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Surviving in a Digital Economy a Study of the Consultant Brokerage Industry

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Surviving in a Digital Economy a Study of the Consultant Brokerage Industry Surviving in a digital economy A study of the consultant brokerage industry Andreas Pettersson Industrial and Management Engineering, master's level 2018 Luleå University of Technology Department of Business Administration, Technology and Social Sciences SUMMARY Purpose - The purpose of this master thesis is to identify critical factors and create guidelines for traditional consultant brokerage firms to stay competitive in a digital economy. Methodology - This qualitative study with an abductive approach, gathered data primary from semi-structured interviews. A total 18 interviews were conducted with travel agency executives as well as buyers, sellers, and matchmakers of consultant services. Collected data were analyzed using thematic coding. Findings - The main findings of this show that traditional matchmakers can take actions to stay competitive if a digital platform enters the market. In addition, the study suggests proactive and reactive measures that organizations can take to address these disruptive forces. Theoretical implications - The study will provide an understanding of consultant brokerage and their function as a matchmaker in the marketplace. Besides, it will provide an insight into how some traditional matchmakers can survive in a digital economy. Practical implications - This thesis will provide managers with concrete guidelines on how to react in the event of disintermediation of a matchmaker market. Keywords - Disintermediation, Business strategy, Reintermediation, Matchmakers, Intermediates, Consultants, Brokers Paper type - Master thesis ACKNOWLEDGMENTS This master thesis is written by Andreas Pettersson and concludes the author's studies in Industrial and Management Engineering with a focus on innovation and strategic business development. I would like to thank my supervisor, Mats Westerberg, and fellow students at Luleå University of Technology for their constructive criticism, discussions, and guidance throughout this thesis. In addition, a great thanks to all respondents for their time and knowledge that they provided. Berlin, 2018-05-28 Andreas Pettersson TABLE OF CONTENTS 1. INTRODUCTION .................................................................................................. 1 1.1 Background ........................................................................................................... 1 1.2 Problem discussion and research purpose ............................................................ 2 2. THEORETICAL BACKGROUND ........................................................................ 4 2.1 Intermediation ....................................................................................................... 4 2.1.1 Intermediates as matchmakers ....................................................................... 5 2.2 Transaction costs ................................................................................................... 5 2.3 Digital disruption .................................................................................................. 7 2.3.1 Digital platforms and disintermediation ........................................................ 8 2.4 Reintermediation strategies ................................................................................... 9 2.5 Theoretical summary .......................................................................................... 11 3. METHODOLOGY ............................................................................................... 13 3.1 Research approach and strategy .......................................................................... 13 3.2 Data collection .................................................................................................... 14 3.2.1 Interviews ..................................................................................................... 14 3.3 Data analysis ....................................................................................................... 16 3.4 Quality improvement measures .......................................................................... 17 3.5 Delimitations ....................................................................................................... 17 4. FINDINGS AND ANALYSIS ............................................................................. 18 4.1 The role and function of the business travel agent ............................................. 18 4.2 The role of the consultant broker ........................................................................ 19 4.3 How the Internet and digital platforms have affected matchmakers .................. 21 4.3.1 Business travel agencies .............................................................................. 21 4.3.2 Consultant brokers ....................................................................................... 24 4.4 The value of consultant brokers .......................................................................... 24 4.4.1 Value for consultants ................................................................................... 25 4.4.2 Value for buyers ........................................................................................... 26 4.4.3 How consultant brokers value their services ............................................... 27 4.4.4 Challenges for consultants ........................................................................... 29 4.4.5 Challenges for buyers .................................................................................. 32 4.4.6 Travel agencies versus consultant brokers .................................................. 33 4.5 How to navigate in a digital economy? .............................................................. 33 4.5.1 How travel agencies survived in a digital economy .................................... 34 4.5.2 The future for consultant brokers................................................................. 36 5. DISCUSSION AND CONCLUSION .................................................................. 38 5.1 Theoretical contributions .................................................................................... 39 5.2 Managerial implications ..................................................................................... 39 5.3 Limitations and further research needs ............................................................... 41 5.4 Conclusion .......................................................................................................... 41 REFERENCES ............................................................................................................. 42 APPENDIX ...................................................................................................................... I Appendix 1 - Original quotes and translations ............................................................ I Appendix 2 - Interview protocols .......................................................................... XIV 1. INTRODUCTION This chapter will give an introduction to the research topic and provide a background of the identified problems. Also, the chapter will present the research purpose and research questions. 1.1 Background Digitalization speeds up the competitive landscape and requires organizations, more than ever, to be prepared for the next significant shift in their industry and adjust their business strategies to remain competitive (Teece & Linden, 2017). There are numerous examples of industries that have got the rug pulled from under their feet by the introduction of digitalized business models. One of the more prominent examples is the travel agent business, a matchmaker between travelers, accommodation, and transportation. Being a matchmaker means that they do not own the assets they are selling, but instead tries to match buyers and sellers with each other. In the consumer traveling industry, the function of the travel agent is more or less, in whole, replaced by online platforms like Expedia.com and Agoda.com, where travelers, by themselves, can perform the job that previously was the sole province of the travel agent (Law & Lau, 2005). Another example is the music industry, where digital platforms such as iTunes, Spotify, and Tidal filled the role of conventional brick-and-mortar music stores (Maharg, 2016). These are just two examples of the disintermediation of industries, a term that Maharg (2016) defines as when the role of the intermediate is absorbed, eliminated entirely, or taken over by digital technologies. A study by Law & Lau (2005) examined hotel managers view on the potential disintermediation of travel agencies, and the result was that they, overall, were optimistic about the outlook for travel agencies. Still, they saw that internet-based marketing and distribution channels could do the same job, even though, they thought that travel agencies still would be needed to plan and reserve hotel rooms in the future (Law & Lau, 2005). Fast forward ten years, it is known today that most of the hotel managers were wrong and that consumers, by themselves, make a majority of the bookings. Grossman (2016) presented in a 2016 survey of more than 2,000 executives 1 across 15 different industries that consumer-oriented industries had the most anticipation that their industry would see moderate to massive digital disruption in the near future. However, the survey showed that only 51% of executives within business and professional services thought that such a change would happen. Even though managers know that digital disruption
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