Revising organizational structures in e-business

When a company first embarks on e-business, perhaps through creating a new web site to pro­mote its products, it will normally operate within the existing company structure, perhaps using outsourcing to make good a resource deficit. However, as the contribution of the web site to the company increases, the work involved increases and more staff from different parts of the organization are involved in e-business, it may be necessary to adopt new organizational structures and working practices. This issue has been considered by Parsons et al. (1996) from a sell-side e-commerce perspective. They recognize four stages in the growth of what they refer to as ‘the digital marketing organization’:

• Ad hoc activity. At this stage there is no formal organization related to e-commerce and the skills are dispersed around the organization. At this stage it is likely that there is poor inte­gration between online and offline marketing communications. The web site may not reflect the offline brand, and the web site services may not be featured in the offline marketing communications. A further problem with ad hoc activity is that the maintenance of the web site will be informal and errors may occur as information becomes out of date.
• Focusing the effort. At this stage, efforts are made to introduce a controlling mechanism for Internet marketing. Parsons et al. (1996) suggest that this is often achieved through a senior executive setting up a steering group which may include interested parties from marketing and IT and legal experts. At this stage the efforts to control the site will be experimental with different approaches being tried to build, promote and manage the site.
• Formalization. At this stage the authors suggest that Internet marketing will have reached a critical mass and there will be a defined group or separate business unit within the company which manages all digital marketing.
• Institutionalizing capability. This stage also involves a formal grouping within the organization, but is distinguished from the previous stage in that there are formal links created between digital marketing and a company’s core activities. Baker (1998) argues that a separate e-commerce department may be needed as the company may need to be restructured in order to provide the necessary levels of customer service over the Internet if existing processes and structures do not do this.

Although this is presented as a stage model with evolution implying all companies will move from one stage to the next, many companies will find that true formalization with the cre­ation of a separate e-commerce or e-business department is unnecessary. For small and medium companies with a marketing department numbering a few people and an IT department perhaps consisting of two people, it will not be practical to have a separate group. Even large companies may find it is sufficient to have a single person or small team responsible for e-commerce with their role being to coordinate the different activities within the company using a matrix management approach. That many companies are not ready to move to a separate digital marketing depart­ment was indicated by the KPMG report (Baker, 1998). Here it was found that over three-quarters of respondents were against establishing a separate e-commerce department.

Activity 10.3 reviews different types of organizational structures for e-commerce. Table 10.4 reviews some of the advantages and disadvantages of each.

Where the main e-commerce function is internal, the Econsultancy (2005) research sug­gested that it was typically located in one of four areas (see Figure 10.10) in approximate decreasing order of frequency:

• Main e-commerce function in separate team.
• Main e-commerce function part of operations or direct channel.
• Main e-commerce function part of marketing, corporate communications or other central marketing function.
• Main e-commerce function part of information technology (IT).

There is also often one or several secondary areas of e-commerce competence and resource. For example, IT may have a role in applications development and site build and each busi­ness, brand or country may have one or more e-commerce specialists responsible for managing e-commerce in their unit. Consider which of the options would be preferable for organizations you are familiar with, such as your college or university or companies you have worked with. The research suggested that the approach which was appropriate depended strongly on the market(s) the company operated in and their existing channel structures.

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