Electronic Business: Concepts, Methodologies, Tools, and Applications (4-Volumes) P55 pptx

474
B2C Failures
what customers expect; (2) not knowing the right
service design and standards; (3) not delivering
to standards; and (4) not matching performance
to standards (Zeithaml & Bitner, 2003). While
these approaches are insightful, they do not
fully address the problems that B2C technology
innovations pose to sellers as well as buyers. We
DUJXHWKDWLQSDUW%&¿UPVIDLOHGEHFDXVHWKH\
failed to perceive correctly the nature and scope
of their innovation, and this eventually led to the
problems of matching consumer expectations as
the context of innovation changed. This is particu-
larly important in the context of high-technology
innovations where the question of the precedence
of technology voice or customer voice remains
a contested issue. We extend the current discus-
sion on innovations, combine high-technology
product development literature, and present a new
framework to show an additional dimension of
GLI¿FXOW\UHJDUGLQJSHUFHSWXDOSUREOHPVFUHDWHG
by the nature and scope of the innovation itself.
Our model explores the problem of concordance
and discordance between buyers and sellers about
the innovation in different innovative contexts.
Our model adds texture and substance to the
theory of diffusion and service quality model in
the context of technology innovation.
Viewing the Initial B2C Wave
as Innovation

As a global concept, B2C represents a major inno-
vation in the way marketing is done. It offers goods
and services to consumers through the Internet. It
reduces search costs. It is convenient, quick, easily
accessible, and less expensive. In this sense it is a
³ Q HZVHU Y LFHL Q Q R YDWLRQ´ IRUFRQVX P H U V D V ZHOODV
WKHZRUOG:KHQ¿UPVRIIHUWUDGLWLRQDOSURGXFWV
such as books, CDs, groceries, and toys via the
Internet, they are not merely marketing known
products to known customers. They are offering
instead fast, highly competitive, interactive, and
technologically facilitated means of informa-
tion access and transaction. Using such means,
consumers are able to shop, make comparisons,
and receive door-to-door service at a reasonably
ORZSULFH7KHIDLOXUHRI%&¿UPVFDQWKXVEH
construed as a failure of an entirely new class of
Internet-mediated service, not just a failure of the
SDUWLFXODU¿UPVLQYROYHG&RQFHSWXDOO\WKHUHIRUH
the B2C debacle needs to be seen as a failure of
a new service product.
Putting this observation into the overall context
of innovation research, however, it is evident that
this experience is not unique. Failure rates of new
products generally continue to be as high as 95%
(Brown & Eisenhardt, 1995). When viewed as
a major innovation in marketing methods, B2C
systems are equally susceptible to such punishing
rates of failure.
Newness of Innovative Solutions

and Needs Addressed by
Innovations
In the 1980s, Hewlett-Packard (HP) found that
successful innovators had a deep understanding
of user needs. HP also found that the primary
FDXVH RI GLI¿FXOWLHV LQ WKH PDUNHWSODFH ZDV D
failure to understand user needs, and the clarity
reached in understanding user needs was the key
determinant of new product success (Leonard-
Barton, Wilson, & Doyle, 1995). But the process
RI¿JXULQJRXWQHHGVLQYDULHGPDUNHWFRQWH[WVLV
GLI¿FXOW7KHGLI¿FXOWLHVDUHFRPSRXQGHGZKHQ
markets are new.
New products entering existing markets ad-
dress known needs. In such cases, satisfaction
JDSV ZLWK H[LVWLQJ SURGXFWV FDQ EH LGHQWL¿HG
with relative ease and incorporated in the new
product. But in new markets, customer needs are
uncertain, and the needs and products co-evolve,
giving rise to four need-solution contexts (as
elaborated later in Table 2). These are respectively
an improved solution for a known need, a new
solution for a known need, a new solution for an
anticipated need, and an evolving solution for
an uncertain need (Leonard-Barton, Wilson, &
Doyle, 1995).
475
B2C Failures
Concordant and Discordant
Perceptions of Innovations

What should drive new product development:
technology or customers? Views of innovators
and customers regarding the nature of product
³EUHDNWKURXJKV´ PD\QRW EH FRQFRUGDQW 6XFK
mismatch in innovator-customer perceptions
could lead to failure of innovations (Rangan &
Bartus, 1995).
Breakthroughs usually employ new technol-
ogy, create new markets, and represent concep-
tual change. Conversely Increments represent a
continuation of existing products or practices.
)XUWKHUPRUHVXSSOLHUVDQGFXVWRPHUV¿QGLWHDV\
to understand increments (Rangan & Bartus,
1995), while breakthroughs — requiring technol-
ogy and applications development — are driven
by technologists (and may be less readily under-
stood by customers). Hence increments tend to
evolve from the demands of customers, and the
customer’s voice (rather than the technologist’s
voice) guides incremental innovations.
Additionally performance at a price, rather
than performance per se, usually becomes a de-
sign criterion for incremental innovations. Hence
when one side thinks a particular innovation is
a breakthrough while the other thinks it is an
increment, we have the potential for discordance.
C l e a r l y f a i l u r e s a r e m o r e l i k el y i n s u c h d i s c o r d a n t
settings.
In the initial B2C wave, there were many pos-
sibilities for discordance:

 /DUJH¿UPVWUHDWHG%&H[WHQVLRQVOLJKWO\
as mere increments, but their customers did
not.
• B2C startups were enamored of the technol
-
ogy and thought they had breakthroughs on
hand. Conversely customers felt they were
buying regular products (clothes, detergents,
books, CDs, toys). The only difference was
that these were being presented through a
different channel.
Understanding of the B2C e-commerce success
vs. failure phenomenon increases substantially
when we integrate concordance in buyer/seller
perceptions with the need-solution context (Table
2). If innovations are to succeed, not only must
the perceptions of sellers and buyers of innova-
tions match, but innovators must also recognize
WKHLQKHUHQWXQFHUWDLQW\LQ¿QGLQJVROXWLRQVIRU
customer needs in situations where contexts
change.
Technology Continuum
B uyer/Seller concur that the
innovation category is:
Buyer/Seller
disagree about
newness
NEE D-SOLUTION
CONTEXT
B

REAK THROUGH
I
NCREMENTAL
M
IS MATC H

Incremental Solution/
Known Need
F
ALSE
D
AWN

C
ONCORDANT
I
NNOVATIONS

D
ISCORDANT
I
NNOVATION

Innovative Solution/
Known Need
M
INOR
B REAKTHROUGH
U
NDERESTIMATED

INNOVATION
D
ISCORDANT
INNOVATION
Innovative Solution/
Anticipated Need
C
ONCORDANT
I
NNOVATIONS

U
NRECOGNIZED
P
ROMISE

D
ISCORDANT
I
NNOVATION

Incremental (Evolving)
Solution/Uncertain Need
P
ERILOUS
O
PTIMIS M

C
AUTIOUS

O
PTIMIS M

D
ISCORDANT
I
NNOVATION

Table 2. Concordant and discordant states of innovations/markets
Source: Authors’ integration of ideas from Leonard-Barton, Wilson, and Doyle (1995) and Rangan and Bartus (1995)
476
B2C Failures
Integrative Innovation Theory
Framework
Table 2 is thus constructed using four dimensions:
(1) customer need (known to uncertain); (2) nature
of solution (improved to evolving); (3) the scope
of innovation (incremental to breakthrough);
and (4) buyer-seller agreement (concordance to
discordance). These four dimensions on which
the framework is constructed give rise to 16
cells. Table 2 shows only 12 cells because the
right-hand column (where buyer/sellers disagree
about newness) shows only four cells instead of
eight cells. To save space, unlike the left column,
we have not bifurcated the rightmost column
into breakthrough and increment columns. Also,
each of the eight cells in this right column has a
³GLVFRUGDQW´HQWU\7KXVORRNLQJDW7DEOHDVD
whole, we see that in the buyer/seller agreement

column, there are only two concordant situations:
one under breakthrough and the other under
increment. The remaining six cells are false
perceptions, overly optimistic assessments, or
overly pessimistic assessments. These cases are
unlikely to lead to success. In the buyer/seller
disagreement column on the right, all eight cells
(only four of which are shown) show discordance
with high chance of failure.
The three right-hand columns of Table 2 char-
acterize the level of concordance or discordance
of the buyer and the seller about the perceived
newness of the innovation. The left-hand column
UHÀHFWVDNLQGRIWHFKQRORJ\FRQWLQXXPUDQJLQJ
from the relative comfort of low-tech/known-
need to the opposite extreme of high-tech/high-
uncertainty.
Concordant innovations occur when needs
are known, and both sellers and buyers agree
the solution is incremental (and therefore un-
derstandable and quickly adopted) and chances
of success are high. But when one party thinks
it is a breakthrough while the other thinks it
is an incremental solution, we have discordant
expectations with greater chances of failure.
In rare cases, there may be the possibility of a
³IDOVH GDZQ´ZKHQDQLQFUHPHQWDO LQQRYDWLRQ
is misperceived as a breakthrough by both sides
and there is concordance — where failure occurs
after a bubble of enthusiasm.

When needs are unknown, both parties must
think it is a breakthrough, otherwise perceptions
will be discordant and success will be unlikely.
7KHUHLVDOVRWKHUDUHSRVVLELOLW\RI³XQUHFRJQL]HG
promise,” when sellers and buyers both see only
LQFUHPHQWDOEHQH¿WVLQDWUXO\LQQRYDWLYHVROX-
tion, which may remain under-promoted and
under-appreciated. As Table 2 shows, for each
solution/need pair, there are concordant and
discordant conditions. However, it is proposed
here that the concordant condition is more likely
to lead to success, while the discordant condition
will most likely lead to failure.
It should be noted that the framework pre-
sented here will behave differently in different
market conditions faced by buyers and sellers.
Competitive conditions will make the problem
of new services and goods marketing certainly
more complicated. We are, however, addressing
a central issue in high-technology products and
services development literature, which argues
that — for success of innovations — concordance
between buyers and sellers is essential. How
that concordance is to be created depends on the
need/solution context of the innovation. It should
be further noted that the framework in Table 2
also suggests that if all cells were equally likely,
concordance is possible in only two out of 16 pos-
sibilities, or about 12% of the time. Discordance is
likely 88% of the time. It is not surprising therefore

WR¿QGWKDWPRVWLQQRYDWLRQVIDLO:KHQZHVHH
WKH¿UVWZDYHRI%&HFRPPHUFHLQWKLVOLJKW
as a service innovation, we can explain the high
failure incidence of this wave. Understanding
such failure then will help managers to conceive
and plan the development of their innovations
better. In the next section we examine published
evidence to validate the various dimensions of
this model.
477
B2C Failures
Evidence of B2C Innovation
Discordance
There is evidence of considerable discordance in
B2C settings. In early 2000, Josh Harris, founder
of the streaming-media company Pseudo.com,
declared with certitude on the CBS television show
³0LQXWHV´WKDWKHZDVWKHUHWRSXWFRPSDQLHV
like CBS out of business (Useem, 2000). At the
WLPHWKH,QWHUQHWZDVVHHQDVD³GLVUXSWLYH´RU
³ EU HDN W K URXJK´WHFKQRORJ \WKDWZRXOGI DYRUQHZ 
entrants and send old-line brick-and-mortar com-
panies scurrying for cover. Pseudo.com of course
no longer exists, but streaming media are being
used extensively on the Internet along with other
media. In hindsight, the discordance inherent in
such views is obvious.
Many established merchants perceived B2C
as breakthrough innovation and deliberately
FUHDWHG ³SXUH SOD\´ LH SXUHO\,QWHUQHWEDVHG

commerce) divisions, insulated from the parent.
Examples include Borders.com and Grainger.com.
Subsequent learning has often apparently changed
WKHVHSHUFHSWLRQV)RUH[DPSOHDIWHUWKH¿UVWÀXVK
of enthusiasm, WW Grainger, a Chicago-based
warehousing company, later reabsorbed Grainger.
com. According to Grainger’s president, it became
obvious that the Internet unit needed greater
interdependence with the originating company
(Useem, 2000).
Michael Dell was far more insightful. He
created an independent online division within
WKH¿UP6FRWW(FNHUWWKH&(2RIWKH,QWHUQHW
company, used highly creative strategy to get the
RUJDQL]DWLRQDVDZKROHWRDGRSWWKHÀHGJOLQJXQLW
once it became a success, and integrated the divi-
sion in their existing business groups and made it
DSDUWRIWKHODUJHU¿UP+DUYDUG%XVLQHVV6FKRRO
Publishing, 1998). Dell clearly saw B2C as a new
JURZWKRSSRUWXQLW\IRUKLV¿UPEXWRQO\DVDQ
extension of existing Dell-Direct business and
not a breakthrough.
In direct contrast to Dell, many B2C start-
ups mostly assumed they were breakthroughs
and spent enormous capital on acquiring new
customers and upgrading technologies. Some
estimate that customer acquisition costs of online
¿UPVZHUHIRXUWLPHVDVKLJKDVWKRVHRIRIIOLQH
companies (Useem, 2000). Agarwal, Arjona,
and Lemmens (2001) also found that companies

spent three to four times the amount a customer
spent at the Web site to acquire a new customer.
The presumption here was that customers, once
acquired, will soon learn the wonders of the
breakthrough technology and eventually will
spend enough money at the Web site to justify
the acquisition costs. Customers were probably
looking for price and good delivery experience.
Discordance in perception set the stage for gaps
in expectations to arise, leading to dissatisfaction
ZLWKWKH¿UPV
Boo.com is the prototypical breakthrough-en-
amored B2C startup. It got entangled in creating
the best aesthetic Web site possible, but failed to
incorporate the basic desire of customers to view
and compare fashion products quickly in order to
make the buying decision. Launched with a blaze
of publicity, it burned through $135 million even
before it went public (Isaacs, 2001). Insiders say
Boo.com failed because it spent too much money
on marketing (Isaacs, 2001). While Boo.com Web
designers fretted about aesthetics, customers were
actually looking for good deals and fast delivery
service. Discordance carried the day.
Petstore.com, Pets.com, Toysmart.com, and
other similar ventures also failed to take off.
They offered nothing new by way of services to
the customers. These Web sites had neither in-
expensive products, nor inexpensive and reliable
delivery systems. They targeted ultra-thin product

niches for which demand had never been proven
(Isaacs, 2001), and they also did not augment
their offers with high quality and timely service.
Toysmart.com did not have a chance in a crowded
space occupied by Toys-R-Us and other e-tailers
(Isaacs, 2001). These B2C e-commerce companies
addressed a known need, but their offer did not
match either customer expectations of better and
478
B2C Failures
cheaper service or the offers of already existing
QHZDQGWUDGLWLRQDOVXSSOLHUV(7R\VIDLOHG¿UVWWR
forecast demand, and then overreacted and over-
stocked products that quickly became obsolete. It
FRXOGQRWIXO¿OOFXVWRPHUH[SHFWDWLRQVGHVSLWH
the fact that its top management team consisted
of experienced Disney executives. Here again
we see examples of innovative companies and
their customers, where perceptual discordance
eventually led to service quality failure.
Misperceptions about
Breakthroughs and Network
Externalities
7KH³EUHDNWKURXJK´QRWLRQSURPSWHGE\WKHLGHD
that the Internet was a disruptive technology,
DOVR VSDZQHG WKH ³LQVWDQWFRPSDQ\´ DSSURDFK
8VHHPUHVWLQJRQLOOXVRU\¿UVWPRYHUDG-
YDQWDJHVDQGQRQH[LVWHQW³QHWZRUNH[WHUQDOLW\´
effects (i.e., the positive impact on all members
of an ever-expanding network). These ideas led

companies to build major brands supported by
marketing and advertising expenditures. Only
some networks, however, are capable of positive
network externalities (Arthur, 1996). Networks
where members are not interdependent do not
exhibit positive externalities. B2C seller-buyer
networks are usually star-shaped, where each
buyer is connected to a single seller. An increasing
membership base does not therefore necessarily
FRQIHUQHWZRUNH[WHUQDOLW\EHQH¿WV
,QWKH¿UVW%&ZDYHWKLVZDVWKHFDVH
B2C players did not have specialized partners
— transporters, parcel couriers, third-party
ORJLVWLFVSURYLGHUVIXO¿OOPHQWKRXVHVSD\PHQW
systems, and producers of main and peripheral
SURGXFWV /DFNLQJ VXFKVHUYLFHV ³WKHH\HEDOOV
the Web sites managed to attract did not turnout
to be loyal” (Useem, 2000, p. 84). For example,
CDNow, a music e-tailer, had 83% name recogni-
tion, but only 17% loyalty. Under such conditions,
EUDQGSURPRWLRQGLGQRWWXUQLQWR¿UVWPRYHURU
network advantage.
A notable trend is that these hard-learned les-
sons have made subsequent and surviving B2C
players attentive to how networks function. The
survivors created partnerships to provide interde-
pendent services and have learned to differentiate
their products on the Internet.
Misperceptions about First-Mover
Advantages

Because the Internet offers instant market ac-
FHVVLWFDQDOVRLQVWDQWO\ZLSHRXWWKH¿UVWPRYHU
advantage of B2C pioneers. In general, me-too
FRPSHWLWRUVFDQHQWHUMXVWDVUDSLGO\DVWKH¿UVW
PRYHUVGLG2QO\¿UPVFDSDEOHRIFUHDWLQJVXV-
tainable advantages can hope to build customer
loyalty. Perceptions that B2C offerings in a sector
are interchangeable commodities, quite logically,
generate commodity like response from the cus-
tomers. In such contexts, savvy second movers
sometimes win the competitive game.
Breakthrough on the Customer
Relationship Side
While B2C methods may not be the disruptive
³EUHDNWKURXJKV´WKDWWKHLQLWLDOZDYH%&SOD\HUV
believed them to be, they are certainly different
because they bring the sellers and the buyers
together in new ways. B2C methods disrupt old
ways of doing business and change the customer-
company relationships. Given this, in B2C set-
tings the customer’s voice must take precedence
over technology’s voice. B2C settings create
new demands on managers regarding listening
DQGUHVSRQGLQJWRWKH³YRLFHRIWKHFXVWRPHU´
This is not easy. A Deloitte Consulting study
RI WRS¿UPV 5HHG IRXQG WKDWRQO\
13% of the companies paid attention to creating
customer loyalty networks (integration of market-
ing and servicing activities through technology)
and supply chain collaborations (streamlining of

¿QDQFHDQGKXPDQUHVRXUFHVDQGWKHFUHDWLRQ
of e-chain connectivity involving collaboration
479
B2C Failures
and customization of manufacturing and supply
processes amongst supply chain partners).
,QSUDFWLFHWKH¿UVWZDYHIDLOHG%&¿UPVDS-
pear to have seen themselves merely as providers
of goods by alternative means. Late entrants and
survivors were substantially more customer cen-
tric. They focused on basic product presentation,
FXVWRPHUVHUYLFHRQWLPHDQGHI¿FLHQWGHOLYHU\
no hassle returns, and so on. In other words,
they designed their services and aligned them
with the needs of the customers, thus creating
concordance.
IMPLICATIONS FOR MANAGERS
AND FOR FURTHER RESEARCH
B2C retail methods offer low start-up costs, ease of
entry, and greater geographic exposure, but these
advantages do not make B2C business models
simple. For example, Amazon.com, the leading
B2C survivor, has increased the assortment of
goods offered. Amazon is continually augment-
LQJ WKH ³%& LQQRYDWLRQ´ E\ DGGLQJ IHDWXUHV
such as full-text search of books, recommenda-
tion engines, reviews and ratings, time-based
Gold Box specials, referral bonuses, payment
system discounts, political campaign coverage
and contribution channels, and so forth. Amazon

has realized that:
  7 K H ¿ U V W ZDY H % & L Q Q RYD W LRQZ D V D Q L Q F U H
-
ment.
2. It is essential to keep pushing this innovation
VRWKDWWKH³$PD]RQFRPVKRSSLQJH[SHUL-
ence” moves towards the two highlighted
concordant cells of Table 2.
By 2004, Amazon had still not met conven-
WLRQDO UXEULFV RI UHWDLO SUR¿WDELOLW\ EXW LW ZDV
inching towards that goal.
The foregoing discussion has several implica-
tions for B2C managers. In relation to its brick-
and-mortar counterpart, the B2C operation must
be viewed and studied as an innovation. In most
cases, such an innovation would turn out to be
more incremental than breakthrough in nature, at
least from the customer perspective. It therefore
EHFRPHVQHFHVVDU\WR¿JXUHRXWWKHVHJPHQWVRI
customers to whom the B2C option will deliver
clear (and more than incremental) advantages.
Amazon found this segment amongst book buyers.
The B2C advantages, however, cannot be static.
Such advantages need to be constantly augmented
and communicated to the customers. Rather than
lapsing into techno-euphoria, the baseline posi-
tion of B2C managers should be this: it is going
WREHH[FHHGLQJO\GLI¿FXOWWRFUHDWHDQGPHHWKLJK
customer expectations.
E-Toys thought it would present serious

competition to brick-and-mortar toy sellers like
Toys-R-Us by removing the hassle of shopping,
especially during frenzied holiday periods. This
created expectations of a fail-proof service. In
practice, however, E-Toys ran out of key inven-
tories, stocked the wrong inventories, and failed
to process orders correctly. The result was that
customers were subjected to serious delays,
particularly during the busy holiday gift-giving
season. If E-Toys had positioned its innovation
incrementally, say as an online birthday toy gift
registry, perhaps it could have engendered and
successfully met the lower expectation levels,
and thus remained in business.
I n s u m m a r y, w e h a ve u s e d h i s t o r i c a l e x a m p l e s
in an eclectic cross-sectional fashion across the
B2C retail sector to illustrate our proposed innova-
tion theory-based framework for B2C success and
IDLOXUH:HVWDUWHGE\TXHVWLRQLQJWKH¿QGLQJVRI
UHFHQWHPSL ULFDOVW XG LHVDVWRZK\VRPDQ\¿ U PV
with so much talent and easy access to capital,
failed to use time-tested management principles.
Why did they fail to realize that managing a B2C
e-commerce required acumen similar to that
required in the conventional brick-and-mortar
world? What was it about this new technology and
service delivery method that most B2C managers
misread? Why could these companies not convert
480
B2C Failures

YLVLWRUVLQWRSUR¿WDEOHDQGOR\DOFXVWRPHUV":H
have argued that it is not incompetence that led
to the collapse of many of these ventures, but a
misperception of their basic business on the one
hand and a mistaken positioning of their innova-
tive services for their customers. These errors
we believe led to discordance in perceptions
between buyers and sellers, and misallocation
RIUHVRXUFHVZLWKLQWKH¿UPPRUHVRDWWKHIURQW
end for customer acquisition and technology
than on customer retention and delivery. These
problems eventually resulted in serious lapses in
service quality, and customer desertion and the
customers’ abandonment of the B2C method.
Our framework captures the problem of creating
concordance between buyers and sellers in the
context of high-tech innovations, and shows by
implication that managers have to be aware of
the nature and scope of the innovations and then
ensure that they are in concordance with their
customer base. The framework underlines the
necessity of correctly choosing between the voice
of the customer and the voice of technology. For
known needs and improved solutions, attention
to customer voice tends to lead to concordance.
But as needs become uncertain and solutions are
evolving, customers know less about the needs
and will depend on the technology to address
their problems. But if managers assume they
have breakthrough innovations, and chances

of this are high in high-tech settings, they will
alienate their clients and will not succeed. The
framework thus can be of great use to managers
involved in developing and marketing innovative
products and services, especially in the e-com-
merce context. They can carefully assess the
need-solution context in which they are operating
and then strive for concordance and avoid false
optimism or pessimism.
While such an approach has value, it also
has obvious limitations. First, there are reasons
other than innovation failure that potentially help
to explain the dot.com B2C crash phenomenon.
These alternative approaches warrant further
continuing and in-depth study to understand
the colossal economic collapse of the dot.com
era. Second, even within the innovation theory
framework that we offer, there is need for further
systematic in-depth studies that go deep into spe-
FL¿F%&FDVHV0RUHV\VWHPDWLFFRPSDULVRQVRI
B2C failures are also needed.
REFERENCES
Achrol, R.S. & Kotler, P. (1999). Marketing in
the network economy. Journal of Marketing,
63(Special Issue), 146-163.
Agarwal, V., Arjona, L.D., & Lemmens, R. (2001).
E-performance: The path to rational exuberance.
The McKinsey Quarterly, (1), 31-43.
Anderson, J. (2001). Carnage.com. Institutional
Investor, 35(1), 90.

Arthur, W.B. (1996). Increasing returns and the
new world of business. Harvard Business Review,
(July-August).
Berry, L.L., Seiders, K., & Grewal, D. (2002).
Understanding service convenience. Journal of
Marketing, 66(July, 3), 1-17.
Brady, M.K. & Cronin, J.J. Jr. (2001). Some new
thoughts on conceptualizing perceived service
quality: A hierarchical approach. Journal of
Marketing Research, 65(3), 34-50.
Brown, S.L. & Eisenhardt, K.M. (1995). Product
GHYHORSPHQW 3DVW UHVHDUFK SUHVHQW ¿QGLQJV
and future directions. Academy of Management
Review, 20(3), 343-383.
Corcoran, E. (2002). Digital diaspora. Forbes,
169(February 15), 74-80.
Harvard Business School Publishing. (1998). Dell
online. Boston.
Isaacs, N. (2001). Crash & burn. Upside, 13(3),
186-192.
481
B2C Failures
This work was previously published in Journal of Electronic Commerce in Organizations, Vol. 3, No. 2, edited by M. Khosrow-
Pour, pp. 68-81, copyright 2005 by IGI Publishing (an imprint of IGI Global).
Leonard-Barton, D., Wilson, E., & Doyle, J. (1995).
Commercializing technology: Understanding
user needs. In K. Rangan, B.P. Shapiro, & R.T.
Moriarty Jr. (Eds.), Business marketing strategy:
Cases, concepts, and applications (pp. 281-305).
Chicago: Irwin.

Marn, M. (2000). Virtual pricing. The McKinsey
Quarterly, (4), 128-130.
Rangan, K. & Bartus, K. (1995). New product
commercialization: Common mistakes. In K.
Rangan, B.P. Shapiro, & R.T. Moriarty Jr. (Eds.),
Business marketing strategy: Cases, concepts, and
applications (pp. 63-75). Chicago: Irwin.
Reed, J. (2000). For success, building a customer-
centric strategy is key. Electronic News, 46(42),
54-59.
Rock, J. (2000). The hostile market hurts more
than just dot-coms. Weekly Corporate Growth
Report, 11068(1118), 11057.
Useem, J. (2000). Dot-coms: What have we
learned? Fortune, (October 30), 82-104.
Varianini, V. & Vaturi, D. (2000). Marketing les-
sons from e-failures. The McKinsey Quarterly,
(4), 85-97.
Zeithaml, V.A. & Bitner, M.J. (2003). Services
marketing: Integrating customer focus across
WKH¿UP Boston: McGraw-Hill-Irwin.
482
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
Chapter 2.11
Procedure for Modeling and
Improving E-SCM Processes
Patcharee Boonyathan
University of Melbourne, Australia
Latif Al-Hakim
University of Southern Queensland, Australia

ABSTRACT
Today’s managers are turning to the functions
of the supply chain to improve margins and gain
competitive advantage. The explosion of the In-
ternet and other e-business technologies has made
real-time, online communication throughout the
entire supply chain a reality. Electronic supply
chain management (e-SCM) is a reference to
the supply chain that is structured via electronic
technology-enabled relationships. This chapter
concentrates on the development of a procedure
referred to as eSCM-I for e-SCM process im-
provement. The procedure focuses on process
mapping and relies on principles of coordination
theory. It is based on SCOR to standardize the
process and take advantage of this technique
of benchmarking/best practices potential. The
procedure employs IDEF0 technique for mapping
the processes.
INTRODUCTION
Supply chain management (SCM) is a network of
entities that encompasses every effort involved
LQSURGXFLQJDQGGHOLYHULQJD¿QDOSURGXFW
from the supplier’s supplier to the customer’s
customer (Supply Chain Council, 1997, in Lum-
mus & Vokurka, 1999). A key principle is that
all strategies, decisions, and measurements are
made considering their effect on the entire supply
chain, not just individual functions or organiza-
tions (Towill, 1996).

The association of supply chain manage-
ment with e-business offers new challenges for
marketing. The explosion of the Internet and
other telecommunication technology has made
real-time, online communication throughout the
entire supply chain a reality. The Internet allows
483
Procedure for Modeling and Improving E-SCM Processes
companies to interact with customers, and col-
lect enormous volumes of data and manipulate
it in many different ways to bring out otherwise
unforeseen areas of knowledge (Abbott, 2001).
Poirier and Bauer (2000) refer to the term ‘elec-
tronic supply chain management’ as a reference
IRUWKH³QDWXUDOFRPELQLQJRIVXSSO\FKDLQDQG
e-commerce.” Electronic supply chain manage-
ment (e-SCM) is a concept introduced to the need
RIDGDSWDELOLW\DQGÀH[LELOLW\LQDKLJKO\G\QDPLF
e-business environment which focuses on network
integration. E-SCM refers to the supply chain that
is built via electronic linkages and structurally
based on technology-enabled relationships (Wil-
liams, Esper, & Ozment, 2002).
Poirier and Bauer (2000) highlight three
constituents in the preparation and execution of
e-SCM:
1.
E-network: Business networks should sat-
isfy customer demands through a seamless
(fully connected end-to-end) supply chain

to serve the end consumer (see also Towill,
1997).
2.
Responses: Customer responses form the
central theme of the supply chain strategy.
The market value of the supply chain can be
dramatically enhanced by jointly creating
SUR¿WDEOHUHYHQXHJURZWKWKURXJKLQWHJUDWHG
inter-enterprise solutions and responses.
3.
Technology: Each of the above constitu-
ents can achieve the purposes and goal of
the supply chain by being supported with
leading-edge technology, particularly e-
commerce.
The three constituentse-network, customer
responses, and technologycould be seen as the
³LQSXW´LQWRH6&0ZRUNLQJWRJHWKHUWRDFKLHYH
the ultimate aim (output) of the supply chainthat
is, customer satisfaction. In synergy with the
model developed by Goldman, Nagel, and Preiss
(1995) and Meade and Sarkis (1999) for agile
manufacturing, Figure 1 models the dimensions of
an e-SCM environment within the context of the
IDEF0 process mapping modeling technique.
Murillo (2001) and Helms, Ettkin, and Chap-
man (2000) indicate that the problem in pursuing
supply chain construction efforts is not a lack of
ideas about what to do, but instead about how
to coordinate the efforts throughout the supply

network. It was drawn by Peppard (1995) that a
business process approach can act as a catalyst for
bringing together the various things that have been
occurring in the organization and management
areas over the past decade. He further suggests
that a process focus can provide an integrative
mechanism. Process management involves plan-
ning and administering the activities necessary to
achieve a high level of performance in a process,
and identifying opportunities for improving qual-
ity and operational performance. Ultimately it
includes translating customer requirements into
product and service design requirements (Evans
& Lindsay, 2002).
*ROGPDQHWDOUHFRJQL]HWKHVLJQL¿-
cance of employees as a company asset and em-
phasize the importance of leveraging the impact
of people and information for an agile enterprise.
Evans and Lindsay (2002) show direct correlation
between employees’ (people) satisfaction and
customer satisfaction, and argue that ‘people’
DUHWKHRQO\RUJDQL]DWLRQDVVHWWKDW³FRPSHWLWRUV
cannot copy; and the only one that can synergize,
that is, produce output whose value is greater than
the sum of its parts.” Evans and Lindsay (2002)
also emphasize that the two key components of
service system quality are employees and in-
formation technology. Meade and Sarkis (1999)
state that people and information are the most
valued resources. It follows that the mechanism

that converts the input of the e-SCM environment
to its output (i.e., customer satisfaction) includes
three constituents: process, people, and informa-
tion sharing. In an analogy with agile enterprise
dimensions (Goldman et al., 1995; Meade &