 119).

For historical reference, Barnard lived and wrote at a time and occupied a professional position that likely influenced his conceptualizations of employee-customer

• collaboration. Barnard was an executive in the Bell Telephone System, an
• rganization that personified solid collaborative relationships with its customer
• base. Uninterrupted service received from the Bell organization was paramount, and

for this the customer’s collaboration was essential, from initial instrument placement to the patient and detailed reporting of any service faults. Though not yet articulated in a modern sense, Metcalf’s Law revealing that n members of any network yielded n 2 value (Gilder, 1993, p. 158) was intuitively well understood in the rapidly growing telephone industry; engaging and serving the customer was fundamental (Boettinger, 1977, pp. 10-22). Barnard was steeped in a sense of service. As noted by Gabor (2000, p. 73), “Barnard’s tenure at New Jersey Bell Telephone was marked by a sense of public service . . . almost unimaginable to many today.” To start the relationship, an installation crew had to be admitted to the home and trusted to accurately drill holes and string wires all through the property. Next, employees and customers had to collaborate extensively in placing the telephone instruments in exactly the proper places to facilitate their best and most satisfactory

• use. Should any difficulty subsequently develop, customer notification to the telephone

company involved an extensive customer debriefing about exactly what difficulty was

• ccurring so that choices could be made by employees (e.g. repair personnel could be

sent out to the premise, the problem could be explored in the central serving office, or the miles of wire runs along the way could be examined). There was a tremendous need for customer cooperation and information, essentially a partner in the repair, to avoid exorbitant costs when difficulties arose. The monthly rental rates included subsequent repair, so a cooperative, informative, patient customer had high value to the company.

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We tend to believe that only employees need inducements and incentives for their firm loyalty, as “we predominantly think of employees as seeking jobs, rather than employers seeking employees, just as we predominantly think of sellers seeking customers” (Barnard, 1948, p. 120). In the world of emergent telephone service, a functioning service is a significant inducement. In this way, the customer was conceptually very much a part of the organization’s employee base, and CRM may well have naturally emerged in Bell System management mental models of the day as a result of this customer-company

• relationship. This unique, collaborative customer-employee relationship led to a fairly

“soft” view by Barnard of the potential for customer-employee conflict and dissention. Telephone service of his day was considered wholly vertically integrated and operated

• n a “cradle to the grave” mentality. This was such a distinct and pervasive service in

the customer’s world, such that the primary organization rendering the offering to the customer became known as “Ma Bell”. Less collaborative customer-employee relationships have long existed, challenging many human resource organizations and their customer service training efforts. There is a natural and observable tension in many service encounters with both customer and employee seeking to be in control (Coye and Verma, 2005). In an extensive study of call centers, Korczynski (2003) points out that customers can be irate and abusive and even force workers into “communities of coping” as a process internal to the employee group, effectively intruding upon the human resource efforts to manage the customer. There is a need to control the customer relationship to be an effective firm, but the role

• f customers as burdens to be endured must be acknowledged as well.

However, that in no way detracts from Barnard’s specificity and foresight that we recognize here as he pioneered CRM thinking. He saw early what has become more acceptable today – that the customer must systemically be incorporated into firm processes for firm performance to be optimized (Frei and Harker, 2000; Mahoney, 2002). Like employees, customers also need to be controlled and trained. Barnard suggested that the most notable practices of supervision and control are retail credit practice, professional surveillance, and analysis of accounts. Training, advertising, sales support, pamphlets, and instruction manuals are commonplace:

Not only is this educational work necessary for specific use of merchandise and services, but also much of it, just as in the case of employees, is necessary to secure an indispensable cooperative state of mind (Barnard, 1948, p. 123).

Although Barnard claims that the main function of the organization is to secure cooperative services of all stakeholders in general, and employees and customers in particular, he does not suggest that the treatment of customers should be analogous to that of employees. Rather, his view is that the “nature of cooperative acts is the same in both cases” and that “the nature of the behavior required to elicit such acts is the same,” as “human nature is human nature whether you call it ‘employee’ or ‘customer’” (Barnard, 1948, p. 124). In this section, we have used the post-analytic approach suggested by Bevir (1999) in order to identify Barnard’s view of the key elements of CRM. Our use of this approach well-substantiated Barnard’s claim that customers and employees form similar cooperative relationships with the firm but require different treatment (i.e. relationship management).

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Constructing CRM foundations from Barnard’s works Historically, management researchers have been hesitant to address the role of customer participation and involvement in processes occurring within the boundaries

• f the firm (i.e. internal business processes) (Brief and Bazerman, 2003; Groth, 2005;

Slater, 1997; Vargo and Lusch, 2004). Among the few classic management scholars that have attempted to fill this void, Barnard (1948, p. 118) was the first to suggest that customers and employees “are essentially alike” as contributors to the organization’s cooperative system. Barnard (1948) argued that the reason the two groups are considered to be separate entities is that their roles tend to be assessed more in short-term economic rather than long-term sociological terms. In other words, the emphasis on economics in organization-customer relationship deals more with short-term exchanges and less with long-term cooperation (Barnard, 1948). In contrast to organizational economists who view an organization as a goal-directed entity with a primary mission to efficiently provide a service/product, Barnard conceptualized an organization as a nexus of cooperative stakeholder relationships, which is sustained by internal and external governance mechanisms and managed by organizational leaders. These relationships reflect “an integrated aggregate of actions and interactions having continuity in time” (Barnard, 1948, p. 112). Barnard thus “rejected the view of organization as comprising a rather definite group whose behavior is coordinated with reference to some explicit goal or goals,” but rather “included in organization the actions of investors, suppliers, and customers or clients” (Barnard, 1948, p. 112). In his view, the primary job of an organization is:

.

to form cooperative relationships with stakeholders; and

.

to elicit the stakeholder services (i.e. actions contributing to the organization’s purposes) once the stakeholders “have been brought into that relationship” (Barnard, 1938, p. 227). Going beyond the view of the organization as service provider to customers, Barnard (1948) conceptualizes the organization also as a service recipient. In other words, Barnard’s stakeholder-service view places an organization at the center of an interacting cooperative exchange network. Several recent studies echo Barnard’s seminal arguments about customers as participants in the activities of the firm (Bowers et al., 1990; Brief and Bazerman, 2003; Halbesleben and Buckley, 2004; Kelley et al., 1990; Mills and Morris, 1986). In particular, many researchers contend that customers could actually participate as “partial” employees of the firm (Manolis et al., 2001). Customers are then viewed not

• nly as consumers of the products and services offered by the organization, but also as

their co-developers, co-producers, or users because of an implied contractual relationship formed between the customer and the company (Gouthier and Schmid, 2003; Keh and Teo, 2001). In this implied psychological contract, customers are offered incentives for their labor contributions to the product/service production and delivery and simultaneously being held accountable for upholding their part of the contract (Hsieh et al., 2004). This broader understanding of a customer, not only as a recipient of the

• rganization’s output but also as a contributor to the organization’s input, grew with

the spread of cross-functional practice (e.g. TQM, six sigma, and reengineering) across

• industries. These new practices, which increased the number of employees interacting

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with customers, engendered the need to find a way to exploit customer satisfaction and

• knowledge. This need to “translate customer orientation words into customer
• rientation deeds” (Lengnick-Hall, 1996, p. 794) calls for co-optation of customers (in

different roles) as partners for organizational success (Jackson and Schuler, 1992). Configuring the role of CRM from Barnard’s works Halbesleben and Buckley (2004) identified two types of customer labor contributions,

• ne with the customer as:

(1) employee substitute (i.e. employee replacement); and (2) employee complement (i.e. strategic partner). There are numerous examples of how customers can replace employees intoday’s service sector (e.g. pumping gas, checking out groceries, and busing tables). According to Bowen (1986), organizations that effectively design governance mechanisms for such replacement jobs for customers can become reputable as customer-centered in the

• marketplace. In addition to substituting employees, customers can also serve as

strategic partners by supplying an organization with complementary resources such as a patient providing complementary information to a physician, a client giving

• pinions to a hairstylist, or students offering feedback to instructors (Halbesleben and

Buckley, 2004). Subscribing to CRM based on substitute and complementary customer contributions, Gersuny and Rosengren (1973) proposed four distinct customer roles: (1) resource for development (or co-developer); (2) worker (or co-producer); (3) source of revenue (buyer); and (4) beneficiary (or user). The former two roles contribute primarily to the input of the organization’s value-creating process, while the latter two roles contribute more to the organization’s

• utput. It should be noted, however, that the customer roles are contributory to the firm

processes only when aligned appropriately with the firm-customer governance. This configuration of customer roles reflects differentiated ways in which customers can invest their human capital into the firm business process (Hsieh et al., 2004). The configurational view of customer participation and engagement posits that:

.

customer do not take a single role when investing their human capital into the firm;

.

multiple governance forms are used by the firm to create an appropriate context in which to invest their human capital in a differentiated way by assuming different roles; and

.

value and uniqueness of customer role contributions are derived from combinations of human capital across these different cohorts. As customer human capital is viewed here more broadly in terms of the cognitive and structural bases of knowledge exchange, the act of balancing the complexity and dynamics of all role configurations depends on the development of appropriate

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customer-engaging HRM practices (Lengnick-Hall and Lengnick-Hall, 1999; Lepak and Snell, 2002). The alignment (i.e. fit) between governance mechanisms and customer role configuration is necessary because when customer contribution is critical to the success of organizations, boundaries of the organization need to be expanded to integrate customers as engaged participants. With enhanced customer engagement, service effectiveness is improved. However, higher costs both to the customer and the

• rganization are inevitable. Therefore, it is in the interest of both parties to reduce the

costs associated with involving customers in the development, production, improvement, and consumption of services (Mills and Morris, 1986). To facilitate this cooperative system, both parties must collaborate to ensure performance transparency and goal commonality in the service value-creation process (Xue and Harker, 2002). Barnard (1938) suggests that cooperative systems arise out of individuals’ needs to achieve certain common objectives by overcoming the limitations of what one person can do alone. The success of the cooperative system depends upon the accomplishment

• f the common objectives and the satisfaction of each individual’s motives. A key

component of any cooperative system is the willingness of individual participants to contribute efforts to reach the common goal. For cooperation to be extended beyond the firm’s boundaries, customer relationships should be supported with the appropriate form of governance. This means not only that some autonomy needs to be designed in contracts, but also the incentives to perform should be designed to reward the formation of relationships with others and the achievement of goals common to the cooperative group. Within such a broader view of cooperative systems that include

• rganization’s members and customers, Barnard (1948, p. 119) argues that customers

are equivalent contributors to employees, “providing similar contributions to the same

• rganization.” Therefore, to become engaged participants, customers require the same

human resources considerations as employees (Barnard, 1948; Bettencourt, 1997; Halbesleben and Buckley, 2004). Indeed, when customers are considered to be partial employees, their contributions as vital “quasi” human resources must be governed to ensure their efforts are aligned with the strategic intent of the organization. Therefore, customer labor relations, similar to those that apply to traditional employees, can be developed to manage the customer engagement in internal processes of the firm (Bowen et al., 2000). Conceptualizing customer labor relations from Barnard’s work The maintenance of customer morale sustains customer willingness to cooperate and engage in the service development, production, and delivery. To elicit this willingness, goodwill must be established through incentives (i.e. values and prices), proper treatment, quality salespeople, and sufficient working conditions (e.g. temperature, cleanliness, and location of merchandise) (Barnard, 1948). Maintaining customer morale in case of service failure may prevent dysfunctional customer turnover, which is an important cost consideration intoday’s service economy. Specifically, transferring customers to another service that better matches their knowledge, skills, and abilities is a supportive way to help prevent dysfunctional turnover (Halbesleben and Buckley, 2004). Halbesleben and Buckley (2004) provide a banking transaction example: a

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customer who is not satisfied with an ATM service may be redirected to drive-through

• r window services.

A convenient setting to illustrate how governance forms interact with customer-as-employee relations practices is a restaurant. Fast-food restaurants tend to employ mostly market governance form, while full-service fine dining establishments have a preference for hierarchy governance form. Restaurants that fall between these two extremes commonly employ a relational governance

• mechanism. Customers place their order at a counter and prepare their own

beverages, while restaurant staff delivers the food and cleans the tables. In this example of relational governance, performance ambiguity is varying because it may not be clear (especially to new customers) what procedures should be

• followed. New customers must watch others that are familiar with the norms of

the restaurant. Goal incongruence is low in that customers want quality service and choices in terms of beverage refills, etc. while the organization is concerned with minimizing costs by transferring employee responsibilities to the customer. Successful companies tend to align their governance mechanisms with customer role configurations when managing relations with customers as if they were employees

• f the firm. The national pharmacy chain, CVS Pharmacy, employs impersonal market

mode (aligned with the customer-as-buyer role) for maintaining high morale among its

• customers. For example, their use of a “shopper” card that is swiped with each

purchase not only provides immediate feedback to customers regarding their cost savings for using the card, but also provides for the accrual of store credit that may be used at a later date. With low performance ambiguity associated with any chain retail store, and high goal incongruence whereby both parties are interested in maximizing their returns, an impersonal market governance form is appropriate for maximizing returns from this type of firm-customer exchange. In an example provided by Prahalad and Ramaswamy (2000), the Whitney Museum in New York provides multimedia PCs to be used by visitors alone or with tour guides so that people can tailor their visits to their specific interests. In this example, a relational market governance form (aligned with the customer-as-user role) is used. In a situation of low performance ambiguity and low goal incongruence, engagement in a cooperative effort whereby the visitor may choose whether to use an additional tour guide, an option provided by the museum is most feasible. Prahalad and Ramaswamy (2000) illustrate the role Palm Pilot users play in establishing an image for the Palm Pilot company and their products. Not only does that image have the potential to establish good morale among its users, but also the users themselves serve as co-developers for the company (that utilizes the impersonal hierarchy governance form). Largely due to the internet, some companies are able to personalize services and keep customers engaged by their services (Prahalad and Ramaswamy, 2000). For example, Amazon.com uses a relational hierarchy mechanism by providing recommendations based on the customer’s previous purchases and the purchases of other customers who have bought similar books or other products. Prahalad and Ramaswamy (2000, p. 82) note, “As its customers’ tastes and preferences evolve, Amazon’s engagement with them reflects those changes.” By helping out other customers with purchasing decisions, the customer is an engaged co-producer for the firm.

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Conclusion Barnard’s seminal prophetic conceptualization of CRM has been gaining significance with the growth of service economy. He was the first to recognize the latent fact that “in all organized groups, industrial political or social, there are serious limitations in the development of the will to collaborate” (Barnard, 1948). Therefore, the primary goal of management should be to elicit collaborative services of its stakeholders in general, and customers in particular, so that it can manage relationships with them in a value-creating way. Today, many companies are nurturing customer labor relations to discover innovative ways to manage customer relationships and elicit value-creating customer contributions in different roles. For example, Deere & Co. developed a GPS-based technology that tracks how farmers use its equipment, diagnoses emerging problems, and warns of potential equipment failures. Also, Sumerset Houseboats, Inc. engages each customer in a dialogue throughout the houseboat design-and-construction process by connecting the customer via the web to a community of Sumerset Houseboat

• wners. Recently, this community alerted Sumerset to the risk of side-mounted

exhausts in marinas. Sumerset responded by developing a solution that will likely become the industry standard. Medtronic, Inc. went even further in its CRM by engaging patients to collect data regarding their health and transmitting it by a standard telephone line to the Medtronic CareLink Network, which maintains a dedicated secure web site where physicians can review patient data, and patients can check on their own conditions. As Medtronic’s technology platform can support a wide range

• f

devices and remote monitoring/diagnostic systems, it has the potential to be used for new value-creating processes such as monitoring blood sugar readings, brain activity, blood pressure, and

• ther important physiological measures.

This service-centered view of the firm, which originates from Barnard (1948), is evidently customer-centric. Barnard anticipated that the engagement of the customer would have to eventually become the main source for improvement of firm

• productivity. When the firm is focused on the customer, the value delivered by the firm

is co-generated with the customer and embodied in the firm output (Day, 1999; Sheth et al., 2000; Slater and Narver, 1995). As “service provision is maximized through the interactive learning process on the part of both the enterprise and the customer” (Vargo and Lusch, 2004, p. 6), the primary driver of organizational processes is the co-optation

• f customer engagement in the value-creation process. The customer-centric
• rganizational processes will particularly contribute to the development of the firm

value proposition when the firm HRM system of practices insures that both employees and customers become service providers engaged in communities of practice (Lengnick-Hall, 1996).

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