E-business risks and barriers to business adoption

Opportunities have to be balanced against the risks of introducing e-business services which vary from strategic risks to practical risks. One of the main strategic risks is making the wrong decision about e-business investments. In every business sector, some companies have taken advantage of e-business and gained a competitive advantage. But others have invested in e-business without achieving the hoped-for returns, either because the execution of the plan was flawed, or simply because the planned approaches used for their market were inappropriate. The impact of the Internet and technology varies by industry. As Andy Grove, Chairman of Intel, one of the early adopters of e-business has noted, every organization needs to ask whether, for them:

The Internet is a typhoon force, a ten times force, or is it a bit of wind? Or is it a force that fundamentally alters our business? (Grove, 1996)

This statement still seems to encapsulate how managers must respond to different digital technologies; the impact will vary through time from minor for some companies to signifi­cant for others, and an appropriate response is required.

As well as the strategic risks, there are also many practical risks to manage which, if ignored, can lead to bad customer experiences and bad news stories which lead to damage to the reputation of the company. In the section on e-business opportunities, we reviewed the concept of soft lock-in; however, if the customer experience of a service is very bad, they will stop using it, and switch to other online options. Examples of poor online customer experi­ence which you will certainly be familiar with include:

• Web sites that fail because of a spike in visitor traffic after a peak-hour TV advertising campaign.
• Hackers penetrating the security of the system and stealing credit card details.
• A company e-mails customers without receiving their permission, so annoying customers and potentially breaking privacy and data protection laws.
• Problems with fulfilment of goods ordered online, meaning customer orders go missing or are delayed and the customer never returns.
• E-mail customer-service enquiries from the web site don’t reach the right person and are ignored.

The perception of these risks may have limited adoption of e-business in many organizations which is suggested by the data in Figure 1.10. This is particularly the case for small and medium enterprises (SMEs). We study adoption levels and drivers in this type of business further in Chapter 4.

A DTI (2002) study evaluated some of the barriers to B2B e-commerce (Figure 1.12) which remain valid today. You can see that reasons of cost were the most important factors. This suggests the importance of man­agers assessing e-business to develop a cost-benefit analysis that considers both the initial investment costs and the ongoing costs that form the total cost of ownership (TCO) against the value created from the tangible and intangible benefits. The difficulties in implementation which we will review later in this book such as the lack of the right resources or difficulty in integrating systems are also indicated by the figure.

1. Evaluating an organization’s e-business capabilities

Assessment of an organization’s existing e-business capabilities is a starting point for the future development of their e-business strategy. We will see in Chapter 5 how different forms of stage models can be used to assess e-business capability. An example of a basic stage model reviewing capabilities for sell-side and buy-side e-commerce is shown in Figure 1.13. This shows how companies will introduce more complex technologies and extend the range of processes which are e-business-enabled. More detailed explanation and coverage of stage models is given in Chapter 5.

2. Drivers of consumer Internet adoption

To determine investment in sell-side e-commerce, managers need to assess how to adopt new services such as web, mobile and interactive TV and specific services such as blogs, social networks and feeds. In Chapter 4, we see how such demand analysis is conducted in a structured way. One example of demand analysis is popularity or adoption rates for differ­ent online services. The range of different ways in which consumers use the Internet to research or transact is shown in Figure 1.14. You can see that male and female usage of the Internet for different activities is now very similar, but with downloading of different types of digital content generally more popular amongst males.

We will see in Chapter 4 on strategy development for e-business how it is important that companies offering e-commerce services create a clear online value proposition (OVP) to encourage customers to use their specific online services. Typical benefits of online services are summarized by the ‘Six Cs’, a simple mnemonic to show different types of customer value:

• Content – In the mid-1990s it was often said that ‘content is king’. Well, relevant rich content is still king. This means more detailed, in-depth information to support the buying process for transactional or relationship-building sites or branded experiences to encourage product usage for FMCG brands.
• Customization – In this case mass customization of content, whether received as web site pages such as ‘Amazon recommends’ or e-mail alerts, and commonly known as ‘personalization’
• Community – The Internet liberates consumers to discuss anything they wish through forums, chat-rooms and blog comments. We will explore these techniques more in Chapters 2 and
• Convenience – This is the ability to select, purchase and in some cases use products from your desktop at any time: the classic 24 X 7 X 365 availability of a service. Online usage of products is, of course, restricted to digital products such as music or other data services. Amazon has advertised offline using creative showing a Christmas shopper battling against a gale-swept street clutching several bags to reinforce the convenience message.
• Choice – The web gives a wider choice of products and suppliers than via conventional distri­bution channels. The success of online intermediaries such as Kelkoo (kelkoo.com) and Screentrade (www.screentrade.com) is evidence of this. Similarly, Tesco.com provides Tesco with a platform to give consumers a wider choice of products (financial, travel, white goods) with more detailed information than are physically available in-store.
• Cost reduction – The Internet is widely perceived as a relatively low-cost place of purchase. Often customers expect to get a good deal online as they realize that online traders have a lower cost-base as they have lower staff and distribution costs than a retailer that runs a network of high-street stores. A simple price differential is a key approach to encouraging usage of online services. In the late 1990s, low-cost airline easyJet encouraged the limited change behaviour required from phone booking to online booking by offering a £2.50 discount on online flight bookings.

Note that the 7 Cs of Rayport and Jaworski (2003) provide a similar framework of Context, Content, Community, Customization, Communication, Connection and Commerce.

3. Barriers to consumer Internet adoption

An indication of some of the barriers to using the Internet, in particular for consumer pur­chases, is clear from a survey (Booz Allen Hamilton, 2002) of perceptions in different countries. It noted that consumer barriers to adoption of the Internet included:

• No perceived benefit
• Lack of trust
• Security problems
• Lack of skills
• Cost

This lack of demand for Internet services from this group needs to be taken into account when forecasting future demand.

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