E-business defined

Given that Figure 1.2 depicts different types of e-commerce, what then is e-business? Let’s start from the definition by IBM (www.ibm.com/e-business), which was one of the first suppliers to use the term in 1997 to promote its services:

e-business (e’biz’nis) – the transformation of key business processes through the use of Internet technologies.

Today, IBM calls the e-business services it provides for its clients ‘on-demand’ web services, as explained in Chapter 3.

You will find that the term ‘e-business’ is used in two main ways within organizations. The first is as a concept which can be applied to strategy and operations. For example, ‘our organiz­ation needs an improved e-business strategy (or e-business technology)’. Secondly, ‘e-business’ is used as an adjective to describe businesses that mainly operate online, i.e. they have no physical presence on the high streets and seek to minimize customer service and support through enabling ‘web self-service’, i.e. customers serve themselves before, during and after sales. In the dot-com era e-businesses used to be known as ‘pureplays’. Amazon (www.amazon.com) and eBay (www.ebay.com, Case Study 1.3) are the world’s two biggest e-businesses.

In an international benchmarking study analysing the adoption of e-business in SMEs the Department of Trade and Industry emphasizes the application of technology (information and communications technologies (ICTs)) in the full range of business processes, but also emphasizes how it involves innovation. DTI (2000) describes e-business as follows:

when a business has fully integrated information and communications technologies (ICTs) into its operations, potentially redesigning its business processes around ICT or completely reinventing its business model. . . e-business, is understood to be the integration of all these activities with the internal processes of a business through ICT. (DTI, 2000)

Referring back to Figure 1.2, the key business processes referred to in the IBM and DTI defi­nitions are the organizational processes or units in the centre of the figure. They include research and development, marketing, manufacturing and inbound and outbound logistics.

The buy-side e-commerce transactions with suppliers and the sell-side e-commerce transactions with customers can also be considered to be key business processes.

Figure 1.3 presents some alternative viewpoints of the relationship between e-business and e-commerce. In Figure 1.3(a) there is a relatively small overlap between e-commerce and e-business. From Figure 1.2 we can reject Figure 1.3(a) since the overlap between buy-side and sell-side e-commerce is significant. Figure 1.3(b) seems to be more realistic, and indeed many commentators seem to consider e-business and e-commerce to be synony­mous. It can be argued, however, that Figure 1.3(c) is most realistic since e-commerce does not refer to many of the transactions within a business, such as processing a purchasing order, that are part of e-business.

So e-commerce can best be conceived of as a subset of e-business and this is the perspec­tive we will use in this book. Since the interpretation in Figure 1.3(b) is equally valid, what is important within any given company is that managers involved with the implementation of e-commerce or e-business are agreed on the scope of what they are trying to achieve!

In Chapter 8 we go on to consider how e-marketing, a concept now used by many mar­keting professionals, relates to the concepts of e-business and e-commerce.

1. Intranets and extranets

The majority of Internet services are available to any business or consumer that has access to the Internet. However, many e-business applications that access sensitive company information require access to be limited to qualified individuals or partners. If information is restricted to employees inside an organization, this is an intranet as is shown in Figure 1.4.

In a survey of 275 managers responsible for an intranet featured in CIO (2002), the main benefits mentioned by managers were:

1. Improved information sharing (customer service), 97%
2. Enhanced communications and information sharing (communications), 95%
3. Increased consistency of information (customer service), 94%
4. Increased accuracy of information (customer service), 93%
5. Reduced or eliminated processing, 93%
6. Easier organizational publishing, 92%.

It is apparent that benefits focus on information delivery, suggesting that management of infor­mation quality is a key to successful use of intranets. Notice that cost saving is not referred to directly in the list of benefits. Direct cost reduction can be achieved through reduced cost of printing and indirectly though reduced staff time needed to access information. However, intranets represent a substantial investment, so careful consideration of the return on investment is required. David Viney, who has managed implementation of intranets at Pricewaterhouse- Coopers, British Airways and Centrica PLC estimates that for a large implementation of more than 10,000 staff, the cost could average £250 per user or seat (Viney, 2003). He suggests this cost breaks down into four categories: software (content management systems), hardware (servers to store content and applications), integration of information sources and applications and process change (staff costs and opportunity costs associated within implementation). He also suggests that if the portal project involves integration with ERP systems, this could add £150 per seat.

If access to an organization’s web services is extended to some others, but not everyone beyond the organization, this is an extranet. Whenever you log on to an Internet service such as that for an e-retailer or online news site, this is effectively an extranet arrangement, although the term is most often used to mean a business-to-business application such as the Shell SIMON capability described in Case Study 6.1 where certain customers or suppliers are given shared access. We look at examples of intranets and extranets in Chapter 3 including the Dell Premier extranet.

2. Different types of sell-side e-commerce

Sell-side e-commerce doesn’t only involve selling products such as books and DVDs online, but also involves using Internet technologies to market services using a range of techniques we will explore in Chapters 8 and 9. Not every product is suitable for sale online, so the way in which a web site is used to market products will vary. It is useful to consider the four main types of online presence for sell-side e-commerce, which each have different objectives and are appropriate for different markets. Note that these are not clear-cut categories of web sites since any company may combine these types, but with a change in emphasis according to the market they serve. As you review web sites, note how organizations have different parts of the site focusing on these functions of sales transactions, services, relationship-building, brand­building and providing news and entertainment. The four main types of site are:

• Transactional e-commerce sites. These enable purchase of products online. The main business contribution of the site is through sale of these products. The sites also support the business by providing information for consumers that prefer to purchase products offline. These include retail sites, travel sites and online banking services.
• Services-oriented relationship-building web sites. Provide information to stimulate purchase and build relationships. Products are not typically available for purchase online. Information is provided through the web site and e-newsletters to inform purchase decisions. The main business contribution is through encouraging offline sales and generating enquiries or leads from potential customers. Such sites also add value to existing customers by providing them with detailed information to help support them in their lives at work or at home.
• Brand-building sites. Provide an experience to support the brand. Products are not typi­cally available for online purchase. Their main focus is to support the brand by developing an online experience of the brand. They are typical for low-value, high-volume fast- moving consumer goods (FMCG brands) for consumers.
• Portal, publisher or media sites. Provide information, news or entertainment about a range of topics. ‘Portal’ refers to a gateway of information. This is information both on the site and through links to other sites. Portals have a diversity of options for generating revenue, including advertising, commission-based sales, sale of customer data (lists). Social networks can also be considered to be in this category since they are often advertising-supported.

3. Digital marketing

Digital marketing, e-marketing or Internet marketing is yet another field you will hear of which is closely related to e-commerce. ‘Digital marketing’ is a term increasingly used by specialist e-marketing agencies, in recruitment of specialist staff and the new media trade publications such as New Media Age (www.nma.co.uk) and Revolution (www.revolutionmagazine.com) to refer to sell-side e-commerce. We cover digital marketing in more detail in Chapters 8 and 9.

To help explain the scope and approaches used for digital marketing the IDM (www.theidm.com) has developed a more detailed explanation of digital marketing:

Digital marketing involves:

Applying these technologies which form online channels to market:

• Web, e-mail, databases, plus mobile/wireless and digital TV.

To achieve these objectives:

• Support marketing activities aimed at achieving profitable acquisition and retention of customers … within a multi-channel buying process and customer lifecycle.

Through using these marketing tactics:

• Recognising the strategic importance of digital technologies and developing a planned approach to reach and migrate customers to online services through e-communications and traditional communications. Retention is achieved through improving our customer knowledge (of their profiles, behaviour, value and loyalty drivers), then delivering inte­grated, targeted communications and online services that match their individual needs.

Let’s now look at each part of this description in more detail. The first part of the descrip­tion illustrates the range of access platforms and communications tools that form the online channels which e-marketers use to build and develop relationships with customers including PCs, PDAs, mobile phones, interactive digital TV and radio.

Different access platforms deliver content and enable interaction through a range of differ­ent online communication tools or media channels. Some are well-established techniques which will be familiar to you, like web sites, search engines, e-mail and text messaging. One of the most exciting things about working in digital media is the introduction of new tools and techniques which have to be assessed for their relevance to a particular marketing campaign.

For example, recent innovations which we discuss further in Chapters 8 and 9 include blogs, feeds, podcasts and social networks. The growth of social networks has been docu­mented by Boyd and Ellison (2007) who describe social networking sites (SNS) as:

Web-based services that allow individuals to (1) construct a public or semi-public profile within a bounded system, (2) articulate a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system.

The interactive capabilities to post comments or other content and rate content are surpris­ingly missing from this definition.

Mobile services adoption is increasing rapidly as users purchase the latest models. Table 1.2 shows how more advanced devices with improved functionality and download speed encourage adoption of services. For example, the majority of iPhone users browse the mobile web compared to a minority in the market for all handsets.

As an example, an online bank can potentially use many of these technologies to com­municate with its customers according to the customers’ preferences – some prefer to use the web, others mobile banking or SMS alerts, others wireless or interactive TV and others traditional channels. Bank First Direct (www.firstdirect.com) which is part of the HSBC banking group has a strategy of innovation and showcases its latest approaches in First Direct Interactive (Figure 1.5). It uses SMS short codes as direct response from TV or print advertising to integrate traditional and digital media channels and also uses SMS periodi­cally to deliver relevant related product offers to customers.

The second part of the definition of digital marketing shows that it should not be the tech­nology that drives digital marketing, but the business returns from gaining new customers and maintaining relationships with existing customers. It also emphasizes how digital mar­keting does not occur in isolation, but is most effective when it is integrated with other communications channels such as phone, direct mail or face-to-face. The role of the Inter­net in supporting multi-channel marketing and multi-channel marketing strategy is another recurring theme in this book and Chapters 2 and 5 in particular explain its role in supporting different customer communications channels and distribution channels. Online channels should also be used to support the whole buying process or customer journey from pre-sale to sale to post-sale and further development of customer relationships. This clarifies how different marketing channels should integrate and support each other in terms of their proposition development and communications based on their relative merits for the customer and the company.

The final part of the description summarizes approaches to customer-centric marketing. It shows how success online requires a planned approach to migrate existing customers to online channels and acquire new customers by selecting the appropriate mix of e-communi­cations and traditional communications. Gaining and keeping online customers needs to be based on developing customer insight by researching their characteristics and behaviour, what they value and what keeps them loyal, and then delivering tailored, relevant web and e-mail communications.

4. Web 2.0

Since 2004, the Web 2.0 concept has increased in prominence amongst web site owners and developers. The main technologies and principles of Web 2.0 have been explained in an influ­ential article by Tim O’Reilly (O’Reilly, 2005). Behind the label ‘Web 2.0’ lies a bewildering range of interactive tools and social communications techniques like those we have just men-tioned such as blogs, podcasts and social networks which have engaged many web users. These are aimed at increasing user participation and interaction on the web. With the widespread adoption of high-speed broadband in many countries, rich media experiences are increasingly used to engage customers with the hope they will have a viral effect, i.e. they will be discussed online or offline and more people will become aware of or interact with the brand campaign. Mini Case Study 1.1 gives an example of a viral campaign which helped sell products.

Web 2.0 also references methods of exchanging data between sites in standardized formats,

such as the feeds merchants use to supply shopping comparison sites with data about prod­ucts offered and their prices. We include examples of Web 2.0 e-business applications

throughout the book and discuss them in more detail in Chapter 3.

The main characteristics of Web 2.0 are that it typically involves:

1. Web services or interactive applications hosted on the web such as Flickr (flickr.com), Google Maps™                                   (http://maps.google.com) or blogging services such as Blogger.com or Typepad (www.typepad.com);
2. Supporting participation – many of the applications are based on altruistic principles of community participation best represented by the most popular social networks such as Bebo, MySpace and Facebook;
3. Encouraging creation of user-generated content – blogs are the best example of this. Another example is the collaborative encyclopedia Wikipedia (wikipedia.com);
4. Enabling rating of content and online services – services such as delicious (http://del.icio.us) and traceback comments on blogs support this. These services are useful given the millions of blogs that are available – rating and tagging (categorizing) content help indicate the relevance and quality of the content;
5. Ad funding of neutral sites – web services such as Google Mail/GMail™ and many blogs are based on contextual advertising such as Google Adsense™ or Overture/Yahoo! Content Match;
6. Data exchange between sites through XML-based data standards. RSS is based on XML, but has relatively little semantic markup to describe the content. An attempt by Google to facilitate this which illustrates the principle of structured information exchange and searching is Google Base™ (http://base.google.com). This allows users to upload data about particular services such as training courses in a standardized format based on XML. New classes of content can also be defined and mashups created;
7. Use of rich media or creation of rich Internet applications (RIA) which provide for a more immersive, interactive experience. These may be integrated into web browsers or may be separate applications like that downloaded for Second Life (secondlife.com);
8. Rapid application development using interactive technology approaches known as ‘Ajax’ (Asynchronous JavaScript and XML). The best-known Ajax implementation is Google Maps which is responsive since it does not require refreshes to display maps.

5. Supply chain management

When distinguishing between buy-side and sell-side e-commerce we are looking at different aspects of managing an organization’s supply chain. Supply chain management (SCM) is the coordination of all supply activities of an organization from its suppliers and delivery of products to its customers. The opportunities for using e-commerce to streamline and restructure the supply chain are described in more detail in Chapter 6. The value chain is a related concept that describes the different value-adding activities that connect a company’s supply side with its demand side. We can identify an internal value chain within the bound­aries of an organization and an external value chain where these activities are performed by partners. Note that in the era of e-business a company will manage many interrelated value chains, so in Chapter 6 we also consider the concept of a value network.

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).