Desperately Seeking Self-Determination:
Key to the New Enterprise Logic of Customer Relationships
Dr. Yogesh Malhotra
Syracuse University Whitman School of Management
Citation: Malhotra, Y., Desperately Seeking Self-Determination: Key to the New Enterprise Logic of Customer Relationships, Customer Relationship Management Mini-track. Proceedings of the Americas Conference on Information Systems (AMCIS 2004), New York, New York, August, 2004, 1-8.
A growing ‘chasm’ separates consumers and the adversarial buyer-seller practices of commerce. CRM systems focusing on maximizing transaction values are “ultimately doomed.” In response, Zuboff and Maxmin (2002) have outlined the contours of the new enterprise logic based upon “relationship economics.” Their paradigm recognizes the critical need for satisfying ‘new’ consumers’ needs for psychological self-determination while treating them as the origin of all value. This research develops theory-based empirical understanding of their core concept of “psychological self-determination” that is central to the new enterprise logic of customer relationships. By situating the proposed construct within technology acceptance research, we outline how future CRM implementation research can benefit from better understanding about consumers’ perceptions and behaviors. The theoretical construct and proposed measures are empirically validated in an organizational implementation of a communication, collaboration, and coordination system. Directions for extending this research to design and implementation of new CRM systems are offered.
Customer Relationship Management, CRM, Psychological Self Determination, Technology Acceptance and Use, Technology Adoption, Transaction Economics, Relationship Economics, Field Study, Enterprise Logic, Business Models.
“The innovations we have mentioned create the corporate equivalent of the man with the ill-fitting suit. Customer relationship management systems? “Just pinch your shoulders together.” Mass customization? “Hold your left arm up.” One-on-one marketing? “Left leg bent at the knee, please.” A move to the Internet? A wireless platform? “Now, hop!” These are attempts to make the suit fit without cutting into cloth or fundamentally altering its design. These innovations do not produce the standard enterprise logic transformed and reborn. Rather, they reveal today’s commercial organizations at the breaking point – strained, cracked, and stretched to their very limit as they attempt to confront challenges that they were never designed to address and that are in conflict with their nature and purpose.”
- The Support Economy: Why Corporations Are Failing Individuals And The Next Episode Of Capitalism (p. 22)
A widening ‘chasm’ separates consumers and the adversarial buyer-seller practices of commerce. Zuboff and Maxmin (2002) have argued that this chasm results from the unprecedented, pervasive, and growing “sense of self” in today’s consumers. The “deep and abiding yearning for psychological self-determination” (p. 4) of the new consumers signals the need for a fundamental transformation of commerce and markets. Early signs of this transformation are evident in the premonitions of scholars that (Zaltman 2003, p. ix): “While consumers have changed beyond recognition, marketing has not.” They are also evident in the failure rates of 50%-75% for customer relationship management (CRM) systems and 80% failure rates of all new products and services. Majority of such failures are attributed to socio-psychological barriers resulting in alienated customers and systems users (Fjermestad and Romano Jr. 2003; Zaltman 2003; Zuboff and Maxmin 2002).
There is therefore an imperative need for a critical examination of Zuboff and Maxmin’s (2002) thesis about the new enterprise logic that can possibly alleviate the above problems. They have argued that existing enterprise logic and associated CRM systems focus on maximizing transaction value with little heed for customers’ interests. They also predict that the resulting adversarial buyer-seller equation characterized by “weary mistrust – frequently shading into disgust – among end consumers” is “ultimately doomed” (p. 4, 12). To remedy the situation, they propose the new enterprise logic based upon the higher-order paradigm of “relationship economics” with its core concept of ‘psychological self-determination’ (Malhotra 1998).
In the above context, advancement of information systems (IS) theory, research, and practices on the new enterprise logic of customer relationships therefore depends upon the following concerns that are the focus of this study:
1. Developing a theory-based empirical understanding of their core concept of “psychological self-determination” that is central to the new enterprise logic of customer relationships;
2. Situating the new construct in technology adoption, acceptance, and usage research to suggest how future CRM research and practice can benefit from better understanding of consumers’ perceptions and behaviors;
3. Developing a measurement model for the proposed construct and empirically validating it in the context of an organizational systems implementation that allows for psychological self-determination.
Next, we discuss how the enterprise logic of customer relationships based upon transaction economics must be adapted to meet new consumers’ needs for deep support. Subsequent two sections focus on the above three issues. Finally, we review the key contributions and recommend directions for future research on further integrating psychological self-determination in future CRM research and practice.
2. From Transaction Economy to the Support Economy
This section discusses how today’s commercial organizations are failing their customers and how the enterprise logic must be adapted to meet their needs for deep support. First, model of customer relationships based upon transaction economics is reviewed. Next, the alternative model of relationship economics is introduced to bridge the growing chasm between consumers and commercial organizations. Finally, the new perspective about consumers in terms of individuated consumption and their needs of psychological self-determination is discussed.
Transaction Crisis in Customer Relationships
The enterprise logic of today’s business still focuses on consumption in terms of production and distribution of goods and services. Zuboff and Maxmin (2002) attribute the growing chasm between today’s individuals and commercial enterprises to what they call the (p. 177-213) “transaction crisis.” They argue that marketers often take a very narrow view of consumption, (p. 5) “as if it were only about people running through shopping malls like rats in a maze.” In the transaction economics framework, value is considered to be created by the producers in the organizational ‘value chains’ and as embedded in their products and services. Firms must maximize transaction value by seeking the most profitable terms in their exchanges with end consumers (p. 187-189). This standard enterprise logic however disregards the new perspective about consumption as a means for achieving and expressing self-determination. For today’s individuals, consumption is only incidentally about (p. 7) “tossing away discretionary income at the mall.” Rather, consumption is a necessity and not a luxury: it is what people must do to survive and to take care of themselves and their families. It is through the processes of consumption of experience, that people achieve and express individual self-determination.
Relationship Economics and the Support Economy
Zuboff and Maxmin (2002) argue that new consumers, those born since the mid-twentieth century, have a very different orientation toward consumption in contrast to their predecessors. The new individuals do not want to be the (p. 11) “objects of commerce, treated like anonymous pawns in the exploitative games of market segmentation, penetration, and manipulative pseudo-intimacy.” Instead, these self-determined individuals would rather choose to “opt-in” and want to be recognized as the origins of a new form of value called relationship value. In contrast to the transaction value, relationship value is latent in and is realized in the subjective experience of the consumers and cannot be created or destroyed by managers linked in organizational value chains. All commercial processes are aligned with the individual end consumer (p. 11): “realized relationship value translates into immediate cash flow.”
Their perspective of relationship economics recognizes the individual consumer as the origin of all value as (Zuboff and Maxmin 2002, p. 14) “all value originates in their needs, and all cash flows from the fulfillment of those needs.” It subsumes transaction economics as production and distribution of goods and services become ancillary to the broader and more inclusive new commercial purpose of providing deep support (Zuboff and Maxmin 2002, p. 190-191). Its purpose is based on the recognition that the new purpose of consumption is (Zuboff and Maxmin 2002, p. 12) “acquisition of the time and support necessary to pursue a life of psychological self-determination.” Deep support is realized in the assumption of full accountability and responsibility for every aspect of the consumption experience. It will be evident in the commercial enterprises based on advocacy and assistance of customers’ interests and based upon mutual respect, trust, and sensitive alignment of interests (Urban 2004).
Individuated Consumption and Psychological Self-Determination
The new enterprise logic of customer relationships will result from a profound understanding about the new society of individuals and its expression in a new kind of individuated consumption. It will be based on the awareness that today’s people experience themselves first as individuals and share a common longing for psychological self-determination. In this view of individuated consumption, the dominant force in economic growth takes various forms such as (Zuboff and Maxmin 2002, p. 76-77): “an expression of community, an outlet for spiritual expression and the preservation of ethnic heritage, a way of constructing one’s own identity, a means to achieve personal growth and self-renewal, an expression of values and meanings, an action that generates personal energy, an opportunity to express free choice, a way of elaborating self-concept, a means of expressing fantasies, feelings, and having fun, a way to demonstrate motherly love, a rite of passage, and expression of imagination, to name but a few of the findings that have emerged from this new field of study.”
Zuboff and Maxmin (2002) distinguish the new generation of consumers from their predecessors in the following terms (p. 93): “The new individuals seek meaning, not just material security and comfort. They enjoy their things but place an even higher value on quality of the lives they lead, in which those possessions play a part. They insist on self-expression, participation, and influence because they share the certain knowledge that the singularity of their own lives cannot be deduced from the general case. No longer born to a biography, their identities must be invented as they go – cobbled together from personal initiative and private judgment.” They form a new worldwide society of individuals characterized by the shared yearning for psychological self-determination – an abiding sense that they are entitled to make themselves. The higher-order purpose of commerce and markets in the relationship economy becomes therefore the provision of ‘deep support’ for such customers by facilitating and enhancing their self-determination.
3. UNDERSTANDING PSYCHOLOGICAL SELF-DETERMINATION
Psychological self-determination is the key to the relationship economics as it epitomizes the new consumers and the survival of commercial enterprises that depend upon them. Psychological individualism is a pervasive phenomenon that spans all boundaries that defined the mass society, those of class, nation, gender, race, political affiliation, and ethnicity (Zuboff and Maxmin 2002, p. 100): “Though the claims of psychological self-determination find their strongest expression in the West, it is increasingly clear that they are not limited to those societies but are in fact part of a new universal culture increasingly shared by those who live in the aftermath of scarcity.”
As evident, psychological self-determination is the central concept in Zuboff and Maxmin’s (2002) treatise which they developed from inductive analysis of hundreds of worldwide surveys and studies from varied spectrums of work and life trends. Given their inductive logic, they did not define or develop a theory of psychological self-determination, nor did they refer to any such theoretical base. Developing a systematic theoretical understanding of psychological self-determination and its measurement model is therefore critical for advancing theory development, empirical research, and its practical applications. We accomplish this by anchoring their prescriptions based upon inductive logic within a socio-psychological theoretical foundation evolved over the past thirty years.
Zuboff and Maxmin’s (2002) characterization of increasing psychological self-determination bears interesting semblance to the self-determination theory (SDT) in their reference to individual behavioral regulations such as: transition from group norms toward increasingly internalized values, more reliance upon one’s own judgment, a deepening sense of self, a growing need for self-authorship, and a deeper capacity for empathy, deep personal connection, and non-instrumental quality of relationships. Anchoring their inductive understanding of psychological self-determination based on diverse perspectives within the SDT has interesting implications for both theory and practice. It offers an established theoretical foundation for empirical conceptualization and validation of the psychological self-determination construct for the new enterprise logic and customer relationships based upon ‘relationship value.’ More importantly, it creates opportunities for integration, analysis, application, and refinement of this construct in various IS adoption and usage contexts related to CRM and E-Commerce.
The basic premise of the SDT is that all individuals have natural, innate, and constructive tendencies to develop an ever more elaborate and unified sense of self (Deci and Ryan 1985). It views individuals as innately seeking and engaging with challenges in their environments, attempting to actualize their potentialities, capacities, and sensibilities. It focuses on how individuals develop a coherent sense of self through regulation of their behavioral actions that may be self-determined, controlled, or amotivated. Both self-determined and controlled behaviors are intentional, though only self-determined behaviors involve a true sense of choice: a sense of feeling free in doing what one has chosen to do. The same contrast can also be analyzed in terms of the distinction between internal versus external locus of personal causation, or more specifically, perceived locus of causality of individual behavior. Internal perceived causality refers to seeing oneself as the locus of initiation for a behavior and thus feeling like an “origin.” In contrast, external perceived causality describes intentional actions for which one perceives the source of initiation to be outside oneself and thus feeling like a “pawn.” The more internalized the behavioral regulation, the more it is perceived as reflecting one’s free choice or subjectively located closer to self (Deci et al. 1994; Malhotra 1998; Malhotra 2004a). The above polar contrast seems analogous to the contrast between self-determined consumers seeking deep support and the stereotypical consumers “running through shopping malls like rats in a maze.”
Perceived Locus of Causality
As discussed above, assessment of psychological self-determination is based on the notion of perceived locus of causality. The following subscales of perceived locus of causality are used to represent individual’s behavioral regulation in terms of various levels and types of psychological self-determination. These scales or measures of psychological self-determination are based on the premise that intentional behavior can be correctly understood in terms of the degree to which it is self-regulated versus regulated by forces outside the self (Ryan 1995). These subscales represent the self-determination continuum of intentional behavior with external and internal perceived locus of causality representing the polar ends. A summary of the distinguishing characteristics of various levels and types of psychological self-determination is given below (Deci and Ryan 2002).
§ External Regulation: External regulation is the least autonomous form of extrinsic motivation and characterizes behaviors that are performed to satisfy an external demand or a socially constructed contingency. Often such behaviors are associated with compliance of rules and avoidance of punishments. It has an external perceived locus of causality.
§ Introjected Regulation: Introjected regulation involves an external regulation that has been internalized but not, in a much deeper sense, truly accepted as one’s own. It is a type of extrinsic motivation that, having been partially internalized, is within the person but is not considered part of the integrated self. Introjection-based behaviors may be quite controlling and are performed to avoid guilt and shame or to attain ego enhancements and feelings of worth. It has a somewhat external perceived locus of causality.
§ Identified Regulation: Regulation through identification is a more self-determined form of extrinsic motivation as it involves conscious valuing of a behavioral goal or regulation and acceptance of the behavior as personally important. When a person identifies with an action or the value it expresses, he or she, at least at a conscious level, is personally endorsing it. Identified regulation is thus accompanied by a high degree of perceived autonomy and tends to have a relatively internal perceived locus of causality.
§ Intrinsic Regulation: Intrinsic regulation or intrinsic motivation is the state of doing an activity out of interest or inherent satisfaction. It characterizes behaviors that denote inherent tendency to seek out novelty and challenges, to extend and exercise one's capacities, to explore, and to learn. It is the prototype of autonomous or self-determined behavior and is associated with an internal perceived locus of causality.
The progression from external to internal perceived locus of causality characterizes increasing levels of psychological self-determination and perceived sense of autonomy in performing that behavior. The four ‘types’ of regulation are not mutually exclusive and each of them may affect individual's intentionality and resulting behavioral outcomes.
Psychological Self-Determination and Technology Acceptance Research
The coming of the global knowledge economy with its advances in computing, information, and communication technologies has abetted the increasing self-determination of individuals as employees and as consumers (Malhotra 2003). It has resulted in increased abstraction of work given increasing content of non-routine and unstructured knowledge processes (Malhotra 2004b). Digitization of work has also led to dispersion of knowledge work across traditional boundaries of work-life as well as across boundaries of geography and time zones. The ‘service economy’ is characterized by increased abstraction of consumption as hard goods give way to less tangible services seamlessly intertwined with daily work-life (Malhotra 2003); and, “luxuries” get redefined as “necessities” (Zuboff and Maxmin 2002). In the early days of technology adoption, managers strived to get the ‘buy in’ of the potential system users for adoption of new information technologies. More recently, technologies of knowledge work require pro-active engagement of users unlike the technologies of data processing and transaction processing (Malhotra 1998; Malhotra 2004a; Malhotra 2004b). In contrast to ‘controlled’ deterministic systems of transaction processing, systems for creating, sharing, and renewing organizational knowledge increasingly depend upon employees’ self-determination. Enforcement of compliance and surveillance, standard practices for transaction-focused and data-processing focused enterprise logic, may be neither feasible nor effective for developing advocacy and ‘connection’ with customers for providing deep support.
Despite its increasing importance, IS theory and research have yet to factor psychological self-determination in technology acceptance and usage research (a survey of these models is available in Venkatesh et al. (2003); an alternative interpretation for relatively autonomous ‘professional’ users is available in Chau and Hu (2001) and Malhotra and Galletta (in press). In particular, psychological self-determination plays an unprecedented but critical role in the increasingly abstract models of (knowledge-based) work and (digitally-supported) consumption. Hence, consideration of psychological self-determination can contribute to reconciliation of conflicting empirical findings that increasingly characterize these domains. For CRM systems in particular, integration of psychological self-determination is relevant to research as well as practice from multiple perspectives. From the perspective of consumers, acceptance and use of self-service technologies and other customer-integrated systems could be improved. From the perspective of employees, acceptance and use of customer-support and customer-service technologies could be improved. Additional contributions to technology acceptance and use research could involve comparing and contrasting how self-determination can possibly offer better understanding of user perceptions of ‘voluntariness’ in system use as it continues to be an area of ongoing debate (cf: Agarwal and Prasad (1997); Karahanna et al. (2004a)).
Blatant disregard of the social-psychological aspects has led some researchers to ponder why (Zuboff and Maxmin 2002, p. 265): “the very thing that marketers are doing to build relationships with customers are often the things that are destroying those relationships.” In particular, CRM applications are among the technologies with highest failure rates that are attributed to social-psychological barriers to understanding imposed by the standard enterprise logic. Hence, there is a critical need for IS acceptance and use research to account for system users’ – consumers’ and employees’ – behavioral characteristics associated with psychological self-determination: transition from group norms toward increasingly internalized values, more reliance upon one’s own judgment, a deepening sense of self, a growing need for self-authorship, and a deeper capacity for empathy, deep personal connection, and non-instrumental quality of relationships.
External Regulation (External perceived locus of causality)
External1: I'll get in trouble if I don't use the system
External2: that is what I'm supposed to do.
External3: my supervisors expect me to use the system.
External4: using the system is required by my job description.
External5: so that my supervisor wouldn't reprimand me.
External6: using the system is compulsory in my job.
External7: so that others won't get upset with me.
Introjected Regulation (Somewhat external perceived locus of causality)
Introjection1: I want the supervisor to think that I'm a good employee.
Introjection2: I will feel bad about myself if I don't use the system.
Introjection3: I'll feel ashamed of myself if I don't use the system.
Introjection4: it bothers me when I don't use the system.
Introjection5: I want my colleagues to like me.
Introjection6: my friends would think that I should use the system.
Introjection7: my colleagues would think…I should use the system.
Introjection8: my supervisor would think…I should use the system.
Identified Regulation (Somewhat internal perceived locus of causality)
Identification1: I want to understand how to use the system.
Identification2: I want to learn how to use the system.
Identification3: I want to find out if I am able to use the system.
Identification4: I think it's personally important to myself.
Identification5: I personally like using the system.
Intrinsic Regulation (Internal perceived locus of causality)
Intrinsic1: using the system is fun.
Intrinsic2: I enjoy using the system.
Table 1. System User’s Self-Determination to Use the System
4. EMPIRICAL VALIDATION OF PSYCHOLOGICAL SELF-DETERMINATION
Empirical validation of the psychological self-determination construct is another essential pre-requisite for new CRM technology acceptance and usage research models informed by Zuboff and Maxmin’s (2002) perspective. The psychological self-determination construct proposed earlier was empirically validated based upon observations from an organizational system implementation. Ryan and Connell (1989) had developed an approach for assessing psychological self-determination in terms of the relative autonomy of one’s behavioral regulation. Table 1 shows our measures for the various types of behavioral regulations adapted from Ryan and Connell (1989) for our context of system implementation. All items were measured using 7-point Likert scales anchored at the center.
The research site was a major professional patient-care services organization in the Northern United States. The context was the organizational implementation of a new knowledge management system that would enable inter- and intra-organizational communication, coordination, and collaboration capabilities. Most system enabled activities related to creating, sharing, and using information and knowledge at work, and thus depended upon pro-active self-determined acceptance and use. User training focused on hands-on functional application of these activities through integrated scheduling, calendaring, document exchange, message exchange, contact management, and, project management capabilities. Surveys were administered to the 200 users participating in the training and yielded 151 usable responses giving a response rate of just over 75%. Majority of the study participants occupied internal and/or external customer, user, and provider roles responsible for creating, using, and sharing information through the new system.
Principal components analysis of data with varimax rotation resulted in four factors. Examination of the scree plot showed three factors and one single item, identification3, loading separately on the fourth factor. Removing that item and re-doing the principal components analysis resulted in three distinct factors each having eigenvalue greater than 1 and explained 65.37% of the overall variance. The scree plot confirmed the presence of three independent factors. Convergent and discriminant validity were verified from the inter-correlations matrix: items within specific sub-scales correlated highly and the items across the sub-scales had low correlations. The specific factors and respective measures are shown in Table 2.
High<< Psychological Self-Determination >>Low
Table 2. Factor Analysis for Psychological Self-Determination
Table 1. System User’s Self-Determination to Use the System
Similar to Ryan and Connell (1989), our analysis showed that the items for internal personal locus of causality (identification and intrinsic regulations) loaded together whereas the items for introjection and external locus of causality exhibited a cross-loading pattern. Reliability of the psychological self-determination scale was assessed in terms of internal consistency with Alpha equal to .9044. The Alpha scores for the three sub-scales of psychological self-determination were found to be: .9302 for Introjection, .8768 for Internal, and .8604 for External sub-scales.
5. CONCLUSIONS AND RECOMMENDATIONS FOR FUTURE CRM RESEARCH
The contributions of this research include theoretical conceptualization and empirical validation of psychological self-determination construct, and its integration with the technology acceptance and usage research. The research was motivated by the inductive analysis and vision of the new enterprise logic of customer relationships with its central concept of psychological self-determination. This research makes three important contributions to the resolution of the growing “chasm” separating the consumers and the commercial organizations whose survival depends upon fulfilling their needs. Drawing upon Zuboff and Maxmin’s (2002) thesis about transition to the higher order paradigm of relationship economics, we described the new enterprise logic with psychological self-determination at its core. Next, based upon the theory of self-determination, we proposed a theoretical conceptualization of the psychological self-determination construct that is central to realization of the vision of the new enterprise logic of customer relationships based upon relationship value. Then, based upon observations from of an organizational systems implementation, we empirically validated the proposed theoretical construct of psychological self-determination. These contributions develop the basis for further advancing IS, E-Commerce, and CRM theory, research, and practices on the new enterprise logic of customer relationships.
We also suggested two complementary perspectives for integrating this research for furthering the success of CRM systems: i) of consumers using the self-service technologies and other customer-integrated systems, and, ii) of employees using the customer-support and customer-service technologies. We also explained how integration of psychological self-determination could possibly help bridge the schism between the dichotomous understanding about individuals as consumers and as workers. Increasing complexity and abstraction of work and consumption demand a new perspective that can reconcile the prevailing dichotomous understanding that is the legacy of the mass economy (Zuboff and Maxmin 2002).
Another important insight from our research is that psychological self-determination is a function of the employees’ or consumers’ perceptions in the respective contexts. This perception may not coincide with managers’ perceptions of what employees perceive or marketers’ perceptions of what consumers perceive, as may be the case. The prevailing “chasm” of the ‘meaning’ of customer relationships between the customers and marketers has made one marketing researcher ponder (Zaltman 2003, p. x): “These changes in consumer behavior include increased skepticism about business (especially marketing), more assertiveness, greater sophistication, less loyalty to companies and individual brands, and major concerns about privacy and security.” He goes on to observe that (Zaltman 2003, p. 3): “Too many marketers don’t understand how their own and consumers’ minds interact.” The construct of psychological self-determination anchors the recognition and solution of customers needs in their self: it helps marketers and designers of CRM systems ‘connect’ to customers better by recognizing their perceptions about their own behaviors. It also provides the foundation for furthering empirical and theoretical understanding about the vision of the new enterprise logic based on relationship economics. Quoting Drucker (1954, p. 37-41), Zuboff and Maxmin (2002, p. 248) assert that in the final analysis: “It is the customer who determines what a business is. For it is the customer, and he [or she] alone, who through being willing to pay for a good or service, converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance… What the customer thinks he [or she] is buying, what he [or she] considers “value,” is decisive.” This research contributes to the theoretical and empirical foundation for knowing the true value – creation of which can help the commercial organizations’ survival and growth.
This is the first study that integrates the inductive analysis behind the new enterprise logic of real customer relationships with the theory of self-determination and proposes and validates the core construct of psychological self-determination. Hence, there are apparent limitations related to the first theoretical proposition and its validation in the context of a single organizational field study. However, given the critical relevance of this research for the ‘next episode of capitalism’ (Zuboff and Maxmin 2002), future research is necessary to further refine and develop theoretical and empirical understanding in diverse contexts. Constraints imposed by the word limit for this paper make it infeasible to include empirical analysis of how self-determination affects psychological self-determination. Therefore, empirical validation of the proposed relationship is recommended for future research.
[Acknowledgements: Comments of the two anonymous reviewers and the track chairs resulting in minor revisions are acknowledged. Partial support for this research was received from the Center for Creation and Management of Digital Ventures at the Syracuse University Whitman School of Management.]
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