Markets of one

Abstract

Solutions - customized and integrated product bundles sold in the context of complex business markets - represent an increasingly popular marketing strategy for many firms. Seeking to escape the perils of competition and commoditization, companies such as IBM, GE, Siemens, and HP are investing significant resources to create idiosyncratic offerings that integrate multiple goods and services. A solutions-based marketing strategy stands in contrast to traditional product strategies by emphasizing the co-production of large-dollar offerings with a single buyer. Unfortunately, there are many barriers to this strategy, with some studies suggesting that more than 75% of suppliers fail to achieve a positive return on their solutions investments. Despite substantial practitioner interest, there is a surprising absence of research on solutions. In response, my dissertation develops a model of solution success by examining the antecedents to the profitability of B2B solution contracts, commonly referred to as “engagements.” Spanning multiple months to many years, solution engagements represent an intriguing new form of buyer-seller exchange. Firms must navigate two financially risky decisions as they pursue and develop their idiosyncratic offerings for buyers. The first decision pertains to opportunity selection - which solution opportunities to pursue? The second involves a set of resource allocation issues - how to configure the solution offering? Leveraging field interviews and theoretical perspectives from the organizational problem solving literature, my study aims to assess how various aspects of the focal customer problem and the supplier’s solution offering influence the profitability of individual solution engagements. To evaluate my model, I partnered with a Fortune 100 technology firm to develop a novel dataset containing details of more than 700 individual engagements, including opportunity and customer descriptors, solution characteristics, and engagement-specific profit. My analysis reveals several significant and intriguing findings that paint a complex picture of solution profitability. As the first empirical examination of this major business phenomenon, this dissertation has the potential to make important theoretical and managerial contributions.