Business–customer alignment in the Australian phar

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Copyright © 2006 Inderscience Enterprises Ltd.

Business–customer alignment in the Australian pharmaceutical industry

John Hamilton

James Cook University,

Cairns, Qld 4870, Australia

E-mail: John.Hamilton@jcu.edu.au

Abstract: Emerging technologies are delivering new pharmacy business

models including: web-based operations (like E-Pharmacy); low cost discount

models (like Priceline), and diversified chain models (like V-Pharmacy). The regulated Australian industry is experiencing mounting external

business pressures from supermarkets, doctors, consumers and politicians.

This exploratory research targets the competitive services strategies of the existing pharmacy business models, pharmacy business performance, perceived

pharmacy customer value delivered, and the business ÅÆ customer alignment mixes. It investigates the option of incorporating a new potentially disruptive

solution-set that may enhance the industry’s future competitiveness. A service

value network (SVN) framework is projected as a likely future competitive scenario.

Keywords: e-business models; pharmacy; services; customer targeting;

alignment; performance; value; architectures; networks; electronic business; Australia; pharmaceutical industry.

Reference to this paper should be made as follows: Hamilton, J. (2006)

‘Business-customer alignment in the Australian pharmaceutical industry’, Int. J. Electronic Business , Vol. 4, No. 5, pp.401–420.

Biographical notes: John Hamilton is the Director of e-business at James

Cook University. His research interests include innovation, service value networks, competitive futures and solutions, e-business, strategic management,

marketing, international business, benchmarking, service operations and

value-adding solutions. He is well published in national and international journals and conferences. His research is currently spread over several

countries and is linked with several international research teams.

1 Introduction

Recent research by Siegel (2002) at US Sloan’s School of Management indicates

that all players in an industry benefit from aggregation or sharing of information,

ideas and knowledge. They suggest a wealth of knowledge may be garnished by

combining organisational expertise. Aggregation analysis delivers relationships with

greater combined competitiveness. It was further posited that it remains prudent for

organisations, like the pharmacy industry, to consider their e-strategy and to add

aggregated information and knowledge capabilities into their competitive frameworks

(Siegel, 2002; Zain et al., 2003). This supports emerging new business models involving

multiple aggregations like e-pharmacies and the proposed concept of a SVN.

Emerging technologies often deliver disruptive solutions that may radically change the status of competition (Christensen and Anthony, 2004; Evans, 2002). For example, e-pharmacies, networked medical services, direct customer-targeted solutions, fully integrated supply chains, logistics solutions and other efficiencies constitute genuine threats to existing pharmacy industry business structures. In particular, competitive threats from Australia’s supermarkets, the Australian Medical Association and the Australian Consumers’ Association are encroaching on the pharmacy industry with the aim of opening up this traditionally protected pharmaceutical industry, allowing free and open competition. One way in which the industry has responded is through the creation of e-pharmacies. In our research, an e-pharmacy may be defined as a virtual shop front pharmacy, often working collaboratively with a physical pharmacy outlet to enable rapid selection and distribution of customised and generic pharmaceuticals and associated products. Since 2000, several major e-pharmacies including: ePharmacy.com.au; HomePharmacy.com.au; PharmacyOnline.com.au and PharmacyDirect.com.au have emerged in Australia.

This emerging business model creates new challenges of value creation and modes of interaction for customers. Of particular interest is the notion of the underlying SVN (Hamilton, 2004a, 2005a) and its partners and dimensions and issues that shape its customer interface and service offering and enable service delivery system – the identification of which will be the focal point of our research.

2 Service Value Network (SVN)

The SVN in an e-pharmacy setting is hereby defined as a collaborative network of supply chain partners (such as pharmacists, drug companies, distributors, beauty care suppliers, health and natural product suppliers, medical practitioners), sales channels (website e-sales, direct over-the-counter sales and referrals) and operational and network administration personnel, working with and serving the needs of its customers and its online e-customers.

Figure 1 displays a global perspective of the industry and the capabilities required of an SVN. Here, a national data storage solution is developed that may be accessed by individual stores, store groups, store chains or e-pharmacies. Development of such an SVN solution requires industry-wide information sharing and will eventually lead towards cost savings and enhanced value propositions (Hamilton, 2004a, 2005a).

The SVN is designed and managed by a central SVN coordinating group, which in a pharmacy setting might be taken up by the Pharmacy Guild of Australia. Another example resides in Australian Tourism Industry where the Australian Tourism Export Council is currently compiling a national database in preparation for linking up its industry partners under an SVN-like framework. The generic SVN model is detailed in the following section.

Business-customer alignment in the Australian pharmaceutical industry 403

Figure 1

The Service Value Network: global perspective

Source : Adapted from Anwar and Hamilton (2005)

3 Service Value Network (SVN) and the pharmaceutical industry

The SVN for the pharmaceutical industry is comprises a service-related strategy that

drives the three dimensions of the virtual service encounter: the services provision,

customer targeting and the underlying operational IT-infrastructures. In turn, the

virtual service encounter systems may interface with the physical encounter system.

For example, when a sales assistant accesses the pharmacy’s databases to fill-in the

customer prescription details, the sales assistant may also access additional specific drug

information – like the last time the customer used such a drug and if it was a successful

treatment; safe drug dosages for the customer’s body weight; possible complications if

consumed with other drugs the customer has purchased or used; alternative, cheaper

generic drug options and the like. If appropriate, this information may then be shared

with the customer. To further enhance the dialogue between the business and the

customer SVN, sourced service-related value-adding options may include consumer

allowable limits, claim options, delivery options, nearest doctor, hospital, medical

insurance options, tax benefits, local preferences, etc. The customer may directly access

the SVN (via the pharmacy’s industry website) and may source/request annual tax return

data, doctor’s surgery bookings, local hospital information, health and pensioner claims

and the like.

In addition, business intelligence and knowledge/information from suppliers, research

and peripheral sources is stored on a centralised database, and this is accessible by

pharmacies. Such data collation allows the customer to access a variety of pharmacy

stores to obtain their prescriptions and medications. In addition, as stock items are

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consumed, or damaged, or have passed their ‘use-by date’, additional orders are logged

with suppliers and delivery systems are informed so that accurate planning, without

bullwhip effects, is ensured. Pharmacy suppliers and logistics providers may access

the SVN to facilitate production and direct shipping of products to pharmacy sales

outlets – city based or regionally based. Thus supply-related efficiencies and net

cost-of-delivery savings are generated. Finally the SVN is also interconnected into other

medical services – hospitals, doctors, ambulance services, police and the like – thereby

creating an efficient, better-informed, integrated medical services information network.

Under agreement, peripheral partners including health and ambulance insurance funds,

medical researchers and the like may share information across some general data fields of

the SVN. To build such a system requires a key stating point, and, in Australia, this

initiator is the Pharmacy Guild of Australia. Research currently underway is seeking to

align the industry with its customers at both a global and a local level and to deliver

increased performance and greater perceived customer value and to do so in a more

cost-efficient manner.

Interactions within the SVN can be viewed from an internal business perspective

among supply chain partners in delivering and fulfilling customer orders, for example, a

pharmacist replenishing out-of-stock items. On the other hand, the SVN responds to

external customers such as a local nursing home initiating bulk drugs supply directly via

the SVN. Both internal and external perspectives need to be considered separately, as

they need to be aligned in order to accurately respond to customer needs. The generic

SVN model is displayed in Figure 2.

Figure 2

Service Value Network

Source : Adapted from Hamilton (2005a)

The various dimensions of the SVN can be grouped as follows:

• impact of competitive environment on the industry

• dimensions of IT/communications and operations, integrated customer-targeting systems and service offerings in determining an industry strategy as set

(typically by the SVN Coordinating Group)

• dimensions of the service delivery system within a virtual network and the impact of virtual network delivery on potential service performance

• customer targeting employed by the industry.

These dimensions have been discussed extensively by Hamilton (2004a, 2004b, 2005a, 2005b). This paper outlines the empirical approach measures employed by the pharmacy industry to determine the parameters needed to develop a cohesive SVN approach.

The pharmacy industry resides within a competitive environment that is heavily influenced by external forces. In various quests to achieve competitive advantage, different pharmacy groups have incorporated strategic approaches like first mover, differentiation, niche focusing, low-cost provision and dominant player to gain market share. In addition, some recent entrepreneurial/innovative models like E-Pharmacy and V-Pharmacy have also emerged.

Today, higher levels of agility and flexibility are required to keep the industry abreast of external/environmental changes. For example, the government has threatened to allow supermarkets into the protected, regulated pharmacy marketspace. The Pharmacy Guild has responded – negotiating to increase pharmacy services in rural and remote areas. In response to this Pharmacy Guild offering, the government then assured the pharmacy industry it would block supermarkets entering this business domain for five years. In the next five years, the pharmacy industry must improve its competitiveness and its overall services to each of its customers. This research provides the vehicle from which the Pharmacy Guild may deliver aligned, performance enhanced, added value, economical, individual customer service solutions. In addition, the Guild is driving new service packages. For example, it is encouraging flexibility and is delivering new robotic means to package (and label) the unique daily medicines for each of its elderly clients – thereby helping each of them to reduce their personal consumption errors. E-Pharmacies are also offering information services like health insurance and drug information (and side-effect reactions) for clients, Priceline is promoting low-cost generic alternatives and peripheral pharmacy products like cooking and serving utensils, cosmetics and health products. Suppliers and pharmacies are being linked to improve efficiencies, logistics and transportation delivering operational scale effects.

The projected pharmaceutical industry strategy set is integrally linked to the virtual service encounter. If the strategy is one of low service integration, then the individual pharmacy business will be most unlikely to deliver high levels of value-added service, but rather will deliver more standard service offerings. Pharmacies delivering highly integrated services are likely to be aligned with supporting supplier and peripheral partner industries. Here, integrated supply networks such as those in an SVN, play increasingly important roles in delivering high levels of targeted, personalised customer-requested items. These may take the form of an increasingly customerised (or one-on-one) product406 J. Hamilton

solution, an added value offering, faster delivery and more economical options. Hence, new points of difference and competitive strategies emerge. Alignment of all partners sharing the SVN to a customer-centric focus and measured by comprehensive performance measures remains paramount to the delivery of customer value. Customer value is measured by the matching of the customers needs, wants, value-adds and the perceived economic value that the customer obtains during the service encounter with the pharmacy.

Three major classes of inputs to the service strategy are the underlying IT/communications and operations infrastructures, the customer-targeting systems and the service offerings offered.

The pharmacy industry must incorporate relevant technologies and research innovations to assess competitive ramifications. In addition, it must keep its technological capabilities aligned with its customers and their increasingly demanding requirements. The pharmacy industry may respond by enhancing its service offerings and/or reaching the customer through various response channels. An example is the recent development of online medical encyclopaedias in e-pharmacies.

This IT/operations and a communications area incorporate the technical areas of software, knowledge management, business intelligence and communications. This overall network system must be capable of interpreting requests and then delivering the information requested by customers (via online systems) and the necessary information to support staff in enhancing their customer encounters. Such systems require the support of top management along with suitable levels of smart connectivity and resourcing. The resulting service offerings and customer-targeting practices incorporate numerous channels, such as Internet, e-mail, SMS, POS transactions and supply chain partner referrals. Moreover, the IT infrastructure needs to be agile to respond to changes in IT requirements.

The customer-targeting system incorporates historical and current data capture to recognise and personalise its customer-related services responses. Such response information may be drawn from various pharmacy business affiliates and the pharmacy’s own databases. Analysis of such data requests by the pharmacy or its partners may even deliver new services options. For the pharmacy salesperson, such data allows for a more personalised encounter and shows if offering values-adds is appropriate. Frohlich and Westbrook (Frohlich and Westbrook, 2002) have researched some internal business-to-business customer effects, but the business-to-consumer dyad has not been empirically studied (Chen and Paulraj, 2004); yet, this is a key requirement to most successful businesses.

4.1 Information access: website encounters

Websites must be effective (Briggs and Hollis, 1997) and match urgency (or criticality) of the customers’ varying needs (Cohen et al., 2000). They must target increased customer engagement (time) (Rohm and Sultan, 2004), thereby strengthening the brand–customer relationships. They should develop buyer life-cycle ownership value and target delivering intensively loyal groups (segments) of customers. Today, website solutions (including searches and transactions) are moving towards customer-empowered, self-paced exploration of the service (or product) variations, prior to purchase (McCullough-Johnston, 2001). The customer’s readiness to adopt new SVN approaches also varies, and some customers may desire website interactions that are

Business-customer alignment in the Australian pharmaceutical industry 407‘tailorable’ to their actual customer requirements. Many customers today demand speedy service provision(s). Foley et al. (1997) says such time-efficient demands necessitate targeted, personalised communications specific to individual customer needs. Today customers remain the most failure-prone fault-line in transactional marketing. Website activities like shopping and research are increasing – with over 50% of US consumers now too time-pressurised to enjoy traditional face-to-face acquision activities. Hence personalised on-line solutions remain a key to customer targeting. Consideration of: similarity and dissimilarity (Rosenbaum, 1986), satisfaction (Condon and Crano, 1988), pleasant experience (Newcombe et al., 1968), exchange, business customer relationship (Winch, 2003; Preiss, 2005), human courtship (Brown and Levinson, 1978), impression or ‘wow’ factor formation (Peters, 1994), customer activity flow and dialogue (Hoffman et al., 2000), business networks information exchange (Ford et al., 1990), IT interactions and personalisation (Neilsen and Mohlich, 1990) and shopping (Cross, 1994).

Wolfe (1998) suggests the statistical averaging of visual transfer systems (Marmolin, 1991) and real-time ‘telepresence’ (Steuer, 1992) should be provided when businesses seek loyalty and retention interactions from their target market populations. Rigby et al. (2000) evaluated spending patterns and consumer loyalty and concludes businesses cannot break-even on one-time shoppers’ solutions. Customers must be empowered, seduced and converted into lifetime relationships (Rosenfield, 1998). Feedback loops (McKenna, 1993) to direct marketing and targeting most valued customers can further increase both customer loyalty and retention (Reichheld and Schefter, 2000). Customers demand more reliable services and products and they expect to have their needs met in shorter time frames (Draaijer, 1992). This customer perspective is dynamic and subject to change (Shepetuk, 1991). Consequently, the business must become agile and more capable of delivering what the customer needs and wants (van Looy et al., 2003).

Customer targeting in a pharmaceutical setting first and foremost focuses on a broad understanding of what customers desire. This requires continual collection and mining of customer data and customer activities. The SVN approach takes this market research information not only to target and better market for specific customer segments but also to broaden its service offerings by leveraging the unique capabilities of supply chain partners. As such, knowledge building of the customer base is a key activity within the SVN, either directly by the central SVN coordination group, or by sharing information by supply chain partners. Information on customer connectivity and relative use of channel medium are analysed as well.

4.2 Service offerings

Website encounters must deliver the levels of services and products required by the clientele. The levels of networking, agility, flexibility, customer-targeting and business supply chain focusing often vary depending on the choice of strategy. The quality of the service, the extent of added value offerings, the level of external partnering, the degree of environmental response and the like contribute to this dimension.

In today’s highly competitive global environment, many models exist, but the business must maintain some points of difference or risk being out-competed. The virtual strategy for specific service offerings could generically follow the traditional strategy classification by Porter (1985, 2001) of differentiation, focus and cost, in addition to a strategy based on flexibility/agility; but the best model for customerisation (one-on-one408 J. Hamilton

business–customer interactions) is that of an innovative leader in both services and product offerings and one that is well-managed – constantly enhancing its costs, ROI, service rate, knowledge and intelligence base, performance, quality, efficiency, effectiveness, flexibility and agility.

The performance of the website business dimension is embedded in the interconnectivity of relevant supply chain partners. A synchronous delivery by all involved partners may allow for individual customer-targeted value-adding options and may create a unique competitive edge through such elevated service offerings like an online pharmacist connected via a video phone or video conference or teleconference or a personal chat room or an e-mail or SMS, or an evaluation of medical and cost alternatives to a prescription via a ‘side-effects’ report or a doctor–pharmacy direct link so that your prescription could be ready when you arrive or be home delivered or a database list of localities of nearby doctors and their current available appointment times.

Specific attributes/knowledge bases of a pharmaceutical SVN may include the linking of secured aspects of individual customer personal information to medical, hospital, ambulance, tax, insurance and banking information to enable a full emergency response service related to a car accident injury that required hospital intervention or the allowing of direct computer access by local doctors, thereby guaranteeing prescription communication accuracy and delivery of personal prescription information (or a purchase), offering new knowledge to the customer about a purchase and performing all levels of related interactions like: pill recognition, reaction time, insurance ramifications, deals and best price.

5 Pharmacy research

Thus far, major dimensions of a generic SVN approach to an e-pharmacy-based services support strategy have been identified (Hamilton, 2004a, 2005a; Hamilton and Selen, 2005).

This research delivers a new approach to developing industry-wide solutions within the services industries. The pharmacy industry in Australia is used as the test bed for the SVN theoretical approach. Here, the entire industry is analysed from both the business and customer perspective. Answers to performance, alignment and customer value are derived. Key investigative blocks, house resource-based superior performance strategic areas that enable competitive resource-based advantages to deliver efficient and/or effective market customer segment offerings (Hunt and Morgan, 1996). Where these resources are valuable, hard to imitate and not easily substituted, competitive advantage may be more likely sustainable (Barney, 1991). Thus, some pharmacies in Australia approach their intangible resources as a means to deliver long-term or sustainable competitive advantage. Lumpkin and Dess (1996) suggest an entrepreneurial approach as an appropriate strategy and use innovativeness, proactiveness, autonomy, competitive aggressiveness, risk taking and employee motivation to capture such intangibles. Escrig-Tena and Bou-Liusar (2005) suggest that a competency-based approach guides the development of competitive advantage but acknowledge that the unobservables (or intangibles) affect such empirical research. Grant (1996) adopts a knowledge-based approach to deliver business uniqueness. Still others argue that an evolutionary process exists where the business adapts to the environment and changes via a stochastic process of searching for new and more beneficial routines (Winter, 1995). Jambulingam et al.Business-customer alignment in the Australian pharmaceutical industry 409 (2005) use various within-industry clusters to classify these sectors and then test the entrepreneurial orientation of these sectors within the pharmacy industry. They consider the environment, organisational factors and performance outcomes within this framework. Wright and Taylor (2003) consider inter-organisational knowledge sharing as important and define innovative culture, information quality, accountability, strategic connection, change readiness and clarity of response as key measures. Chang Lee et al. (2005) consider knowledge utilisation, accumulation, internalisation, sharing, creation, understanding and information to be important. Mayer and Davis (1999) consider trust to be another vital ingredient, whilst Greenwald and Kahn (2005) consider all strategy must be drawn down to a local level. Swaminthan and Tayur (2003) believe decision technologies and bundling of resources can deliver competitive advantage. Chenhall (2005) believes strategic priorities must be delivered to customers offering high quality, low price, unique, customerised, fast and dependable service, effective availability and service and meeting the customer’s needs. He believes integrative strategic performance, strategic alignment and organisational information and knowledge are all key business factors that must be developed. Abdinnour-Helm et al. (2005) consider websites and their servicing to customers. They develop website customer satisfaction measures that also warrant consideration. Piccoli et al. (2004) also consider factors influencing business service dimensions and customer needs.

Supply chain integration also delivers market and product/services strategies that affect business performance (Narasimhan and Kim, 2002). Diversification is suggested as one means to deliver performance. Other researchers (Hamilton, 2004a, 2005a; Hamilton and Selen, 2005) have considered services, operations, IT business intelligence and knowledge provision systems, customer target marketing and environmental considerations as vital feeds into the business–customer encounter.

5.1 Business–customer comparison blocks

The above-mentioned factors were drafted into a possible initial pharmacy business competitive requirements questionnaire set that encapsulated the relative level(s) of service integration offered. A customer requirements questionnaire was also developed to determine the customer’s needs, wants and economic value requirements and tested using 10 pharmacies and 50 customers. Questions blocks in both questionnaires were then aligned so that business deliverables were linked to customer-perceived needs, wants, desires and economically acceptable price tags. These substantial questionnaires were then refined into pre-pilot surveys, reviewed by a pharmacy and customer focus group and tested on selected groups – pharmacies and customers. Finally, a pilot study involving pharmacy businesses and a selection of customers, enabled further refinement the final survey instruments. Survey validation and reliability tests using Chronbach’s alpha lead to minor adjustments and transformations, with both survey instruments exhibiting considerable validity. The business perspectives and business–customer dyad perspectives were tested according to the measures outlined in Table 1.410 J. Hamilton

Table 1 Aligned survey instrument questionnaire blocks

Business analysis fields Customer analysis fields Business factor perspectives

Competitive positioning: industry, innovative/entrepreneurial, positioning, risk/response Competitive positioning: industry, management, strategy, innovation

Customer targeting: recognition, guarantees, customerisation, accessibility, feel Customer targeting: cost, quality, delivery/ availability by industry

Services/products offered: brands/generics, value additions, comparisons, information/training, latest alternatives Services/products: reliability, range/knowledge offered by industry

IT deliverables: degree of complete networking, data analysis, logistics/shipping, website, interactivity/recognition IT used: Industry website/browser access, business-information /purchase option

Operational delivery: supply networks, products/services / after sales services, website, distributed databases access/mined information, staff, values additions/fee-for-service activities Services/products delivery: fast, accurate, consistent, responsive, empathetic, quality assured, technically supported, trained delivers, low cost

Business ÅÆ Customer dyad perspectives

Customer monitoring: visitors/purchasers, sales-per-day, prescriptions-per-day, loyalty, perceived value, revenue-per-sale Customer satisfaction: services offered, product ranges, IT information, expectations, innovativeness, new ideas

Website usage: ordering/purchasing, information, communications; time, reliability, accuracy and effectiveness Website access/usage options: accredited, save time, source contacts, product knowledge/information, order/purchase, check delivery, retrieve personal data

Innovation offered: advice sessions/customer reports (tax, expenses, drug consumption/side effects, risks, health), remote access, peripheral services, health management Innovation: information, new fields, services/support /follow-ups, hazards, evaluations

Value to customer: needs met, wants met, customer importance level, added value feedback, additional information Customer value: convenience, experienced efficient consultation, payments, service, information and access, relationship strength, safeguards, personaliSation

Economic value: market share, value-per customer, visits-per time, net earnings Economic value: scaled quality, scaled reliability, scaled servicing skills, scaled servicing time, scaled accessibility, scaled pricing

5.2 Business factor perspectives

The existing pharmacy models defined by the Pharmacy Guild of Australia were analysed individually to determine their relative points of synergy and their key points of difference. These eight defined models were

• an independent or owner operator pharmacy (maximum of three pharmacies)

• a member of small pharmacy chain (three to ten pharmacies)Business-customer alignment in the Australian pharmaceutical industry 411• a member of a large chain pharmacies (over ten pharmacies – typically 100–350 stores)

• a mass merchandiser pharmacy like ‘Priceline’ with diverse ranges of cosmetics, giftware, food items in conjunction with a pharmacy dispensaries

• a fully online pharmacy model like e-Pharmacy)

• a hospital pharmaceutical outpatients dispensary

• a large 600 m2 plus, price leader pharmacy warehouse

• a pharmacy prescriptions outlet attached to a medical centre.

Each model offered points of difference ranging from independence, to degrees of group purchasing and delivery, to ‘bricks and clicks’ pharmacy/online operations, through to pure online type operations. These various models house synergies like shared marketing, group innovations and joint Australian Pharmacy Guild research activities.

Investigation of these eight active pharmacy models is used to determine their relative industry competitive positioning. This survey approach includes their innovative/ entrepreneurial approaches, their positioning strategies and their relative risk/response strategies.

Jambulingham et al. (2005) use risk taking, innovativeness, proactiveness, competitive aggressiveness and autonomy as a key part of their pharmacy industry competitiveness scaling classification. These strategic components are captured as follows:

• the tendency to take risks

• the experimentation with new services

• the approach to challenges

• the sourcing of new opportunities in response to challenging market conditions

• the direct response to the competitive manoeuvres of rivals

• the new business opportunities identified by employees.

Australian pharmacies operate in a competitive world and this affects their delivered business model and strategies. This environment should also be captured locally (Narasimhan and Kim, 2002). Immediate degree of competition, growth prospects and competitor analysis provide such a framework. These measures are included below:

• the degree of local market competition between pharmacies

• the prospects for business growth in the current business environment

• the projected market growth for local competing pharmacies.

The degree of responsiveness to changes in the competitive environment is tested in the pharmacy situation using correctness, completion, adaptivity and management (Jambulingam et al., 2005). These are measured using:

• the degree of emphasis to follow formal procedures and rules

• the degree of emphasis to get things done412 J. Hamilton

• the ability to adapt to changes in the business environment

• the accepted management style in handling ambiguous situations.

These measurement tools along with the demographic measures – age group, respondent role/occupation, country where they live, pharmacy access days and time, annual turnover, gender, pharmacy postcode, locality and population centre size served are used to analyse some 300 business surveys and 1500 customer surveys.

The business surveys capture detailed strategic, competitive, performance and customer alignment information (Hamilton, 2004a, 2004b, 2005a, 2005b; Hamilton and Selen, 2005).

Targeting strategies deliver business points of competitiveness (Hamilton, 2005a). These competitive strategies require the business components – recognition, guarantees, customerisation, accessibility and feel – to be aligned with those of the customer – cost, quality and delivery/availability by industry. Such customer-targeting strategies are captured by

• the customer response – both needs and wants

• the offer of guaranteed, high-quality brands

• the offer of cheaper generic alternatives to guaranteed, high-quality brands

• the delivery of individual attention

• the recognition of a customer’s name and the offer of personalised value-adding service(s)

• the delivery of customer service requests within timeframe(s) specified

• the lowest cost provider

• the convenience of 24 hours a day, 7 days a week, 365 days a year service.

The services and products offered are measured using brands/generics, value additions, comparisons, information/training and latest alternatives. These are mapped against the customer’s services and products requirements of reliability, range and explanatory information (knowledge) offered by industry. These important services and products are captured by

• the medical and health product range offered to meet customer needs

• the general product range offered to customers – including generic (low-cost) solutions

• the specific, product-related customer information offered

• the formal annual staff training

• the supply chain networks for medical and health products.

The IT deliverables and information flows are captured by the degree of complete networking, data analysis, logistics and shipping, website, interactivity and IT recognition software used (Mayer and Davis, 1999; Piccoli et al., 2004). These are mapped against customer industry website/browser access, business-information and purchase options and are measured by

Business-customer alignment in the Australian pharmaceutical industry 413

• the software programs used to operationalise in-store network services

• the standardised network software programs used to connect to our pharmacy group’s computer networks

• the national networked pharmacy group database measures collected and shared with the group to develop better solutions and cost savings

• the degree of integrated networking with key suppliers, facilitating reduced stocking levels, automatic reordering and shipping

• the website delivering extended customer services and sales

• the pharmacy operating as an E-Business model operation.

The industry operational delivery systems of supply networks, products/services/after sales services, partnering websites, distributed databases, stored and mined business information, staff, value additions and fee-for-service activities are matched against customer-related requirements concerning services and/or products delivery. Fast, accurate, consistent, responsive, empathetic, quality-assured, technically supported, trained delivers and low-cost options are included.

The business–customer dyad encompasses the vital delivery of services from business to customers and vice versa (Frohlich and Westbrook, 2002; Chen and Paulraj, 2004; Jambulingam et al., 2005; Swaminthan and Tayur, 2003). This encounter has been rarely quantitatively investigated. This extensive study seeks to open new understandings of this vital business alignment.

5.3 Business–customer dyad perspectives

The business monitors its customer encounters using visitors and their purchasers, sales-per-day, prescriptions-per-day, loyalty, perceived value and revenue-per-sale. These features are mapped against the customer satisfaction indicators of services offered, product ranges available (Chang Lee et al., 2005), IT information accessible, customer expectations, perceived innovativeness and new ideas. Business pharmacy monitors include

• the pharmacy visitor numbers

• the number of sales per day

• the information requests per day or per month

• the prescriptions issued per hour, day or month

• the loyalty measures like the number of revisits (or sales) to a customer per unit time • the customer-perceived value in purchases

• customer satisfaction measures

• the revenue amount per sale.

Considering website usage, the additional dyad business measures of ordering and purchasing, information, communications, time, reliability, accuracy and effectiveness are studied in conjunction with customer-related views of business accreditation, time414 J. Hamilton

saving, sourcing contacts, product knowledge/information accessible, simple ordering and purchasing, delivery process monitoring and personal data retrieval (Abdinnour-Helm et al., 2005). Business website operational areas include

• online business offerings to customers via an interactive ‘e-pharmacist’ website

• online customer purchases and ordering of government allowed items

• greater information and knowledge deliverables throughout the pharmacy group, suppliers and in response to customer searches

• effective and efficiently retrieval of individual customer pharmacy purchase history. The business presents various innovations including advice, sessions and customer reports (like tax, expenses, drug consumption/side effects, risks, health), remote access, peripheral services and health management (Wright and Taylor, 2003; Piccoli et al., 2004). From the customer perspective information, new fields, services/support/ follow-ups, hazards and evaluations/feedback are measured. Innovative business options may include

• additional support documentation to a customer purchase

• prescription records management

• health information for patients

• tax return pharmacy medical purchase history

• asthma and/or diabetes care management

• in-pharmacy immunisation

• patient consulting and compliance programs

• blood testing

• talk to the doctor/pharmacist online

• phone calls to patients to monitor pharmacotherapy and reminder scripts

• database connections to local doctor and local health options

• remote pharmacist advice via phone, computer, PDA or mobile connections

• drug ‘side-effects’ reports

• home delivery services

• formal evaluation of patients health risks

• fees for specialist pharmacy services advice

• prospective drug utilisation reviews

• daily drug lot packaging.

The business targets delivering value to its customers by meeting their collective needs and wants; it prioritises customers via their importance level, offers added-value feedback and additional supporting information.Business-customer alignment in the Australian pharmaceutical industry 415 The customers’ perceived value is seen as consultation advice, online or in-store payments, suitable access to their desired service(s), the strength of their relationship, safeguards regarding their personal information and the way the service delivery is personalised and ‘customerised’ (or individually targeted) (Hamilton, 2004a). The business determines its customers’ importance by measuring their success in

• meeting the needs of our customers

• adding its database product knowledge and customer details to each customer purchase

• ensuring its customer’s desires always come first, ahead of the pharmacy’s

• anticipating and responding to our customer’s evolving new wants (or new expectations)

• giving the latest information and solutions to every customer enquiry prescription or possible purchase.

This empirical study sought responses from approximately 5,000 pharmacies and their customers.

The business measures its economic value via market share, value-per customer, visits-per time and net earnings (Jambulingam et al., 2005). From the customer perspective, economic value delivers quality, reliability, servicing skills, time efficiency, accessibility and acceptable pricing. Business measures include

• monitoring improvements in market share

• monitoring the growth in the value of each customer’s total purchase value per visit • employee sales per day and per month

• monitoring improvements in earnings.

These measures allow the industry to assess its overall position and to map pathways to enhanced competitive positions. Preliminary data analysis indicates that an SVN is capable of delivering the necessary connectivity, storage and retrieval infrastructure requirements to ensure this industry remains highly competitive. Detailed empirical analysis is underway and the relative importance of each parameter is being assessed. Currently, the deployment of a full-scale SVN methodology is definitely on the horizon, with a five-year development/development strategy in place, and some business intelligence components are already under development.

The survey questions deliver the business–customer encounter, incorporating a perspective of the relative competitiveness of each individual pharmacy. These are then grouped and may be viewed as four major model of service encounters involving the business entity and its networks. These models are depicted in Figure 3. To move upwards from one model to the next involves substantial business redevelopment or reengineering. Such changes are highly disruptive in nature and also involve new levels of business–customer interactivity. The low level service encounter model is typified by a busy individual store with little or no computerised operations constitute the oldest and least value-adding model. The next level of customer interactivity captures those pharmacies with degrees of supply chain inter-connectivity and some computerised operations. Those working as responsive, demand-driven pharmacies utilise

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J. Hamilton

sophisticated, well-integrated information systems to place in-depth requests and gain responses that may be relayed to the customer and updated in their customer databases. This model may deliver more focused responses to individual customers. The final model is the industry-wide SVN. Here, fully integrated computerised solutions are intelligently delivered to the customer, via the serving staff, or the pharmacist, or via direct online customer engagement into the business network. The SVN uses its business intelligence tools to deliver agile, dynamic, flexible, customerised business–customer encounters that deliver elevated services and added-value solutions in response to customer requests.

Figure 3

Disruptive transitions towards the Service Value Network

Source : Adapted from Hamilton (2005a)

This industry-wide research – based on a large industry-wide survey sample set – provides the knowledge base from which the pharmacy industry plans to develop its own unique competitive pathways into the future. It delivers industry-specific knowledge concerning competitiveness and future competitiveness, strategic alignment, higher industry performance capabilities and their delivery, a deep understanding of value-adding solutions and their relevance, customer satisfaction measures and customer-perceived value measures and finally delivers the ingredients from which an aligned, high-performance SVN may be constructed – one that is capable of delivering the needs, wants, desires and value-for-money solutions the customer desires.

One limitation of this research is that it primarily delivers a global – industry wide – solution. This research-supported solution delivers a strategically positioned, competitive, business–customer-aligned stating point – capable of delivering customer-targeted needs, wants, desires and economic value solutions. This solution suits the Australian pharmacy situation as it moves into a tough competitive future – with national supermarket chains seeking to incorporate pharmacies within their stores and to then compete directly with the Pharmacy Guild, its pharmacy chains, its individual members and its e-pharmacies.

This strategic SVN approach also has application to cluster type networks and other smart business networks competing in the dynamic marketspace of the early 21st Century. In such cases, industry-specific modifications will need to be incorporated, but similar analysis techniques and strategies may still be applied. For example, the real estate industry and the tourism industry in Australia both operate under weak global business models and e-models, and in both cases they will likely adopt an SVN type approach. For smaller more business-specific, supply chain type solutions like logistics providers or service/manufacturing chains operating under highly competitive situations, these smaller-scale operations will likely be relevant industry-specific SVNs, as these interconnected business networks will increase their competitive dynamics and will generate cost savings in scheduling, reduce demand chase and ultimately deliver more efficiencies. Hence the strategic SVN approach still has advantages for these smaller operations and also facilitates business–customer or end-user–customer-targeting solutions. Such smaller businesses will likely become partners, or peripheral partners, in larger, industry-specific SVN solutions suitable for a business operating under tight competition.

6 Conclusions

Currently, many competitive pharmacy positioning models exist, and new additions like the e-pharmacies, and the differentiated V-pharmacies are currently targeting meeting customer needs. These models still do not offer a customerisation (one-on-one business and individual customer relationship) approach, and consequently need further enhancements. Today the pharmacy industry is seeking new disruptive solution sets to enhance its status and competitiveness. SVNs offer one such pathway.

To develop a SVN for the pharmacy industry a detailed knowledge base must be established. This paper presents the mechanisms underpinning the frameworks from which a targeted, broad industry SVN approach may be established. This research collects the data from which the industry may move forward as a cohesive body, with individual groups, or individual pharmacy outlets, still differentiating. Thus a ‘glocal’ or global and local solution is deliverable.

This detailed, industry-specific, empirical SVN approach allows the entire pharmacy industry to operate under a peak body and to develop better, customer-targeted, strategically aligned; higher-performance (capabilities and delivery); value-adding solutions. Provided additional customer related data is captured, then the empirically-based information may be investigated to show how increased customer satisfaction targeting customer needs, wants and desires may be incorporated. This approach may be used to deliver a more customer-convenient, competitively-priced solution. This evolution to a pharmacy industry SVN approach delivers improved pharmacy-business-customer alignment options, and incorporates key research-defined, elevated pharmacy service offerings into the final solution set.418 J. Hamilton

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