Description
Entrepreneurship And Innovations In E-business An Integrative Perspective
Entrepreneurship
and Innovations
in E-Business:
An Integrative Perspective
Fang Zhao
Royal Melbourne Institute of Technology University, Australia
Hershey • London • Melbourne • Singapore
IDEA GROUP PUBLISHING
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Copyright © 2006 by Idea Group Inc. All rights reserved. No part of this book may be reproduced,
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Library of Congress Cataloging-in-Publication Data
Entrepreneurship and innovations in e-business : an integrative perspective / Fang Zhao, editor.
p. cm.
Summary: "The book presents a comprehensive introduction of the concepts and practices of e-
entrepreneurship and e-innovation"--Provided by publisher.
Includes bibliographical references and index.
ISBN 1-59140-920-9 (h/c : alk. paper) -- ISBN 1-59140-921-7 (s/c : alk. paper) -- ISBN 1-59140-
922-5 (ebook : alk. paper)
1. Electronic commerce. I. Zhao, Fang, 1956-
HF5548.32.E586 2006
658.8'72--dc22
2005027701
British Cataloguing in Publication Data
A Cataloguing in Publication record for this book is available from the British Library.
All work contributed to this book is new, previously-unpublished material. The views expressed in this
book are those of the authors, but not necessarily of the publisher.
Entrepreneurship and
Innovations in E-Business:
An Integrative Perspective
Table of Contents
Preface ........................................................................................................ vi
Chapter I
Entrepreneurship and Innovation in E-Business: An Integrative
Perspective .................................................................................................. 1
Fang Zhao, RMIT University, Australia
Chapter II
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks:
A Deleuzian Approach to Emergent Knowledge Dynamics .................. 18
Alexandra Steinberg, The London School of Economics and
Political Science, UK
Chapter III
Innovation and B2B E-Commerce: Explaining What Did Not
Happen....................................................................................................... 41
Steve New, University of Oxford, UK
Chapter IV
How E-Entrepreneurs Operate in the Context of Open Source
Software...................................................................................................... 62
Ambika Zutshi, Deakin University, Australia
Samar Zutshi, Monash University, Australia
Amrik Sohal, Monash University, Australia
Chapter V
Personalized Relationship E-Marketing and the Small Medium-Sized
Enterprise .................................................................................................. 89
Clare Brindley, University of Central Lancashire, UK
Diane Wright, Manchester Metropolitan University, UK
Chapter VI
Strategies for Virtual Learning and E-Entrepreneurship in Higher
Education ................................................................................................. 107
Juha Kettunen, Turku Polytechnic, Finland
Mauri Kantola, Turku Polytechnic, Finland
Chapter VII
The Beginnings of a Postal E-Marketplace: Innovation or Natural
Evolution? The Corprocure Story ......................................................... 124
Kim Hassall, Melbourne University, Australia
Karyn Welsh, corProcure, Australia
Chapter VIII
Sensis.Com.Au: An Uprising Star of E-Innovation and
E-Entrepreneurship................................................................................ 148
Fang Zhao, RMIT University, Australia
Chapter IX
Using E- and M-Business Components in Business:
Approaches, Cases, and Rules of Thumb............................................. 159
Mikael Collan, Åbo Akademi University, Finland
Anna Sell, Åbo Akademi University, Finland
Ville Harkke, Åbo Akademi University, Finland
Bill Anckar, Omena Hotellit Oy / IAMSR, Finland
Chapter X
Entrepreneurial Opportunities On the Internet .................................. 179
Di Waddell, Deakin University, Australia
Mohini Singh, RMIT University, Australia
Ambareen Musa, General Electric, UK
Chapter XI
Online Information Privacy and Its Implications for
E-Entrepreneurship and E-Business Ethics ........................................ 200
Carmen Gould, RMIT University, Australia
Fang Zhao, RMIT University, Australia
Chapter XII
E-Organisation and Its Future Implication for Small and
Medium-Sized Enterprises .................................................................... 223
Gideon Azumah, University of Sheffield, UK
S.C. Lenny Koh, University of Sheffield, UK
Stuart Maguire, University of Sheffield, UK
Chapter XIII
A Prototype E-Business Model to Create a Competitive
Advantage in SMEs ................................................................................ 238
S. Pavic, University of Sheffield, UK
M. Simpson, University of Sheffield, UK
S. C. L. Koh, University of Sheffield, UK
Chapter XIV
Impact of E-Innovation on Corporate Procurement Control:
Electronic Marketplaces and Broad Spectrum Changes .................... 261
J. Doug Thomson, RMIT University, Australia
Glossary ................................................................................................... 288
About the Authors .................................................................................. 294
Index ....................................................................................................... 301
vi
Preface
The fast growth and business successes of Amazon.com, Dell, travel.com, and
others, and the bankruptcy of numerous dot-com firms worldwide in 1999-2000
have reinforced the importance of entrepreneurship and innovation in e-com-
merce and e-business. E-entrepreneurship and e-innovation are emerging dis-
ciplines for proactively responding to changes in the e-world. The dot-com crash
presented new challenges and new opportunities to entrepreneurs as well as
intrapreneurs and researchers to rethink and redefine the constructs of entre-
preneurship and innovation for e-business. This author argues that a combina-
tion of entrepreneurship and innovation will be a crucial factor to the long-term
sustainability of e-commerce and e-businesses. While in this frenetically changing
competitive landscape, e-entrepreneurship and e-innovation help organizations
to gain competitive advantage, they raise important issues in their practices.
“Entrepreneurship, in its narrowest sense, involves capturing ideas, converting
them into products and/or services and then building a venture to take the prod-
uct to market” (Johnson, 2001, p. 138). A noticeable trend in the study of entre-
preneurship in recent years has been away from the subject of small business
per se toward the concept of entrepreneurship (Cornwall & Perlman, 1990;
Chell, 2001). This book reflects this trend by emphasising the concept of entre-
preneurship itself, rather than the personality or psychology of small e-business
entrepreneurs in e-business.
Entrepreneurship represents organisational behaviour. The key elements of
entrepreneurship include risk-taking, proactivity, and innovation (Miller, 1983).
However, Slevin and Covin (1990, p. 43) argued that the three elements are not
vii
sufficient to ensure organisational success. They maintained that “a successful
firm not only engages in entrepreneurial managerial behaviour, but also has the
appropriate culture and organisational structure to support such behaviour.”
The book adopts a similar approach and treats entrepreneurship as organisational
behaviour that is related to change and innovation and discusses both external
and internal environmental elements and structures for fostering entrepreneur-
ship and innovation in e-business environment.
From an economic perspective, entrepreneurship increases national prosperity
and competitiveness by virtue of its impact on employment creation and the
development of new goods and services (Zahra et al., 1999). Corporate entre-
preneurship, that is, intrapreneurship, can be used to improve competitive posi-
tioning and transform corporations, their markets, and industries as opportuni-
ties for value-creating innovations are developed and exploited (Miller, 1983;
Naman & Slevin, 1993; Lumpkin & Dess, 1996). There is a firmly established
empirical base for claiming the effectiveness of corporate entrepreneurship
(Lumpkin & Dess 1996; Zahra & Covin 1995). The book examines the rela-
tionship between the economy and e-entrepreneurship and e-innovation and the
effect of corporate entrepreneurship on e-business success.
Is entrepreneurship related to innovation? Studies show that there is consider-
able overlap between entrepreneurship and innovation (Kanungo, 1999; Sundbo,
1998; Drucker, 1994; Schumpeter, 1934). Innovation is the specific tool of en-
trepreneurship by which entrepreneurs exploit change as an opportunity for a
different business or service. Moreover, innovation has to address market needs,
and requires entrepreneurship if it is to achieve commercial success (Zhao,
2004). Entrepreneurship is a change of state, a dynamic process, and a unique
event. Legge and Hindle (1997) believed that people who lead teams and
organisations to introduce innovations are entrepreneurs. Entrepreneurs seek
opportunities, and innovations provide the instrument by which they might suc-
ceed. Corporate entrepreneurship often refers to the introduction of a new
idea, new products, a new organisational structure, a new production process,
or the establishment of a new organisation by (or within) an existing organisation.
As Herbig, Golden, and Dunphy (1994, pp. 37 and 45) have observed: “Innova-
tion requires three basic components: the infrastructure; the capital; and the
entrepreneurial capacity needed to make the first two work.”
Drawing upon the outcomes of the principal studies of entrepreneurship and
innovation, this book opens up a new field of debate and research about the role
of entrepreneurship and innovation in the e-world, namely, e-entrepreneurship
and e-innovation. E-entrepreneurship and e-innovation refer to broadly entre-
preneurship and innovation in the context of e-business activities and opera-
tions. The theoretical constructs and the working concepts of e-entrepreneur-
ship and e-innovation are developed and explored from various perspectives in
the book through comprehensive and collective studies by a number of researchers
and practitioners with e-business and management expertise.
viii
The primary purpose of the book is to explore the changes in the nature, pro-
cess, and practice of entrepreneurship and innovation in e-commerce and e-
business after the dot-com crash. The specific objectives are:
• To characterize and define the main constructs of e-entrepreneurship and
e-innovation;
• To examine the relationships and internal synergies between entrepre-
neurship and innovation in e-commerce and e-business;
• To explore the economical, social, political, and organizational structural
elements in the rise and fall of e-entrepreneurship and e-innovation;
• To investigate the effect of “e-intrapreneurship,” that is, e-entrepreneur-
ship within organizations, on e-business;
• To identify and corroborate best practices in e-entrepreneurship and inno-
vation through best practice case studies;
• To examine ethical issues relating to e-entrepreneurship; and
• To speculate the future trends of the e-dimension of entrepreneurship and
innovation.
You will find the book extremely helpful if you belong to one of the following
groups:
• Entrepreneurs and managers from micro-enterprises to multinational com-
panies who have been engaged in or plan to start, e-commerce and/or e-
business;
• Lecturers and students in the subject areas of entrepreneurship and inno-
vation;
• Researchers and students who study the electronic business and technol-
ogy aspects of entrepreneurship and innovation;
• Government policy-makers and regulators who seek to address the sig-
nificant issues in relation to e-commerce in the small and medium-sized
business sector; and
• Anyone who is interested in the field of study.
This book helps e-business managers to formulate and implement strategies
that foster the development of e-entrepreneurship and e-innovation, and pro-
vides a greater understanding of the crucial issues in e-business operations in a
wide range of fields. As the present study is based upon both empirical and
theoretical research, the book is also a valuable resource for researchers and
students in the study field.
ix
A review of the current literature about e-business as well as entrepreneurship
and innovation found that there is hardly any English language literature inves-
tigating the dot-com crash from a perspective of entrepreneurship and innova-
tion. The book intends to fill the knowledge gap and entails a better understand-
ing of how significantly e-businesses rely on their entrepreneurial and innova-
tive capacities, and how to develop these capabilities needed for sustainable
success.
The book provides readers with both theoretical and practical guidance to a
further study of e-entrepreneurship and e-innovation. The book presents a com-
prehensive introduction of the concepts and practices of e-entrepreneurship
and e-innovation. The book discusses the application of the concepts in e-busi-
ness operations and management. Readers are able to appreciate the key is-
sues involved in the development of e-entrepreneurship and e-innovation.
The book is organized into 14 chapters, addressing the objectives of the book. A
brief description of each of the chapters follows:
Chapter I sets the theme for the entire book. It identifies and explores the
synergies between entrepreneurship and innovation, analyses the factors that
foster an interaction between the two, and provides an integrative framework
for building entrepreneurial and innovative organization in the e-world. The chap-
ter reports findings from a number of case studies of entrepreneurial and inno-
vative dot-com companies and from a comprehensive review of entrepreneur-
ship and innovation literature. This empirical study contributes to a better un-
derstanding of the existing theories and practices of entrepreneurship and inno-
vation in organisations.
Chapter II introduces the work of Deleuze and Guattari, particularly their no-
tion of rhizomic becomings to the study of emergent knowledge dynamics in
contexts of innovation. It shows how an analysis of rhizomic becomings can
assist to explore new and emergent patterns, channelling interpretation toward
the discovery of new combinations and creative assemblages in knowledge.
This is exemplified by the example of a qualitative study exploring knowledge
dynamics in e-business entrepreneurship since the dot-com crash. The results
highlight the forging of the conditions for innovation in new combinations of
lines of affect and lines of technology.
Chapter III critically challenges the naïve view of Internet innovation and re-
flects on the extraordinary rise and fall of large numbers of e-entrepreneurial
intermediaries. Unlike much of the literature in this area, which has largely
focused on leading companies or the few successful hubs, this chapter concen-
trates more on the opportunities and obstacles that face small and entrepre-
neurial organizations, and the innovations which failed. It addresses two central
questions: Why did the Internet revolution not happen? What substantive ideas
for business practice can be salvaged from the wreckage? Drawing on a multi-
stranded empirical study, this chapter seeks to explain the divergence between
the expected and realised degrees of e-business innovation.
x
Chapter IV presents experiences of two entrepreneurial companies in adopting
e-innovations. The chapter identifies current and future online business envi-
ronments, especially in light of Open Source Software (OSS) being accepted
globally. Unlike proprietary software (such as Windows), OSS comes with its
internal implementation details (source code) visible both to its developers and
users, along with the freedom to change and redistribute this source. The sig-
nificant implications of this unique style of software distribution for e-entrepre-
neurs are examined. Having a flexible strategic plan; possessing management
skills; providing excellent service; and having patience are some of the recom-
mendations provided by interviewed e-entrepreneurs. When made part of the
decision-making process, these recommendations would enhance current and
future e-entrepreneurs in sustaining their business.
Chapter V aims to illustrate how technology innovations can be implemented in
the SME sector and to explore how technology innovation and marketing can
help each other in enhancing e-entrepreneurial companies. The chapter fo-
cuses on a UK-based marketing communications company which has devel-
oped an innovative personalized relationship e-marketing tool, utilizing mobile
technology aimed at the SME sector. Current marketing practices, such as da-
tabase marketing and CRM systems, are discussed in terms of SME adoption.
The chapter provides a pragmatic guide to formulating SME relationship mar-
keting strategies using e-innovations.
Unlike other chapters of the book which predominantly focus on the business
and/or industry sectors, Chapter VI seeks to explore the strategies for virtual
learning and e-entrepreneurship in higher education institutions. The study ex-
amines the pedagogical ICT strategy which is a specific functional strategy
that describes the strategic outlines for virtual learning and e-entrepreneurship.
The aim is also to explore the methods (such as the balanced scorecard (BSC)
approach developed by Kaplan and Norton) to communicate and implement the
strategy in an understandable and efficient manner. This chapter helps educa-
tional administrators to better implement strategies for virtual learning and e-
entrepreneurship.
Chapter VII illustrates the rise and fall of an e-entrepreneurial company em-
bracing e-innovation. The case company corProcure, a postal e-marketplace
founded in partnership with 13 big corporations, was viewed by many as a
promising e-innovation star when it was launched. But the company’s business
model failed. This chapter seeks to answer the questions: Why had the poten-
tially largest buying cartel failed so quickly? What lessons were learned? What
was the right e-business strategy that needed to be implemented? The evolu-
tion of corProcure.com has been a learning curve for those involved, the initial
owners, the new owner Australia Post, but also for all the interested e-business
observers.
xi
Chapter VIII presents a case study of Sensis Search, a young successful e-
business which was launched in July 2004. The case study sheds light on a
model of best practices in terms of the development of entrepreneurship and
innovation, in the current business environment where the overall economic
conditions worldwide have been improving, and investors’ confidence in high-
tech and e-business industries has been recovering. The e-entrepreneurship
strategy that Sensis Pty, the parent company of Sensis Search, has taken is
actually that of an intrapreneurship, that is, an entrepreneurship within an orga-
nization. The chapter explores the lessons, both good and bad, learned from the
case and identifies the areas for future research.
Chapter IX discusses using e- and m-business components in supporting and
enhancing existing businesses and in creating new business innovations. A frame-
work illustrating two different approaches companies have to the adoption of e-
and m-business components is proposed. Three cases of how Finnish compa-
nies have, in an innovative way, used e- and m-business components to support,
to enhance, and to launch entrepreneurial businesses are presented. Based on
the illustrative framework and the cases, some rules of thumb for using e- and
m-business components are proposed. The aim of this chapter is to offer e-
managers and e-entrepreneurs helpful insights for planning e- and m-business
component investments.
Chapter X explores the main constructs of e-entrepreneurship through a case
study of an Internet start-up company developed by two e-entrepreneurs. The
Internet is a new platform for setting up business providing entrepreneurial
opportunities to those who may not be capital rich. It enables people to turn
innovative business ideas into reality. It is also apparent from the case study
that like any other business, just an innovative idea is not enough, a business
plan and a revenue model are essential for developing the enterprise. The e-
entrepreneurs in the example had to make an enormous effort in marketing and
promotion of the business for customer acceptance.
Chapter XI touches on ethical issues in e-entrepreneurship. It reports the re-
sults of an Australian national survey which studied Australian Internet users’
online information privacy values using a typology that combines specific de-
mographic and attitudinal measurements with behavioural data. The chapter
contains a comprehensive examination of the internal, external/environmental,
and behavioural dimensions of information privacy, incorporating a comprehen-
sive profile of each of the typologies’ categories along with a general profile of
total respondents. The implications of the findings for e-entrepreneurship and
e-business ethics are discussed.
Chapter XII incorporates several perspectives to examine how small and me-
dium-sized enterprises (SMEs) use the network technologies and information
and communication technology (ICT) in their current business environment.
Through a literature review and interviews, the chapter analyses the various
xii
options for managing the transformation, and its effects, to ascertain the appro-
priate strategies within a range of SMEs. The results of this study reveal that
the SMEs’ journey toward becoming e-organisations can be classified into three
stages: 1/2-fusion, fusion, and the ultimate e-organisation stage. Based on this
work, strategic solutions are proposed for future SMEs intending to adopt Internet
and other network technologies.
Chapter XIII explores new ways for SMEs to create a competitive advantage
through the use of e-business. It examines the level of ICT use in SMEs and
identifies the drivers and barriers which owner-managers face in adopting e-
business. Furthermore, it explores the degree of awareness amongst SMEs of
the opportunities available to them for developing their employees, their busi-
ness strategies, and their attitudes toward the range of initiatives and options on
the use of e-business. Industry behaviour and organisational culture in relation
to the creation of competitive advantage through e-business are also explored.
Chapter XIV addresses the very important question of the impact of e-innova-
tion, namely, Web-based global electronic procurement systems and market-
place on corporate governance in relation to organizational purchasing — the
organizational structures and processes for procurement control. This is under-
taken through an action research case study of the failures and successes of
competitor global organizations cooperatively establishing and utilizing a global
electronic marketplace. Specifically, the chapter investigates how electronic
procurement contributes to the adaptation and evolution of control structures
— from highly structured, bureaucratic, and rigid to flexible, adaptable, free-
flowing, and profitable, and these can result in substantial reductions in transac-
tion costs.
In today’s e-business context, technology, customers, competitors, and partners
can change rapidly. E-technology innovations can become obsolete in the blink
of an eye and customers can appear and disappear with a keystroke. In such
circumstances, it is crucial that e-business entrepreneurs, managers, and policy-
makers have an insightful knowledge and understanding of the complexities of
e-business and how to make e-entrepreneurship and e-innovation work for e-
business.
As shown, e-entrepreneurship and e-innovation are critical to the sustainability
of e-business. Unfortunately, they are under-researched areas in e-business
management literature. While there are many publications, both academic and
professional, that talk about e-business and entrepreneurship, such as the books
authored by Timmons and Spinelli (2003) and Allen (2000), most of the publica-
tions place their focus on how to help micro enterprises and entrepreneurs set
up and run e-commerce.
Unlike the existing publications, this book was written from an integrative per-
spective of entrepreneurship and innovation to examine both strategic and op-
erational issues around e-business after the dot-com crash. The book also con-
xiii
tributes to the development of the emerging disciplines of e-entrepreneurship
and e-innovation both theoretically and practically.
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xv
Acknowledgments
The production of this book would not have been possible without the assis-
tance of the institutions and the people to whom I am deeply grateful. I am
greatly indebted to the School of Management and the Business Portfolio of
Royal Melbourne Institute of Technology University, Australia, for their re-
search grants and the time that was needed to undertake this project. I also am
indebted to all the chapter authors for their insights and excellent contributions
to this book. Also, special thanks go to all the reviewers of my proposal of this
book and reviewers of each of the chapters of the book for their constructive
and invaluable reviews and comments. A further special note of thanks goes to
the publisher Idea Group Inc. and Dr. Mehdi Khosrow-Pour for offering me an
opportunity to publish the book, and to the publishing team, in particular, Ms.
Kristin Roth and Ms. Michele Rossi, for helping me keep the project on sched-
ule.
Finally, I wish to thank my parents, Deming and Peishen, and my daughter
Kelly for their love and warm support throughout this project.
Entrepreneurship and Innovation in E-Business 1
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
Chapter I
Entrepreneurship
and Innovation
in E-Business:
An Integrative Perspective
Fang Zhao
RMIT University, Australia
Abstract
This chapter argues that a combination of entrepreneurship and innovation
is a crucial factor to the long-term sustainability of e-commerce and e-
businesses. Entrepreneurship and innovation are positively related to each
other and interact to help an organisation to flourish. The chapter takes an
integrative approach to exploring the synergies between entrepreneurship
and innovation and to analysing the factors that foster an interaction
between the two. Case studies of entrepreneurial and innovative dot-com
companies were conducted to complement a comprehensive lit erature
review of entrepreneurship and innovation. This empirical study contributes
to a better understanding of the existing theories and practices of
entrepreneurship and innovation in organisations.
2 Zhao
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
Introduction
The fast growth and business successes of eBay, Amazon.com, travel.com,
priceline.com, and so forth, and the bankruptcy of numerous dot-com firms
worldwide in 2000 have held potent management implications for IT innovation
and entrepreneurial organizations worldwide. E-entrepreneurship and e-
innovation are emerging disciplines for proactively responding to changes in the
e-business world. The dot-com crash presented new challenges as well as new
opportunities to e-business entrepreneurs and managers to rethink and reshape
their business strategy. This author argues that a combination of entrepreneur-
ship and innovation is a crucial factor to the long-term sustainability of e-
commerce and e-businesses. In this frenetically changing competitive land-
scape, an integrative approach to e-entrepreneurship and e-innovation will
enable organizations to gain competitive advantage and hold the key to e-
business success.
This chapter investigates the relationship between entrepreneurship and innova-
tion and their roles in organizational development, in general, and in dot-com
industries, in particular. A review of the current literature about e-business as
well as entrepreneurship and innovation found that there is hardly any English
language literature investigating dot-com experiences from a perspective of
entrepreneurship and innovation. Some studies have dealt with the process,
structure, and strategy of either entrepreneurship or innovation (Littunen, 2000;
Cornwall & Perlman, 1990: Caird, 1988; Casson, 1982), and others have touched
on the conceptual relationship between the two (Schumpeter, 1934; Drucker,
1994; Legge & Hindle, 1997; Kanungo 1998; Sundbo, 1998). However, there
have been few empirical studies that explore the synergies between the two.
Thus, the aims of this chapter are:
• to contribute to an understanding of the complementary nature of entrepre-
neurship and innovation through an empirical study of dot-com companies,
and
• to develop an integrative framework for building entrepreneurial and
innovative organization.
Data for this qualitative study were collected from three sources, using comple-
mentary methods. First, a review of principal literature about entrepreneurship
and innovation was undertaken to collate the existing theories about the two and
explore the conceptual relationships between them. Second, semi-structured
interviews were conducted to examine the perceptions of senior managers in e-
business regarding entrepreneurship and innovation and the factors that contrib-
Entrepreneurship and Innovation in E-Business 3
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
ute to the development and integration of entrepreneurship and innovation.
Eleven senior managers involved in e-businesses in Australia were interviewed
between April and August 2004. These interviews focused on how the dot-coms/
e-businesses have been managed, how they have succeeded or failed, and what
lessons can be learned from their experiences. This chapter reports part of
findings of the interviews relevant to the main theme of the study. Third, case
studies of five dot-com companies were undertaken to explore organisational
practice and behaviour, and the correlation between business practice entrepre-
neurship and innovation in dot-com industries. Three of the case studies rely
on documentary research, while the other two rely on semi-structured interviews
with their senior managers. The companies that were selected for the case
studies and interviews encompass various business sectors (e.g., search engine,
online auctioneer and retailing, digital music provider, and online speaker portal),
operating in different nations and cultures, and have different histories, varying
in size and length of existence, but they serve to illustrate the main focus of the
chapter — the interaction between entrepreneurship and innovation in e-
business.
Literature Review
There has been no consensus in defining entrepreneurship and innovation in the
existing literature. Some studies have dealt with entrepreneurship and innovation
by investigating the personality and psychology of entrepreneurs and innovators
(Littunen, 2000; Caird, 1988; Casson, 1982). Others have talked of the nature of
entrepreneurship and innovation in organisations (Goffin & Pfeiffer, 1999;
Martin, 1994). This literature review summarises a diverse spectrum of views
about entrepreneurship and innovation and the relationship between them. The
review also touches on cultural issues because they have a profound influence
on the development of entrepreneurship and innovation (Herbig, Golden, &
Dunphy, 1994).
Entrepreneurship
“Entrepreneurship, in its narrowest sense, involves capturing ideas, converting
them into products and/or services and then building a venture to take the product
to market” (Johnson, 2001, p. 138). A noticeable trend in the study of entrepre-
neurship in recent years has been away from the subject of small business per
se toward the concept of entrepreneurship (Cornwall & Perlman, 1990; Chell,
2001). The chapter reflects this trend by emphasising the concept of entrepre-
4 Zhao
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neurship itself, rather than the personality or psychology of small business
entrepreneurs.
Entrepreneurship represents organisational behaviour. The key elements of
entrepreneurship include risk-taking, proactivity, and innovation (Miller, 1983).
However, Slevin and Covin (1990) have argued that the three elements are not
sufficient to ensure organisational success. They maintained that “a successful
firm not only engages in entrepreneurial managerial behaviour, but also has
the appropriate culture and organisational structure to support such behaviour”
(Slevin & Covin, 1990, p. 43). This chapter adopts a similar approach and treats
entrepreneurship as organisational behaviour that is related to change and
innovation.
Entrepreneurs and Small Business Owners
Entrepreneurs are different from small business owners. Garland, Hoy, Boulton,
and Garand (1984) and Steward, Watson, Garland, and Garland (1998) argued
that small business owners were concerned primarily with securing an income
to meet their immediate needs and that they did not usually engage in innovation,
whereas entrepreneurs had higher achievement motivation and risk-taking, and
were inclined to innovation and change. This chapter presents a related
perspective in arguing that entrepreneurship and innovation are closely related
and complementary.
Corporate Entrepreneurship or Intrapreneurship
Drucker (1994) made an important contribution to the theoretical construct of
entrepreneurship in large organisations when he referred to “corporate entre-
preneurship” or “intrapreneurship.” Antoncic and Hisrich (2003) argued that
intrapreneurship goes on within organisations, regardless of their size.
Intrapreneurship research has studied the individual intrapreneur, the formation
of new corporate ventures, and the characteristics of entrepreneurial organisation
(Antoncic & Hisrich, 2003). In this chapter, entrepreneurship includes corporate
entrepreneurship and intrapreneurship.
Innovation
For more than half a century, research and development (R&D) has been closely
associated with technological innovation (Miller & Morris, 1999). Invention is the
narrowest definition of innovation. Drucker (1994) maintained that there are
Entrepreneurship and Innovation in E-Business 5
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seven basic sources of opportunities to innovate. Only one of them is to do with
inventing something new. Thus, innovation is more than invention and does not
have to be technical. There are numerous examples of social and economic
innovations (Drucker, 1994). Innovation is a proposed theory or design concept
that synthesises extant knowledge and techniques to provide a theoretical basis
for a new concept (Sundbo, 1998; Bright, 1969). Hence, innovation has many
facets and is multidimensional. The most prominent innovation dimensions can
be expressed as dualisms: (i) radical vs. incremental; (ii) product vs. process; and
(iii) administrative vs. technological (Cooper, 1998).
Innovation can be radical and incremental. Radical innovations refer to path-
breaking, discontinuous, revolutionary, original, pioneering, basic, or major
innovations (Green, Gavin, & Aiman-Smith, 1995). Incremental innovations are
small improvements made to enhance and extend the established processes,
products, and services. However, this contradistinction does not “necessarily
[correspond] to the more fine-tuned reality” because “radicality is a continuum”
(Katila, 2002 p. 307). Product innovation, as the name suggests, “reflects change
in the end product or service offered by the organizations, [whereas] process
innovation represents changes in the way firms produce end products or
services” (Utterback cited in Cooper, 1998, p. 498). Some researchers have
categorised innovation into technological and administrative innovations. Tech-
nological innovation is about “the adoption of a new idea that directly influences
the basic output processes, [whereas] administrative innovations include changes
that affect the policies, allocation of resources, and other factors associated with
the social structure of the organization” (Daft, 1978, cited in Cooper, 1998, p.
497).
For the purpose of this chapter, innovation is defined broadly to include new
products, new processes, new services (including new uses of established
products, processes, and services), new forms of organisation, new markets, and
the development of new skills and human capital.
The Conceptual Relationship between Entrepreneurship
and Innovation
The conceptual relationship between entrepreneurship and innovation has been
discussed in the literature for many years. The economics of innovation, in
particular, have attracted increased attention in recent years (Grupp, 2001;
Arora, Fosfuri, & Gambardella, 2002; Stoneman, 1995). Sundbo (1998)
summarised the basic theories of the economics of innovation and identified
three competing paradigms in the current theoretical discussion of innovation: (i)
the entrepreneur paradigm; (ii) the technology-economics paradigm; and (iii) the
strategic paradigm.
6 Zhao
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The entrepreneur paradigm can be traced back to the 1930s when Schumpeter
(1934) first attempted to establish a linkage between entrepreneurs and innova-
tion in theory, and viewed the entrepreneur as innovator. He maintained that
innovation contributes to the growth of the economy because entrepreneurs
produce innovations. The concept of the entrepreneur as innovator underpins the
entrepreneur paradigm in which the role of the entrepreneur is highlighted in the
innovation process. According to this paradigm, only a person who founds a new
company on the basis of a new idea can be called an entrepreneur. Entrepreneur-
ship is viewed as a creative act and an innovation. Entrepreneurship is about
creating something that did not previously exist. The creation adds value to the
individual and the community, and is based upon perceiving and capturing an
opportunity (Johnson, 2001). Bygrave and Hofer (in Legge & Hindle, 1997) held
similar views. They regarded entrepreneurship as a change of state, a dynamic
process, and a unique event. Legge and Hindle (1997) believed that people who
lead teams and organisations to introduce innovations are entrepreneurs. Entre-
preneurs seek opportunities, and innovations provide the instrument by which
they might succeed. Corporate entrepreneurship often refers to the introduction
of a new idea, new products, a new organisational structure, a new production
process, or the establishment of a new organisation by (or within) an existing
organisation. As Herbig et al. (1994, pp. 37 and 45) have observed: “Innovation
requires three basic components: the infrastructure; the capital; and the entre-
preneurial capacity needed to make the first two work.”
Innovation is the specific tool of entrepreneurship by which entrepreneurs exploit
change as an opportunity for a different business or service. There is consider-
able overlap between entrepreneurship and innovation (Kanungo, 1998; Sundbo,
1998; Drucker, 1994; Schumpeter, 1934). Moreover, innovation has to address
market needs and requires entrepreneurship if it is to achieve commercial
success (Zhao, 2001).
Case Studies of Synergies between
Entrepreneurship and Innovation
This section summarizes key findings from the 11 interviews and five case
studies conducted for the study. The interviews with senior managers from dot-
com companies in Australia were aimed to examine their managerial practices
and perceptions of the role of entrepreneurship and innovation in running an e-
business. The majority of the managers interviewed considered that entrepre-
neurship and innovation share an interdependent and synergistic relationship and
cannot actually be separated. For example, the CEO of Destra, a successful
Entrepreneurship and Innovation in E-Business 7
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dot-com company based in Australia, believes that entrepreneurship means
“creating something out of nothing,” and that it is a mindset, where “anything is
possible and the only boundaries are those that we create ourselves.” To him,
innovation means “doing something that hasn’t been done before or doing
something differently.” His company’s Destramusic.com was the first digital
music provider in Australia, going live between 1997 and 1998, far in advance of
their current competitors.
SpeakerDirect (www.speakerdirect.com.au) is a young Melbourne (Austra-
lia) based dot-com, providing an online speaker portal. The online speaker portal
business idea was developed in December 2003, and the portal was formally
launched in March 2004, illustrating the fact that the founders believed that speed
to market was one of the essential elements of their strategy, and a characteristic
of the e-market. The Web site system was developed from scratch with the
premise that the company wanted a corporate friendly and comprehensive tool
for both speakers and speaker-seekers. SpeakerDirect is actually a business
resource as well as a promotional platform. SpeakerDirect.com.au provides a
free service for corporations to search and select corporate speakers, however,
unlike their competitors, the company does not take engagement fees. The
company has an ambitious goal of becoming the number one global speaker
portal within five years and to connect up the entire business community.
From the perspective of the company’s founders and directors interviewed for
the study, entrepreneurship and innovation mean risk (financial, emotional, and
personal):
Entrepreneurship is taking control and action on a concept or a dream in
the face of adversity. The tangible aspect of making that happen is where
innovation comes in. For example, I want people to communicate with each
other over long distances (the dream), therefore I am going to do something
about it and invest time and dollars to do it even when everyone is saying
it cannot be done/I am mad/it is too risky (entrepreneurship/the risk) and
a phone is designed to achieve this (the innovation to achieve the dream).
A combination of both is the ‘big picture’ that requires tenacious and
passionate people to turn an idea into reality by being independent and in
control. (Interview Data, 2004)
The business model that the company has developed is in itself an example of a
combination of entrepreneurship and innovation — it is the first of its kind,
replacing the idea of the client having to deal with many agencies separately, by
creating a one-solution portal. Another example of entrepreneurship and innova-
tion is the system behind the Web site. This was designed to be multi-functional
(but streamlined) and very user-friendly for both speakers and seekers. One of
8 Zhao
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the most innovative features is a bulletin board where companies can advertise
an event for which speakers can express an interest in being engaged for — this
would be a useful tool for anyone who is time-pressed or needs a speaker at short
notice. Another key e-dimension of entrepreneurship and innovation that the
case company demonstrates is responsiveness to client and market needs. For
example, SpeakerDirect.com.au is seeking to position itself as a media tool
(e.g., by providing a service whereby speakers are available to journalists for
“expert comment,” gaining valuable and credible exposure, but without actually
being engaged on a fee basis). In the director’s words, they have “flipped the
agency concept on its head,” and as a result, many seeker clients believe the free
service is “too good to be true.”
eBay, a widely successful start-up, is a classic example of entrepreneurship and
innovation in the e-business world. From its humble origins as a trading post for
Beanie Babies, eBay has become one of the world’s largest online trading
centres. It has created a whole new business arena which hosts over 150,000
entrepreneurs and about 30 million customers worldwide. The company has
constantly pursued new ways of doing business. For instance, eBay created an
innovative feedback system in which buyers and sellers can rate each other
following a transaction, thereby enhancing users’ experience and satisfaction.
Its PayPal payment-processing system also allows buyers to make electronic
payments to eBay sellers who cannot afford a merchant credit card account.
This opens up a whole new medium of exchange. As a result of such innovations,
it is estimated that eBay’s net revenues will grow to US$3 billion by 2005 (Hof,
2003).
Google, the Web search engine giant, is not only an entrepreneurial company in
terms of its aggressive growth strategy but also a pioneer of innovation. To
enhance the level and efficiency of its features and services, Google has
continuously improved its technologies. It created a services and tools section in
its Web site known as Google Labs to demonstrate its innovation and ask its users
to experiment with and provide feedback on the features and tools. Google
toolbar, Google Groups, and Google Answers are a few of their other innovative
e-business developments (Anonymous, 2004). The founders of Google, two
graduate computer students expressed their innovation mindset quite frankly,
“Google is not a conventional company. We do not intend to become one.” In this
respect, Google has persistently taken an unconventional way of designing its
business and concentrated on building a better search engine rather than
spending millions on marketing campaigns. It has innovated the existing technol-
ogy to provide a fast, accurate, and easy-to-use search service that can be
accessed from anywhere at anytime. “Never settle for the best” is one of the
company’s philosophies (Google, 2004). In fact, Google’s strategy against the
fierce competition in the search engine provider market is one of constant
innovation and entrepreneurship through creating new and innovative services
Entrepreneurship and Innovation in E-Business 9
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and tapping new channels of revenues. For example, Google has recently
launched a string of new services, such as the free Webmail service, G-mail, and
Froogle, an online shop price comparison service (BBC News, April 29, 2004).
Most recently, Google took another unconventional step to sell its company to
the public. The floating approach is innovative and “peculiar” (in some analysts’
view) as Google’s management decided to sell its shares through an online
auction rather than the traditional allocation by big banks. It was reported that
this approach to the initial public offering (IPO) aimed to give the general public
a better chance to buy Google’s stock before the shares begin trading, rather than
let investment banks decide who should own the shares. However, the floating
plan caused concerns that the impending float would fuel a second Internet
bubble. Analysts expected that Google would attract a market valuation of up to
US$40 billion (Clarke, 2004, BBC News, April 29, 2004). Amid a weak stock
market and a lukewarm investors’ response to Google’s IPO proposal, the
company’s executives had to reset the opening price from US$108-US$135 to
$85 and cut the number of shares offered from 25.7 million to 19.6 million. After
two days trading, Google’s share price jumped 27%. All of a sudden, the value
of the young start-up dot-com became worth more than the Ford Motor Company
(Wood, 2004). By October 22, 2004, about two months after the IPO, Google’s
share price had reached US$169, which almost doubled the initial IPO price
(Perez, 2004).
Amazon.com’s success has everything to do with innovation and entrepreneur-
ship. The company has been a pioneer in the dot-com industry since its beginning.
It was the first company to move a book retailing business online; the first to offer
its customers a “one click” program to streamline the buying process by storing
detailed customer information including credit numbers; and the first to use
collaborative-filtering technology to give customers an idea about what other
people with similar purchase histories have bought. Amazon.com was the first
company to develop the comparison-shopping program that directs its customers
to other retailers if it does not sell a certain product. Its affiliates program also
was also the first in the dot-com industry, having directed millions of customers
from its partners’ sites to Amazon.com. Undoubtedly, Amazon.com has always
been a first mover in e-business through continuous innovation (Mellahi &
Johnson, 2000).
These empirical studies of e-entrepreneurship and e-innovation demonstrate that
the success of e-business is inextricably linked to a combination of entrepreneur-
ship and innovation, and that the two are enablers and key drivers of e-business.
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Issues and Challenges
Facing Entrepreneurship and
Innovation in E-Business
Today’s e-business operates in a highly competitive marketplace where sustain-
able competitive advantage is almost impossible as there are minimal barriers to
new entrants and competitors in the marketplace. Innovation faces constant
challenges of imitation and erosion. There have been different views in the
literature about the benefits of first movers in e-business marketplace. Mellahi
and Johnson (2001) asked the question “does it pay to be first to market or should
e-commerce firms wait for first movers to make an investment and then
cannibalize the idea with lower entry cost?” The cause of the concerns are raised
by a general belief that it is safer and less expensive to imitate the first mover
in the e-business environment, where there is a higher level of technical
uncertainties and rapid rate of technological innovation. For instance, many new
dot-coms rushed to build an e-marketplace and chose imitation as a business
strategy rather than innovation. This author maintains that it is the lack of a
combination of innovation and entrepreneurship capacity that has caused the
demise of many imitators in the dot-com industry. The essence of innovation and
entrepreneurship is taking a new idea to market, not imitating a new idea without
taking into account the special needs of local markets, and being innovatively and
proactively responsive to environmental changes by introducing a new product,
process, service, or implementing a distinctive business model as did the case
companies studied in this chapter.
In the early days of e-business, it was likely that most businesses could be applied
differently online and off-line. “Irrational exuberance” was prevalent within the
market, and venture capitalists were prepared to take on much more risk.
However, since the dot-com crash, the market appears to have reverted to
traditional models and methods. More attention has been given to the fundamen-
tal structural components of e-business, such as flow of revenue. E-business, to
many companies, is now just seen as another channel to market (rather than
signalling the demise of off-line business as originally prophesized). Likewise,
many senior managers interviewed for the study indicated that there was no
difference in the concepts of entrepreneurship online and off-line. Traditional
business models are here to stay. For new e-businesses to succeed, they need
an innovative idea incorporated into a sound business model which is viable
economically and which is facilitated by knowledgeable and experienced people.
As such, those entrepreneurial and innovative e-business activities which
genuinely have utility for the customer (e.g., e-banking) are more likely to be
successful. For example, the difference between retailing and banking is that
Entrepreneurship and Innovation in E-Business 11
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while one is seen as an emotive and/or social activity, the other is perceived to
be a chore. Therefore, offering an electronic channel to facilitate the latter is
more likely to succeed than the former — people want convenience and speed
when they bank, but they are more likely to value other factors which an online
channel may not necessarily be able to offer when they shop for goods and
services. In this respect, dot-com companies should endeavour to enhance
customer experience by offering tools on their Web sites which enable custom-
ers to personalize the shopping process and provide more personalized business
services.
In summary, the issues facing e-business today are that entrepreneurship and
innovation needs to respond closely to market needs and gain market credibility.
Ideally, there should be credibility built within the marketplace before inception
of the business. In addition, the intangibility of an online service needs to be
addressed in order to build brand awareness.
An Integrated Framework for
Building Entrepreneurial and
Innovative Organizations
Both the theoretical and empirical studies of this chapter demonstrate that a
combination of both entrepreneurship and innovation is crucial to e-business
success, and that they require systematic and organizational behaviour. In this
respect, organisations can foster entrepreneurship and innovation behaviour
internally through their strategy, structure, and processes (Cornwall & Perlman,
1990). Therefore, this author proposes an integrated framework for developing
innovation and entrepreneurship to help organizations including dot-coms to
obtain competitive advantage. The framework involves the “5 S’s” of strategy,
system (structure), staff, skills, and style. This model is developed on the basis
of the principal management literature of Bartol, Martin, Tein, and Matthews
(2001), Robbins, Bergman, Stagg, and Coulter (2000), and Drucker (1994).
However, the complex and evolving nature of entrepreneurship and innovation
as shown in this chapter means that the proposed model might address only some
of the issues pertaining to entrepreneurship and innovation behaviour. Therefore,
the model should be seen as a starting point in developing effective organisational
strategy, structure, and culture to stimulate entrepreneurship and innovation
behaviour in organisations.
12 Zhao
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Strategy
A well-defined and proactive strategy is central to an entrepreneurial and
innovative organisation. Such an organisation needs internally focused strategies
that propel growth and stimulate change within the organisation, as well as
externally focused strategies that actively seek out new ventures, acquisitions,
mergers, or joint ventures to achieve commercial success through innovations.
The strategy should be diverse enough to address a spectrum of technological,
financial, and human issues, and should be congruent with the future scenario
envisaged for the organisation. Given the close synergies between entrepreneur-
ship and innovation, the strategy should be both entrepreneurial and innovative,
and should include methods of transforming established products and services
into something new that will add value to existing businesses. Meeting and
exceeding the changing needs of customers, as well as an emphasis on marketing
and the development of new markets, should be key management and entrepre-
neurial strategies.
Moreover, in the current turbulent e-business environment, developing
organisational capacity to acquire, create, accumulate, and exploit knowledge
should be an essential strategy in gaining a competitive advantage through
innovation. A good strategy depends on effective execution and requires an
appropriate system, a capable staff team, a wide range of skills, and an
encouraging and supportive management style that fosters an innovative and
entrepreneurial organisational culture.
System and Structure
The case studies of this chapter suggest that size, industry sector, and type of
organizations do not determine the extent of organisational capability in entrepre-
neurship and innovation, and that cultural and structural elements play a crucial
role. Generally speaking, flexible, adaptive, and open organizations are more
conducive to innovation and entrepreneurship, because a highly centralised
decision-making process restricts information flows and communication with
inter-firm partners and also stifles the motivation of e-innovation and e-
entrepreneurship. The control and management system should be flexible —
depending on the changing situational conditions affecting each project or
program. Generally speaking, innovation is not fostered in tightly controlled
structures. Empowerment and delegation are needed, especially during the early
stages of innovation and product development. However, to secure a niche
market, an appropriate control system should be maintained to monitor quality
and costs, to meet tight deadlines, and to achieve predetermined objectives as the
project develops. An effective balance between freedom and control is required.
Entrepreneurship and Innovation in E-Business 13
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Staff
People are the most important assets in today’s knowledge-based economy.
Staff members in an innovative and entrepreneurial organisation must be
creative people with a flair for innovation and entrepreneurial spirit, to realize its
value. They must be keen to change, and keen to exploit such change as an
opportunity. To succeed in its economic environment, an innovative and entre-
preneurial organisation needs entrepreneurial project managers to promote and
coordinate the development of innovative projects as well as creative and
conscientious supporting staff to implement the projects. The right mix of people
is essential to the successful commercialisation of innovations.
Skills
Drucker (1994) maintained that systematic innovation requires the capturing and
monitoring of seven sources of opportunity: (i) the unexpected; (ii) incongruities;
(iii) process need; (iv) industry and market structures; (v) demographics; (vi)
changes in perception; and (vii) new knowledge. Clearly, an innovative and
entrepreneurial organisation needs a range of managerial and entrepreneurial
capacities and skills to handle innovation. These can be summarised as follows:
• an ability to search for and identify innovative opportunities
• a proactive attitude to the promotion of innovation through a strategic vision
• the ability to create a cultural environment that fosters innovation and
entrepreneurship
• the ability to develop effective plans to implement innovation and
commercialisation procedures
• the ability to integrate research, design, and market information to convert
new ideas and inventions into commercially viable innovations
• the ability to develop effective and realistic procedures for the evaluation
of R&D projects in terms of innovation, quality, and commercial value
Style
An ideal entrepreneurial management style for innovation should be open and
supportive, should encourage and nurture new product development, and should
identify new needs of customers, new users, and new markets through an ability
14 Zhao
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to absorb information from various sources. The style of an innovative and
entrepreneurial organisation should provide employees with a culture of
empowerment and should enforce a reward system that provides incentives for
innovative and entrepreneurial behaviours, values, and assumptions.
Conclusion
This chapter has explored the synergies between entrepreneurship and innova-
tion through a review of the principal literature in this field and case studies of
entrepreneurial and innovative organisations in the dot-com sector. The argu-
ment of the chapter is that a combination of entrepreneurship and innovation is
a crucial factor to the long-term sustainability of e-commerce and e-businesses.
The author has found that:
• Entrepreneurship and innovation are positively related to each other and
interact to help an organisation to flourish.
• Entrepreneurship and innovation are complementary, and a combination of
the two is vital to organisational success and sustainability in today’s
dynamic and changing environment.
• Entrepreneurship and innovation are dynamic and holistic processes in
entrepreneurial and innovative organisations.
The chapter also broadly discussed key issues and problems in the implementa-
tion of entrepreneurship and innovation in e-business. Because entrepreneurship
and innovation are systematic behaviours (Drucker, 1994), systematic efforts
are required to incorporate them into the operations of organisations. The “5 S’s”
model is designed to address this need. Entrepreneurship and innovation should
be regarded as ongoing, everyday practice in organisations, and this chapter has
contributed to the development of such an attitude.
However, given the small sample size of interviews and case studies, and the
nature of this qualitative study, there are methodological limitations which do not
permit any generalization of the findings of the chapter to other situations. The
perceptions of the people interviewed may not represent those of the industry as
they are personal understanding of entrepreneurship and innovation based upon
their respective experiences. To minimize the limitations, this author chose two
small dot-coms in Australia to complement the case studies of the three leading
global players in the dot-com industry — Amazon.com, Google, and eBay.
Entrepreneurship and Innovation in E-Business 15
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Nevertheless, these limitations infer that further systematic and comprehensive
research would be useful — especially if it involves quantitative studies of a
larger sample size in different settings.
Acknowledgments
This author gratefully acknowledges the valuable assistance of Ms. Carmen
Gould in the data collection of the research project. The author is deeply indebted
to all the participants in the interviews for their constructive inputs to the project.
Special thanks go to RMIT University for an Entrepreneurship Research Fund
which entailed this research.
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Chapter II
Exploring Rhizomic
Becomings in
Post Dot-Com
Crash Networks:
A Deleuzian
Approach to Emergent
Knowledge Dynamics
Alexandra Steinberg
The London School of Economics and Political Science, UK
Abstract
This chapter introduces the work of Deleuze and Guattari, particularly
their notion of rhizomic becomings to the study of emergent knowledge
dynamics in contexts of innovation. It shows how an analysis of rhizomic
becomings can assist to explore new and emergent patterns, channelling
interpretation toward the discovery of new combinations and creative
assemblages in knowledge. This is exemplified by the example of a qualitative
study exploring knowledge dynamics in e-business entrepreneurship since
the dot-com crash. The results highlight the forging of the conditions for
innovation in new combinations of lines of affect and lines of technology.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 19
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Introduction
The reader may engage with this chapter in two different modes. First, it can be
approached in a social psychological mode as an exploration of the idea of
networking in e-business entrepreneurship, especially of the idea of new forms
of technological interaction in order to consider the issue of the emergence of
new knowledge. Specifically, I have in mind the issue of networking amongst e-
business entrepreneurs via communication technologies (predominantly the
Internet), which specifically since the dot-com crash has brought forward new
creative dynamics of interaction not captured in the ways in which knowledge
dynamics is addressed in present studies. The aim is to get a better understanding
of these dynamics in order to explain emergent conditions of innovation.
On a second level, the chapter speaks to a post-structuralist literature, in that it
is an elaboration of the notion of knowledge dynamics as rhizomic becoming,
adopting Deleuze and Guattari’s ontology of non-dialectic, aconceptual differ-
ence. This elaboration moves toward a critique of the very ubiquity and endless
utility of the dialectic idea as a way to address knowledge dynamics through the
suggestion that its appeal may conceal moments and movements where more
unexpected effects are taking place. Indeed, I suggest that there may be some
twists in the knowledge dynamics of post dot-com crash networks, where some
selected thoughts from a reading of Deleuze and Guattari specifically around the
notions of “difference-in-itself” and “the rhizome,” may lead one to read other
stories than pre-offered through contemporary literature on networks and
innovation.
Researching Knowledge Dynamics in
E-Business Entrepreneurship
E-Business Entrepreneurship, Knowledge, and
Innovation
Today, e-business entrepreneurship brings together two signs of change: ad-
vances in technological communication culture and changes in the organisation
of business life centred on the management of knowledge. E-business entre-
preneurship is a young business sector, roughly 10 years old. With the develop-
ment of the World Wide Web
1
in the mid-1990s, new business opportunities
emerged for selling products and services. The new ways to spread information
20 Steinberg
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quickly in digital form around the globe led to an explosion in the number of small
entrepreneurial businesses that focused on the use of new information and
communication technologies (ICTs) for business that is wholly or predominantly
conducted through Web sites. Over a short period of time, this new “Internet-
enabled business” (Whinston et al., 2001) emerged as a highly successful new
business type. Especially in the latter half of the 1990s a high level of new
business activity developed, a period that is often referred to as the “dot-com
boom”
2
.
In this new business arena, knowledge is seen as one of the most significant
levers of innovation and its effective management is seen as a route to successful
innovation (Seely-Brown & Duguid, 2002). Internet-enabled business developed
quickly into a “knowledge-based” business arena of innovation, with the majority
of businesses concentrating on the selling and trading of services and solutions
over the Web (Whinston et al., 2001). Business types include firms that focus on
the provision of systems and solutions for infrastructure or service applications
on the Internet, Web pages offering specific information content (content
aggregators), Internet intermediaries such as consultancies through or about e-
business, and firms concentrating on electronic commerce (business-to-business
and retail) (Whinston et al., 2001).
The development of the new sector of e-business entrepreneurship co-exists
with what is widely referred as the “dot-com crash,” a stockmarket crash in April
2000. What seemed to be an unstoppable growth of the e-business sector in the
1990s ended abruptly in April 2000 in a worldwide stockmarket collapse of high-
tech firms’ values (Ellis, 2001). In the UK alone, hundreds of dot-com firms
experienced bankruptcy (DTI, 2002). The dot-com crash meant a major turning
point, and its aftermath has opened up a “start-from-scratch” scenario that has
raised new questions as to how entrepreneurial innovation can be approached.
It also has reinforced the general focus on the importance of knowledge and its
management, both in business practice and policy.
Networking “Post Dot-Com”
In this chapter, I suggest that new theoretical flexibilities are required in response
to the dynamics that emerge when attention is focused at the meeting point of
communication technologies and business centred on knowledge. The network
may indeed be the central dynamic at this meeting point. There is increasingly
social scientific evidence that networks play an important role in the ways in
which business is conducted (Agre, 1999; Aldrich & Zimmer, 1986; Castells,
1996). Wittel (2001), most notably, argues for a new network sociality, a new
way of socialising via networking that is reshaping not only contemporary
business life but also social life in general.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 21
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During the dot-com boom, new networking practices emerged, such as “First
Tuesday” networking events where entrepreneurs and venture capitalists
mingled every first Tuesday of a month at an informal face-to-face event. The
aim was to bring people with business ideas together with people who could
potentially fund such ideas. First Tuesday networking enjoyed great popularity
nationwide and many similar but more locally focused e-business networking
events mushroomed during the dot-com boom.
However, with the dot-com crash, these networks changed. While the focus on
potential investors disappeared, the concept of networking has had a revival in
the form of online networking that offers ways for entrepreneurs to place each
other in contact in a combination of online introducer systems
3
with face-to-face
networking. In these networks, the scope of networking had been extended to
a wider, seemingly more general theme: being connected. This is illustrated in the
two networks that I will examine in this chapter. Web-based networking with
integrated introducer systems have been highly successful in the UK with
growing membership numbers in the past three years; several of them have
membership numbers in the ten thousands and are expanding on an international
level.
The question this chapter is concerned with is how we can better understand how
these new and highly popular networks contribute to innovative dynamics in e-
business entrepreneurship. When it comes to explaining innovation in knowl-
edge-centred business, the predominant logic of thinking about knowledge
dynamics adopted is the dialectic one. This is evident in several streams of
research that focus on interaction and knowledge creation.
In organisation and management theory, for instance, knowledge dynamics in
innovation are studied as the social creation of knowledge through social
relations and social interaction (cf. Nonaka & Toyama, 2003; Nonaka, Toyama,
& Konno, 2000; Von Krogh, Ichijo, & Nonaka, 2000; Wenger, 2000). This work
emphasises social interaction as a key factor in knowledge emergence and bases
recommendations for innovation management on it (Kenney, 2001). Interaction,
crucially, is presumed to constitute innovation because of the dynamics of
learning that the dialogue amongst proactive agents engenders (cf. Seely-Brown
& Duguid, 1991). At the centre stands the assumption that it is mainly a dialectic
dynamic that brings forward creativity and innovation (Chell, 2000; Hoang &
Antoncic, 2003). Dialectics, in this context, is understood in a Hegelian way,
meaning a progressive evolution of ideas in the interplay of thesis, antithesis, and
synthesis (Hegel, 1977; Rosen, 1982).
The Hegelian stance of theorising dynamics is emblematic for a growing post-
Cartesian literature that counters the classic individual-centred and static view
on knowledge by Descartes, which separated knowledge from its embodiment
and its social context (Hosking, Dachler, & Gergen, 1995). Most prominently,
22 Steinberg
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Cook and Seely-Brown (1999) have drawn attention to the legacy of Cartesian
epistemology for organisation theory and have argued that in order to go beyond
the static Cartesian notion of knowledge units “possessed” by individuals, a
dynamic epistemology grounded in interaction is necessary.
Social psychologists also have argued for dialectics with regard to explaining
knowledge dynamics. They have shown how a dialectic perspective is useful to
highlight the dynamics of knowledge transformation in the inter-subjective and
mutual constitution of the social (Jovchelovitch, 2001; Marková, 2003; Moscovici,
2000). Consistently, authors seek to map out the knowledge relations that
individuals create in communicative interaction and explain social change
through the dialectic dynamics of social construction in everyday dialogues and
argumentation (Moscovici, 2000; Howarth, 2002). Similarly to organisational
theorists, the underpinning assumption is that new knowledge emerges from the
evolutionary progression of ideas in controversial debate. Argument and counter-
argument and the synthesis of different concepts is taken as the exclusive pattern
to explain how new knowledge emerges.
Beyond Dialectics
In this chapter, I suggest that in order to capture and explore knowledge
dynamics in the contemporary context of post dot-com-crash networks we need
to leave behind certain assumptions about the nature of knowledge dynamics
which we have tended to rely on to explain knowledge creation. Particularly, this
concerns the dialectic model as a way of thinking about knowledge dynamics.
Surely, there might be dialectic dynamics in network relationships engendering
new understandings about networking. However, dialectics no longer suffices as
the exclusive pattern through which we address the dynamics that networking
engenders.
Two issues are at stake here. First, if we want to account for innovation in
knowledge business, we need to be able to think about the emergent character
of knowledge, that is, we need to be able to capture not merely how existent
knowledge transforms but how new and unprecedented aspects arise that might
lead to new knowledge. Typically, with innovation what emerges is a “some-
thing” (Wagner, 1998) that does not relate to any pre-existent socially mediated
concept we might have in mind. Rather, this “something” forms a potentiality of
a new concept being forged. Second, if we are to better understand the dynamics
of such new and unprecedented aspects arising, we need to be able to think about
the creative patterns that foster such a process of emergence. By creative, I
mean patterns that might be different each time. Innovation can “happen” in
various “different” ways; they do not follow a proven, routine pattern or
procedure. Both aspects point to the unpredictable and surprising character
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 23
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of innovation. While the dialectic perspective is useful to highlight how people
collectively reconstruct existent meanings and identities (Steinberg, 2003), it,
however, fails to address this precise aspect; the unpredictable and the new in
emergent patterns cannot be addressed, as the dialectic logic directs attention
predominantly to the realignment of a pre-existent, familiar concept or pattern
with the novel.
Emergence as Rhizomic
Post-structuralist thinkers Deleuze and Guattari (1987) argue that emergent
phenomena are part of a much larger, more diverse, and multiple becoming than
is represented by an epistemic logic of dialectics (Deleuze & Parnet, 1987).
Dialectics, they hold, subordinates our thinking about dynamics to conceptual
difference (Lambert, 2002) which exclusively addresses differences between
pre-existent concepts and directs attention to the emergence of the novel only
in relation to pre-existent concepts. Deleuze and Guattari radically oppose
dialectics and turn to an ontological notion of becoming that is continually
engendered by the repetition of difference-in-itself (Deleuze, 1994). For
Deleuze and Guattari, what moves a system forward is not conceptual differ-
ence, but rather a rich and multiple form of difference that bypasses the pre-
existent because it does not relate to it. Difference-in-itself is a difference that
is unprecedented, multiple, and, most importantly, one that “makes itself”
(Deleuze, 1968).
This philosophy of becoming emphasises that the dialectic of thinking is not
groundless. It depends upon an ontological work of dividing the world which
ensures that it can visibly bear the marks that ongoing communicative interaction
cuts into it. Deleuze and Guattari describe this work of dividing with the image
of the rhizome. In their seminal work A Thousand Plateaus, Deleuze and
Guattari (1987) write:
Non-parallel evolutions, which do not proceed by differentiation, but
which leap from one line to another, between completely heterogeneous
beings; cracks, imperceptible ruptures, which break the lines even if they
resume elsewhere, leaping over significant breaks …. The rhizome is all
this. (Deleuze & Parnet, 1987, p. 26, emphasis added)
The rhizome challenges the notion of a unique direction of emergence; rather, it
portrays a dynamic that grows in simultaneous, multiple ways (Deleuze &
Guattari, 1987). Furthermore, the rhizome has no central or governing structure;
it has neither beginning nor end. A rhizome spreads continuously without
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beginning or ending and exists in a constant state of play. It does not conform to
unidirectional or linearly progressive reasoning. This provides a stark contrast to
the dialectic assumption that emergence progresses linearly in tree-like patterns
of thesis, antithesis, and synthesis.
For the present purpose, the rhizome offers a logic of thinking about emergence
as a series of combinations of different (in-themselves) streams of becoming.
This is what Deleuze and Guattari describe as the emergence of new assem-
blages (Deleuze, 1990) through the crossing of different lines of becoming.
Assemblages can be defined as “multiplicities”; they express the potentiality of
multiple differences that are enmeshed variably and without a pre-existent fixed
concept or pattern of how they should be linked. Following Deleuze (1987), all
life consists of processes of assemblages, of new, unforeseen connections,
patterned in rhizomic ways. Consistently, any human body or object is the result
of a process of multiple connections (Colebrook, 2002).
Despite its appeal to address unforeseen connections and creative patterns of
emergence, the advantage of the rhizome image also is its disadvantage, as Eco
(1983, p. 57) points out, as the notion of connections and assemblages becomes
easily limitless:
The rhizome is so constructed that every path can be connected with every
other one. It has no center, no periphery, no exit, because it is potentially
infinite. (Eco, 1983, p. 57)
Those within and those engaging with new connections, therefore, have to
engage in forms of “cutting” that halt the flow of the rhizome in order to be able
to perceive it and to speak about them (Strathern, 1996). Here it is important to
bear in mind that Deleuze and Guattari’s philosophy is an ontology of becoming
(Hayden, 1998), which implies that we are concerned with flow and movement
in the material and natural world rather than exclusively the meaningful world of
social sense (the case of dialectics).
Deleuze (1968) emphasises that as human beings we are part and parcel of both
worlds — the social world of understanding and the material and natural world.
But in contrast to Hegel and other classic metaphysics, sense-making and
understanding do not provide the main and superior faculty that orders all sense
experiences in the material world (Bryant, 2000). Rather, Deleuze suggests a
disjunctive rather than harmonious functioning of the faculties of human recep-
tion. This means that, different human faculties such as understanding or feeling
are equally important in the creative process of movement. Different sense
experiences consistently disrupt each other, with different faculties of reception
being involved, such as intuition disrupting understanding.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 25
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Thus, a cutting of rhizomic becoming would mean its disruption by the faculty of
understanding in order for it to become incorporated in the social world of
meaning. The networks I explore next illustrate this: They enmesh contact and
friendship with elements of technology in new ways, which emerges as a
rhizomic dynamic that disrupts existent understandings of friendship and technol-
ogy. What the interpretation then hones in on is how people’s understanding of
technology is variously cut by affect and how people’s affect is variously cut by
their understanding of technology.
In what follows, I illustrate the notion of rhizomic becoming that is variously
cut at the example of an exploration of two post dot-com crash networks.
Specifically, I present a new individuation that emerged from central cuttings of
new connections amongst various lines of technology and lines of affect: the
personal profile page.
The Study
An interpretative study was conducted exploring London’s e-business networks
using participant observation, interviews, and a focus group. The enquiry was
conducted over a period of four months (September 2002 to December 2002) and
featured 33 e-business entrepreneurs as well as seven e-business networks. At
the time of the study, the business arena of e-business entrepreneurship was in
a phase of reassessment of business after the dot-com crash. It was a time of
radically new phenomena of interaction being shaped, which made it particularly
relevant to an exploration of emergent knowledge dynamics.
In this chapter, I report a particular result from the participant observation, which
surfaced when exploring rhizomic becomings in networks. Networks had
emerged as the most important site for observation in the interviews. The course
of observation was determined through a snowball process (Huck, 2000). This
was a two-stage purposive sample that first turned to a social milieu that exposed
the minimal criteria of the context in question (e-business entrepreneurship as
defined by Whinston et al. (2001)), and second, was helped by respondents to
complete the sample by pointing to further locations of observation.
Through snowballing, the natural context of social life in the context in question
can be reproduced (Gaskell, 2000). This was a key aspect in establishing the
quality and public accountability of this qualitative exploration. As Gaskell and
Bauer (2000) have suggested, it is crucial for qualitative exploration to ensure the
openness of the research for the discovery of local surprise and novelty, enabling
the exploration to unfold according to the local context under study rather than
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the expectations of the researcher. The snowball process addressed this
successfully and yielded seven networks altogether; two of which I report here.
Deleuzian Analysis
The notion of rhizomic becomings by Deleuze and Guattari (1987) indicates an
approach to analysis that lets us “think beyond dialectics” and that enables us to
channel interpretation in such a way that it lets us surface the emergence of
creative new assemblages. Essentially, Deleuze and Guattari introduce a new
vocabulary to think about dynamics and emergence. Their philosophy animates
analysis to “think otherwise,” which is in their sense to approach philosophy as
a tool kit from which to draw selectively in order to think about becoming in the
light of the analytical task at hand (Deleuze & Guattari, 1994).
Deleuze and Guattari were prolific inventors of concepts, to embrace this logic.
Their work teems with such concepts as nomadology, deterritorialization, lines
of escape, assemblage, intensity, rhizome, becoming, machinism, plateaus,
heterogeneous series, body without organs, and plane of immanence, to name but
a few. The Deleuzian approach is often loosely described as “artistic” by critics;
yet, authors increasingly take notice of Deleuze’s approach because of his
capacity to overturn taken-for-granted assumptions (Bogue, 1989).
In what follows, I employ particularly three notions which suit the present
purpose of accounting for emergent knowledge dynamics in e-business entrepre-
neurship: lines, connections, and individuations. What lies behind this is not a
desire to be trendy, but the realization that in order to account for the emergence
of new concepts we need new words to express this — especially in an
exploration of the dynamics of innovation.
To change my thinking to “rhizomic mode” when interpreting, I looked beyond
the dialectic categories of similarity (with existent concepts) and opposition (to
existent concepts) when interpreting. Rather, I wanted to highlight the various
and startling phenomena I had come across in the observation, pointing me to
events which did not translate into any pre-existent concepts about networking
and to new connections that would seem counterintuitive to be working together
(according to pre-existent categorisations of concepts), yet, nonetheless, worked
extremely well together.
First, lines provide the main routes of the rhizome. Some such lines will cross
over one another, others will merge, and yet others will proliferate chaotically.
A rhizomic line is any non-attributable micro-becoming that we can follow and
that proceeds in-between points. Lines are the routes that make a rhizome what
it is: de-rooted. Deleuze and Guattari (1987) describe lines as follows.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 27
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These lines are constantly crossing, intersecting for a moment, following
one another. …it should be borne in mind that these lines mean nothing. It
is an affair of cartography. They compose us, as they compose our map.
They transform themselves and may even cross over into one another.
Rhizome. It is certain that they have nothing to do with language; it is, on
the contrary, language that must follow them, it is writing that must take
substance from them, between its own lines. (p. 203)
Lines can connect to anything, yet can be broken at any instant, only to take off
again in any direction. A line can be an event, a nonsense, a something, a
movement. Importantly, in comparison to dialectic lines of progression, lines do
not function in terms of lines with a beginning and an end. They do not translate
into pre-existent concepts, but rather pass “in-between” (Deleuze & Parnet,
1987) them. As Ansell-Pearson (1997) puts it, “in rhizomatic-styled becomings,
becoming denotes the movement by which the line frees itself from the point and
renders points indiscernible” (p. 136). In my thinking when interpreting, lines
were thus about attempting not to look for origins or destinations, but to focus on
the “in-betweens,” that is, on those aspects that were ambivalent to existing
evaluative dimensions such in the present networks which were breaking down
existent categorisations of online versus off-line networking and of business
versus private life.
Second, I focused on connections. Connections signify new combinations and
assemblages arising from “lines twisting, converging, and crossing as well as
diverging; not aborescent but rhizomaniac” (Mackay, 1997, p. 264). A connec-
tion can be a disruption, a rupture, a divergence, as well as a convergence. The
important aspect about connections is that what is connected “functions well
together” (Deleuze & Parnet, 1987) as this is what creates a dynamism of
movement. Furthermore, connections are, similarly to lines, ambivalent to pre-
existent categories. They are new, heterogeneous phenomena that do not allow
an interpretation in terms of unity, resemblance, or contradiction, but bring forth
new (non-dialectic) orderings. Hetherington (1997) has described a conceptual,
non-dialectical ordering as an ordering through similitude:
Similitude, … is all about an ordering that takes place through a juxtaposition
of signs that culturally are not seen as going together, either because the
relationship is new or because it is unexpected. What is being signified
cannot easily be attached to a referent … Similitude is constituted by an
unexpected bricolage effect. (p. 9)
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It is this unexpected bricolage effect that is at the centre of innovation — usually
perceived only in hindsight. They are the new connections that do perhaps not
make sense in terms of existing concepts or categorisations but nonetheless work
well together.
Third, the analytical focus on ambivalent lines and non-dialectic connections let
me concentrate the interpretation overall on the cutting of becomings, in the
sense that I looked for emerging patterns that came close to what Deleuze and
Guattari call “haecceity”:
There is a mode of individuation very different from that of a person,
subject, thing, or substance. We reserve the name of haecceity for it. A
season, a winter, a summer, an hour, a date have a perfect individuality
lacking nothing, even though this individuality is different from that of a
thing or a subject. They are haecceities in the sense that they consist
entirely of relations of movement and rest between molecules or particles,
capacities to affect or be affected. (Deleuze & Guattari, 1987, p. 261,
emphasis in original)
A haecceity is an intensity and new ordering that is becoming a new concept, yet
was not defined in its emergence through the relations to other pre-existent
concepts. Rather, through individuating, it gradually intensifies the energy of
lines running through it and enmeshes connections in new orderings to forge a
dynamic that allows them to be grasped by the faculty of understanding — in that
it can be named and interpreted in meaning.
In the following section, I concentrate on the particular example of such an
individuation: the personal profile page. It came particularly close to forming a
haecceity: It was an intensity that emerged from a rhizomic becoming of lines of
affect and lines of technology that crossed and cut each other in new ways that
were ambivalent to the existent dialectic between virtual versus real world and
business vs. private life. These new cuttings worked extremely well together; the
personal profile page was at the centre of a dynamic of movement that
engendered new potentialities for interaction. To illuminate this, throughout the
following, I include excerpts from traces of the dynamics of the personal profile
page such as postings, visualisations and announcements on networking-sites,
personal messages, guestbook entries, and other micro-events that I experienced
when participating in networking.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 29
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Personal Profile Page and New
Emergent Orderings in Networks
Amongst the seven networks that were sampled in the snowballing process two
networks — Ecademy and Ryze — did not compare to the other networks. While
most networks would use their Web site as an online space to inform about the
network and advertise upcoming face-to-face networking events, the network-
ing-sites of Ecademy and Ryze featured free personal profile pages for
members — embedded in online introducer systems. The personal profile page
was highly popular amongst entrepreneurs: Almost every respondent in the
present study was a member of either one or both of the networks and had a
personal profile page.
Ecademy was initiated in the UK in 1998. In 2002, it had 20,000 members, with
a rising trend. Its mission reads as follows: “… to build the world’s largest
Trusted Business Network by connecting people to each other — enabling
knowledge, contacts, and opportunities to be shared for World Wide Wealth.”
(Excerpt from Web site Ecademy.com, 2002). Ryze has existed since 1996,
originated in California’s Silicon Valley and had 80,000 members in 2002, also
with a rising trend. Its mission was “Extending members’ business networks”
(excerpt from Ryze.com Web site, 2002). In addition to online networking, they
both feature monthly face-to-face networking events for members. Ryze had its
first face-to-face networking event in London in 2002.
In both networks, a membership is free and acquired via an online registration.
Membership can be upgraded to an advanced service (providing special member
search functions) for a monthly fee. Once one is registered, one gets assigned
a personal Web page (the personal profile page) through which one can publish
all kinds of information about oneself and one’s business. Figure 1 shows the top
section of a (randomly selected) personal profile page on Ryze.
Once one is present on the network with a personal profile page, one is connected
to an online universe of personal profile pages and can browse the pages of other
entrepreneurs in related business fields or sub-networks (called “tribes” on
Ryze). Also, one’s own page can be accessed by all other members of a network;
it also is searchable via a search tool. Browsing through personal profile pages,
one is presented with a rich and colourful range of “personal universes” of
knowledge, ambition, and experience. Besides a small standardised part of the
page (on Ryze, for instance, the top of the personal profile page features a pre-
structured space where entrepreneurs list their “have’s” and their “want’s”), the
larger part of the personal profile page is open to the content preferences of the
entrepreneur. On the personal profile page, network members post their profiles,
30 Steinberg
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biographies, and photos, list their vitals, favourite quotations, hobbies, previous
jobs, and future career interests.
Members also have a range of profile and communication management tools at
their disposal. Via these tools, entrepreneurs can “manage” their contacts and
can track potential new network contacts. Examples are private messaging, a
guestbook feature via which a member’s message is publicly displayed on the
personal profile page of the addressee as well as the “list of friends.” To appear
on the list of friends (also on the personal profile page) requires that both
members have requested and confirmed their friendship online. Figure 2 shows
Figure 1. Randomly selected personal profile page on Ryze.com (2005)
Figure 2. Cut-out from a personal profile page on Ryze.com — guestbook,
networks, and list of friends
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 31
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a cut-out from the lower section of a randomly selected personal profile page,
depicting the guestbook, next to the list of friends and a list of sub-networks that
this member is involved in.
Hence, a common way of interacting was to contact other entrepreneurs by
browsing personal profile pages, and subsequently by sending a guestbook note
or personal message. As part of my own participation during the study, I would
receive networking messages such as the example shown below.
Ryze Guestbook entries
Anurag Mehra, 12/10/02
Hi, Alex, I have just started an e-learning company myself. Do check it out.
Let me know if you need anything.
Anurag
Karen Edelman, 10/25/02
Hi, Alex – Just dropping by to say hello. Your profile is very interesting.
Stop by my site perhaps my services would be useful for you at some point.
Karen
Crucially, contacts acquired in this way were in-between business and private
interaction as on the one hand, the contact in the network could be for any
purpose or reason and had a feel of online chats to close friends to them, but at
the same time usually involved some form of assertion that for future business
opportunities one would keep each other in mind. This form of interaction was
ambivalent to business versus private interaction, but also, as we shall see, to
virtual versus real interaction.
The personal profile page brings together two lines of becoming: the technology-
becoming of friendship and the friendship-becoming of technology, to phrase it
in Deleuzian terms. This means that friendship becomes a technology of
networking (technology-becoming of friendship), and technology becomes part
of the entrepreneurs’ socializing apparatus (friendship-becoming of technology).
Both the lines of technology running through the various tools of contact and
communication and the lines of affect emerging from the online communication
crossed each other in new ways and became each other. Together, this lets the
personal profile page emerge as a phenomenon that is “different-in itself” and
that intensifies around a large amount of creative energy, given the sheer
limitless ways in which technology and affect could intersect via this page.
The phenomenon of the personal profile pages is remarkably close to a “perfect
individuality” in the sense of a Deleuzo-Guattarian haecceity as it has a capacity
to affect others or to be affected by others (capacity to move and to bring forth
dynamics). On the surface, it seemed to form a technology image, but, in fact,
32 Steinberg
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it was far more multiple: Emerging from new connections of lines of affect and
lines of technology, it created a dynamic in that ”what” each becomes changes
no less than ”that which becomes” (Deleuze & Parnet, 1987, p. 3). This means
that both new crossovers of affect and technology emerged as well as rearrange-
ments within each of these lines. The personal profile page emerged as an
individuation from the various ways in which these lines cut each other; each of
which ordered technology-becomings and affect-becomings in different ways,
but highlighted the importance of their difference-in-themselves for the dynam-
ics the personal profile page engendered.
Friendship as a Technology of Networking
The technology-becoming of friendship can be described as the dynamic
engendered by two lines crossing. First, as the slogan from Ryze illuminates
(Figure 3), there is the aspect of the sheer limitless potentiality of expansion of
one’s personal network via the technology of the personal profile page. At the
same time and second, this potentiality of unlimited growth is variously cut by
several tools that make one’s contacts publicly visible on the personal profile
page.
The list of friends is the tool at the centre of this becoming. As we have seen in
Figure 2, it is featured on each personal profile page, embedded into an
automatism that tracks online interaction. More precisely, the list of friends is a
dedicated space on the personal profile page that is automatically generated; it
adds the names of one’s contacts to a list whenever a new friendship is
confirmed. The list of friends opens up one’s potentiality of interaction to an
unlimited array of contacts. The list of friends can extend widely without any
rules about where the lines of connection should stop and the boundaries of the
personal circle of friends are defined. Consider the statement by the network
user below.
“ …‘If there’s someone with whom I have common business interests, I add
them to my list of friends, and then a link to their page appears on my page,’'
explains Kaup’s friend Anne Fitzpatrick, Executive Director of the Boston-
based Rock & Roll Library and a Ryze user.” Excerpt from "The Press on
Ryze,” published on Ryze.com, 2002
The statement also illustrates how friendship is not attributed via the notion of
face-to-face interaction: This is the image of friendship qua network — it is also
the image of friendship that becomes a tool, a technology.
This technology-becoming of friendship extends one’s private network and despite
the sheer limitless expansion of one’s network, the crossing of lines of technology
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 33
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that made contacts visible cut the rhizomic growth of the network. On Ryze, for
instance, in addition to the list of friends as a list of names, the entrepreneurs’ ties
to other network members also is depicted graphically on the personal profile page,
featuring thumbnail photographs of one’s contacts (Figure 4).
This feature in Ryze creates an image of the lines of connection running through
the network, illustrating the chain of people via whom one is connected to other
entrepreneurs. While, again, this feature invites one to make new contacts in
order to become more connected to other entrepreneurs, the visibility is
important as it cuts into the limitlessness of this line. Through the guestbook, the
photographs, and the list of friends, the visibility of friendship became a
technology that connected “making contacts online” with one’s “real” reputation
and thus enabled it to make sense in the “real world” of entrepreneurs. Consider
the following excerpt from a networking message distributed to all members by
Ecademy.
Ecademy Networking Message
Check your personal reputation with fellow members
Fellow Ecademist.
Now you can check your personal reputation with fellow
Ecademy members and rate members in your personal
Ecademy network:http://www.ecademy.com/module.php
Figure 3. Cut-out from Ryze
Figure 4. Cut-out from Ryze.com — visualisation of friendship
34 Steinberg
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The visibility of one’s friends creates a relationship of similitude, seen from the
outside, “from the standpoint of another perspective” (Hetherington, 1997, p.
43); in other words, it creates an ordering of the lines of connection “established
by their difference in a relationship between sites rather than their Otherness
deriving from a site itself” (ibid, p. 43). In this way, the network becomes real
for entrepreneurs in such as way that the technology of the network becomes
part of one’s socialising apparatus. This is the friendship-becoming of technol-
ogy.
Technology as Part of Entrepreneurs’ Social Life
The lines of technology that run through the network take another route of
crossing lines of affect: The technology-becoming of friendship also is a
friendship-becoming of technology. The technology of visualisation of one’s
acquaintances becomes part of one’s everyday way of socialising with others.
I wrote that the ways of interaction via these networks are ambivalent to the
concept of virtual (online) vs. real (off-line). There are various new tools that
reinforced the “becoming entangled” of the technology with the daily life of
entrepreneurs. An example is e-mail notifications informing the network mem-
ber about a “movement” on one’s personal profile page. This can be, for
instance, a notification about a profile visit (see e-mail excerpt below), a
guestbook entry, or a request for friendship.
Profile Visit
Alexandra,
Steve Collins has looked at your profile.http://www.ecademy.com/
You can see who else has looked at your profile here:http://www.ecademy.com//
Ecademy Connecting Business Peoplehttp://ecademy.com
Another example is a weekly summary e-mail of one’s online activities in the
form of statistics of visits and traffic on one’s personal profile page.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 35
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email « Ryze stats »
HITS
Your Ryze page : 6* (cumulative)
Average Ryze home page : 91*
Average Ryze home page w/photo: 260*
To increase your hits, add a photo on your Ryze
homepage, at:http://www.ryze.org/photo.php?lr=weekly
FRIENDS & GUESTS
Friends you link to: 0
No Friends yet?? GET THE MOST VALUE or of RYZE by
leveraging your Friends Networks:http://www.ryze.org/invite.php?lr=weekly
Friends linked to you: 0
Guestbook entries: 0
Contacts: 0
The friendship-becoming of technology also is present in other ways. Entrepre-
neurs would often post photographs of friends on their personal profile pages.
These photographs usually show friends and acquaintances in a leisurely setting
such as in homes, holidays, restaurants, or occasionally, at weddings. The
important aspect hereby is that these friends are mostly friends from the network
shown in the private context of the entrepreneur: The friendship technology has
begun to cross over affect in “real life” — there is no distinction into real or
virtual.
As a newly-appointed CEO, I have special needs for business contacts.
Thanks for creating Ryze! I’ve not only made many great business contacts,
but also lots of personal ones! Great job.” Bob Glass, CEO, Creative
Science SystemsExcerpt from “Member Testimonial Section”. (published on
Ryze.com, 2002)
While some authors have drawn attention to problems of establishing trust via
online communication, focusing attention on the lamentable absence of proximity
in online networking or “virtual networking” (cf. Lash, 2000; Rheingold, 1994;
Tucker & Jones, 2000), I suggest that in the present networks the new ways in
which lines of technology and lines of affect become enmeshed create conditions
for rearrangements in lines of affect that depended primarily upon technologies
rather than the face-to-face aspect of human interaction. The more a member
can prove via the list of friends, guest-book sign-ins, and photographs that he or
she “has” friends, the more this person is deemed trustable and successful.
36 Steinberg
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Together, these new connections of business and private life, of real and virtual,
forge the conditions for a new ordering of the network; it creates the conditions
for new creative assemblages. The personal profile page generated new
potentialities for “trusted” interaction and allowed lines of affect that are in-
between the flow of the real life and the virtual, blending them together in a new,
different, and innovative form of business-private interaction. This is an unprec-
edented form of interaction that has reinvented the concept of networking; as it
creates new conditions for interaction, it presents in itself an innovative and
different becoming.
Implications and Conclusion
In his reading of contemporary society as a highly technologically mediated
network society, Manuel Castells suggests that in informational networks a
culture of “real virtuality” emerges. This is a reality in which “appearances are
not just on the screen through which experience is communicated, but they
become the experience” (Castells, 1996, p. 373).
The findings presented in this chapter have shown a particular mode in which two
post dot-com crash networks become such a real virtuality. The Deleuzian
analysis uncovered the dynamics that make these networks a phenomenon of
movement and creative energy. The personal profile page stands at the centre
of it, ordering the experience of networked entrepreneurs in new ways.
Entrepreneurs’ social lives are no longer connected mainly to a local community
of businesses, but come via the list of friends and network messages; via lines
of technology that get intermingled in new ways with friendship. Reputation and
business credibility is no longer solely created in face-to-face relations.
These findings raise new questions about the future reverberations of these new
connections. The rearrangements in lines of affect and lines of technology go
beyond those potentially captured in dialectic relations between real and virtual
and between business and private. They are different in-themselves, that is, they
do not translate into a mere synthesis between these classic divisions. Rather,
they are likely to forge new concepts, just like the personal profile page has
emerged as a new concept of networking, assembling elements such as the
guestbook, the list of friends, and photographs of close friends.
The Deleuzian analysis has been invaluable to recognise the personal profile
page as an intensity of creative becomings as such; it has enabled me to single
out the personal profile page as an individuation of a dynamic process of
emergence in-the-making. This aids our analytical possibilities of distinguishing
creative and emergent dynamics from other dynamics that might merely
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 37
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reproduce and recreate existing concepts. It gives us a handle to describe the
micro-cosmos of becomings, which might not be realised conceptually at the time
but which bears first cuttings that allow us to “see” new emergent conditions for
innovation.
The present analysis was only possible by keeping the analysis itself “in-
between” — bypassing what Deleuze (1987) calls the “grille” of invested
evaluative dimensions (such as online versus off-line or business versus private
life) when interpreting. This mode of engaging with emergent dynamics does not
dictate the story that emerges, and indeed, that has not been the objective. But
in following these paths that the Deleuzian philosophy suggests, this chapter has
promoted an exploration in the spirit of rhizomic connections in an attempt to
estrange the conventional and taken-for-granted, while opening the interpreta-
tion up to the imagination of new emergent concepts.
This chapter has been an illustration of what could be developed into a new
method of the explorative interpretation of conditions for innovation in knowl-
edge-related contexts. Far from being complete, this chapter has merely
presented a first attempt in this direction. Somewhere between the ethno-
methodological and the sceptical, the social psychological and the ontological,
this chapter has itself been something of a rhizomic journey connecting points of
a story rarely narrated as such.
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Endnotes
1
Graphical user interface of the Internet
2
Since then, entrepreneurship in e-business is often referred to as “dot-com
business.” The name derives from the “com” suffix of many business Web
sites. A dot-com firm is one whose business is wholly or predominantly
conducted through such a site, as opposed to traditional businesses which
may be represented online but continue to operate primarily off-line.
3
An online introducer system is software that can be integrated into a Web
site to support the registration and interaction management of an online
community. It allows registered users to send messages to other registered
users, to visualise their networking contacts, and to create links between
other users.
Innovation and B2B E-Commerce: Explaining What Did Not Happen 41
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Chapter III
Innovation and
B2B E-Commerce:
Explaining What
Did Not Happen
Steve New
University of Oxford, UK
Abstract
The massive wave of enthusiasm for B2B (business-to-business) e-commerce
generated with the “dot-com” boom led many to believe that a fundamental
transformation of how firms bought and sold products was just around the
corner. The new “wired” world of commerce would lead to real-time,
Internet-driven trading, with significant implications for — amongst other
things — the nature of buyer-supplier relationships, pricing, and the
management of industrial capacity. Despit e the excitement, such a
transformation has largely failed to materialise, and whilst there has been
a limited uptake of B2B innovations (for example, the use of online reverse
auctions), the fundamental character of B2B trade has remained mostly
unchanged. Drawing on a multi-stranded empirical study, this chapter
seeks to explain the divergence between the expected and realised degrees
of innovation.
42 New
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Introduction
The extraordinary rise and fall of the late 1990s technology bubble was not the
first speculative boom of its kind — and presumably will not be the last. As with
the successive 19
th
century booms relating to the railways, the frenzy was
accompanied by an astonishing explosion of rhetoric, folklore, and intellectual
and managerial fashion — crudely, “hype.” This led to a significant flurry of
innovation, particularly in the founding of large numbers of Internet-based
intermediaries (“hubs” or “exchanges” Bakos, 1991, 1998; Bloch & Catfolis,
2001; Barratt & Rosdahl, 2002; Le, Rao, & Truong, 2004). Investors and
organisations poured vast sums into these ventures and, for the most part, lost
their money. Consultants and investment banks made shrill claims that
interorganisational trade would be transformed, but the predicted revolution
failed to materialise.
I address two central questions in this chapter. The first is the simple question:
Why did the revolution not happen? The second is: What substantive ideas for
business practice can be salvaged from the wreckage? This is an important task;
to adapt George Santayana’s famous quip, those who do not understand the past
are condemned to repeat it.
One feature of published work in this field is that there has been relatively little
solid empirical material; on the other hand, there has been a great deal of
generalised comment and unsupported speculation regarding the causes and
consequences of the bursting of the B2B bubble. Day, Fein, and Ruppersberger
(2003) present an analysis that emphasises the similarities with other “shakeouts”
associated with disruptive technologies.
This chapter reports the results of a multi-stranded investigation into the extent
to which organisations are prepared to make use of the Internet in buying and
selling, and into the patterns of life and death of B2B exchanges. Unlike much
of the literature in this area, which has largely focused on leading companies or
the few successful hubs, this chapter concentrates more on the opportunities and
obstacles that face “ordinary” organisations, and the innovations which failed.
The logic behind this is that there is often much to be learnt about the process of
innovation from the mundane and the typical. The purpose of this study was not
to recount the organisational success stories of leading firms — others have done
that before, and the potential benefits of B2B e-commerce are well documented
(e.g., Sculley & Woods, 1999; Timmers, 2000; DeMaio, 2001; Raisch, 2001). For
this study, the challenge was to understand the reality of organisations’ experi-
ences, and to gauge the key issues and obstacles that they face.
Innovation and B2B E-Commerce: Explaining What Did Not Happen 43
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Background: The B2B Phenomenon
A simple starting point to the complex origins of the B2B e-commerce
phenomenon lies in the well-established technologies of electronic data inter-
change (EDI). At the beginning of the 1990s, for many industries, the direct
system-to-system transfer of data over proprietary networks following industry
standard protocols had become a routine element of doing business. The
technology allowed significant savings from both increasing the speed and
accuracy of data transmission, and in some cases was progressing to more
advanced uses whereby buyers and suppliers could not only manage routine
transactions but also “see” into each others’ systems, facilitating such opera-
tional innovations as collaborative planning forecasting and replenishment,
and vendor managed inventory. In addition, electronic linkages also were
developing for the easier sharing of technical and design data, encouraging inter-
firm collaboration in technical design. The downside of these “inter-
organisational information systems” were the considerable “hook up” costs
incurred by the parties involved, a fact which limited the adoption of the
technologies by smaller suppliers, often faced with meeting the costs of linking
their own systems with the non-matching requirements of several customers. In
parallel, in the academic literature, there was a limited debate as to the long-term
effects of these technologies on firms’ switching costs, and good arguments
could made for expecting both a reduction and increases in market “stickiness,”
and the consequential shift to purer “markets” or growing ”hierarchies,”
respectively (Malone, Yates, & Benjamin, 1987; Bakos, 1991). The debate was
rather theoretical, and was rather neglected outside of a handful of learned
journals.
The arrival of the Internet, and its adoption by businesses as a serious tool for
business, however, radically changed the character of the debate. Three key
features of the Internet and two innovations transformed the horizons of
possibility. The Internet was ubiquitous, cheap, and — being built around the idea
of a standard and simple set of technical protocols — relatively easy for firms
to adopt. The two innovations — the search engine and the online auction —
opened up a range of new possibilities for online B2B trading. Over time, two
basic connected perceptions emerged regarding the potential for a new ap-
proach.
The first of the perceptions was that the Internet could radically transform
procurement and sales processes, collapsing the costs and timescales of trading.
Prospective buyers could seek out prospective suppliers very rapidly, and
suppliers could present vast quantities of searchable information on their
products and capabilities. Furthermore, buyers could use Internet mechanisms
to identify the cheapest supplier in real time using multilateral reverse auctions.
44 New
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Correspondingly, suppliers could be more responsive in their pricing. The scope
for these new approaches to yield substantive benefits was widely acknowl-
edged.
The second perspective, however, took these new potentials as heralding
something far more significant than some dollars shaved off administrative
transaction costs. As Bill Gates (1995) stated, the Internet will “carry us into a
new world of low-friction, low-overhead capitalism, in which market information
will be plentiful and transaction costs low.” This vision of the future initially
fuelled enthusiasm for online business-to-consumer (B2C) retailing, but after
a while many observers realised that the B2B market was of a vastly larger
scale. B2B e-commerce was held to signify a “fundamental change in the way
capitalism works” (Prigg, 2000; Tapscott et al., 2000). A report by AT Kearney
(2001) suggested the emergence of “differentiated value networks” that would
“redefine entire industries and value chains,” and that that e-markets “can
dramatically affect the power balance in today’s value chain.” Partly driven by
an almost ideological faith in the nature of “markets,” this position assumed that
supply markets for corporate purchasers would be transformed: The features
which stopped industrial markets behaving like the theoretical, equilibrium-
finding markets of the neoclassical model (small numbers, constrained flows of
information, high switching costs, high barriers to entry) could be removed by the
new technology, reaping substantial efficiency gains. For these gains to be
realised, however, new market institutions would be needed to act as “hubs”
between buyers and sellers, and these — even if charging just a tiny fraction of
the throughput — stood to reap phenomenal economic rewards. These hubs
were to be the “killer application of the B2B Internet revolution” (Sculley &
Woods, 1999). As a result, an Internet “land grab” emerged as entrepreneurs and
existing market participants sought to establish themselves in the controlling
positions in their chosen market or industry.
As time has passed, many of these new intermediaries have fallen by the wayside
— and their fate is examined later in the chapter. However, it is important to note
that there is far more to B2B e-commerce than online exchanges and market-
places, and some organisations have achieved significant advantage through the
use of e-procurement and the use of so-called “private exchanges.” However,
many organisations have struggled to develop their e-procurement or e-market-
ing activities, and it is interesting to explore why this might be so.
Methodology
The investigation described here used multiple research methods. First, an e-mail
questionnaire was sent to over 4,000 firms who supply the major UK utilities,
Innovation and B2B E-Commerce: Explaining What Did Not Happen 45
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generating 240 usable replies that provided information on these companies as
both buyers and sellers. Second, follow-up telephone interviews with a dozen of
these firms helped provide greater insight into their experiences. Third, this was
complemented by nine case studies (involving site visits, multi-informant inter-
views, and documentary analysis) involving a range of both public and private
sector organisations. Fourth, the work used a database of 663 e-marketplaces
and B2B hubs constructed by Meakin (2002). This large database represents a
significant slice of the population, although there is no way of definitively
establishing what percentage it represents. Grubb (2000) estimated 1,400 B2B
exchanges had been launched; Levaux (2001) “estimated a thousand or so.”
Caspar (2000) cited an Andersen Consulting study that claimed there were 7,500
by late 2000. Day et al. (2003) claim a peak of 1,520. (For reasons discussed next,
all these figures must be taken with considerable caution).
The sample for the e-mail survey was firms in the Utilities Vendor Database
of the Achilles Group — a B2B company whose activities concentrate on public
and regulated procurement (see www.achilles.com). The pool of companies
represented a broad range of firms supplying the UK utilities sector. Our
approach was to initially use a very brief questionnaire and to use the immediacy
of e-mail feedback to refine the structure and examine the effect on response
rates by adapting the number and sequence of questions asked. The survey was
administered in the autumn of 2001, and we e-mailed just over 4,000 organisations,
reaping over 240 usable replies (we asked firms about either their purchasing or
selling, or both). However, due to our adaptive design, we did not collect data on
all questions from every respondent. Participants were entered into a drawing to
win a £50 gift voucher.
The mechanism of the questionnaire was to send a plain text e-mail, for which
the answers could be simply overtyped on the reply and returned. We did this to
avoid using e-mail attachments (which might be blocked by firms’ firewalls), and
to avoid the need for respondents to access a Web page (we knew that for at
least some of the smaller firms involved, whose access to the Internet was by
standard telephone line, this requirement would be a disincentive). We also
offered each participant access to the findings of the report, and a brief
benchmarking report comparing their response with other (anonymous) firms.
Due to the exploratory nature of the research, we have not employed formal
scaling or rigorous hypothesis testing in the interpretation of the data; the full
analysis is still in progress. Here, we present an overview of the descriptive data,
which in this case we believe is more instructive than looking for intricate
correlations of scores. As we were dealing with non-anonymous returned
questionnaires, we were able to additionally incorporate further public domain
information about the organisations into our analysis, including financial informa-
tion and (subject to data protection constraints) data from the original database.
46 New
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The median turnover of the respondents was £11m, with the median number of
employees being 124.
The qualitative aspects of the research entailed a series of visits to nine
organisations with a view to finding out which issues and aspects of B2B e-
commerce at the top of their agendas; we sought (within the time and budget
available) as wide a selection of organisations as possible (large, small, public,
and private sector), and sought to let managers and staff in these organisations
largely steer the direction of the discussions. This rather unstructured approach
meant that we did not (nor did we expect) to collect commensurate or matching
data from these organisations; however, it helped us engage with some of the
underlying issues regarding B2B and e-procurement, which we suspect would
have been rather lost if we had framed the meetings too strictly in our own terms.
We believe this trade-off to be particularly important given managers’ propensity
to discuss aspiration in these areas as if it were current fact, and the way in which
interviewees’ responses may sometimes encapsulate that which they have read
in professional magazines rather than the actual experience of their organisations.
However, the serious downside to this approach is that much of the material
generated is not directly relevant to issues at hand, and of course generalisations
are even more problematic than with survey data.
Methodological trade-offs also were needed in the analysis of the B2B hubs.
Much of the writing on these initiatives has assumed that relatively few of them
would survive, for example, Levaux (2001) estimated that only 200 would still be
around by 2003. Drawing from the prior database, this phase of the research
worked through 302 e-marketplaces with a highly structured search process
which entailed examining the Web site (where available) and using two search
engines (Factiva
™
and Lexis-Nexis
™
) to collate news and PR-agency coverage
(typically from trade journals). There are obvious problems with these secondary
sources not being wholly accurate or reliable; on the other hand, for some of the
initiatives we examined, these reports are the only accessible information left.
Where necessary and possible, e-mail messages were sent to the exchange to
gain further information.
This highly structured process allowed the systematic analysis of data regarding
each of the initiatives and also allowed a rational decision to abandon the search
for information on a particular exchange and move on to the next one. This
Taylorist approach to data gathering proved particularly effective, as experimen-
tation showed that without a programmed cut-off point, a great deal of time could
be spent searching fruitlessly for exchanges which were the equivalent of
“vapourware” — initiatives which were announced in the press but subsequently
disappeared without trace.
A key aspect of the data collection process was the classification of the B2B
initiative according to a set of dimensions (such as type of exchange, industry,
Innovation and B2B E-Commerce: Explaining What Did Not Happen 47
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etc.). These included whether the site was alive, dead, or had a continued
existence via merger with or acquisition by another initiative. Sites that appeared
to be dormant were contacted via e-mail, but if the link was broken and the e-
mail returned, it was assumed the operation had closed. If the site appeared to
be in a state “yet to go live” it was left until the end of the project and then
rechecked — if it was still pending, it was ignored.
During the course of the data collection, it became clear that it was not easy to
judge the level of activity or indeed in some cases the seriousness of intent of the
initiatives. Many of the marketplaces described what they did in principle, but
displayed no evidence that the site or the services provided were genuinely
operational. This transpires to be a major problem when investigating organisations
that may or not be viable, and which exist in a business context where it is not
in the actors’ interests to be completely honest about their current degree of
success. What was needed was an indication of substantive activity — an
“Activity Test.” We eventually settled on a simple proxy for being “genuinely
alive”: whether there was any reported quantitative indication of the transaction
volume (in number of transactions or dollar value) or throughput. These were
deemed to be “Actives.” However, this does not imply that the initiatives were
financially viable; an exchange could have throughput but not make any profit.
There is clearly a risk of “type one” error in this classification, in the cases where
an Active site has simply not gotten around to releasing some indicative numbers,
or there is some other strategic reason for obfuscation. There is also a “type two”
error for marketplaces that falsely declare activity. However, as there will be a
general incentive for initiatives to publicise their vitality in order to attract
participants, this seems a reasonable criterion to apply. Büyüközkan (2004)
describes another attempt to “score” the activity of e-marketplaces, but, from
the experience gained in the current study, it is difficult to see how his approach
could be operationalised in practice.
Sudden Birth and Lingering Death
of B2B Exchanges
Figure 1 illustrates that — given the extensive reportage of the death of B2B —
a surprising number of initiatives remained “alive,” in that there was still a Web
presence of some kind. However, out of the 302 studied, we identified only 29
who passed the “Activity Test” of providing quantitative evidence of any
substantial kind of any kind of activity.
Interestingly, the small difference between sites passing the Activity Test and
those not was not statistically significant (using the chi-squared test at the 0.1
48 New
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level of significance). So marketplaces able to publish throughput figures seem
to be no more likely to be still “alive” than those not. This can be explained by
two ideas: The relatively low capital and operating costs for “pure play” Internet-
based businesses (and the relative ease of fundraising during the boom years)
can mean that sites with meagre levels of real activity may be able to sustain
some type of Internet presence for some time as they simply burn off the initial
investment. This is a significant point. Day et al.’s (2003) study uses the
construct that a marketplace “exists and continues to operate” — our work
points to the fact that these two things are separable concepts.
Second, one way of attracting sufficient buyers and suppliers to participate in an
exchange would be to charge minimal fees, or to offer attractive but expensive-
to-provide services, thereby making continuing operations unviable.
There are a very wide range of schemes for classifying different types of
exchange. Here we adopt that proposed by Ramsdell (2000), which is summarised
in Table 1.
Figure 1. Survival of B2B e-marketplaces — comparison of whole sample
with those passing the ‘success test’
Table 1. B2B marketplace types (after Ramsdell, 2000)
0.0% 20.0% 40.0% 60.0% 80.0%
Dead
M&A
Alive
Activity Test (N=27) Overall (N=302)
Type
Typical
Owners
Type of
Market
Description
Product
Suppliers or 3
rd
Parties
Fragmented
Horizontal e-marketplace usually formed around a supply
market that cuts several industries (e.g., MRO market)
Industry Buyers
Buyer power
dominated
Vertical e-marketplace, usually revolving around an
industry sector (e.g., Chemical Industry)
Function 3
rd
Parties Non-fragmented
Focuses on services and capabilities rather than products,
such as Supply Chain Integration (SCI) or Project
Management.
Innovation and B2B E-Commerce: Explaining What Did Not Happen 49
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The classification of exchanges transpires to be a rather complex matter, as
there are many instances of hybrid and unconventional approaches. However,
in this study we found that the total sample — where categorisation was possible
— was split roughly equally between the categories as shown in Table 2. Figure
2 illustrates the status of these categories; again, there is no statistical signifi-
cance between the types of exchange.
The lesson that emerges here is that despite the widespread assumption in the
prescriptive and speculating writing at the time, no one particular exchange
model turned out to be dominant.
The emergence of B2B needs to be understood in the context of the technology
boom of the late 1990s, and Figure 3 plots the date of first announcement against
the value of the NASDAQ composite index. This pattern is illustrated in more
detail in Figure 4, which illustrates the lifelines of exchanges by category.
The data presented in Figures 3 and 4 points to some interesting speculation. On
the one hand, the close match of announcements to the NASDAQ index is
suggestive that much of the enthusiasm for B2B intermediaries was driven as
much by the potential of making money from investors in the heat of the
technology investment boom as it was by the desire to build genuinely viable
businesses. Simply setting up some kind of intermediary B2B organisation is not
in itself capital intensive (although making it really deliver value to buyers and
Table 2. Breakdown of marketplaces by category
0% 20% 40% 60% 80% 100%
Function
Product
Industry
T
y
p
e
o
f
B
2
B
percentage
Alive M&A Dead (N=231)
Figure 2. Status of exchange types
Type Percentage
Function 38%
Product 35%
Industry 27%
50 New
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suppliers may be). Therefore, it seems unlikely that the decline in the launching
of B2B initiatives is completely explained by the difficulty of raising funds as the
boom subsided. If, on the other hand, the motivation for many of the enterprises
was simply to get to the investment markets quickly, then the sharp drop off in
announcements between April 2000 and February 2001 makes more sense.
Figure 4, however, suggests that the fate of the initiatives cannot be explained
by looking at the launch date. A very cynical view might expect that those
Figure 4. Birth and death of e-marketplaces (n = 193)
J
a
n
-
9
4
J
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l
-
9
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a
n
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n
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-
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-
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a
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2
J
u
l
-
0
2
J
a
n
-
0
3
Time
DEAD
MERGED/
ACQUIRED
ALIVE
Figure 3. Announcements of marketplaces
0
5
10
15
20
25
30
J
a
n
-
9
4
J
u
n
-
9
4
N
o
v
-
9
4
A
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r
-
9
5
S
e
p
-
9
5
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e
b
-
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-
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6
D
e
c
-
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6
M
a
y
-
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r
-
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g
-
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-
9
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o
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-
9
9
A
p
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-
0
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e
p
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0
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F
e
b
-
0
1
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l
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e
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a
y
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c
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F
r
e
q
u
e
n
c
y
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1000
2000
3000
4000
5000
6000
p
r
i
c
e
First Announcement (N=209) NASDAQ Composite
Innovation and B2B E-Commerce: Explaining What Did Not Happen 51
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launched at or just before the frenzy might be the least likely to survive, being the
most driven by fashion and being subject to the least rigorous degree of scrutiny.
However, if this is the case, it is not clear from the data. Furthermore, it does not
seem that the early initiatives were more or less likely to fail than the later
starters. A key point in the consideration of this data is that many of the initiatives
may well be alive, and yet not very active, and not generating very much or any
revenue. As nearly all the initiatives are small private businesses, it is generally
very difficult to get convincing or informative data on their financial and
operating performance. The fact, however, that so few pass the “Activity Test”
is perhaps indicative that the task of bringing buyers and suppliers together is far
more complex than many initially thought. To explain why this might be, it is
sensible to begin by reviewing the impact of e-commerce to “ordinary” compa-
nies — and this brings the discussion to the survey and case studies.
Experiences of B2B E-Commerce:
Initial Observations
Before we turn to the substantive data gathered by the survey and the cases, it
is worth noting some incidental aspects of the research that we found interesting.
First, an immediate feature of the survey was the large number of e-mails
(roughly 10%) that were returned as undeliverable — even though we had used
contact e-mails provided by the firms themselves to a database to which they
paid a fee. Following up these cases revealed several potential problems: Many
firms had changed the format of their e-mail addresses; individuals had left the
organisation; and a surprising number were addresses based on non-company e-
mail systems (for example, Hotmail™ or Freeserve™), and the addresses were
no longer active. For reasons we discuss next, we think this is a significant
finding. A second and surprising observation was that eight of the responses
were returned by conventional post rather than by e-mail.
For reasons of available space, we concentrate here on just three aspects of the
substantive research findings: the impacts of e-commerce on buying, selling, and
the character of the buyer-seller relationship.
Buying: Commodification and Specification
We suspected that much of the hype surrounding B2B e-commerce was based
on a naïve view of corporate procurement. For example, many of the B2B
enthusiasts over-emphasise the extent to which corporate purchasing is about
52 New
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buying commodities or highly standardised products for which price is the only
salient variable. We sought data from supplier organisations about the nature of
their sales on two dimensions: First, the degree to which their output was
commoditised — in the sense that the goods or services provided were standard
“off-the-shelf” items, or bespoke for a particular customer’s needs. Second, we
asked about the extent to which buyers play a role in the specification of their
own requirements: In some cases, buyers spell out exactly what they want; in
others, the seller specifies the solution according to an assessment of the buyer’s
needs; in many cases, the exchange requires a process of dialogue between the
buyer and seller. Much of what has been written about B2B e-commerce has
assumed a particular model of inter-company trade, emphasising standardized
products specified by the customers (e.g., from an online catalogue). From the
supplying firms who responded to the e-mail questionnaire in this study, this
amounted to less than 19% of sales. This is a significant finding, as it indicates
that (if the result were indicative of the general case) more than 80% of B2B
trade is not amenable to the impersonal, price-oriented, online catalogue mecha-
nisms which have been one of the key archetypal images of B2B. Firms also
differ from each other by supplying different combinations of goods, services,
and works. The firms in the e-mail survey provided a good mix here, with 60%
providing goods alone or in some combination with works and services, and the
remainder selling some combination of works and services. Of the firms that sold
goods, three quarters sell them as part of a more complex package involving more
intangible elements. Again, much of the discussion about B2B has thought only
in terms of simple “products,” but the reality is far more complex.
Buying: Use of the Internet
We asked organisations about the use of the Internet in the purchasing process
and found extensive use, especially in terms of seeking information from
suppliers’ Web pages (see Figure 5).
Telephone interviews confirmed that respondents interpreted the term “online
marketplaces” very broadly — and organisations often view distributors in these
terms. Also, it seems that a crucial role of suppliers’ Web pages is simply
providing further contact data — postal addresses and telephone numbers. The
“other info” response includes using standard search engines to find, for
example, press coverage on a supplier. This mundane but valuable facility
transpired to main current impact of the Internet on the procurement function,
and is a significant observation only in as much as that it falls considerably short
from the idea of a “closely-coupled supply chain” or a “virtual community.” In
our case studies, we noted that the opportunity for “finding new suppliers” did
not seem to excite much enthusiasm amongst the organisations; the Internet
Innovation and B2B E-Commerce: Explaining What Did Not Happen 53
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could make getting information slightly faster, but was not perceived by the case
participants as being fundamentally different from using the Yellow Pages. This
is an apparently mundane but significant finding; much of the early excitement
about the role of the Internet was based around a notion that it would reduce
search costs (see Bakos, 1991). This appears not to be much of an issue — or,
if it is, there is only marginal advantage in a marketplace system over a simple
Google
™
search.
Buying: Inter-Organisational Systems
Although the B2B hype emphasises the electronic linking of organisations’
procurement systems to their suppliers’ systems, we found that only half of the
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Computerised
Purchasing System
Centralised Purchasing
Department
Formal Tendering
Procedures
(n = 165 for this question)
P
e
r
c
e
n
t
a
g
e
o
f
R
e
s
p
o
n
d
i
n
g
F
i
r
m
s
Figure 6. Purchasing organisation and methods
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Internet -
Supplier Web
Pages
Internet - Online
Directories
Internet - Other
Info
Online
Marketplaces
None of the
Above
(n = 167 for this question)
P
e
r
c
e
n
t
a
g
e
o
f
R
e
s
p
o
n
d
i
n
g
F
i
r
m
s
Figure 5. Purchasers’ use of the Internet
54 New
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supplying firms had computerised purchasing systems, with the same proportion
having centralised purchasing systems (see Figure 6).
These findings are interesting in that it suggests that for smaller organisations at
least, the idea of inter-linked systems along the supply chain is likely to remain
something of a fantasy without considerable innovation in both information
technology and business practice amongst many firms. This is not to say that this
cannot or will not happen; however, were these findings to be representative, it
would appear that there is a major task of supplier development ahead for those
firms which wish to cascade integrated supply chain practices.
Buying: Purchasing Measurement and Control
Much of the enthusiasm for e-procurement has focused on the enormous scope
for reducing the costs of purchasing bureaucracy and transactions processing.
Rather than go through an internal purchasing department, “users” can order
what they need from their desktop, with automatic budget controls keeping
spending within predefined limits: Many B2B enthusiasts have predicted the
demise of purchasing departments as a result.
While not denying the great potential for these types of savings, this study points
to some important qualifications. This is because there is more to purchasing than
transaction processing. First, effective procurement requires higher-level, stra-
tegic management in regard to external issues — such as supplier development,
collaboration on business processes, and supply policy. In other words, there is
much more to good purchasing than simply finding the lowest price. Second,
there are more complex internal issues than simple budgetary controls — a prime
function of procurement systems is the control of fraud, and, in the public sector
in particular, organisations’ procurement systems are constrained by a complex
regulatory framework. So while e-procurement can yield significant savings on
elements of the procurement process, it does not do away with the need for
specialist procurement staff with real purchasing expertise.
These considerations of organisation and structure lead to the questions of
measurement. The participants in our study all struggled with quantifying both
the performance of purchasing and in determining reliable costs for the purchas-
ing process itself. This issue has two important consequences for the adoption
of e-procurement and B2B.
First, without effective metrics of how well a purchasing process is performing,
the appeal of using Internet-based innovation to reduce costs is rather blunted.
Indeed, for managers in some of the organisations in this study, the key
motivation was to ensure compliance with a system of bureaucratic controls
rather than a hunger to reduce expenditure. This seems a particular issue if an
Innovation and B2B E-Commerce: Explaining What Did Not Happen 55
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permission of Idea Group Inc. is prohibited.
organisation’s culture rewards risk aversion; we found organisations where
purchasing managers’ principal goals seemed to be to stop things going wrong
and to maintain a steady equilibrium. In such organisations, mechanisms of
measurement and reward work against dynamic innovation in procurement
systems.
Second, in other types of organisations, the measurement of purchasing works
to give a misleading focus on short-term savings. In some organisations, the
dazzle of dramatic savings in headline prices achieved by B2B innovation (for
example, online reverse auctions) has mesmerized firms into forgetting that the
important cost is the total cost of acquisition and ownership. The phenomenon of
suppliers “lowballing” to win a contract, then working hard to claw back their
margin by, for example, raising post-contract complexities, is well known and
understood by procurement professionals. Equally, costs associated with deliv-
ery, quality, warranties, and post-sale support can easily dominate the initial
purchase price. It appears, however, that in some organisations it has become
politically convenient to brush aside these concerns and focus on impressive
sounding reductions in headline prices. In such cases, there is a clear risk that
such an approach may backfire in the longer term.
Selling: Communication and Customer Relationships
B2B has often been presented as though it is all about purchasing. But is essential
to understand the other side of the coin — how it affects selling organisations.
We asked suppliers about various aspects of their relationships with customers
(see Figure 7).
0%
20%
40%
60%
80%
100%
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(n = 140 for this question)
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Figure 7. Customer relationships
56 New
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permission of Idea Group Inc. is prohibited.
Although only roughly one-third used electronic links such as EDI, the use of e-
mail was very widespread. E-mail is clearly a dominant aspect of firms’ use of
the Internet, but it is useful at this point in the discussion to consider the earlier
finding regarding the poor quality of e-mail addresses. It seems fair to say that
although the firms in our study are largely reliant on electronic communications,
there are many examples where the process of managing these communications
is rather amateurish, and, specifically, where the organisational infrastructure
for managing these systems are underdeveloped. (It is worth noting that in the
author’s own institution, there are cases of administrators continuing to use e-
mail addresses to send and receive messages from accounts labeled after long-
departed colleagues; published “contact” e-mail addresses are often personalised;
and there are few managerial systems for systematically managing the “filing”
of e-mails). Electronic communication — for all its benefits — brings with it a
need for an administrative infrastructure, and associated investment and train-
ing.
Selling: Use of Web Sites
The use of Internet pages for selling firms varied considerably, with many firms
using the opportunity for both information and handling queries. Far fewer
organisations used the Web sites for transactional purposes — and for many the
mechanism for handling orders was merely the provision of an e-mail address for
the sales department (see Figure 8).
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(n = 241 for this question)
P
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e
Figure 8. Use of Web sites for selling
Innovation and B2B E-Commerce: Explaining What Did Not Happen 57
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permission of Idea Group Inc. is prohibited.
Figure 9. Predicted effects on price changes to customers
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
UP DOWN NO CHANGE
Expectations
P
e
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c
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n
t
a
g
e
o
f
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s
p
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F
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r
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s
Total (N=184)
High Impact (N=83)
Low Impact (N=101)
The study highlighted the various roles that the Internet might play in the sales
and marketing strategies of supplying firms. Much of the B2B literature presents
a very passive role for suppliers — their role reduced to supplying commoditised
goods and participating in price-driven auctions, or merely providing the fulfilment
of orders placed through online catalogues. In contrast, we found that organisations
have various proactive approaches to using the Internet. Our case studies
included a small manufacturer of specialist architectural electrical equipment,
who made considerable use of the Internet as a marketing intelligence tool — a
member of the marketing team systematically trawled the Web for news relating
to suitable building projects in key overseas markets. For this firm, the crucial
marketing activity was working with the “specifiers” rather than the immediate
customers, and to avoid any type of marketing which presented their products as
commodities, or easily comparable to competitors’ products. In this case, the use
of online catalogues was not at all a priority, as this would be entirely out of step
with its relationship marketing philosophy.
Impact on Buyer-Seller Relationships
A key question for B2B e-commerce is its effect on the power balance in supply
relationships. Figures 9 and 10 indicate some interesting contradictions in
participants’ perspectives. (“High” and “Low Impact” here refer to participants’
expectation of the impact of the Internet on customer relationships in the next
five years. “Don’t Knows” and “Not Applicables” are not included on these
graphs).
58 New
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permission of Idea Group Inc. is prohibited.
An interesting contrast here is that a large group of respondents expect their
suppliers’ prices to decline while the prices they charge to customers remain
unaffected. This imbalance is also reflected in the way in which firms viewed the
likely shifts in power (see Figures 11 and 12).
One interpretation of these data is that there is perhaps an unwarranted degree
of optimism — and maybe even complacency — in the responding firms. This
intriguing and contradictory finding echoes previous findings regarding firms’
views regarding the power consequences of supply chain integration and
partnership relationships (see Burnes & New, 1996; New, 1998).
0%
10%
20%
30%
40%
50%
60%
70%
MORE Powerful LESS Powerful No Change
Expectations
P
e
r
c
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n
t
a
g
e
o
f
R
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s
p
o
n
d
i
n
g
F
i
r
m
s
Total (N=158)
High Impact (N=75)
Low Impact (N=83)
Figure 11. Predicted effect on power position relative to customers
0%
10%
20%
30%
40%
50%
60%
70%
80%
UP DOWN NO CHANGE
Expectations
P
e
r
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n
t
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o
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p
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g
F
i
r
m
s
Total (N=136)
High Impact (N=67)
Low Impact (N=69)
Figure 10. Predicted effect on prices paid to suppliers
Innovation and B2B E-Commerce: Explaining What Did Not Happen 59
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permission of Idea Group Inc. is prohibited.
Conclusion
This chapter has presented some of the data from a multi-method study into the
reality of B2B e-commerce. Its general conclusions are to point toward a picture
which is considerably at variance to the extraordinary hyperbole generated by
the business media, consultants and some academics about the potential impact
of B2B.
A key element of this picture is that much of the theorising about the potential
impact of B2B has started from an inaccurate and deeply misleading image of
a) what organisational buying and selling is like, and b) the degree of sophistica-
tion of much of the supply base. Here, we found firms who were a considerable
distance from “supply chain cybermastery” (Berger & Gattorna, 2001) and
appeared not to be “surging forward on the crest of the Internet wave”
(Friedman & Blanshay, 2001, p. 2) and for whom the reality of B2B relationships
are more complex and richly textured than the rather Spartan and highly
depersonalised images of the electronic marketplace.
The boom and bust in B2B e-commerce could be accounted for by a number of
explanatory stories. Day et al. (2003) focus on the idea of a competitive
opportunity attracting many players, many of whom die in the rush. The fact that
so many of the e-marketplaces have failed simply reflects brutality of the “land
grab.” Good ideas attract much interest, and there is not enough gold to go
around. An analogy could be that the innovations at the turn of the 20
th
century
that initially encouraged the founding of hundreds of car companies — but only
a few can become Ford and GM.
The story that emerges from the research described here is different. It suggests
that the B2B hype was based on a fundamental misreading of the nature of inter-
0%
10%
20%
30%
40%
50%
60%
70%
MORE Powerful LESS Powerful No Change
Expectations
P
e
r
c
e
n
t
a
g
e
o
f
R
e
s
p
o
n
d
i
n
g
F
i
r
m
s
Total (N=184)
High Impact (N=86)
Low Impact (N=96)
Figure 12. Predicted effect on power position relative to suppliers
60 New
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organisational buying and selling, and the rush was for fool’s gold. Many of the
presumptions of the B2B model were not true, and, in consequence, innovators
lost a great deal of money. From this wreckage, one might salvage a reminder
of the idea that innovators have a duty to understand in detail the nature of the
markets into which they wish to enter.
These observations are clearly contingent on the degree to which the data
gathered here is representative of other populations. However, the use of the
triangulated approach in the broader research project has indicated to us that this
line of inquiry is worth continuing.
Acknowledgments
The author would like to acknowledge the significant contributions of Tony
Meakin, Ruth Southworth, and Mark Siddall, to this work, and to Achilles Group
Ltd for financial assistance. Earlier versions of this work were presented at the
EurOMA conference, Lake Como, in June 2003.
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New, S.J. (2002). Understanding the e-marketspace: Making sense of B2B.
Saïd Business School, Oxford.
Prigg, M. (2000, December 3). How sharing can change the way business
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Raisch, W.R. (2001). The eMarketplace: Strategies for success in B2B
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62 Zutshi, Zutshi, and Sohal
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Chapter IV
How e-Entrepreneurs
Operate in the
Context of Open
Source Software
Ambika Zutshi
Deakin University, Australia
Samar Zutshi
Monash University, Australia
Amrik Sohal
Monash University, Australia
Abstract
The Internet has become an integral part of our everyday lives and it is
often difficult to imagine how we ever functioned without it. This chapter
presents experiences of two entrepreneurial companies, one of which has
survived the ‘dot-com bubble burst.’ The chapter identifies current and
future online business environments especially in light of open source
software (OSS) being accepted globally. Unlike proprietary software (such
as Windows), OSS comes with its internal implementation details (source
code) visible both to its developers and users, along with the freedom to
change and redistribute this source. The significant implications of this
unique style of software distribution for e-entrepreneurs are examined.
How e-Entrepreneurs Operate in the Context of Open Source Software 63
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permission of Idea Group Inc. is prohibited.
Having a flexible strategic plan; possessing management skills; providing
excellent service; and having patience are some of the recommendations
provided by interviewed e-entrepreneurs. When made part of the decision-
making process, these recommendations would enhance current and future
e-entrepreneurs in sustaining their business.
Introduction
The aim of this chapter is to explore the usage of OSS in e-entrepreneurship and
to identify the attributes and skills necessary for an e-entrepreneur. E-entre-
preneurship is defined as the notion which principally uses the Internet to
strategically and competitively achieve vision, business goals, and objectives. E-
entrepreneurs use the World Wide Web (WWW) to interact and complete
virtual transactions both with other businesses (B2B) and their consumers/
customers (B2C).
The notion of an e-entrepreneur has recently gained recognition amongst both
academics and practitioners. An e-entrepreneur has many similarities with that
of an ‘entrepreneur,’ especially with respect to the attributes and traits required
to be successful. Concurrently, the major differences between the two are
primarily in the resources (such as infrastructure and setup costs) required to
start the business.
Over the last two decades, most businesses have experienced substantial change
brought about as a result of globalisation and the Internet. Maintaining a
competitive advantage to simply survive is a continued battle for many busi-
nesses. The Internet, however, has provided companies with numerous oppor-
tunities irrespective of the nature of the products and services offered to
customers. Many companies now make use of the Internet and provide custom-
ers through their Web site information such as store opening hours, store
locations, contact details, and listing of their products and services. However, for
a majority of these businesses a large proportion of the sales revenue is still
generated through activities conducted at the physical stores. One example is
Telstra, which in addition to having nationwide physical stores also does sales
and online billing (Telstra, 2004).
The number of companies performing their business activities through the
Internet is increasing rapidly while still maintaining a physical store presence to
enable customers to ‘see and feel’ their products before making a purchasing
decision. Satisfying the needs of conventional customers who prefer to complete
‘face-to-face’ transactions is recognised by many businesses. One example
being the Borders bookstores (Borders, 2004). Then, there also are companies
64 Zutshi, Zutshi, and Sohal
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who only have a virtual presence and complete all their advertising, marketing,
and transactions through the Internet. Amazon.com (Amazon.com, 2004) is a
perfect example of this type of organisation. Brand recognition, customer
service, and customer satisfaction are the main ingredients for any company,
whether operating solely as ‘bricks and mortar,’ ‘online,’ or a mix of the two
(Mottl, 2000).
The concept of ‘entrepreneurship’ has been in existence and researched by
academics for some time. Due to the lack of literature in the area of e-
entrepreneurship, the authors have sought guidance and direction from the
entrepreneurship literature to realise the following objectives:
• Identify attributes of e-entrepreneurs.
• Identify the similarities and differences between entrepreneurship and e-
entrepreneurship.
• Identify if being an e-entrepreneur is more advantageous than simply being
an entrepreneur.
• Examine open source software in the context of e-entrepreneurship.
Chief executives of two e-entrepreneurial organisations were interviewed to
obtain insights into the concept of e-entrepreneurship. Some of the issues
explored in the interviews included:
• attributes of an e-entrepreneur,
• role played by open source software (OSS) in the information technology
sector,
• impact of OSS on existing and future e-entrepreneurs, and
• role played (if any) by government in supporting e-entrepreneurs.
The next section presents an overview of the literature examining the dot-com
crash, entrepreneurship, and open source software (OSS). This is followed by
the section that describes the research methodology used to conduct the
interviews. Case studies of the two companies interviewed is then presented
identifying the various aspects of being an e-entrepreneur with respect to the
current technological environment including OSS. The last section presents the
conclusions and future research directions.
How e-Entrepreneurs Operate in the Context of Open Source Software 65
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permission of Idea Group Inc. is prohibited.
The Dot-Com Crash:
Did It Change the World?
The arrival of the 21
st
century was accompanied by the ‘dot-com crash’ with
hundreds of companies around the world laying off thousands of employees and
filing for bankruptcies. Competition amongst the remaining companies, however,
has not diminished. Companies that have survived have merely “shifted their
value propositions to meet (or chase) new marketplace needs” (Spiegel, 2002,
p. 30). Success stories of companies that have survived and moreover thrived
following the crash are no less amazing (see Anonymous, 2003; Spiegel, 2002).
A number of parties have been blamed for the ‘dot-com crash’ that include but
are not restricted to venture capitalists, investment banks and brokerages, and
the Federal Reserve Bank (Mills, 2001). Another factor that has been attributed
to the dot-com crash was that the majority of these businesses were established
and run by young entrepreneurs who lacked the “essential experience in
planning, organising, and managing businesses” (Foster & Lin, 2003, p. 456).
These arguments also have been substantiated by The New York Times and The
Industry Standard studies (Infante, 2001) where lack of human resource
planning has been noted as a contributing factor leading to sexual harassment and
legal suits against the companies, further crippling them following the crash (see
also Dvorak, 2001). Duck (2004, p.14) listed seven mistakes that resulted in the
crash: “too many competitors; short-term mentality; undisciplined growth;
unrealistic revenue projects; inexperienced management; underestimated costs
of establishing a national brand; and lack of customer-centered focus.” It is the
authors’ view that as opposed to the traditional models, entrepreneurs and
investors alike failed to foresee long-term funds allocation and put in place
contingency plans.
The ‘dot-com crash’ has not meant that the Internet is no longer used for
undertaking business transactions, rather it is being used more than ever before.
Whether a company started using e-technologies before or after the crash, it is
imperative that they offer security to their customers and avoid hackers from
their Web sites. Conry-Murray (2001) and Dvorak (2001) have highlighted
security issues that companies should address to protect their customers such as
debugging their sites regularly, minimum use of cookies, and not putting too many
advertisements on their Web sites.
Over the past decade there has been a substantial increase in the uptake of the
Internet by businesses primarily as a marketing tool. The Internet has enabled
even small businesses with limited resources to instantly communicate their
products and services to their target markets and audiences globally. Worldwide
companies are being encouraged to join this phenomenon. For instance, speakers
66 Zutshi, Zutshi, and Sohal
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at the Dubai Strategy Forum mentioned a number of attributes required to
improve economic performance. This included the need for accepting informa-
tion technologies and a “strategic structure that wipes out bureaucracy and
encourages entrepreneurialism, where managers manage, innovators innovate,
and the teams are rewarded for their successes” (Anonymous, 2002, p. 1).
The next section identifies the attributes of entrepreneurs and reviews the
relevant literature in the area of e-entrepreneur(ship).
Entrepreneurship and Its Relationship
to e-Entrepreneurship
The concept of entrepreneurship has been evident in economics and sociology
studies since the early 18th century (Becker & Knudsen, 2004). A number of
entrepreneurship definitions have been mentioned in the literature. Mulcahy
(2003, p.165), while citing the Oxford Dictionary defines an entrepreneur as “a
person who undertakes or controls a business or enterprise and bears the risk of
profit or loss.” Thompson and Randall (2001, p. 290) describe entrepreneurs as
those individuals who “sense opportunities and take risks in the face of
uncertainty to open new markets, design and develop new and improved products
and processes” (see also Legge & Hindle, 1997; Kuratko & Hodgetts, 2001).
A number of traits and skills that entrepreneurs possess are cited in the literature.
According to Chris Dyson, a business analyst, there are nine traits that depict a
person’s entrepreneurial characters. These traits include: “personality, integrity,
initiative, commitment, drive and determination, directiveness, confidence, self-
direction, selling, and leadership” (cited in Tams 2002, p. 399). Cherwitz and
Sullivan (2002, pp. 24-25) similarly comment that an “intellectual entrepreneur”
is depicted by having attributes such as “realistic and attainable vision, taking
risks and seizing opportunities, using available resources to achieve the vision by
using collaboration, teamwork, and innovative strategies” (see also Jablecka,
2001, p. 376). From these definitions, it can be inferred that successful
entrepreneurs need to possess attributes such as vision, opportunity-seeking,
leadership, and management skills.
As highlighted earlier, for the purpose of this chapter, the authors have defined
e-entrepreneurship as a concept which principally uses the Internet to strategi-
cally and competitively achieve vision, business goals, and objectives. e-
entrepreneurs have been defined as those individuals who use the World Wide
Web (WWW) to interact and complete virtual transactions both with other
businesses (B2B) and customer (B2C) (see Thompson & Stickland, 2003). E-
entrepreneurs have come under focus after the dot-com crash that resulted in the
closing of hundreds of businesses and thousands of people left unemployed.
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Practitioners, consultants, academics, and governments are investigating the
causes behind this crash that left many other industries dependent on information
technology crippled for months. Contingency measures are now being put in
place to avoid similar crashes in the future. A study of 42 entrepreneurs based
in the Greater London Business area who survived the dot-com crash was
conducted during the last quarter of 2002 by the London School of Economics
and Political Science (Steinberg, 2004). Using a triangulation method, the study
found that businesspeople were “in the process of jointly developing a new
[under]standing of what success and decision-making means via e-business
networks” (Steinberg, 2004, p. 4) and, accordingly, developing coping strategies
to avoid similar downfalls in the future.
One of the factors that contributed toward the demise of many e-entrepreneurial
companies was the lack of human resources and communication between sellers
and customers. To address such issues and provide potential e-entrepreneurs
with an understanding and practicalities of the business world, many multina-
tional organisations are now working with their prospective employees with the
aim of providing them with an in-depth understanding of business operations.
“Media entrepreneurship” is one such program that has been launched by
Hewlett-Packard (Canada) Ltd. (Bolan, 2002). The program primarily uses
Linux as being open sourced, allowing users (students) to acknowledge that there
are no limitations in software development. Robert Miller, national business
development manager responsible for education and healthcare at HP, com-
menting on the program said (Bolan, 2002, p. 19):
The dot-com boom/bust saw a lot of technologically astute people become
empowered with vast amounts of capital funding, but they lacked the
business sense or financial management skills to fully exercise their plans.
Some of them were smart enough to bring in business people that had that
kind of savvy, but it was a very awkward culture mix because there were two
totally different kinds of mindsets.
Globally, companies and individuals are being encouraged to embrace the
Internet as a means of developing a business advantage. For instance, the e-
Business Forum Working Group D5 (WG D5) in June 2003 identified the key
challenges (including those encountered in communication and policy formula-
tion) to encourage Greek companies to enter the area of e-business (Neofotistos
& Yagoulis, 2003). WG D5 consulted with a number of Greek private and public
sector companies involved in e-business and provided a number of recommen-
dations to smooth the process of conducting business through the Internet. These
included being aware of issues of privacy, protection of personal information,
promoting communication, and the training the e-entrepreneurs (Neofotistos &
Yagoulis, 2003).
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An individual’s prior understanding and knowledge in business studies and
cultural background affects how much new knowledge and information is
required to develop a collaborative business plan. This finding was realised by
Foster and Lin (2003) when exploring the impact of individual students’ learning
in e-business and e-commerce environments. By using cognitive perspective in
the study of students from different cultural backgrounds, Busenitz and Lau
(1996) found that people from some cultures produced more entrepreneurs than
others (see also Thornton 1999). Similar results have been found in a recently
completed study across eight countries including Australia, Slovenia, Mexico,
North America, Finland, Scotland, South Africa, and Kenya (Morrison, 2000).
Business plans of new ventures in New Zealand in 2000 were compared to
identify the percentage of Internet usage as part of the e-entrepreneurship
competition based on the Mckinsey model (McQueen, 2004). At the end of the
phase two of the competition, it was found that individuals with pervious IT
background, education, business experience, or personal interest had a much
higher Internet component in their business plans than participants with tradi-
tional business experience such as those for the fields of accountancy, retail,
entertainment, and games.
Open Source Software (OSS)
vs. Proprietary Software
Proprietary Software Model
In the recent past, much high-profile software (including Microsoft products
such as Word and Windows XP) have been distributed under a license that treats
the software as a ‘black box.’ The software is supplied in ‘compiled’ or ‘binary’
form, meaning that a computer can read and execute it directly. However,
programmers are unable to study the internals of the program. They are
forbidden to understand in detail how the program works, they are not permitted
to modify its working and they can redistribute neither the software in its original
form, nor in any derived or modified form. Typically, a single company or an
individual holds copyrights on proprietary software (Anonymous, 2004). These
copyrights are used in conjunction with licensing agreements to deny the
“freedom” or “openness” to modify and redistribute the software. “Proprietary
software is software that is not free or semi-free. Its use, redistribution, or
modification is prohibited, or requires you to ask for permission, or is restricted
so much that you effectively can’t do it freely” (FSF 2004).
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From the point of view of the software vendor, the proprietary software model
utilises restrictive licensing and secrecy to safeguard intellectual property
(IP). It is possible that the development of the software could be regarded as
entrepreneurship.
However, from the point of view of an e-entrepreneur looking to leverage
existing technology, proprietary software may not seem like an attractive option,
since modification and redistribution of existing proprietary software is forbid-
den. Furthermore, providing key services related to deployed proprietary soft-
ware may not be possible due to the unavailability of the internal source code.
Another problem is what is commonly referred to as ‘vendor lock-in.’ A
proprietary software vendor by definition is the only organisation with the legal
capacity to improve and enhance their proprietary software products. Hence, an
e-entrepreneur wishing to deploy proprietary software is “locked in” to the
vendor. No other organisation or individual (including the e-entrepreneur) can
provide improvements or custom modifications. For instance, Microsoft is the
only organisation that can provide security updates and bug fixes for the
proprietary Windows operating system. In effect, any user of Microsoft Win-
dows faces vendor lock-in. Unless and until Microsoft decides to issue a security
update or a bug fix, users must helplessly use the software in whatever condition
it is in. This argument is developed further under the discussion of OSS below.
Free and Open Source Software Model
When referring to OSS, the authors have used the Open Source Initiative (OSI)
definition (OSI, 2004a). OSS involves access to the underlying source code. In
addition, for a license under which software distributed is to be considered open
source, it must permit redistribution of the software without requiring a royalty.
Redistribution must be permitted in source as well as compiled (ready-to-run)
form. Modification of the software and creation of derived works must be
permitted. There are some other clauses that must be satisfied for a particular
software package to qualify as OSS (OSI, 2004b). However, the criteria are
arguably the most fundamental and, to someone not familiar with the OSS
paradigm, perhaps the most revolutionary. Many organisations and Web sites
use the term “free software” (FSF 2004) whose meaning and interpretation is
very similar to OSS, with ‘free’ implying freedom to access and modify the
source as well as redistribute unmodified and modified versions. Strictly speak-
ing, the definition of ‘free software’ might preclude certain software from being
considered “free” even though it might be considered OSS. Since all ‘free’
software would be considered OSS, we will use that term for simplicity and to
avoid the confusion that comes from ‘free,’ meaning ‘at no charge.’ Interest-
ingly, while it is possible that OSS and ‘free’ software can be obtained for no or
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very little cost, e-entrepreneurs should note that it is entirely possible for OSS and
‘free’ software to be ‘commercial’ (i.e., a source of revenue). For instance, Red
Hat produces an open source product called Red Hat Enterprise Linux, an open
source operating system that is sold by annual subscription. Subscribed custom-
ers are entitled to receive ongoing security updates, errata fixes, and new
features as they become available for the duration of their subscription.
Research Methodology
In this chapter, we have adopted the exploratory methodology (see Peil et al.,
1982; Spencer, 1982) to identify the trends of how OSS has been and would
impact the entrepreneurs as the usage of Internet and other technological
methods to conduct business continues to increase. Conducting interviews as a
method of exploratory research has been accepted in academia. For instance,
Murray (1996) used case study methodology to identify the role of venture
capital investments in newly established technological firms. Conducting inter-
views as a research methodology offers a numbers of advantages: giving
flexibility to both interviewers and interviewees in setting up a mutual time;
increasing the interviewers’ control on the direction of the questions and an
opportunity to further explore issues; providing undivided attention of the
interviewees; and, last but not the least, providing insight into non-verbal
observations such as body language (see May, 1993; Burns, 1998; Peil et al.,
1982; Spencer, 1982; Reddy, 1987; McNiff, 1988; Yin, 1994).
As previously mentioned, e-entrepreneurship is a new and under-researched
area, hence, the authors were working in unfamiliar terrains. Case study as a
research methodology has been accepted when attempting to overcome the
uncertainty of having clear measuring instrument (see Wallace, 1984; McCutcheon
& Meredith, 1993; McGuire, 1995; Palmer & France, 1999; Corbett & Cutler,
2000).
Chief executives from two entrepreneurial organisations were interviewed in
September 2004 for their experiences of setting up, running, and maintaining their
businesses in light of growing technological changes. According to the Australian
Bureau of Statistics (ABS) classification, Company A can be classified as
“micro” with only four employees, while Company B can be classified as “small”
with 25 full-time employees (see Steinberg, 2004). The focus of the interviews
was on the role of OSS in today’s entrepreneurial world where considerable
focus is being placed on functions of the Internet for completing business
transactions. After receiving consent from the interviewees, the interviews were
tape-recoded and subsequently transcribed and written up as case studies.
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These were then sent back to the interviewees for verification of the content, and
any changes as required, were accordingly made. This step was undertaken to
reduce limitations (e.g., generalisation, reliability, information overload, validity,
rigour) accompanied by the case study methodology (see McNiff, 1988; McGuire,
1995; Burns, 1998; Kitazawa & Sarkis, 2000).
Please note that to protect the confidentiality of the interviewees and their
respective organisations, their names have not been disclosed and are referred
to here as Company A and Company B, respectively. Nonetheless, as far as
possible, direct quotes from the interviewees have been incorporated in the
following sections.
Case Study Findings
Company A
With its head office currently based in regional New South Wales (NSW),
Australia, the company was established and registered as a partnership business
in early 2003 and then become a proprietary limited company in January 2004.
The company is “focused on developing and deploying Web commerce and
Linux-based network solutions” (Company A Web site) and has successfully
secured and completed projects in both the open source area and commercial
world projects for both Australian and foreign-based companies including in the
UK and the United States. The company’s open source content management
product has been ranked in the top 2% of the active projects at the SourceForge
dot-net site which has over 8,000 projects and downloads listed on its Web site
(Company A Web site). Even though the company and its members have a strong
background and focus on Linux, it also provides software solutions for pocket
PCs, the Palm Operating System (Palm OS), and Microsoft Outlook.
The mission and vision of Company A, in addition to generating and increasing
its revenue, is to move toward the area of “embedded media.” Interviewee A
considers embedded media to “employ devices and solutions on single chip
computers running on open source software.” Each of the Company A directors
have expertise in areas of programming, administration, and management,
respectively, and are on the path of expanding the company.
The motivation and flexibility offered by working for oneself was one of the
driving forces for the interviewee to establish his own company. The interviewee
also wanted to have the flexibility to adjust quickly as changes in the external
environment and technology took place without going through the bureaucratic
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levels often found in a large organisation. Technology itself is also the passion
of the company. This is still a motivating factor for all the personnel involved,
which is steadily pushing the company forward. The interviewee believes that
this is true of other companies such as Adobe and Apple, where he feels that the
vision of the company and the passion of its technologists had kept them going
despite management changes.
One of the themes that intrigued the interviewers was how the concept of OSS
that involves freely distributing your knowledge can result in generating business
for the company. Under an open source license the ‘source code’ is distributed
along with the ready-to-run version of the software product. The interviewers
were keen to ascertain how this apparent giving away of intellectual capital could
result in profit for the person/organisation involved. It appears that OSS is gaining
momentum and acceptance around the world, and these issues are becoming
more relevant, especially for e-entrepreneurs.
To answer the query, interviewee A commented that the writers of a program
are generally accepted as having the authoritative knowledge. To elucidate his
point he gave the following example: If a program is released as OSS, the writer
not only shares, but also demonstrates, his or her knowledge in a manner that can
be subject to scrutiny by experts. In addition, other organisations that require
tailoring of the program to their specific needs may contact the writer to do the
customisation for them.
This is where dollars come into the picture. The interviewee has had similar
experiences. A London-based company contacted the interviewee when they
wanted him to make changes to their program source code so that it was
compatible with the company’s accounting system. Since the company’s experts
had the source code of the product available to them, they could, in theory, do the
customisation themselves. However, this would involve them first becoming
familiar with the internal details of the software and then modifying it. Cost-
benefit analysis by the company showed that it was easier and more economical
for them to ask the interviewee to utilise his knowledge and expertise to deliver
the modified code. The interviewee estimates that the work took him approxi-
mately 20 hours to complete while his customers might have had to spend several
man-days to achieve the same result. So, the interviewee was able to acquire
highly specialised, lucrative business without having invested in marketing or
publicity services. The client, on the other hand, was able to procure a software
system that fitted their needs in less time and for less money than if they had done
it by themselves. So, it was a win-win situation for both parties involved.
In interviewee A’s view, the Internet, due to its ubiquitousness and near universal
accessibility, can be very effectively used as a marketing medium and MySQL
AB, the popular open source database product vendor, is a classic example. In
less than a decade, the MySQL database server has become internationally
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recognised and widely used, including in customised forms. High-profile clients
include Sony, Suzuki, and Sabre Holdings (MySQL, 2004).
It should be noted that not all the software produced by Company A is OSS. Some
software is released under the “general public license” (GPL) (Derekgnu, 2004)
and qualifies as OSS. In other cases, clients may purchase software under a
“commercial licence agreement” from Company A. This agreement allows the
client to use the product and to view the source code and covers the provision
of regular service by Company A such as providing further customisation and
enhancements. Under this license, the clients are not allowed to modify the
source. Essentially, this is Company A’s strategy to be able to effectively support
their clients. If too many modifications are made to the code, Company A would
have to extensively study the modified version before being able to provide
enhancements. It also can be seen as a precaution taken by Company A to avoid
legal repercussions arising from claims of failing to provide adequate support as
per the license agreement of the customised program. However, if the buying
organisation changes the source code without obtaining prior consent from
Company A, the latter is under no legal obligation to be able to support the
changed version of the code. Of course, the client is free to approach Company
A and/or other software solution providers to collaborate on customised versions
subject to additional costs.
During discussions with Interviewee A, an interesting point emerged: Company
A does produce open source software but also utilises open source software
tools. Company A has obtained commercial services from Red Hat Linux related
to their open source Linux-based operating system. They also are developing
some software for embedded systems which may turn out to be a derived and
open modification of existing open source software.
If an individual is contemplating to become an entrepreneur or change himself or
herself from an entrepreneur to an e-entrepreneur, they have to first consider a
number of alternatives and subsequently take appropriate decisions. One needs
to decide whether they would be deploying new software or leverage the existing
software. Further considerations regarding licensing agreements (OSS or pro-
prietary or a mix of both) also would be required.
In views of Interviewee A, “Open source [should be considered] as a serious
alternative for people [who] are trying to do [something new]. Statistically, more
than 50% of the Web servers in the world run open source software, which is
generally […] Apache, […] the most popular Web server in the world.
1
MySQL
is the best or the most popular database for Web-based projects.” Company A
does still utilise proprietary software, such as MYOB for its accounting needs
since it helps them conform to the appropriate standards and legislation. MYOB
runs on the proprietary Microsoft Windows operating system. Except in in-
stances where the clients request that supplied programs remain closed source,
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Company A generally licenses its software as OSS and believes that other
organisations should do the same.
Interviewee A commented that the decision whether or not to go OSS for their
software is a business decision and dependent on its vision, current position in the
market, current/existing new code development, and future plans. One needs to
keep in mind that like any other material product, software and code have their
own life cycle and the business decision should incorporate the potential life of
the code, accordingly.
Interviewee A also made two points of direct relevance to e-entrepreneurship.
First, as an e-entrepreneur, if you are trying to develop a novel solution, you can
focus on the entrepreneurial aspects by using existing, reliable, open source
software to avoid “re-inventing the wheel.” Second, as a provider of innovative
IT solutions, an e-entrepreneur faces a more level playing field since organisations
are not “locked-in.” Hence, they can turn to the e-entrepreneurs to provide
support, maintenance, and enhancement of OSS.
The interviewers also were interested to know the support, if any, provided by
the government to Company A and whether being based in a regional area it was
eligible for any specific government funds. Interviewee A indicated that he had
approached the state government for assistance and there had been some
progress. The response, however, has not always been very speedy which
sometimes is a challenge for small, struggling firms looking for assistance as they
may not be operating after a few months. The problem is sometimes further
compounded by the bureaucratic structure of the governments. The difficulty
experienced by regionally based organisations is convincing the officials of their
innovative ideas who are sometime reluctant to provide capital for new ideas that
may be regarded as being too risky. A classic example is trying to get funds for
OSS projects as the question raised by government officials is the same as the
authors: How can one make money by giving away their knowledge and
expertise?
Company B
The company has been providing innovative, competitive solutions based on open
systems and open source technology to its customers since the late 1980s. The
company aims to “develop strong, ongoing relationships with its clients and long-
term partnerships, based on mutual growth and respect with industry vendors”
(Company B Web site). Services provided by the company fulfil customers’
needs in areas of: consulting; application development; and training in software
programs such as Unix, Linux, Windows systems administration and network
management, and Web-based solutions to name a few. In addition to serving a
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number of small and medium-sized Australian-based customers, Company B
also has successfully completed projects and provided training to a number of
large organisations including Hitachi, Telecom Australia, Kodak Australasia,
University of Melbourne, Mobil Oil Australia, CSIRO, RACV Insurance,
Rockwell Areospace, ANZ Bank, Ericsson Data Australia, and VDO Instru-
ments (Company B Web site).
When the interviewee first started working in the computer industry, not only
was the industry in its infancy with huge-sized computers, a much smaller
percentage of people had access to computers as compared to today. The
majority of people involved in the industry at the time were young males generally
categorised as ‘geeks.’ Only large professional organisations such as insurance
companies and banks were using computers. The interviewee’s introduction to
the potential for online collaboration and the spirit of OSS occurred in the late
1980s. At the time, only a small team of professionals had access to the Internet.
He recalls participating in an online newsgroup where he would ask questions
about the C++ programming language and on occasion receiving advice from
Bjarne Stroustrup — the creator of C++. However, the state of the technology
at the time meant that only technically skilled people could take advantage of this
online community and near-instantaneous communication. Interviewee B realised
that there was a “great business opportunity” in this area if people at large could
access the Internet using tools that they could learn to work with relatively easily.
Unfortunately, initial feasibility studies indicated that the level of capitalisation
available was not sufficient to fund the infrastructure needed to realise such an
opportunity. The way to make an entry into the field was by doing consulting
work based on the emerging Internet technologies and the related open standards
and software.
One of the areas in which Company B has competitive advantage is in the area
of OSS as it was one of the pioneering companies. The company also has a very
high reputation in providing superior client service and catering to clients’
specific needs. Hence, the company receives many of its projects through
referrals as has happened in one of its recent projects when an Australian
University on recommendation from another university contacted the company
to tailor its student database to comply with the federal government’s reporting
guidelines by using the ERP system. In this instance, the company made use of
existing codes from “open source framework called Open for Business,” along
with their expertise in programming to successfully complete the project in less
than half of the time and cost than if the company had to write the source code
from scratch. By using existing codes on the OSS, the company can reduce the
price of their products and accordingly is more competitive than its counterparts.
By having access to codes and research and development (R&D) at their
disposal, the company also is able to provide prompt service as compared to other
large software companies who may not have their respective service offices in
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Australia. The company does not bind its clients into a lifetime contract and the
latter have full access to their codes that they can decide to move to another
vendor/company if they wished without being penalised/disadvantaged in any
way.
Working toward the “betterment of the mankind” by sharing his knowledge and
expertise with others while operating in an exciting, dynamic sector are the
motivations for Interviewee B to remain as an e-entrepreneur. One of the
challenges encountered by the company and others in the information technology
sector is when trying to market their products to third parties and businesses. It
has been noted that most technology experts do not have marketing and business
skills that can often disadvantage them in the marketplace.
Interviewee B and his company had different experiences while interacting with
the government sector. At the time of the interview, Interviewee B had been
working with the federal government to create a document/database that would
provide access to all government “agencies on the procurement of open source
software.” The document would explain legal ramifications if the third party
decides to take up the OSS modules from the document. The database also would
act as a networking site for individuals and organisations who wish to safely use
OSS modules. The federal government is consequently working to “remove
impediments towards the adoption of open source.” At the state government
level, the focus is still at industry development. The New South Wales (NSW)
government recently announced a US$40m Linux project which is one of the
largest in the world.
Company B had been in operation long before the dot-com crash, and the authors
were interested in understanding how the company had survived it as opposed
to many other unfortunate competitors. Interviewee B noted that unlike other
new companies emerging at the time with hundreds of people being employed in
the company within weeks, the number of employees had remained more or less
the same in Company B. Many people contemplating to expand their wealth also
had invested huge funds in their newly established companies. Company B,
however, did not receive any such funds. This does not imply that Company B’s
products and services were any less reliable or competitive. Nonetheless, its
experience had cautioned them against investing or accepting impulsive projects
and funds alike. Thinking and operating strategically as well as employing
experienced staff saved the company while other businesses vanished within
days after the dot-com crash. In an attempt to capture the already saturated
market, new information technology companies spent huge amount of resources
and was another reason for their failing: not conducting sufficient market and
competitive analysis, a prerequisite for establishing and running any type of
business.
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Interviewee B cautioned existing and new entrepreneurs of being aware of
globally existing patents for various programs and software codes as even
without their knowledge the programmer could be held liable for potentially
plagiarising other patented softwares. He proposed that for emerging economies
and businesses to be successful, it was essential that the software patent system
be either made redundant or more flexible with clear guidelines with a database
for searching all the existing patents.
When asked about the future of e-entrepreneurship, Interviewee B commented
that this was going to expand in the coming years. To emphasise his point, he gave
the example of the music industry. Until very recently, popularity in the music
industry was gained by singing face-to-face to a wider audience and generally
it took years to get a reputation and make money. In this current era, however,
by using the technology and the Internet, the singer can make hundreds of copies
of the music on CD and simultaneously distribute it worldwide capturing the
global music market. This would not have been possible using the traditional
manufacturing and distribution system.
Interviewee B strongly believes that for existing and future e-entrepreneurs and
information technology companies it is essential that laws relating to patents
should be changed, otherwise the progress could come to a standstill. Entrepre-
neurs also need to be aware and cautious of the situation and take comprehensive
legal consultation and protection.
Discussion
For an e-entrepreneur, the software tools used are likely to be the enabling factor
of the novel service being provided. In fact, the entrepreneurial product may be
software or a combination of hardware equipment and software. Given that such
is the case, how should various entrepreneurs decide whether to use software
solutions and/or which model to use for development?
To become a successful entrepreneur, it is essential that a person learns from the
experience of others and avoids making the same mistakes. The reoccurring
themes within the literature and interviewees complement each other. Halloran
(1991), for example, discussed the 20 commonly experienced pitfalls which
should be avoided, including: having unrealistic expectations; short-sighted
financing arrangements; missing the target market; buying costly and ineffective
advertising; and inconsistent and chaotic management.
Explaining the similarities and differences between an entrepreneur and an e-
entrepreneur, Interviewee B viewed that both have similar attributes and skills.
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Both need to be able to “visualise future potential [that is] above and beyond just
the vision for making money.” One major difference between the two is that
while working in the information technology sector, an e-entrepreneur requires
comparatively less funds and infrastructure when starting a business and,
consequently, less total investment dollars. Once a comprehensive market and
competitor analysis has been undertaken and the service that would be delivered
has been finalised, only access to the Internet is required to start the business,
which can be done from any location.
Andal and Yip (2002) postulate that companies should combine traditional and
new-economy bases of competitive advantage into their business models in order
to be successful in e-business. The generally accepted “e-bases” (Andal & Yip,
2002, p.1) include community effects, first mover advantage, fulfilment/delivery,
technology, teamwork, and scalability. They also suggest that some e-business
start-ups failed to implement these advantages effectively or found that they
needed to be augmented with traditional bases of competitive advantage. For
instance, the e-base first mover advantage should be combined with traditional
product/service advantages. Getting to the market first with a novel product or
service can result in significant benefits such as in the case of Amazon.com and
Yahoo. Also, while the use of new and emerging technologies is considered an
e-base of competitive advantage, realistically, most technology can be easily
replicated. Despite this, some companies, notably Google, have been able to
convert technology into an asset and sell it.
The interviewees’ comments indicate that they are at least intuitively aware of
such implications. Both Interviewees A and B perceived a business opportunity
in connection with an emerging technology, namely, embedded devices and the
Internet, respectively. At the same time, they also realised that over-committing
themselves merely on the basis of new technology did not make business sense,
and they relied on other sources of revenue such as consulting work and Web
development to acquire the infrastructure and capital to develop their e-
entrepreneurial ideas.
Interviewee B mentioned that the fact that they were the pioneers in the industry
of open source solutions was a major source of competitive advantage, thus,
underscoring the first-mover e-base of competitive advantage. However, Inter-
viewee B regards their use of OSS as another — and perhaps less traditional —
source of competitive advantage. By candidly disclosing to their clients the fact
that a solution is based on open source software, the clients are reassured that
they can, should the need arise, go to other vendors for maintenance, support, and
development. There is also an undercurrent of transparency at work; when a
company agrees to provide an OSS solution, their entire system is potentially
subject to scrutiny by their clients. This may give the clients a sense of
confidence; a vendor supplying a completely open solution that can be verified
How e-Entrepreneurs Operate in the Context of Open Source Software 79
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by independent technical staff must surely believe in the technical quality of their
product.
A possible interpretation of the comparative ease with which certain technologi-
cal functionality can be replicated is that the intrinsic value of the software that
provides such functionality does not amount to much. In cases like these, OSS
offers the opportunity for an e-entrepreneur to focus on services that are enabled
by or based on technology rather than wasting resources developing technology
which will soon be replicated and widely available anyway. Certainly, it is still
possible to try and sell technology, as Google has done. But this involves ensuring
that one’s technology is constantly evolving at a rapid enough pace to consis-
tently stay ahead. As pointed out by Interviewee B, such research and develop-
ment (R&D) can be prohibitively expensive for e-entrepreneurs, particularly in
the Australian market where capitalisation can be harder to come by than, say,
in the United States.
Teamwork amongst a diverse mix of people with varied skill sets and experience
is another commonly cited e-base of competitive advantage (Andal & Yip,
2002). Apart from the contributions from team members within the organization,
making software available in open source form allows participation from the
wider community. One of Interviewee A’s open source projects has built up a
virtual community of users, some of whom are able to contribute by asking
questions and reporting errors that enabled Company A to enhance the quality
of their product. In some cases, they are even able to offer “patches” — snippets
of software code that add functionality or repair an error. Interviewee B also is
aware of this effect and mentioned that Company B is an organization that tries
to contribute its expertise and knowledge to the improvement and enhancement
of OSS that they deploy. Interviewee B considers the process a way of
“bartering IP.” In this sense, releasing software developed by an e-entrepreneur
as OSS is not giving away something at no charge, it is an offer to exchange and
share expertise, knowledge, and time with the possibility of mutual benefit to the
developer(s) of the software and the wider community. Successfully trading IP
with the global community is potentially a very powerful way of harnessing the
synergy arising from a team of diverse backgrounds and abilities.
Based on the understanding developed from the experiences of the interviewees,
the authors have identified the following three key requirements for being a
successful e-entrepreneur in the field of OSS.
1. Being Technically Competent
Both interviewees recognised the critical importance of technical ability.
Interviewee B mentioned the depth of knowledge required and the “wiz-
ards” on Company B’s staff. Interviewee A also is emphatic on the need
80 Zutshi, Zutshi, and Sohal
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to be “technically sound.” By definition, e-entrepreneurial activities are
strongly dependent on the underlying technology. The e-entrepreneur must
not only be thoroughly familiar with the state of the art of the relevant
technology but also possess a deep understanding of the underpinning
principles in order to be able to analyse trends and foresee opportunities.
Interviewee B does caution that in the context of Company B, high quality
technical ability is often found in people who are unable to liase well with
customers, and it can be a challenge to find staff that strike the right balance
between being “tech” and “suit.” Hence, the latter can act as a marketing
challenge when “tech experts” need to explain their product in layman’s
language to their customers.
2. Taking the Customer Service Perspective
Interviewee A, while emphasising technical ability of the product, insisted
that the focus should be on what the technology can do for the consumer.
Ideally, the technology should be transparent and the customer should see
the benefits of the technology without needing to understand the details. In
many cases, they should not even have to care whether the solution is open
source or not. What should be clear to the consumer is what the technology
can enable them to do and what the e-entrepreneur can make possible for
them via the services related to the technological product. These views hold
for Interviewee A’s e-entrepreneurship plans in embedded media – small,
portable devices which must, by their very nature, be consumer specific.
They are also relevant to Company A’s online content management system
products. The base product itself is available to everyone, but the true
source of revenue comes from consumers wanting services based on the
existing product. These services include maintaining the customers’ online
presence and customisation of the base product to deal with customer-
specific requirements.
Interestingly, while Company B operates in a slightly different arena, the
customer service and technology transparency issues are the ones that they
strongly identify with. For instance, they have a product called the small
business server. This is meant to be a turnkey solution that can be set up
quickly and easily. It provides small businesses the most commonly needed
functionality such as Internet connection sharing and acceleration, e-mail,
anti-virus, fire walling, and file and printer sharing. It so happens that the
software installed on the server is all OSS. However, in Interviewee B’s
experience, the customer does not necessarily care — or need to know —
that this is the case, as long as they are instructed on how to use and
administer it. Further, Interviewee B asserts that the open source nature of
the software in this product ensures that they have full access and complete
control over all aspects of the software functionality, thus placing them in
How e-Entrepreneurs Operate in the Context of Open Source Software 81
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a position to provide maintenance and service as long as the customer is
willing to pay for such services.
3. Being Clear on the Reasons for Going OSS
Neither interviewee recommends OSS as a panacea. It is clear from both
their interviews that a number of factors influence their choice of whether
a solution is made OSS or not. In fact, while doing some consulting work,
Interviewee B recalls being specifically asked to provide proprietary
software-based solutions, which Company B was comfortable providing.
Hence e-entrepreneurs should not perceive OSS as the next “bandwagon”
or something to be done purely out of ideological reasons. The interviewers,
as well as some existing literature (see Cusumano, 2004), caution against
this. Still, there can be solid business reasons for focussing on OSS as
evidenced by the activities of big business such as IBM, Sun, Red Hat, and
Novell (Mahoney & Naughton, 2004). In fact, both Companies A and B
produce or have produced offerings and services based on proprietary and
open source software. One or more of the following reasons have been
compelling enough for both Companies A and B to go open source:
• To harness the distribution and marketing power of the Internet
Interviewee A decided to release Company A’s content management
system under an open source license over the Internet. The idea was to
make it easy and obligation free for prospective customers to download and
use the product. If they were technically inclined, they also could inspect
the source and assure themselves that the product was technically sound.
While there are a large number of people who have chosen to use this for
free, they have at least become aware of the existence of the product and
Company A. Further, some of the users have requested services and
support for which they have paid Company A. Interviewee B made the
observation that in order to get commercial entities to try out one’s
software, the fact that it is open source gives them further incentive. This
is because a potential customer is ensured that they can make some use of
the software even if the original vendor is not readily available because they
have the code and can modify it to suit their purposes, if the need arises.
• Avoid re-inventing the wheel. When the functionality of the product and
the services are paramount (such as Company B’s turnkey product), the
software itself is the means to an end. Therefore, it makes sense for an e-
entrepreneur to make use of the readily available OSS rather than having
to devote valuable resources to rebuild what has already been done (and
often done well). For e-entrepreneurs seeking to move quickly and offer
novel services, this can be a major motivation. Interviewee B finds that by
82 Zutshi, Zutshi, and Sohal
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avoiding a lot of duplicated R&D, they are able to provide cost-effective
solutions.
• Interaction with the community. Interviewee A acknowledges that Com-
pany A has indeed benefited from the questions, suggestions, and contribu-
tions of the online community that uses their open source content manage-
ment product. Interviewee B views his Company B’s building solutions
based on existing OSS as bartering IP. Company B benefits from the IP of
the developers of existing OSS and in turn feeds back expertise to these
open source projects.
• Get an edge over proprietary software vendors. An e-entrepreneur may
have an idea for a new product or service that can be enabled by a software
package (or, indeed, the product may be a software package itself). It is
often the case that the e-entrepreneur would struggle against the big
businesses that offer similar products/services based on proprietary soft-
ware. By releasing their product as OSS, the e-entrepreneur can get the
attention of some potential customers who are deterred by the higher prices
or the closed nature of the proprietary vendors. These potential customers
could become a source of revenue based on custom modifications and other
support-related activities. Of course, if there are already a number of OSS
solutions available, then the e-entrepreneur should try to come up with a
different idea.
Apart from the discussed business reasons, a strong ethical undercurrent did
seem to underlie some of the issues outlined by the interviewees. For instance,
Interviewee A saw releasing a proprietary product as OSS after it had reached
its end of life as one way of letting customers know that they were not being left
in the lurch. By granting access to software that Company A had previously
developed under a proprietary license, users of that software would be able to
continue to use and maintain the product well after Company A declared it as
discontinued, if they so wish. For Interviewee B trying to “make the world a
better place” is more important than “making a buck.”
Another common factor is the passion for technology and the excitement that
comes from developing new technology or watching the technology evolve by
following and perhaps collaborating with the open source software community.
As a result of these findings, we agree with Mahoney and Naughton (2004) when
they say that for some companies, OSS can be a strategically valuable weapon.
However, the idealistic tendencies of both interviewees would cause us to stop
short of agreeing completely with them when they say that it is difficult to find
the “ideals of freedom, volunteerism, and a shared community of values in
today’s world of Monetized Open Source.”
How e-Entrepreneurs Operate in the Context of Open Source Software 83
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Conclusion
In this chapter, we have examined the increasing usage and growing acceptance
of open source software within the technological world. E-entrepreneurship is a
growing field and the experiences of two e-entrepreneurs trying to survive in this
competitive field were presented. The underlying attributes and skills necessary
for an e-entrepreneur are very similar to that of becoming an entrepreneur.
These include: being a visionary; the ability to develop short- and long-term
strategic plans; providing leadership; developing flexible structures; and remain-
ing responsive to changing environmental and market demands.
Presented next are the recommendations we have elicited from the interviewees
that can enable e-entrepreneurs to be successful in their ventures.
Flexibility in Strategic Planning and the Work
Environment
There is a need for maintaining flexibility when doing business irrespective of the
organisational size. Especially in this technologically-dominated business world,
the organisation needs to have a flexible structure so as to be able to respond to
the ever-dynamic and ever-changing environment. At the same time, long-term
strategic decisions should be made which reinforce the vision of the company.
Provision of High Levels of Service
A high emphasis needs to be placed on providing regular and outstanding service
to clients. A company’s reputation (communicated though “word-of-mouth”)
plays a major part in obtaining repeat business from existing clients and attracting
new clients.
Developing Basic Management Skills
A successful e-entrepreneur must acquire basic management skills and at-
tributes such as leadership, negotiation, and business planning. Furthermore, a
balance needs to be maintained between the technical demands and the business
demands of the company, especially those relating to people management —
customers, suppliers, and employees. Motivating employees will remain a key
task for managers regardless of the type of organization.
84 Zutshi, Zutshi, and Sohal
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Taking the Long-Term Perspective
Establishing a new business requires significant commitment in terms of effort
and financial resources over a significant period of time. Hence, returns in the
short-term should not be the motivating factor. Building a robust and stable
business requires patience. One way of maintaining motivation over a long period
is to ensure that all individuals involved keep an open mind and enjoy the journey
that can provide numerous challenges and highly satisfying outcomes.
Listening to Technologists
In order to maintain a competitive advantage, it is imperative that managers
regularly communicate with their technical personnel since they are ones who
will have firsthand knowledge of what is happening in the technological world.
This chapter has contributed to our understanding of OSS and e-entrepreneur-
ship. The literature highlights the need for further research in this area,
particularly to do with small businesses with Internet usage (Steinberg, 2003).
Gaps in the existing literature in the area of OSS and e-entrepreneurship needs
to be filled with more studies. One way this could be initiated is by more
qualitative studies incorporating both in-depth case studies and focus-group
discussions exploring experiences of e-entrepreneurs in the current technologi-
cal environment. The experiences of entrepreneurs who have now become e-
entrepreneurs also need to be further explored.
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Endnote
1
Netcraft (www.netcraft.com), in fact, reports a 67.92% market share for
the open source Apache Web server in October 2004, which is a bare
0.07% change since October 2003.
Acronyms Used
ERP enterprise resource planning
IP intellectual property
MYOB Mind Your Own Business (accounting software package)
OSS open source software
SAP “Systeme, Anwendungen, Produkte in der Datenverarbeitung,” mean
ing “Systems - Applications - Products in data processing” [url:wiki_sap]
SQL structured query language
Personalized Relationship E-Marketing 89
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Chapter V
Personalized
Relationship
E-Marketing and the
Small Medium-Sized
Enterprise
Clare Brindley
University of Central Lancashire, UK
Diane Wright
Manchester Metropolitan University, UK
Abstract
Many small businesses are beginning to adopt at least tactical solutions to
enhance relationships between themselves and their customers. This chapter
focuses on a UK-based marketing communications company which has
developed an innovative personalized relationship e-marketing tool, utilizing
mobile technology aimed at the SME sector. Current marketing practices,
such as database marketing and CRM systems, are discussed in terms of
SME adoption and whether the tool, Sign-Up.to is an effective replacement
for established CRM systems. The authors conclude that while the case
study company has developed a tool that will aid SMEs with their relationship
marketing, the philosophy of relationship marketing must already be
imbedded within the SME. The authors’ intention is to illustrate how
90 Brindley and Wright
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technology can be implemented in the SME sector and to explore how
technology and marketing can help each other.
Introduction
It is recognized that the small business demonstrates certain characteristics that
are not conducive to long-term strategic planning. Indeed, many small businesses
perceive that the level of risk associated with marketing and marketing decisions
is prohibitive and any marketing undertaken by a small business tends to be
limited to a more tactical marketing communications approach as opposed to a
strategic approach.
Studies (Ritchie & Brindley, 1999) indicate, however, that the small or
medium-sized enterprise (SME) is rapidly becoming aware of the potential
for competitive advantage that can be gained via e-marketing. Research has
indicated that the initial primary impact of e-marketing is in terms of the
business–to-customer relationship, with SMEs developing Web sites to provide
basic product range information (Ritchie & Brindley, 2000). The evidence
suggests that while some SMEs are developing their strategic thinking about the
potential use of the Internet, this is still primarily focused on the marketing
communications and sales strategies. Changes in the wider business environ-
ment have led to significant adaptations of technological advancements in the
field of marketing, such as the use of specific software. Much of these
developments have taken place alongside the shift from transactional aspects of
doing business with a customer to relational aspects. Technology has therefore
provided businesses with a means of collecting and manipulating customer data
that will aid loyalty management, such as the introduction of sophisticated
measurement systems, customer targeting based on lifetime value, and defection
analysis. In confirmation of this, Zineldin states “Relationship marketing will not
be established without IT-based relationships using advanced technological
tools” (2000, p. 7). As a consequence, therefore, the use of CRMsoftware
systems is becoming more widespread. At the same time, smaller businesses are
starting to address the wider opportunities associated with e-marketing (Brindley
& Ritchie, 2001), and many are beginning to adopt at least tactical solutions to
enhance relationships between themselves and their customers.
This chapter focuses on a case study of a UK marketing communications
company which has developed an innovative personalized relationship e-mar-
keting tool, utilizing mobile technology aimed at the SME sector. The majority
of current technological systems designed to aid the marketing efforts of
organizations are geared to the larger companies rather than to the SME sector.
Personalized Relationship E-Marketing 91
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permission of Idea Group Inc. is prohibited.
The aim of the chapter is to explore whether the new e-marketing tool, Sign-
Up.to, can help SMEs use technology to develop their relationship marketing
efforts, while avoiding the issues and costs of implementing the more “estab-
lished” CRM systems. The chapter begins with a discussion of marketing
practice in terms of database marketing and CRM before moving onto explore
the experience of SMEs and technology application. A section on CRM and
SMEs is included. The e-marketing tool developed by the case company is then
described and examples of its application are given. Conclusions are then drawn
to its effectiveness in aiding SME relationship marketing strategies.
Background
As mentioned, many of these tactical solutions have been focused on marketing
communications, as the SME begins to take advantage of the technological
developments. To consider these developments in more detail, it is clear that the
manipulation of customer data is important to feed the new obsession with
measurement reinforced by the argument put forward by Buchanan and Gillies
(1990) that what gets measured or lends itself to measurement is likely to be
implemented. Measuring relies on the manipulation of data; in the case of
marketing, this is customer data. The use of specific customer data, while
fundamental to many aspects of marketing, is traditionally associated with two
specific areas, namely database marketing and direct marketing. Given the
confusion that surrounds the distinction of these terms, it is appropriate at this
point to dwell on them in some depth.
Fletcher, Wheeler, and Wright (1997) define database marketing as how to use
market data to the best advantage through whatever medium. They list three
aims for database marketing: strategic improvement through better use of
marketing information; the identification of strategic advantage through the use
of customer and market information (product/service development); and the
development of long-term customer loyalty evident in the reduction in brand
switching and the enhancement of cross selling. The basic requirements for
database marketing also are presented, namely a relational database (informa-
tion from different files linked by a common field), a query language for access,
software for market segmentation analysis, forecasting, merge/purge functions,
and others. Thus, the database should be able to be manipulated in a useful
manner. Peters (1997) argues that companies need to use customer information
in a structured fashion if they are to gain value from it and build customer
relationships. Customer information files for relationship marketing purposes
should include profitability information, so that the lifetime value of the customer
can be forecast (Gronroos, 1996).
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The functionality of database marketing is recognized by Sisodia and Wolfe
(2000, p. 185) who refer to it as “automated transactional marketing.” Murphy
(2000) notes that databases are often product-oriented, not customer-oriented,
again underlining their functional (short-term) as opposed to their strategic (long-
term) nature. Morris, Brunyee, and Page (1998, p. 361) indicated even earlier
that database marketing is nothing more than “building detailed customer
intelligence files, that permit ongoing, customized communications.” Thus,
database marketing is seen by many as a tool to help maintain contact with a
customer. By contrast, relationship marketing goes much further than that,
focusing as it does on the development of an ongoing long-term relationship.
The other area of marketing often associated with concentrated data manipula-
tion is direct marketing. Bird (2000, p. 16) defines it as “any advertising
activity, which creates and exploits a direct relationship between you and your
prospect or customer as an individual.” Fletcher et al. (1997) see it as a way of
using direct media for a target market. There is a strong emphasis on measur-
ability and return on investment, thus often encouraging a short-term focus.
While still thought to be primarily used for marketing communications, Long et
al. (1999, p. 5) recognize the role that both database marketing (DBM) and
direct marketing (DM) have played in the development of relationship market-
ing (RM): “Companies have identified personal data as the foundation of direct
marketing and database marketing, which are two of the immediate forbears of
relationship marketing in consumer markets.” Thus, in the academic world, there
is a developing recognition, that while undisputedly linked, RM is not the same
as DBM or even DM.
Customer relationship management (CRM) is a further development in technol-
ogy and appears to be even more closely linked to relationship marketing if only
by name. Definitions of CRM focus on the organization driving the relationship.
For example, Galbreath and Rogers (1999, p. 162) define CRM as “activities a
business performs to identify, qualify, acquire, develop, and retain increasingly
loyal and profitable customers by delivering the right product or service, to the
right customer, through the right channel, at the right time and the right cost.
CRM integrates sales, marketing, service, enterprise resource planning and
supply-chain management functions through business process automation, tech-
nology solutions, and information resources to maximize each customer contact.
CRM facilitates relationships among enterprises, their customers, business
partners, suppliers, and employees.” Another definition offered by Hamilton
(2001) interprets CRM as being “the process of storing and analysing the vast
amounts of data produced by sales calls, customer-service centres, and actual
purchases, supposedly yielding greater insight into customer behaviour. CRM
also allows businesses to treat different types of customers differently, in some
cases, for instance, by responding more slowly to those who spend less or
Personalized Relationship E-Marketing 93
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charging more to those who require more expensive hand-holding.” Therefore,
the use of CRM software systems presents on the face of it a potential solution
to the small business and it is understandable that the SME may consider
exploring CRM developments as the next stage on from database marketing and
direct marketing when seeking to develop the opportunities presented by e-
marketing.
Indeed the SME sector has generally been recognized as the seedbed of
inventiveness, creativity, and innovation (DTI, 1994). Smallbone, North, Vickers,
and Roper (2001) identified a positive link between innovation and business
performance within SMEs. However, differences between sectors (e.g., manu-
facturing and services) may prevent the treatment of SMEs as homogenous in
regard to developing conclusions and advice on imbedding organizational learn-
ing to foster and sustain innovation. As well as sectoral differences, there also
is the issue of size. For example, the micro business may be totally dependent on
the owner/manager to sustain innovation.
Unfortunately, the owner/manager’s zeal for the development of new concepts
and ideas — an “innovation orientation” — can dominate or exclude a dedication
to the principles of customer orientation. The idea comes first and the check for
market acceptance second. Thus, innovation and entrepreneurial flair without
the application of marketing may not only prove unsuccessful in the short-term
but also in the failure to imbed the knowledge and cultural changes necessary to
sustain longer-term performance. Ideally then, there should be a symbiotic
relationship between marketing and entrepreneurship. Doyle (1998, p. 225),
quoting Peter Drucker’s view “that management have only two key tasks:
marketing and innovation,” reinforces the accepted view that the two are
intimately interlinked. As Geroski (1998, p. 1) illustrated, “it is vital to think
creatively about markets…as it forms the basis for successful strategic innova-
tion.”
It is widely recognized that innovations in the areas of knowledge transfer and
communications represent significant opportunities for competitive advantage
(de Geus, 1988; Slater & Naver, 1995). Kanter (1997) believes that engendering
innovation is key to ensuring companies remain competitive and are market
leaders. According to Kanter (1997), appropriate skills and attributes include
comfort with change, clarity of direction, thoroughness, participative manage-
ment styles, persuasiveness, persistence, and discretion. Quinn (1985) produced
a similar inventory of the necessary characteristics for the innovators and
entrepreneurs, which are crucial to success for innovative small companies.
Often, the role of organizational learning is explored as a possible explanation
for the failure of SMEs to sustain their innovative advantage, although they are
still continuing to survive. The issues associated with the time that they needed
to devote to innovation encompass being too busy running the business to worry
94 Brindley and Wright
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about such developments and is perhaps a reflection on the nature of the
problems encountered by the smaller organization. At issue here is not the
recognition of the importance of innovation, but the human resource capacity
necessary to devote to this work and therefore become acquainted with new
technology. In terms of technology, Smallbone et al. (2001, p. 305) identified that
“technology may be underutilised” and is more commonly used in medium-size
firms as opposed to small firms.
Research suggests that SMEs possibly lag behind in their utilization of e-business
technology because of the lack of opportunity for organizational learning. A view
supported by Dawn, Bodonik, and Dhaliwal (2002) who identified that Canada
is exemplified by low e-business readiness due to the low adoption of e-business
applications i.e. if they don’t use the available technology how can the SMEs
exploit its benefits? Similarly, Brown and Lockett (2004) also identify the low
engagement of SMEs in e-business as do Houghton and Winklhofer (2004). They
argue that trust in a third party is an important requirement in the adoption of
higher-level complexity e-business applications by SMEs. Trust is a key anteced-
ent of take-up, either by the SME themselves or their customers. This is what
Houghton and Winklhofer (2004, p. 380) call “a trusting and committed relation-
ship.” Similarly, Smallbone et al.’s (2001) survey indicated a slow take-up of
online selling within their sample of SMEs, suggesting that this may be due to
consumer reluctance in terms of trust/security.
If it is assumed that there are barriers to innovation within SMEs, then it seems
pertinent to explore Smallbone et al.’s (2001) premise that supply-chain initia-
tives may support innovation — perhaps what Dawn et al. (2002) call opportu-
nities to co-commercialize innovations. Indeed for Smallbone et al. (2001), there
is a clear link between innovative propensity and the involvement of the SME in
external networks. External links that may help reduce risk, improve costs. Yet
Freel (2000) and Chell and Baines (2000) recognized that smaller firms tend to
have fewer external linkages. However, Coviello et al. (2000) point out that
focusing on the tactical approach limits marketing to its traditional framework of
transactional marketing. They point out that what is likely to happen is that by the
very nature of a small business it could adopt a relational approach and may be
more likely to practice an interaction and network approach to marketing.
Thus, there is a dichotomy between SMEs being innovative but not necessarily
in all quarters; for example, they may develop an innovative product that is not
innovative in terms of process (Damanpour, 1991). This viewpoint is contextualized
by Dawn et al. (2002) who argued that SMEs inherently facilitate innovation and
that the Internet can facilitate clusters of SMEs, with members of the supply
chain working together (Ritchie & Brindley, 2001). The issue is compounded
when one views e-business innovation as a continuum (Daniel, Wilson, & Myers,
2002; Peet, Brindley, & Ritchie, 2001). In this chapter’s case study, Sign-Up.to
is operating like a portal cluster.
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For Dawn et al. (2002, p. 139), it is SMEs (like Sign-Up.to) that “create and
commercialise evolutionary new technologies and directly output new innova-
tions.” It is argued that innovation networks enable communication facilities to
reach the right people, creating partnerships of stakeholders and aggregation of
their competencies for greater chances of innovation success (Jutta, Bodorick,
Weatherbee, & Hudson, 2002; Kaufmann & Totdling, 2001 cited in Dawn et al.,
2002). These networks and partnerships may be viewed as another form of
relationship. Similarly, CRM systems are developed to enable communication
between buyers and suppliers.
Main Focus of the Chapter
CRM Systems
Consequently, these issues could go some way to explaining why the recent
development of CRM systems has tended to focus on larger organizations and
are apparently inappropriate for the smaller business. More recently, there have
been criticisms related to the implementation, effectiveness, and success of
CRM systems, and Gartner Research (2001) suggests that the failure rate is
around 65%. A key factor is that vendor hype, product immaturity, and product
cost are contributing to user dissatisfaction (Frost & Sullivan, 2000). Bearing in
mind the potential costs involved both financially and in terms of the time taken
to implement fully, the risks could be great for the SME where resources are
often limited. These issues serve to confirm the scepticism of small businesses
toward marketing, especially when their specialisms are often outside marketing.
Consequently, marketing is not always a priority, so the steps taken to begin to
utilize technology from a more strategic approach could be thwarted.
Taking a more philosophical approach, further problems can be found in today’s
implementation of CRM. Law, Lau, and Wang (2003) suggest that such an
approach is dated and that customers should no longer be treated as passive
groups and assigned “to” some categories. They state that the approach to CRM
should be changed, focusing on the customer as the starting point. Although many
organizations may accept that relationships should be two-way, putting this into
practice becomes difficult and the technology available under the guise of CRM
perpetuates this problem. Research undertaken by Wright and Hurlstone (2004)
questioned whether CRM systems were indeed customer focused, as many do
not provide products that focus directly on benefits to the end consumer but “sell”
benefits based on increased efficiency to the organization. Another criticism is
that CRM systems tend to embody standardized views of relationship manage-
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ment processes, and therefore are a long way from the “customer managed
relationships” talked about by Law et al. (2003).
The Case Company: Sign-Up.to
This chapter uses a case study of a UK-based marketing communications
company that has attempted to identify and address the issues and risks of
existing CRM tools for the SME while exploiting the benefits that technological
developments have brought. The company has consequently developed an
innovative personalized relationship e-marketing tool, aimed at the SME sector.
This tool is called Sign-Up.to and has been designed to establish a personal
dialogue with potential customers, gradually exposing them to the organization’s
messages.
Sign-Up.to is an online application that allows the user to take control of data
capture, processing, campaigning, management, and analysis, across all chan-
nels without technical expertise. In this tool, the threads of database marketing,
direct marketing, and relationship marketing are evident and are discussed.
In the Sign-Up.to model, the basic requirements for database marketing as
referred to by Fletcher et al. (1997) are evident including a relational database,
software for market segmentation analysis, forecasting, and a merge/purge
function. The Sign-Up.to database can include a wide range of information about
the consumer, which can be updated at any time by the consumer. Whenever it
is updated, all member company databases are immediately updated, so consum-
ers do not need to remember to change their details with every company they are
subscribed to. This encourages cross selling across member companies. Data
can be captured from Web forms and SMS messages or can be transported from
an existing database. Any survey questions or additional data can be added to the
registration process, and all captured data is automatically verified via a double
opt-in. It also is possible to perform very detailed targeting of the database. The
Sign-Up.to model handles and structures data by using “products” and “con-
sumer profiles” to organize information. The “product” is a powerful form of
mailing list (a product could represent a Web site newsletter, a competition, or
a special offer for example) whereas a “consumer profile” contains an individual’s
contact information and basic personal details. Products are created in the
system and people “subscribe” to these products. This is how data is captured
and allows the organization to gain the user’s permission to contact them. When
someone subscribes to one of the products, details from their profile are attached
to the product and disclosed to the organization — a product, therefore, contains
a list of consumer profiles. The distinction between products and profiles allows
a business to perform very detailed targeting of their database. This targeting
Personalized Relationship E-Marketing 97
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allows them to send relevant and personalized information to subscribers, thus
catering to individual needs.
Since Sign-Up.to is designed to be a communication tool using direct media to
reach a specific target market, then the influence of direct marketing is also
obvious. Messages can be created and sent via mobile and via e-mail directly to
the target market. The correct type of message can be sent to recipients based
on their preferences, so personalized, regular contact can be maintained with
thousands of contacts easily. The time and date for sending can be selected at
any point up to a year in the future. Sign-Up.to seems on the face of it to conform
to the definitions for direct marketing as tracking and data manipulation is an
important feature of the tool — a point that is raised by Bird (2000) as being a
feature of direct marketing. Whenever an e-mail campaign or an SMS is
executed, the tracking feature allows the company to keep a copy of each
message sent, details of who it was sent to, and statistics about the message.
These statistics provide an invaluable insight into the target audience, allowing
the organization to see what particular content and subjects work best with
specific groups of consumers, what time they read the messages, and even see
how different content structures affect click-through rates. By paying attention
to this information, the business can constantly improve campaigns, making them
more relevant for the audience.
Sign-Up.to vs. CRM Systems
The research indicates that the Sign-Up.to tool has moved down the CRM path
as the messages become personalized and individual needs are catered for. If
CRM and RM are about building loyalty and loyalty has been identified as one
of the enduring factors of a positive relationship, then Sign-Up.to should be able
to secure such loyalty with permitted, appropriately targeted messages and take
the small business in this direction. A particular feature that is useful for small
businesses is the ability to target by location and often — making it local can
make it much more personal. For example, if someone’s favorite restaurant
around the corner from their office gets permission to contact them and then e-
mails the consumer on Monday with a lunch special offer, there is a high chance
that they will redeem it because they have already expressed an interest by
signing up. Indeed, mobile is such a personal medium that local offers work far
better as it is less intrusive when the consumer knows the sender. They also are
more likely to use word of mouth communications when the sender is local —
another feature of relationship marketing.
The tool also has addressed some of the issues associated with CRM systems.
As mentioned, a CRM system would be prohibitive in cost terms for a small
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business, whereas the Sign-Up.to tool is much more accessible to the small
business, with an initial setup fee, no charge for e-mails sent, and SMS charges
at low rates. A further criticism is the passivity of the customer and the
customer’s lack of involvement in what should be a two-way relationship.
However, because Sign-Up.to is a permission marketing system, it ensures that
the customers, who are being communicated with want the relationship because
they have volunteered (opted-in) to be marketed to. This enables the organization
to begin to establish a dialogue and ensure that communications are personal,
anticipated, and relevant to each consumer. As the dialogue progresses, this
offers consumers an incentive to give deeper levels of permission — more
information on themselves and agreement to offer them more services and
information on offerings. So in this sense, Sign-Up.to begins to develop (albeit
tentatively) what was customer relationship management to customer managed
relationships.
However, although Sign-up is going someway to address the issues raised
regarding CRM systems and their drawbacks for the small business, it also has
highlighted an interesting anomaly regarding innovation. Although the SME
sector has been seen as innovative, the sector has not taken-up the opportunity
of the Sign-Up.to product in the numbers originally anticipated in its business
plan. The product has been actively sold to the small business sector and received
with great enthusiasm, but has yet to be adopted by a significant number of
SMEs. However, what is interesting is the type of organization that has adopted
it with tremendous success. One such organization is V2 Music, Richard
Branson’s record label. After a highly successful trial, V2 Music, home to artists
such as Paul Weller, Stereophonics, and Estelle, adopted the Sign-Up.to platform
to manage their worldwide e-mail and mobile marketing and fan communication.
The Sign-Up.to platform has allowed V2 to integrate more than 100 separate
databases into a single system used by all worldwide offices — providing a global
view of fan data and allowing localized e-mail and mobile campaigns to be run
by V2 staff without the need for technical training. This integration has already
saved V2 an estimated £150,000. The adoption has been hugely successful,
consolidating V2’s databases and improving communications to their fanbases.
The features have meant that V2 staff can be creative but, more importantly, can
measure how effective their communications are on a case-by-case basis,
creating a responsive community environment.
Another organization that has successfully implemented the product is BT and
their Mobile Commerce Platform. Sign-Up.to designed, produced, and now
maintain the mobile commerce system for BT, named Click&Buy. This uses a
system based on the Sign-Up Mobile Marketeer platform to enable BT’s micro-
payment systems to securely accept and authorize orders by SMS. Other
organizations adopting the Sign-Up.to tool are Duracell as well as the Thai
government.
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These are not organizations that were originally targeted as potential customers
and indeed came upon Sign-Up as a result of an Internet search and saw the
potential for their own business. In the case of V2 and BT, awareness of
technological developments are crucial as a means of establishing a competitive
advantage, as well as providing means of communication that will appeal to their
own target audiences, who, especially in the case of V2, are likely to be
progressive innovators or early adopters. It could be this awareness and the need
to adopt innovative techniques that have enabled these organizations to see the
potential of such a tool.
In response to this shift in their target market, Sign-Up.to have developed a tool
named FanBase which allows artists and labels to capture and store fan data, run
e-mail and mobile marketing campaigns, track results, and even generate
revenue directly using premium SMS from what is probably their most valuable
asset — their fans.
Paradoxically, although a huge technical or training investment is not necessary
and indeed is a feature of the tool, it is those organizations for whom the tool was
designed (i.e., the small businesses who have not adopted it) and yet those that
have the expertise and the financial backing to adopt more expensive and more
technical solutions have welcomed the simplicity and effectiveness of Sign-
Up.to.
Future Trends
In functional terms, the developers of Sign-Up.to have seen the potential for
future developments, and an optional feature is recently available that allows
acceptance of mobile payments, which could signify a further step along the e-
commerce pathway for SMEs. However, there is still the need to continue to
address the issues that have been raised in the context of the small business and
the need for a more strategic approach to their e-marketing. Possibly, therefore,
the next set of developments could be to move SMEs further along the e-
marketing developmental pathway by offering comparative data, or there could
be a greater opportunity to develop the theme of customer managed relationships
by generating more customer feedback, so that ultimately the customer is the
starting point. There could be the potential for further integration of messages,
not only between mobile and e-mail but also via other channels. As McDonald
(2003) pointed out, a single integrated process, shared information, and a shared
technology platform make for a total customer experience, decrease the chance
of “experience disconnect” and increase the potential to retain customers.
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The reasons for the apparent lack of acceptance of this product among small
businesses may be threefold. First, it could be seen that the customers (i.e., the
SMEs ) lack of familiarity with the technology could be acting as a barrier to
purchase. Smallbone et al. (2001, p. 305) identified that “technology may be
underutilised” and is more commonly used in medium-size firms as opposed to
small firms which may suggest that the target market for Sign-Up.to needs to be
reviewed. There also is the owner’s/manager’s technical competence to con-
sider; a distinction may be drawn between those that are comfortable with
technical developments and those who are not. The dependence on the owner/
manager, typical in the SME sector, could be limiting take-up.
Smallbone et al.’s (2001) survey indicated a slow take-up of online selling within
their sample of SMEs but they suggest that this may be due to consumer
reluctance in terms of trust/security. Thus, if the case company while exempli-
fying the innovativeness recognized by the DTI (1994) is to be successful, it
needs to act as a trusted bridge with its supply chain partners. The company
mirrors a number of the characteristics of innovative best practice (DTI, 1994)
in that the owner is a visionary, enthusiastic champion of change and knows his
customers. These are characteristics that bridge the marketing/entrepreneurial
interface. However, as the product is sold online, larger companies who may
have the necessary technical expertise in-house are comfortable with the
technology, whereas the smaller company needs a trusted individual to sell them
the proposition in the first place. By removing the Sign-Up.to owner from the
equation, trust becomes more difficult to engender.
Moving customers of Sign-Up.to along the adoption continuum (Peet et al., 2001)
is the next challenge. One set of customers, the early adopters of Sign Up.to,
have realized its benefits and are open to more innovative applications as seen
with V2 and “Fanbase.” These early adopters also have put their trust into Sign-
Up.to and are now viewing the company as part of their supply chain. Therefore,
these customers become the product champions that can cascade the innovation
to members of their own networks (e.g., other suppliers, chambers of commerce,
business clubs). Thus, the low take-up of the Sign-Up.to product means that its
benefits are not cascading through the SME network.
Also, as technology is renowned for its “me too” products, it is necessary for
Sign-Up.to to continue to innovate. Innovation for the product lies in the hands
of the owner of Sign-Up.to and as he exhibits the innovative characteristics
identified by Roffe (1999), then it seems likely that product innovations will
continue. Roffe (1999) argues that different skills are needed for the different
steps of the innovation process, namely:
• idea generators,
• information gatekeepers in touch with knowledge sources,
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• product champions to promote new practices,
• project managers to keep the work on track, and
• leaders who encourage and sponsor.
Sign-Up.to has moved through the first three phases and now has to focus on the
final two stages.
Indeed, on the one hand, these leaders may be seen as other SMEs or SME
support agencies, or, on the other hand, the Sign-Up.to owner has to be prepared
to sell the product face-to-face and employ staff to act as demonstrators to keep
the work on track and instill the confidence that necessary support is available
online.
Conclusion
Although Sign-Up.to is providing small businesses with the opportunity to gain
competitive advantage via new technological developments, there is still the
argument that this is a tactical tool used as a substitute for the more strategic
approach that is often lacking in the small business. The tool also focuses
primarily on marketing communications rather than developing more strategic
thinking about the potential use of the Internet. Despite these limitations, the tool
addresses some of the criticisms that have been levelled at CRM systems in
terms of cost and customer involvement. It has taken advantage of technological
developments to adapt database marketing and direct marketing and make them
accessible and workable. The tool enables the small business to enhance
relationships with customers and potentially start to address the wider opportu-
nities associated with e-marketing. If SMEs are encouraged to think strategi-
cally, then the tactical tool (Sign-Up.to) will aid the implementation of the
strategy and help them achieve their objectives. However, the lack of strategic
thinking, inherent techno-phobia, and the issue of trust hamper Sign-Up.to’s
marketability. As Sign-Up.to operates in a highly competitive, technologically-
driven market, then the issue for the owner is how to maintain an innovative
advantage. Organizational learning, both in his own company and within his
customer companies, appears to be a key factor.
The chapter has discussed whether Sign-Up.to is an effective replacement for
a CRM system or if indeed it is one. It is certainly marketed as a relationship
marketing tool, but the authors argue that although it has a role to play in
implementing a relationship marketing strategy, to call it a CRM system is a
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misnomer. However, Sign-Up.to uses permission marketing, so it could be
argued that it can take the SME along the relationship marketing pathway.
So, is Sign-Up.to better than other CRM tools in engaging SMEs with technology
to aid relationship development? Certainly this is an innovative relationship
development tool insofar as it is technically simplistic and affordable, but its
success depends on whether the SME that adopts Sign-Up.to has a RM
philosophy in place. If Sign-Up.to is only used as a tactical tool, then it could
possibly be subject to the same criticism as established CRM systems.
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106 Brindley and Wright
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Appendix
Terms and Definitions
CLV (Customer Lifetime Value)
The value that a customer brings to an organisation over time
CRM (Customer Relationship Management)
The process of storing and analysing the vast amounts of data produced by
sales calls, customer-service centres and actual purchases, supposedly
yielding greater insight into customer behaviour. (Hamilton, 2001)
DBM (Database Marketing)
The ability of a company to use the vast potential of today’s computer and
telecommunications technology in driving customer-oriented programmes
in a personalised, articulated, and cost-effective manner. (Rapp, 1989)
DM (Direct Marketing)
An interactive system of marketing which uses one or more advertising
media to effect a measurable response, from a defined target market.
Permission Marketing
A two-way permitted dialogue between business and customer that fo-
cuses on providing relevant, timely, and specific information to a specific
target market.
RM (Relationship Marketing)
Relationship marketing is the ongoing process of engaging in cooperative
and collaborative activities and programmes with immediate and end-user
customers to create or enhance mutual economic value at reduced cost.
(Parvatiyer & Sheth, 2000)
SME (Small/Medium Enterprise)
Defined by the EU as a company that has less than 250 employees.
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 107
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Chapter VI
Strategies for Virtual
Learning and
E-Entrepreneurship
in Higher Education
Juha Kettunen
Turku Polytechnic, Finland
Mauri Kantola
Turku Polytechnic, Finland
Abstract
This chapter presents the strategies of higher education institutions and
how they can be described using the balanced scorecard approach. The
pedagogi cal ICT st rat egy descri bes t he vi rt ual l earni ng and e-
entrepreneurship in higher education. Strategic themes are presented to
describe what management believes must be done to succeed and achieve
the desired outcomes in virtual learning and e-entrepreneurship. Strategy
maps are used to describe the strategy in a graphical representation. In
addition, the study presents an example of the cooperation between a
higher education institution and a spin-off company. This chapter helps the
educational administrators to better describe and implement strategies for
virtual learning and e-entrepreneurship.
108 Kettunen and Kantola
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Introduction
Higher education institutions (HEI) usually try to adapt their strategies to the
local community, to society as a whole, and to educational policy. HEIs are trying
to ensure competitiveness and employability for their students. To a large extent,
the competitiveness is based on good skills in information and communication
technology (ICT). They are linked to entrepreneurship, which is seen by the
local stakeholders and educational authorities to create economic growth and
welfare.
The primary purpose of this study is to explore the strategies for virtual
learning and e-entrepreneurship in higher education. The pedagogical ICT
strategy is a specific functional strategy, which describes the strategic outlines
for virtual learning and e-entrepreneurship. The aim also is to explore the
methods to communicate and implement the strategy in an understandable and
efficient manner.
Strategic management is a matter of developing the organisation and its
present activities to achieve the desired objectives in the future (Fidler, 2002;
Davies & Ellison, 2003). The new strategies of HEIs typically reflect the existing
strategies, which are tailored to meet the needs of the organisation and its
stakeholders. The strategies are typically fairly stable, but they reflect the
changes in society, economic development, and educational policy.
The strategies typically focus the activities on specific fields of education
according to the needs of the local community or society. Another typical
strategy is the operations excellence theme. HEIs usually try to improve their
quality, achieve more, and reduce costs. These strategies also can be found in
the business literature, where Porter (1990) has presented the strategies of focus
and overall cost efficiency.
The balanced scorecard (BSC) approach developed by Kaplan and Norton
(1992, 1993) is used in this study to describe a pedagogical ICT strategy. The
strategy must be understood before it can be implemented. The balanced
scorecard creates a shared understanding of the selected strategies because it
translates the strategy into tangible objectives and balances them into four
different objectives: customer and regional development; financing; internal
processes and structures; and learning and growth. The significance of the
present study is to show how the competitive strategies and the balanced
scorecard can be applied in HEIs.
A qualitative study is made based on the concepts of strategic planning and the
balanced scorecard approach. The focus on interpretation in how the partici-
pants make sense of these rather than numerical exactness is the strength of
qualitative research. When a qualitative study is carried out, qualitative data are
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 109
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required to clarify and illustrate the meaning of findings. Typically, a relatively
small number of cases is studied preserving the individuality of each of these in
the analyses.
The overall strategy of Turku Polytechnic emphasises high-quality learning. The
pedagogical strategy is a functional specific strategy, which provides outlines for
the development of education to promote the overall strategy. The pedagogical
ICT strategy focuses on the pedagogical strategy to the virtual learning and e-
entrepreneurship. The strategies of the educational departments are aligned with
the functional strategies. The balanced scorecard can be used to communicate
and implement both the overall and specific strategies.
The establishment of new businesses is an effective way to transfer new
knowledge from higher education to the local environment. The spin-off activi-
ties result from the transfer of people and know-how from the HEI. The transfer
of the skills and tacit knowledge embodied in the human capital differentiate this
technology and knowledge transfer mechanism from technology sale, licensing,
joint ventures, and alliances (Davenport, Carr, & Bibby, 2002). The spin-off
activities and e-entrepreneurship are means to implement the strategic plan of
HEIs.
This chapter is organised in that the next section presents the overall strategic
outlines of the HEI and presents how balanced scorecard can be used to
communicate and implement the strategy. Then, the pedagogical ICT strategy is
presented, including virtual learning and e-entrepreneurship. Strategic themes
and strategy maps are used to describe the strategy. An example of a spin-off
company and e-entrepreneurship are then presented. Finally, the results of the
study are summarised and discussed in the concluding section.
Strategic Planning in Higher Education
Strategic Outlines for Educational Institutions
Strategic planning is needed to move an organisation from its present position
to a desirable but uncertain future position. The strategic plan is a description of
the route described by the mission to a desirable future position described by the
vision (Wheale, 1991; West-Burnham, 1994). The strategic plan is a holistic
description of how an organisation adapts to its environment and develops its
activities for a better future.
The competitive strategies by Porter (1990) provide the general strategic
framework for the planning of the strategy in different kinds of organisations.
110 Kettunen and Kantola
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These strategies also have been applied successfully in educational institutions
(Treacy & Wiersma, 1995; Kettunen, 2002). Turku Polytechnic has selected
the focus strategy, which concentrates on the most promising clusters of
Southwest Finland. The focus strategy is combined with the strategy of cost-
efficiency, which enables resources for high-quality learning and research and
development.
The focus strategy means that the organisation selects a market segment and
builds bonds with the most important partners within the selected segment.
Finnish polytechnics are higher education institutions, which aim to serve their
geographical regions particularly well. Each polytechnic has selected its occu-
pational groups, where they educate experts. The focus strategy enables the
polytechnics to enhance their knowledge in their specific market segments.
The most promising growth clusters in Southwest Finland are ICT, biotechnol-
ogy, and the metal and maritime industries. ICT is especially suitable for
entrepreneurship training and incubator activities, because the ICT industry is
based to a large extent on the knowledge of graduates obtained in education. ICT
is not a capital-intensive industry with high entry barriers for most graduates.
When an organisation selects a cost-efficiency strategy, it delivers a combination
of price and quality that is recognised by customers and stakeholders. It is a
natural choice for educational institutions, which typically have predetermined
unit-priced funding and annual budgets. The strategy aims to remove the
overlapping activities to achieve cost reductions. Even though the cost-effi-
ciency strategy does not primarily aim to focus the activities it achieves also
focusing on specific activities. The focus and cost-efficiency strategies com-
plete each other.
Balanced Scorecard Describes the Strategy
The balanced scorecard is used to translate the strategy and vision into tangible
objectives and measures, which can be communicated and translated to the staff
and external stakeholders. The balanced scorecard approach also can be used
to plan and evaluate strategies (Kettunen, 2004). The balanced scorecard has a
balanced mix of objectives in the different perspectives to indicate the strategy.
The perspectives can be defined according to the needs of the organisation.
The perspectives can be defined in higher education as follows:
1. Regional development and customer. The perspective includes the
desired objectives of regional development. It also describes the value
created for students and employers in the internal processes.
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 111
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2. Finance. The financial perspective describes the public funding and
external outcome. The funding is aligned with the internal processes and
structures in the budget of an organisation.
3. Internal processes and structures. The internal processes and struc-
tures perspective describes the internal sequential processes and struc-
tures of organisational units. These processes create value for customers.
4. Learning and growth. The learning and growth perspective describes the
drivers for future performance and what learning and capabilities are
required in the internal processes.
These perspectives have been found to be necessary and sufficient across a
wide variety of organisations in the private and the public sectors (Kaplan &
Norton, 1996, 2001). The balanced scorecard was originally developed for
business companies. The desired objectives of the private sector are typically in
the financial perspective, but in the public sector organisations the financial result
is typically not the primary objective. Therefore, it is reasonable to place the
customer or recipient of the services at the top of the hierarchy.
The customer-oriented process begins by defining the objectives of the regional
development and customer perspective asking, “What value do we create for our
customers in the internal processes?” Then, the process continues by asking,
“What are the objectives in the financial perspective to enable the internal
processes?” and “What is the cost-efficient way of producing the services?”
Finally, the process asks, “What capabilities and learning are required to achieve
the objectives in the internal processes?”
The Pedagogical ICT Strategy
The pedagogical ICT strategy of Turku Polytechnic is based on the development
plans of the Finnish Ministry of Education (1999, 2003a). The purpose is to
increase the pedagogical research and develop virtual learning in order to
increase the competitiveness. Education should provide skills for applying,
managing, and evaluating the information flow of the modern e-networks and
knowledge society. The plans emphasise the importance of local networks,
which combine ICT, modern cooperation methods, independent learning, public
and private partnerships, regional development, and entrepreneurship.
The pedagogical ICT strategy is part of the pedagogical strategy of Turku
Polytechnic. The pedagogical strategy is a functional strategy, which provides
general outlines for the development of education. The pedagogical ICT strategy
112 Kettunen and Kantola
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emphasises the development of virtual learning and e-entrepreneurship. The
pedagogical strategy is aligned with the other functional and department strat-
egies.
E-business is defined in the European e-business Report as automated
business processes (both intra-firm and inter-firm) over computer mediated
networks (European Commission, 2004). It has been done in full accordance
with the definition used by the OECD (2004). E-entrepreneurs can be generally
characterised as entrepreneurs who take advantage of the Internet. They are not
necessarily expert in ICT or Internet technologies, but there may be many who
are interested in including an Internet component in a more traditional business
(cf. Benjamin & Wigand, 1995; Bakos, 1998; Coates, 2004). Virtual learning and
e-entrepreneurship are tied to each other in education.
The pedagogical development includes new working and learning environments,
new content production methods, content production, communication and inter-
action in the e-networks, guidance and evaluation, information security, and
copyright. The pedagogical development produces a wide range of teaching
methods, contents, and cooperation with working life. The purpose is to provide
skills to meet the needs of the local, national, and international partners in the
public and private sector.
New forms of communication and virtual communities emerge in e-networks,
when virtual learning is developed. The Finnish Virtual Polytechnic, which is a
joint development network of all the 31 polytechnics in Finland, has adopted a
widely used approach of developing virtual education. Guidance and support are
important at the beginning. These are followed by independent learning and
support. Finally, teachers and students can use various flexible methods of virtual
teaching and learning (cf. Collis & Moonen, 2001). The approach of developing
virtual learning can be described as follows:
1. Guided and supported virtual learning. Guided and supported virtual
learning is based on teaching based on collaboration in groups where the
teacher and students interact with each other using different kinds of digital
software and equipment. The education may include pair and group tasks,
which may entail discussions and negotiations on the e-networks.
2. Independent learning in e-networks. The students study and solve
problems independently using the virtual material in e-networks supported
by the instructions. Independent learning does not include interactive
support given by the instructor or interactions with other students.
3. Various methods of learning. Implementation includes several kinds of
flexible learning methods. The teaching has long-distance and contact
sessions. The study takes several forms. The students may study indepen-
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 113
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dently, in pairs, larger teams, or they may take lectures. The students use
e-networks, and the learning may take place on campus, at the working
place, or at home. The presence of the students is required both in the live
meetings and virtual environments.
Strategic Themes
Strategic themes describe what management believes must be done to succeed
and achieve the outcomes in the different perspectives. They are in line with the
objectives and describe the causal relationships between them. Each organisation
has a unique set of strategic themes, which are specific to the organisation’s
potential to create value in its environment. The strategic themes also are linked
to the organisation’s internal processes because the essence of the strategy is
in the activities (Porter, 1996).
The strategic themes of the pedagogical ICT strategy have their roots in
educational policy, the needs of local community and the practices of the
development work in virtual learning and e-commerce. The specification of
strategic themes caused extensive thinking at Turku Polytechnic. The general
strategic statement and strategic themes can be written as follows:
Virtual learning skills and e-entrepreneurship for working life:
• Various pedagogical methods are used in virtual learning.
• Virtual learning is included in the curriculum.
• Teacher teams are used to plan and implement the study modules.
• The learning material is used in a broader context.
• The change of virtual learning contents between the HEIs is increased.
• The entrepreneurship and intrapreneurship culture of the HEI is promoted.
The pedagogical methods include especially problem-based and virtual learn-
ing with the emphasis on the interactive skills and self reflectivity of students.
Virtual learning requires a shared understanding and teamwork of teachers. The
virtual learning material is mobile and is used in other degree programmes, the
Open Polytechnic, and other polytechnics through the National Virtual Polytech-
nic. There are cooperative production teams for virtual learning material. The
material is bought and sold by the partners of the production teams among the
different institutions. This supports the entrepreneurship of teachers.
114 Kettunen and Kantola
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Strategy Map
The strategy map developed by Kaplan and Norton (2001, 2004) is a graphical
representation of the functioning of the organisation. The strategy map helps the
employees and stakeholders to understand why the objectives of the organisation
have been set and how the desired objectives can be achieved. It is like a road
map, which describes only the essential characteristics of the strategy in a simple
way.
The description and communication of strategy requires an understandable
“organisational theory” of value creation. Strategy maps can be used to translate
the strategic themes into objectives located in the different perspectives. They
also provide tools to describe the causal linkages between the objectives. The
measurement system indicates the strategy through a sequence of relationships
between performance drivers (leading indicators) and outcome measures (lag-
ging indicators).
The strategy map clearly communicates the objectives of an organisation and
describes why they have been set. The strategy must be understood before it can
be turned into action. The objectives, corresponding measures, and performance
targets are derived from the organisation’s strategy and vision and balanced into
four different perspectives. The performance of organisational units and work-
ers can be directly linked to the strategy.
Figure 1 describes the strategy map of the pedagogical ICT strategy of Turku
Polytechnic. The regional development and customer perspective includes
lagging indicators that report on the desired outcomes of an organisation. The
financial perspective is always linked with the internal processes and structures.
The internal processes illustrate the value chain describing the sequential internal
processes and organisational units cooperating with each other. The learning and
growth perspective includes the capabilities and learning of employees, which
are the driving forces of future performance.
Regional Development and Customer Perspective
The first objective of this perspective is to equip all the students with good virtual
learning skills so that they can use them in working life and adult education.
According to the pedagogical strategy, Turku Polytechnic is moving from a
closed learning environment toward an autonomous and open expert organisation
and network facilitating continuous learning. The polytechnic develops and
provides learning and working environments, which enable the experiments and
study of new activities and procedures together with the companies and other
working life organisations.
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 115
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Another objective is to provide entrepreneurship skills. Various learning methods
include projects, practical training, and theses, which are part of the entrepre-
neurship training and shared with spin-off companies and other customer
organisations. Research and development produce methods of modern entrepre-
neurship training and incubator activities. In addition, continuing education
includes virtual learning and e-entrepreneurship training.
The objective also is to achieve customer satisfaction with e-networking.
Customer satisfaction is what virtually every organisation is trying to achieve.
The purpose of the Polytechnic is to support customers’ virtual learning skills,
working life skills, and e-entrepreneurship skills. The purpose is to create long-
lasting customer relationships, which enable life-long learning and continuous
cooperation between the educational institution and customer organisations.
The Financial Perspective
The first financial objective is to obtain sufficient funding from the Ministry of
Education. The degree programmes and longer educational programmes in
continuing education are funded by the Ministry. It also funds some part of the
research and development and certain development projects of major national or
regional importance.
Another financial objective is to obtain sufficient funding from the City of Turku.
The funding from the Ministry of Education is paid to the City of Turku, which
is the owner of Turku Polytechnic. The City of Turku contributes a minor share
of the funding. The city supports some software, which is used at Turku
Polytechnic. It finances and develops, for example, shared intranet and extranet
solutions of the city organisations.
The objective also is to increase the external funding. External funding is
obtained mainly for continuing education, research and development, and
services provided by the Polytechnic. The funding bodies include the European
Social Fund (ESF), other funds, companies, public sector organisations, and the
Finnish Virtual Polytechnic. The external funding is used to create new contents
and improve the quality of education.
Internal Processes and Structures Perspective
Research and development (R&D) is used to create content and methods of
virtual learning. Content also is required in cooperation and networking with
other educational institutions. The content of virtual learning is typically devel-
oped at the same time as the curriculum development. Research and develop-
116 Kettunen and Kantola
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ment also supports the development of infrastructure, library, and information
services.
The Pedagogical Support Unit of Turku Polytechnic promotes educational
development in many different ways. The support activities of virtual learning
include the development and implementation of new methods of virtual learning.
Educational development also includes many other development approaches
such as problem-based, work-based, and research-based learning. These ap-
proaches can be combined with virtual learning.
Quality assurance (QA) is based on documented procedures. The develop-
ment of quality assurance has been agreed in the Bologna Process by the
European Ministers (Berlin Communiqué, 2003). Quality assurance is at the
heart of the setting up of the European Higher Education Area (EHEA) by 2010.
Each HEI has the responsibility for quality assurance representing their aca-
demic and organisational autonomy. This provides the basis for accountability
within the national quality framework. The purpose of the EHEA is to increase
student and staff mobility in Europe.
The ICT infrastructure is a combination of data networks, systems, equipment,
and software. They include wireless networks, modern audiovisual solutions, and
personal mobile learning equipment. The ICT Unit of the Polytechnic is
developing an electronic learning portal constructed on the existing information
services, digital information sources, e-business instruments, virtual learning
environments, and existing network services of the departments. Physical and
virtual learning environments are developed interactively with each other taking
care of information security.
The library provides the main electronic sources and databases for students and
staff. The library helps them in finding the relevant pieces of information and
provides equipment for information processing. The librarians teach on the
degree programmes and personnel training and participate actively in virtual
learning projects. Cooperation between the support staff, teachers, students,
researchers, and the members of the working life organisations is necessary.
Electronic journals and books reduce the proliferation of printed material.
Virtual learning is expanding at Finnish HEIs. The government has set a target
to provide at least 30 credits of virtual education for each bachelor student
(Ministry of Education, 2003b). Virtual learning provides alternative ways of
studying, especially for those who work during their studies. The replacement of
contact learning with virtual learning helps the working students to avoid dropout.
The virtual learning platform also can be used to carry out other activities such
as tutoring during practical training, study counselling, international projects, and
continuing education.
Cooperation with other HEIs is an important characteristic of the internal
processes and structures. Turku Polytechnic participates in many production
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 117
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teams of the Finnish Virtual Polytechnic. Typically, the production team of
several institutions makes a written contract, agreeing to produce virtual learning
material. The contract also defines the financial transactions between the
institutions. Cooperative and entrepreneurial teacher teams are usually needed
within an institution to participate in the production teams.
Networking is a way of producing large study archives from small virtual
learning materials. The network itself is used as the instrument of guidance,
where the instructors and learners can select the information according their
specific needs (Silander & Koli, 2003). The purpose is to use the learning
material several times in different learning combinations or at different educa-
tional levels. Often the smaller modules correspond best to the various needs in
working life situations of adult education.
Learning and Growth Perspective
Strategic awareness is created in the strategy process, where the expert team
for virtual learning prepares the strategic plan with the experts and management
team of the polytechnic. The existing strategy and the changes in the environ-
ment and technology are evaluated in order to update the strategy. The strategy
is approved by the Board of Turku Polytechnic. Finally, the strategy is commu-
nicated and implemented using the balanced scorecard.
Personnel training is an important way of introducing new methods and software
used in virtual learning and e-entrepreneurship. The departments of the Poly-
Figure 1. Strategy map of the pedagogical ICT strategy
Regi onal
development and
customer
Finance
Internal processes
and structures
Learning and
growt h
• Virtual learning skills for working life and education
• Entrepreneurship skills
• Customer satisfaction of e-networking
• Funding of the Ministry of Education
• Funding of the owner of HEI
• External funding
• R&D
• Pedagogical
support
• QA
• Infrastructure
• Li brary
• Virtual
learning
• Cooperation
• Networki ng
• Strategic awareness of virtual learning
• Personnel training
• Capabilities of quality assurance
118 Kettunen and Kantola
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technic are responsible for the short-term education and working life periods of
the personnel. The Personnel Development Unit of the Polytechnic arranges
longer personnel training and creates preconditions for the implementation of the
pedagogical ICT strategy.
The capabilities of quality assurance have been developed constantly, while the
quality system of Turku Polytechnic was developed. The procedures of quality
assurance have been documented and are also used in virtual learning. The
procedures and documents include evaluations of the Finnish Higher Education
Evaluation Council, the quality manual of the institution, internal audits, internal
target discussions, and feedback from students and employers.
E-Entrepreneurship
of a Spin-Off Company
A Spin-off Company as a Partner
The spin-off companies result from the transfer of people and intellectual
property from educational institutions. The continuous transfer of skills and tacit
knowledge embodied in human capital differentiates the mechanism of technol-
ogy transfer from technology sale, licensing, joint ventures, and alliances
(Davenport et al., 2002). The supporting of start-up companies is an effective
way to transfer the expertise of HEIs to working life and make it commercial.
The case of Mansoft Tietotekiikka Ltd. is used as an example to illustrate how
the pedagogical ICT strategy of Turku Polytechnic is implemented and how
technology transfer takes place. Mansoft Tietotekniikka Ltd. is a spin-off
company in software business and application development. The company was
established by a senior lecturer at the Polytechnic. He is still the managing
director of the company.
The purpose of Mansoft Tietotekniikka Ltd. is to develop the expertise to achieve
customer satisfaction. In order to achieve this aim, the products are tailored to
meet the needs of the customers. The strategy of Mansoft Tietotekniikka Ltd.
also includes the cooperation with Turku Polytechnic as described by Adamsson
and Puukka (2004). The company has planned solutions for specific needs of
knowledge-based organisations. It also carries out consulting, maintenance
services, and several boxed products with a fixed service. As a financially
independent and customer-oriented company, it aims to be a productive and safe
partner in long customer relationships.
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 119
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The company has been developed in a sustainable way. The business profit has
always been ploughed back into the company and product development. All eight
young permanent employees of the company are graduates of Turku Polytech-
nic. One of the main principles of company policy has been to offer permanent
positions to young experts starting their careers in the ICT business.
The managing director of Mansoft Tietotekniikka Ltd. is a member of the Turku
Polytechnic’s Advisory Board. The advisory boards of Finnish polytechnics
include members from working life and help the polytechnics to develop the
curriculum to meet the needs of companies and other organisations. The advisory
board is a network of experts who helps the polytechnic and the participating
companies to adapt to the changes of the environment and conceive new
development ideas.
The recruitment of the company is focused on the final year students of Turku
Polytechnic. Turku Polytechnic has arranged the education so that students can
participate in the company’s projects. The arrangement of the ICT fair is another
mode of cooperation between Turku Polytechnic and Mansoft Tietotekniikka
Ltd. The ICT Fair is organised in Loimaa, where Turku Polytechnic operates.
The fair helps local small companies to recruit new staff, market their services,
and participate in regional development.
According to the company owner, some customers have expressed their opinion
that the company should have older experts to achieve credibility, but the
managing director has felt that the young staff brings more flexibility and fresh
ideas and fewer predetermined attitudes regarding the business culture. The
company is represented by the managing director, who takes care of the business
relationships and project management. The software and system development
are left to the younger colleagues. The long experience of the manager and the
fresh ideas of the young colleagues complement each other in the company. This
is an important characteristic of the social capital and competitive advantage of
the company.
Cooperation in Software Development
Turku Polytechnic has designed project management software for itself and
other knowledge-intensive organisations. The software Projektori was created
in association with Mansoft Tietotekniikka Ltd. Originally, Projektori was
created to manage development projects on the intranet. Then the R&D unit of
Turku Polytechnic expanded the use of the software into other project-related
activities. It can be used, for example, to manage project plans and disseminate
project information on the Internet. These features make the software a useful
tool in many publicly funded projects.
120 Kettunen and Kantola
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The software was designed to be used in data networks so that cooperative
projects can use different kinds of intranet and extranet options. There is a
general understanding about the roles between the partners. Turku Polytechnic
is responsible for content planning and production while Mansoft Tietotekniikka
Ltd. takes care of the database planning and implementation.
The guidelines for the cooperation can be found in the strategic plans and quality
assurance manual of the Polytechnic. The cooperation with the spin-off com-
pany is regional development, which is an important characteristic of Finnish
polytechnics. The quality manual contains guidelines for project management.
Many of the basic principles of cooperation and software solutions can be traced
from the commonly observed needs of databases and action models of large
organisations (Groth, 1999).
The Projektori software is not only a technical instrument to arrange documents;
the use of the software changes organisational behaviour into high-quality
project management. The software guides the individuals and units to the process
and team-oriented organisational culture. It also provides an interactive connec-
tion and a virtual meeting place for public sector institutions, private sector
companies, and other working life organisations.
Turku Polytechnic also has sold the Projektori software to some other large
knowledge-intensive organisations in Finland with the cooperation of Mansoft
Tietotekniikka Ltd. The user rights of the software can be purchased by installing
the application to the customer’s server. It also can be rented as an application
service provider (ASP) solution by locating the application and its database on
the servers of Mansoft Tietotekniikka Oy. The rent includes both the application
and its daily database back-up.
The Projektori software can be connected with other software such as the
Puplikaattori software which is software designed for e-publishing. This soft-
ware is the result of cooperation between the Publication Unit of Turku
Polytechnic and Mansoft Tietotekniikka Ltd. Both software can be purchased
and used as independent solutions. The software helps to increase the Web-
based resources, which are increasing in educational practice (Collis & van der
Wende, 2002).
Conclusion
Information and communication skills are needed in the modern knowledge
society. These skills are among the basic professional skills in most industries.
The ideal is an individual who is aware of the information sources, has the
information reading skills, is capable of acquiring and communicating information
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 121
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efficiently, evaluating the information acquired, and using the information in an
ethically and legally correct way.
High-quality and flexible learning is the overall strategic statement of Turku
Polytechnic. The strategy focuses on the needs of the growing clusters in
Southwest Finland. The ICT cluster is one of the most prominent clusters
including software development and mobile telephones and TV production.
Nokia Mobile Phones Ltd. is one of the best-known companies in this region. The
strategy also focuses on entrepreneurship training, which includes e-commerce,
incubator activities, and other forms of entrepreneurship.
The pedagogical ICT strategy is a specific functional strategy aligned with the
overall strategy, other functional strategies, and department strategies at Turku
Polytechnic. The pedagogical ICT strategy describes the strategic plan of virtual
learning and e-entrepreneurship. The strategic themes of the pedagogical ICT
strategy include various pedagogical methods, the inclusion of virtual learning in
the curriculum, the role of teacher teams, the use of learning material in a broader
context, transactions between other educational institutions, and entrepreneur-
ship culture.
The balanced scorecard approach is useful in accomplishing the strategic
themes, objectives, and measures for virtual learning and e-entrepreneurship.
The strategy map was used to translate the strategy into a graphical represen-
tation which clearly describes the objectives in the different perspectives of the
balanced scorecard. It was used to describe the main characteristics of the
strategy to achieve better expertise in virtual learning and e-entrepreneurship.
An example of the implementation of the pedagogical ICT strategy was
presented. This example illustrates a case of how a spin-off company was
established and how it cooperates with the educational institution. Project-based
education is followed by recruiting graduates. The competitive advantage of the
spin-off company is based on continuous cooperation with the HEI and the
innovative and fresh ideas of the graduates employed.
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124 Hassall and Welsh
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permission of Idea Group Inc. is prohibited.
Chapter VII
The Beginnings of a
Postal E-Marketplace:
Innovation or Natural
Evolution?
The corProcure Story
Kim Hassall
Melbourne University, Australia
Karyn Welsh
corProcure, Australia
Abstract
This e-business case study of the corProcure enterprise is instructive as it
reflects three recurrent themes of the dot-com period:
1. First, the seemingly powerful but unstable corProcure’s business
model was created between a number of large corporate institutions in
response to the corporate pressure to enter the dot-com world.
2. The quick revelation that the initial business model was incompatible
for the founding corporate partners.
The Beginnings of a Postal E-Marketplace 125
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3. The buyout of the venture by one of the partners, Australia Post, and
re-engineering the direction of corProcure for a more workable e-
marketplace business direction. This was considered to be the way
forward.
This evolution, learning curve, and redirection of the e-purchasing cartel
was in one way just a snapshot at the macro-level of what happened to many
ventures during the dot-com boom. At the micro-level, the change in
direction was reflective of a more pragmatic business sense approach,
when all the late 1990s hype was stripped away from the initial e-business
model. The new business model incorporating an e-marketplace also
reflected the need for the new owner to diversify into non-traditional
products as part of new e-business and e-logistic strategies. These strategies
were being examined globally by Postal Authorities.
Introduction
In 2001, the Universal Postal Union and the World Bank released a report that
proposed that the Post Office was potentially headed for being a sunset industry
unless it addressed the issue of its product erosion (UPU, 2001). A further
international postal e-logistics report examined various ways that this “postal
sunset industry mentality” could be addressed and the actual declines arrested
through the introduction of some critical strategies (Hassall, 2003). In Australia,
however, since the advent of the dot-com wave, what was the local postal
authority doing to stem the stagnation in the demand for its traditional postal
products? Was it trying to leverage the new Internet-based technologies, thus
enabling a range of new services?
What the Post Office did was change its focus to internal e-procurement and
implement utility bill payments. As well, Australia Post instigated a warehousing
and fulfillment business, which ran in parallel to the existing postal network.
What was perceived to be the e-business “showstopper” was its partnership with
13 other major corporates, in a buying consortia called “corProcure”
(www.corprocure.com). This buyers’ club began life at the tail end of the dot-
com hype in 2000. By January 2002, the 13 partners cleared the deck chairs and
allowed Australia Post to purchase the corProcure entity and technology. Why
had the potentially largest buying cartel failed so quickly? What lessons were
learned and what was the obvious e-business strategy that needed to be
implemented?
126 Hassall and Welsh
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Background to the Evolution of a Postal E-Marketplace
In 2003, a study into the impacts of e-logistics and e-business and what it might
mean to the traditional post office was published through the Universal Postal
Union (Hassall, 2003). The research surveys spanned 40 countries with the
summary findings being refereed by the e-commerce Unit, Postal Technology
Branch of the Universal Postal Union (UPU). The UPU, which is a division of
the United Nations, is the coordinating and representative body of all national
postal authorities at the international level. The research findings were listed on
the UPU’s Web site in January 2004.
E-Postal Research Findings
In a reassessment, (Universal Postal Union and World Bank Report, 2001), the
global post office needs not become a sunset industry, as was suggested, if it
were to embrace new electronic products. Many of these products could be
facilitated by the adoption of new Internet-based technologies and the processes
that this technology may play in enhancing the traditional postal services. The
first round of this research was conducted by the Centre for Freight & Logistics
Research, as a Delphi survey through 28 interviews across some 11 countries.
The highest scoring strategy emerging from the survey was to embrace “new
electronic products.” With regard to the specific electronic and logistics products
described in Figure 1, the proposition for a postal e-marketplace scored highest
in the future directions estimates with some 43% more important in future
strategic and business focus than at the current time. In fact, 8 of the 12 options
had a future importance factor of some 25% greater than their current perceived
importance. This chapter examines the history and potential for the launch of a
major postal e-marketplace from Australia in what is a rapidly changing
electronic and Internet environment.
Fundamental Business Issues for Markets and Even
Postal E-Marketplaces
To be effective, markets require participants to share their business processes
(e.g., purchasing). Companies are increasingly unwilling to standardise these
processes as they seek to maintain their uniqueness as a competitive advantage
and control over their supply chain for purchasing direct goods. This is not the
case, however, for indirect goods. For this reason, horizontal marketplaces have
better success in connecting traders than do vertical ones.
The Beginnings of a Postal E-Marketplace 127
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Marketplace security is another big issue for corporations. Most will purchase
direct and indirect goods from online environments that sit behind the corporate
firewall.
The Need for New Services as Deregulation Grows on
the Home Front
While postal volumes were declining in many countries during the 1990s (UPU
database of Postal Statistics, www.upu.int), on the Australian domestic scene,
micro economic reform also was occurring. This meant continued deregulation
across many industries including the Postal Industry. Following an Industry
Commission review in 1992, Australia Post’s monopoly was reduced in 1994 and
more services were opened up to competition. Australia Post retained a
monopoly over mail weighing up to 250 grams and with a minimum charge of
$1.80. This meant that couriers and freight operators could pick up and deliver
much business and industrial mail, which was heavier or cost more than this price
threshold. In 1995, “GiroPost,” a multi-bank Eftpos option was introduced as
part of a range of financial transactional services, such as utility bill paying, at
Post retail outlets. In 1995 as well, a five-year postal network renewal program
costing $500 million began, aiming to equip Post with the latest technology for
mail processing and delivery operations.
Figure 1. List of postal options sorted by of future “strategic and business”
importance
Future Increase in Importance Of
e-Postal Strategies
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45
e-Marketplace
Freight&Warehouse Ability
Delivery Strategies
Freight Ability
Track/Trace
Warehouse Ability
Bank License
Multi Language
Utility Payments
Customs Clearances
Site Evaluation
Pre-Paid Products
Source: UPU Web site 2004
128 Hassall and Welsh
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The Australian National Competition Council (NCC) again reviewed Australia
Post’s operations in March 1998 and recommended an almost complete deregu-
lation of mail services by 2000, except for standard personal letters sent by
households within Australia. Australia Post would be exposed to competition in
93% of its services, compared with only 50% in 1998. Australia Post’s
submission to the Council had argued for the retention of the current position,
with a review in 2003. Linda Nicholls, the chair of Australia Post, had com-
mented that the report went further and faster than Post believed was practical.
She noted that the NCC had no plans for any safeguard if the changes had
unexpected outcomes. Graeme Samuel, the then president of the National
Competition Council, responded that Post was abnormally profitable with returns
double that expected from such a business.
The New Focus at the Global Postal Level
Australia Post, and other postal organisations around the world, are challenged
as revenue from traditional sources is under threat from electronic alternatives.
Post’s competitors, including other postal organisations, have increasing global
ambitions and search for new markets and opportunities that exploit network
economies of scale. Post’s customers expect them to understand the customer
and their businesses to a greater degree than ever before and to be able to
interact with them online.
E-business is acting as a catalyst for innovation and value creation. Online
shopping, although turbulent, will continue to grow providing Post with a raft of
opportunities. The proportion of personal bills being presented and paid electroni-
cally is increasing at the expense of payment by mail or payment in person at post
offices. There also is renewed growth in purchasing goods and services online
as industries review areas that can save cost and add efficiency to the day–to-
day procurement process. Improved productivity through efficiency gains is a
key driver of e-business in many organisations including Postal Authorities.
Thomas E. Leavey, director general of the Universal Postal Union, was quoted
in Australia Post’s 1999-2000 Annual Report:
For postal services the challenge is to be totally immersed with customer
concerns, proactively seeking to determine their needs and listening to
their evaluation of the services provided. Customer focus is now central to
the strategy of every successful business — from banks to manufacturers —
and dominates the dynamics of the business environment of the new
millennium.
The Beginnings of a Postal E-Marketplace 129
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What has Changed on the E-Logistics
and E-Business Front to Support a
Postal E-Market Business?
The major “operational” finding from the first round of Delphi analysis into future
Postal e-business options (Hassall, 2003) was that some “track and trace”
mechanism be available to customers for “selected postal products.” The major
future “strategic and business” initiative, however, was to “offer an e-market-
place” to small businesses (SMEs) and to large businesses. Such an e-
marketplace concept is new to Postal Authorities. As such, there are many
variations in both applications and marketplace business rules that will sit behind
any chosen e-postal marketplace model.
Gaining acceptance for such a new product, be it an e-marketplace itself, is
fraught with many challenges for the traditional Post Office culture. However,
should the e-marketplace become successful in any particular country, then this
concept will generate considerable interest internationally, perhaps more so than
any postal product has done within the last 30 years.
An Overview of E-Marketplace Fulfillment
In the case of an e-marketplace, fulfillment and delivery services can be
achieved:
1. through a number of third party logistics providers selected by the buyer,
2. through the marketplace owner’s fulfillment processes and services, and
3. through logistics providers that are also e-booth holders on the marketplace.
(This is certainly a powerful option for international buyers who want to
attain fulfillment in the offshore country where the purchase will be
fulfilled.)
This third option is a considerably important option for international companies
wanting to physically trade in, for example, Australia. Who do you call for service
X? Try the marketplace. This could be for office space, financial advice, freight-
forwarding services, even a bottle of champagne for a birthday, and so forth.
Getting the balance right with fulfillment is often very customer specific. Various
marketplaces offer B2B and B2C services through express carriers, non-
express transport carriers, and even through the post office itself. A postal e-
130 Hassall and Welsh
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marketplace should offer similar services for B2B and B2C clients, that is, those
services that also are offered by other online trading hubs or other e-market-
places.
Difficulties with B2B Fulfillment through the Post Office
It is very simplistic to talk of B2B, however the subclassifications of B2B are
quite large. This was pointed out at the OECD/ECMT e-transport and e-
logistics Summit (Nemoto & Visser, 2001). However, for a marketplace, the
easiest way to offer B2B services is in fact to list B2B providers that offer B2B
services. Certainly Postal authorities such as LaPoste and Deutsche Post, via
Danzas and AEI, as well as New Zealand Post have all acquired a range of
premium and non-premium B2B logistics providers to supplement their postal
parcels capability.
Provision of a “warehousing and freight capability,” did in fact score second to
the establishment of an e-marketplace in terms of future strategic importance
(see Figure 1). It is probably in the best interests of a traditional postal authority
who may be inexperienced to the requirements of B2B that B2B fulfillment
services be available through its own marketplace, as opposed to a single channel
offered by a long-term preferred supplier. In this way, much wider combination
of fulfillment services can be offered, with significant flexibility to any customer
requiring these B2B services.
A third B2B option was examined in the initial research (Hassall, 2003): that B2B
capability be offered by the postal authority but with differing customer service
standards to those offered to existing Postal products. In discussions with both
La Poste’s warehousing and fulfillment divisions, as well as Deutsche Post
Logistics, it was seen as somewhat unfavourable to mix B2B with the existing
postal network. To provide B2B freight and warehousing at differential service
External
Logi stic
Services
Int ernal Logistic
Services
E-Pl atform
Products
Source: Supply Chain Review, August 2001
Figure 2. Variations of marketplace fulfillment
The Beginnings of a Postal E-Marketplace 131
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levels, new freight entities were acquired specifically for such purposes. These
operations often worked out of independent terminal and distribution centres.
From a marketplace perspective, B2B fulfillment agents and services should be
listed on the e-marketplace These services will not be sought through the
marketplace owner but from specialised buyers that may even be e-booth
holders on the marketplace themselves.
B2C can be Expanded in the Marketplace through New
Delivery Options
B2C is considered the expert domain of each domestic Postal Authority. But
could this change in the future? Table 1 lists 12 home delivery strategies. The
several Postal authorities that participated in the e-postal business research
(Hassall, 2003) offered less than half these listed options.
STRATEGIES for
Household Delivery
Greater Channel
Complexity
Greater
Recipient
Complexity
Land Use
Variation
1. Continual Household Attempt Yes/Maybe No No
2. After-Hours Delivery No/Maybe No No
3. Attempt one delivery, phone
follow-up for second attempt.
Yes Yes No
4. Phone booking for initial
delivery slot.
Yes Yes Yes
5. Attempt home delivery,
failure redirected to retail
agent for customer pickup
Yes Yes Yes
6. Attempt delivery to home
parcels box
No Yes Yes
7. Customer pickup from retail
key-hole site
No Yes Yes
8. Customer pickup from secure
depot storage
No Yes Yes
9. Delivery agent to retail agent,
by direct drop
No Yes Yes
10. Initial delivery to preferred
post office of choice.
No Yes Yes
11. Delivery agents loads orders
direct from retail site not a
specialised distribution hub.
No Yes Yes
12. Optional flexible delivery
strategies as stated on the
customer order form
Maybe Maybe Maybe
Table 1. Current and future variations of home delivery strategies
Source: Supply Chain Review, December 2001
132 Hassall and Welsh
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Certainly it is to be expected that further specialised home delivery services will
appear on the home shopping front, which will be competitors to the post office.
New mixtures of delivery strategies will emerge and will offer a higher level of
customer satisfaction, more so than any single option or delivery strategy.
Certainly the specific commodity to be delivered also will restrict many of the
householder delivery choices. High value goods and bulky goods such as garden
furniture have even generated niche operators for such deliveries where the
population base is very large.
International Fulfillment Opportunities Emerging for
B2C and B2B
Emerging from an analysis of international Internet purchasing requirements
(Supply Chain Review, December 2001), the following new demand patterns
became apparent. This shift showed that there was considerable scope for new
international postal services to emerge in the support of both B2B and interna-
tional B2C.
In both cases, an international 5-business-day service, or certainly a less than a
7-day service, would be a highly favourable option, well worth further consider-
ation by international postal authorities. This option of a “deferred express”
service can generally reach not only capital cities but also major regional cities
in other countries. The service would be far more acceptable than the 10-day
international air services, the basic international parcels’ service currently
offered by postal authorities.
Type of Order Service Standard
Domestic < 2 days 5 to 7 days
9% 91%
International Standards Offered 250
employees
1 0 0 0 0 0 1 0 1
A 1 5 6 1 1 0 19 0 19
B 6 0 3 0 1 5 0 0 5
Types of
emerging
forms of
organisation
C 0 0 0 0 0 0 0 0 0
Total 7 5 9 1 2 5 19 0 24
Keys: A: ½ Fusion, B: Fusion and C: e-organisation
Table 1. Size and industry sectors of the new organisational forms
Fusion
½ Fusion
0
20
40
60
80
100
Percent
Reasons
More
Purposes
Business or
Advertising
Figure 2. Driver for using network technologies
232 Azumah, Koh, and Maguire
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permission of Idea Group Inc. is prohibited.
network technologies than the ½ fusion SMEs. For example, the use of online
order taking by the fusion SMEs has created many repeat purchases and
supported e-customer relations management (e-CRM). Nevertheless, the
fusion SMEs are not in a position to fully incorporate e-CRM (Jelassi & Enders,
2005), in their business due to lack of true understanding of its impact as well as
resource and skill shortages.
Figures 4 and 5 show whether the Internet, other network technologies, and ICT
help or facilitate SMEs to remove some organisational and geographical barriers.
A positive result indicated that both organisational and geographical barriers for
both staff and customers have been reduced. This view also was supported by
Bannett, Greve, and Park (1994) who stipulate that the impact of the Internet on
business processes and communication has increased access to such a large
audience and range of people, and this increased the ability of organisations to
leverage the value of information to a scale that has never before been possible.
The impact of the Internet, other network technologies, and ICT on the decision-
making process has revealed that these technologies help to facilitate faster
decision-making. Figure 6 shows once again that fusion SMEs who incorporate
Figure 3. Number of visitors to SMEs site
Fusion ½ Fusion
0
20
40
60
80
100
Percent
Visitors to Site
>10000
8000-9999
5000-7999
3000-4999
Entrepreneurship And Innovations In E-business An Integrative Perspective
Entrepreneurship
and Innovations
in E-Business:
An Integrative Perspective
Fang Zhao
Royal Melbourne Institute of Technology University, Australia
Hershey • London • Melbourne • Singapore
IDEA GROUP PUBLISHING
Acquisitions Editor: Michelle Potter
Development Editor: Kristin Roth
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Managing Editor: Jennifer Neidig
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Published in the United States of America by
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Copyright © 2006 by Idea Group Inc. All rights reserved. No part of this book may be reproduced,
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without written permission from the publisher.
Product or company names used in this book are for identification purposes only. Inclusion of the
names of the products or companies does not indicate a claim of ownership by IGI of the trademark
or registered trademark.
Library of Congress Cataloging-in-Publication Data
Entrepreneurship and innovations in e-business : an integrative perspective / Fang Zhao, editor.
p. cm.
Summary: "The book presents a comprehensive introduction of the concepts and practices of e-
entrepreneurship and e-innovation"--Provided by publisher.
Includes bibliographical references and index.
ISBN 1-59140-920-9 (h/c : alk. paper) -- ISBN 1-59140-921-7 (s/c : alk. paper) -- ISBN 1-59140-
922-5 (ebook : alk. paper)
1. Electronic commerce. I. Zhao, Fang, 1956-
HF5548.32.E586 2006
658.8'72--dc22
2005027701
British Cataloguing in Publication Data
A Cataloguing in Publication record for this book is available from the British Library.
All work contributed to this book is new, previously-unpublished material. The views expressed in this
book are those of the authors, but not necessarily of the publisher.
Entrepreneurship and
Innovations in E-Business:
An Integrative Perspective
Table of Contents
Preface ........................................................................................................ vi
Chapter I
Entrepreneurship and Innovation in E-Business: An Integrative
Perspective .................................................................................................. 1
Fang Zhao, RMIT University, Australia
Chapter II
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks:
A Deleuzian Approach to Emergent Knowledge Dynamics .................. 18
Alexandra Steinberg, The London School of Economics and
Political Science, UK
Chapter III
Innovation and B2B E-Commerce: Explaining What Did Not
Happen....................................................................................................... 41
Steve New, University of Oxford, UK
Chapter IV
How E-Entrepreneurs Operate in the Context of Open Source
Software...................................................................................................... 62
Ambika Zutshi, Deakin University, Australia
Samar Zutshi, Monash University, Australia
Amrik Sohal, Monash University, Australia
Chapter V
Personalized Relationship E-Marketing and the Small Medium-Sized
Enterprise .................................................................................................. 89
Clare Brindley, University of Central Lancashire, UK
Diane Wright, Manchester Metropolitan University, UK
Chapter VI
Strategies for Virtual Learning and E-Entrepreneurship in Higher
Education ................................................................................................. 107
Juha Kettunen, Turku Polytechnic, Finland
Mauri Kantola, Turku Polytechnic, Finland
Chapter VII
The Beginnings of a Postal E-Marketplace: Innovation or Natural
Evolution? The Corprocure Story ......................................................... 124
Kim Hassall, Melbourne University, Australia
Karyn Welsh, corProcure, Australia
Chapter VIII
Sensis.Com.Au: An Uprising Star of E-Innovation and
E-Entrepreneurship................................................................................ 148
Fang Zhao, RMIT University, Australia
Chapter IX
Using E- and M-Business Components in Business:
Approaches, Cases, and Rules of Thumb............................................. 159
Mikael Collan, Åbo Akademi University, Finland
Anna Sell, Åbo Akademi University, Finland
Ville Harkke, Åbo Akademi University, Finland
Bill Anckar, Omena Hotellit Oy / IAMSR, Finland
Chapter X
Entrepreneurial Opportunities On the Internet .................................. 179
Di Waddell, Deakin University, Australia
Mohini Singh, RMIT University, Australia
Ambareen Musa, General Electric, UK
Chapter XI
Online Information Privacy and Its Implications for
E-Entrepreneurship and E-Business Ethics ........................................ 200
Carmen Gould, RMIT University, Australia
Fang Zhao, RMIT University, Australia
Chapter XII
E-Organisation and Its Future Implication for Small and
Medium-Sized Enterprises .................................................................... 223
Gideon Azumah, University of Sheffield, UK
S.C. Lenny Koh, University of Sheffield, UK
Stuart Maguire, University of Sheffield, UK
Chapter XIII
A Prototype E-Business Model to Create a Competitive
Advantage in SMEs ................................................................................ 238
S. Pavic, University of Sheffield, UK
M. Simpson, University of Sheffield, UK
S. C. L. Koh, University of Sheffield, UK
Chapter XIV
Impact of E-Innovation on Corporate Procurement Control:
Electronic Marketplaces and Broad Spectrum Changes .................... 261
J. Doug Thomson, RMIT University, Australia
Glossary ................................................................................................... 288
About the Authors .................................................................................. 294
Index ....................................................................................................... 301
vi
Preface
The fast growth and business successes of Amazon.com, Dell, travel.com, and
others, and the bankruptcy of numerous dot-com firms worldwide in 1999-2000
have reinforced the importance of entrepreneurship and innovation in e-com-
merce and e-business. E-entrepreneurship and e-innovation are emerging dis-
ciplines for proactively responding to changes in the e-world. The dot-com crash
presented new challenges and new opportunities to entrepreneurs as well as
intrapreneurs and researchers to rethink and redefine the constructs of entre-
preneurship and innovation for e-business. This author argues that a combina-
tion of entrepreneurship and innovation will be a crucial factor to the long-term
sustainability of e-commerce and e-businesses. While in this frenetically changing
competitive landscape, e-entrepreneurship and e-innovation help organizations
to gain competitive advantage, they raise important issues in their practices.
“Entrepreneurship, in its narrowest sense, involves capturing ideas, converting
them into products and/or services and then building a venture to take the prod-
uct to market” (Johnson, 2001, p. 138). A noticeable trend in the study of entre-
preneurship in recent years has been away from the subject of small business
per se toward the concept of entrepreneurship (Cornwall & Perlman, 1990;
Chell, 2001). This book reflects this trend by emphasising the concept of entre-
preneurship itself, rather than the personality or psychology of small e-business
entrepreneurs in e-business.
Entrepreneurship represents organisational behaviour. The key elements of
entrepreneurship include risk-taking, proactivity, and innovation (Miller, 1983).
However, Slevin and Covin (1990, p. 43) argued that the three elements are not
vii
sufficient to ensure organisational success. They maintained that “a successful
firm not only engages in entrepreneurial managerial behaviour, but also has the
appropriate culture and organisational structure to support such behaviour.”
The book adopts a similar approach and treats entrepreneurship as organisational
behaviour that is related to change and innovation and discusses both external
and internal environmental elements and structures for fostering entrepreneur-
ship and innovation in e-business environment.
From an economic perspective, entrepreneurship increases national prosperity
and competitiveness by virtue of its impact on employment creation and the
development of new goods and services (Zahra et al., 1999). Corporate entre-
preneurship, that is, intrapreneurship, can be used to improve competitive posi-
tioning and transform corporations, their markets, and industries as opportuni-
ties for value-creating innovations are developed and exploited (Miller, 1983;
Naman & Slevin, 1993; Lumpkin & Dess, 1996). There is a firmly established
empirical base for claiming the effectiveness of corporate entrepreneurship
(Lumpkin & Dess 1996; Zahra & Covin 1995). The book examines the rela-
tionship between the economy and e-entrepreneurship and e-innovation and the
effect of corporate entrepreneurship on e-business success.
Is entrepreneurship related to innovation? Studies show that there is consider-
able overlap between entrepreneurship and innovation (Kanungo, 1999; Sundbo,
1998; Drucker, 1994; Schumpeter, 1934). Innovation is the specific tool of en-
trepreneurship by which entrepreneurs exploit change as an opportunity for a
different business or service. Moreover, innovation has to address market needs,
and requires entrepreneurship if it is to achieve commercial success (Zhao,
2004). Entrepreneurship is a change of state, a dynamic process, and a unique
event. Legge and Hindle (1997) believed that people who lead teams and
organisations to introduce innovations are entrepreneurs. Entrepreneurs seek
opportunities, and innovations provide the instrument by which they might suc-
ceed. Corporate entrepreneurship often refers to the introduction of a new
idea, new products, a new organisational structure, a new production process,
or the establishment of a new organisation by (or within) an existing organisation.
As Herbig, Golden, and Dunphy (1994, pp. 37 and 45) have observed: “Innova-
tion requires three basic components: the infrastructure; the capital; and the
entrepreneurial capacity needed to make the first two work.”
Drawing upon the outcomes of the principal studies of entrepreneurship and
innovation, this book opens up a new field of debate and research about the role
of entrepreneurship and innovation in the e-world, namely, e-entrepreneurship
and e-innovation. E-entrepreneurship and e-innovation refer to broadly entre-
preneurship and innovation in the context of e-business activities and opera-
tions. The theoretical constructs and the working concepts of e-entrepreneur-
ship and e-innovation are developed and explored from various perspectives in
the book through comprehensive and collective studies by a number of researchers
and practitioners with e-business and management expertise.
viii
The primary purpose of the book is to explore the changes in the nature, pro-
cess, and practice of entrepreneurship and innovation in e-commerce and e-
business after the dot-com crash. The specific objectives are:
• To characterize and define the main constructs of e-entrepreneurship and
e-innovation;
• To examine the relationships and internal synergies between entrepre-
neurship and innovation in e-commerce and e-business;
• To explore the economical, social, political, and organizational structural
elements in the rise and fall of e-entrepreneurship and e-innovation;
• To investigate the effect of “e-intrapreneurship,” that is, e-entrepreneur-
ship within organizations, on e-business;
• To identify and corroborate best practices in e-entrepreneurship and inno-
vation through best practice case studies;
• To examine ethical issues relating to e-entrepreneurship; and
• To speculate the future trends of the e-dimension of entrepreneurship and
innovation.
You will find the book extremely helpful if you belong to one of the following
groups:
• Entrepreneurs and managers from micro-enterprises to multinational com-
panies who have been engaged in or plan to start, e-commerce and/or e-
business;
• Lecturers and students in the subject areas of entrepreneurship and inno-
vation;
• Researchers and students who study the electronic business and technol-
ogy aspects of entrepreneurship and innovation;
• Government policy-makers and regulators who seek to address the sig-
nificant issues in relation to e-commerce in the small and medium-sized
business sector; and
• Anyone who is interested in the field of study.
This book helps e-business managers to formulate and implement strategies
that foster the development of e-entrepreneurship and e-innovation, and pro-
vides a greater understanding of the crucial issues in e-business operations in a
wide range of fields. As the present study is based upon both empirical and
theoretical research, the book is also a valuable resource for researchers and
students in the study field.
ix
A review of the current literature about e-business as well as entrepreneurship
and innovation found that there is hardly any English language literature inves-
tigating the dot-com crash from a perspective of entrepreneurship and innova-
tion. The book intends to fill the knowledge gap and entails a better understand-
ing of how significantly e-businesses rely on their entrepreneurial and innova-
tive capacities, and how to develop these capabilities needed for sustainable
success.
The book provides readers with both theoretical and practical guidance to a
further study of e-entrepreneurship and e-innovation. The book presents a com-
prehensive introduction of the concepts and practices of e-entrepreneurship
and e-innovation. The book discusses the application of the concepts in e-busi-
ness operations and management. Readers are able to appreciate the key is-
sues involved in the development of e-entrepreneurship and e-innovation.
The book is organized into 14 chapters, addressing the objectives of the book. A
brief description of each of the chapters follows:
Chapter I sets the theme for the entire book. It identifies and explores the
synergies between entrepreneurship and innovation, analyses the factors that
foster an interaction between the two, and provides an integrative framework
for building entrepreneurial and innovative organization in the e-world. The chap-
ter reports findings from a number of case studies of entrepreneurial and inno-
vative dot-com companies and from a comprehensive review of entrepreneur-
ship and innovation literature. This empirical study contributes to a better un-
derstanding of the existing theories and practices of entrepreneurship and inno-
vation in organisations.
Chapter II introduces the work of Deleuze and Guattari, particularly their no-
tion of rhizomic becomings to the study of emergent knowledge dynamics in
contexts of innovation. It shows how an analysis of rhizomic becomings can
assist to explore new and emergent patterns, channelling interpretation toward
the discovery of new combinations and creative assemblages in knowledge.
This is exemplified by the example of a qualitative study exploring knowledge
dynamics in e-business entrepreneurship since the dot-com crash. The results
highlight the forging of the conditions for innovation in new combinations of
lines of affect and lines of technology.
Chapter III critically challenges the naïve view of Internet innovation and re-
flects on the extraordinary rise and fall of large numbers of e-entrepreneurial
intermediaries. Unlike much of the literature in this area, which has largely
focused on leading companies or the few successful hubs, this chapter concen-
trates more on the opportunities and obstacles that face small and entrepre-
neurial organizations, and the innovations which failed. It addresses two central
questions: Why did the Internet revolution not happen? What substantive ideas
for business practice can be salvaged from the wreckage? Drawing on a multi-
stranded empirical study, this chapter seeks to explain the divergence between
the expected and realised degrees of e-business innovation.
x
Chapter IV presents experiences of two entrepreneurial companies in adopting
e-innovations. The chapter identifies current and future online business envi-
ronments, especially in light of Open Source Software (OSS) being accepted
globally. Unlike proprietary software (such as Windows), OSS comes with its
internal implementation details (source code) visible both to its developers and
users, along with the freedom to change and redistribute this source. The sig-
nificant implications of this unique style of software distribution for e-entrepre-
neurs are examined. Having a flexible strategic plan; possessing management
skills; providing excellent service; and having patience are some of the recom-
mendations provided by interviewed e-entrepreneurs. When made part of the
decision-making process, these recommendations would enhance current and
future e-entrepreneurs in sustaining their business.
Chapter V aims to illustrate how technology innovations can be implemented in
the SME sector and to explore how technology innovation and marketing can
help each other in enhancing e-entrepreneurial companies. The chapter fo-
cuses on a UK-based marketing communications company which has devel-
oped an innovative personalized relationship e-marketing tool, utilizing mobile
technology aimed at the SME sector. Current marketing practices, such as da-
tabase marketing and CRM systems, are discussed in terms of SME adoption.
The chapter provides a pragmatic guide to formulating SME relationship mar-
keting strategies using e-innovations.
Unlike other chapters of the book which predominantly focus on the business
and/or industry sectors, Chapter VI seeks to explore the strategies for virtual
learning and e-entrepreneurship in higher education institutions. The study ex-
amines the pedagogical ICT strategy which is a specific functional strategy
that describes the strategic outlines for virtual learning and e-entrepreneurship.
The aim is also to explore the methods (such as the balanced scorecard (BSC)
approach developed by Kaplan and Norton) to communicate and implement the
strategy in an understandable and efficient manner. This chapter helps educa-
tional administrators to better implement strategies for virtual learning and e-
entrepreneurship.
Chapter VII illustrates the rise and fall of an e-entrepreneurial company em-
bracing e-innovation. The case company corProcure, a postal e-marketplace
founded in partnership with 13 big corporations, was viewed by many as a
promising e-innovation star when it was launched. But the company’s business
model failed. This chapter seeks to answer the questions: Why had the poten-
tially largest buying cartel failed so quickly? What lessons were learned? What
was the right e-business strategy that needed to be implemented? The evolu-
tion of corProcure.com has been a learning curve for those involved, the initial
owners, the new owner Australia Post, but also for all the interested e-business
observers.
xi
Chapter VIII presents a case study of Sensis Search, a young successful e-
business which was launched in July 2004. The case study sheds light on a
model of best practices in terms of the development of entrepreneurship and
innovation, in the current business environment where the overall economic
conditions worldwide have been improving, and investors’ confidence in high-
tech and e-business industries has been recovering. The e-entrepreneurship
strategy that Sensis Pty, the parent company of Sensis Search, has taken is
actually that of an intrapreneurship, that is, an entrepreneurship within an orga-
nization. The chapter explores the lessons, both good and bad, learned from the
case and identifies the areas for future research.
Chapter IX discusses using e- and m-business components in supporting and
enhancing existing businesses and in creating new business innovations. A frame-
work illustrating two different approaches companies have to the adoption of e-
and m-business components is proposed. Three cases of how Finnish compa-
nies have, in an innovative way, used e- and m-business components to support,
to enhance, and to launch entrepreneurial businesses are presented. Based on
the illustrative framework and the cases, some rules of thumb for using e- and
m-business components are proposed. The aim of this chapter is to offer e-
managers and e-entrepreneurs helpful insights for planning e- and m-business
component investments.
Chapter X explores the main constructs of e-entrepreneurship through a case
study of an Internet start-up company developed by two e-entrepreneurs. The
Internet is a new platform for setting up business providing entrepreneurial
opportunities to those who may not be capital rich. It enables people to turn
innovative business ideas into reality. It is also apparent from the case study
that like any other business, just an innovative idea is not enough, a business
plan and a revenue model are essential for developing the enterprise. The e-
entrepreneurs in the example had to make an enormous effort in marketing and
promotion of the business for customer acceptance.
Chapter XI touches on ethical issues in e-entrepreneurship. It reports the re-
sults of an Australian national survey which studied Australian Internet users’
online information privacy values using a typology that combines specific de-
mographic and attitudinal measurements with behavioural data. The chapter
contains a comprehensive examination of the internal, external/environmental,
and behavioural dimensions of information privacy, incorporating a comprehen-
sive profile of each of the typologies’ categories along with a general profile of
total respondents. The implications of the findings for e-entrepreneurship and
e-business ethics are discussed.
Chapter XII incorporates several perspectives to examine how small and me-
dium-sized enterprises (SMEs) use the network technologies and information
and communication technology (ICT) in their current business environment.
Through a literature review and interviews, the chapter analyses the various
xii
options for managing the transformation, and its effects, to ascertain the appro-
priate strategies within a range of SMEs. The results of this study reveal that
the SMEs’ journey toward becoming e-organisations can be classified into three
stages: 1/2-fusion, fusion, and the ultimate e-organisation stage. Based on this
work, strategic solutions are proposed for future SMEs intending to adopt Internet
and other network technologies.
Chapter XIII explores new ways for SMEs to create a competitive advantage
through the use of e-business. It examines the level of ICT use in SMEs and
identifies the drivers and barriers which owner-managers face in adopting e-
business. Furthermore, it explores the degree of awareness amongst SMEs of
the opportunities available to them for developing their employees, their busi-
ness strategies, and their attitudes toward the range of initiatives and options on
the use of e-business. Industry behaviour and organisational culture in relation
to the creation of competitive advantage through e-business are also explored.
Chapter XIV addresses the very important question of the impact of e-innova-
tion, namely, Web-based global electronic procurement systems and market-
place on corporate governance in relation to organizational purchasing — the
organizational structures and processes for procurement control. This is under-
taken through an action research case study of the failures and successes of
competitor global organizations cooperatively establishing and utilizing a global
electronic marketplace. Specifically, the chapter investigates how electronic
procurement contributes to the adaptation and evolution of control structures
— from highly structured, bureaucratic, and rigid to flexible, adaptable, free-
flowing, and profitable, and these can result in substantial reductions in transac-
tion costs.
In today’s e-business context, technology, customers, competitors, and partners
can change rapidly. E-technology innovations can become obsolete in the blink
of an eye and customers can appear and disappear with a keystroke. In such
circumstances, it is crucial that e-business entrepreneurs, managers, and policy-
makers have an insightful knowledge and understanding of the complexities of
e-business and how to make e-entrepreneurship and e-innovation work for e-
business.
As shown, e-entrepreneurship and e-innovation are critical to the sustainability
of e-business. Unfortunately, they are under-researched areas in e-business
management literature. While there are many publications, both academic and
professional, that talk about e-business and entrepreneurship, such as the books
authored by Timmons and Spinelli (2003) and Allen (2000), most of the publica-
tions place their focus on how to help micro enterprises and entrepreneurs set
up and run e-commerce.
Unlike the existing publications, this book was written from an integrative per-
spective of entrepreneurship and innovation to examine both strategic and op-
erational issues around e-business after the dot-com crash. The book also con-
xiii
tributes to the development of the emerging disciplines of e-entrepreneurship
and e-innovation both theoretically and practically.
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Timmons, J.A., & Spinelli, S. (2003). New venture creation: Entrepreneur-
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xv
Acknowledgments
The production of this book would not have been possible without the assis-
tance of the institutions and the people to whom I am deeply grateful. I am
greatly indebted to the School of Management and the Business Portfolio of
Royal Melbourne Institute of Technology University, Australia, for their re-
search grants and the time that was needed to undertake this project. I also am
indebted to all the chapter authors for their insights and excellent contributions
to this book. Also, special thanks go to all the reviewers of my proposal of this
book and reviewers of each of the chapters of the book for their constructive
and invaluable reviews and comments. A further special note of thanks goes to
the publisher Idea Group Inc. and Dr. Mehdi Khosrow-Pour for offering me an
opportunity to publish the book, and to the publishing team, in particular, Ms.
Kristin Roth and Ms. Michele Rossi, for helping me keep the project on sched-
ule.
Finally, I wish to thank my parents, Deming and Peishen, and my daughter
Kelly for their love and warm support throughout this project.
Entrepreneurship and Innovation in E-Business 1
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
Chapter I
Entrepreneurship
and Innovation
in E-Business:
An Integrative Perspective
Fang Zhao
RMIT University, Australia
Abstract
This chapter argues that a combination of entrepreneurship and innovation
is a crucial factor to the long-term sustainability of e-commerce and e-
businesses. Entrepreneurship and innovation are positively related to each
other and interact to help an organisation to flourish. The chapter takes an
integrative approach to exploring the synergies between entrepreneurship
and innovation and to analysing the factors that foster an interaction
between the two. Case studies of entrepreneurial and innovative dot-com
companies were conducted to complement a comprehensive lit erature
review of entrepreneurship and innovation. This empirical study contributes
to a better understanding of the existing theories and practices of
entrepreneurship and innovation in organisations.
2 Zhao
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
Introduction
The fast growth and business successes of eBay, Amazon.com, travel.com,
priceline.com, and so forth, and the bankruptcy of numerous dot-com firms
worldwide in 2000 have held potent management implications for IT innovation
and entrepreneurial organizations worldwide. E-entrepreneurship and e-
innovation are emerging disciplines for proactively responding to changes in the
e-business world. The dot-com crash presented new challenges as well as new
opportunities to e-business entrepreneurs and managers to rethink and reshape
their business strategy. This author argues that a combination of entrepreneur-
ship and innovation is a crucial factor to the long-term sustainability of e-
commerce and e-businesses. In this frenetically changing competitive land-
scape, an integrative approach to e-entrepreneurship and e-innovation will
enable organizations to gain competitive advantage and hold the key to e-
business success.
This chapter investigates the relationship between entrepreneurship and innova-
tion and their roles in organizational development, in general, and in dot-com
industries, in particular. A review of the current literature about e-business as
well as entrepreneurship and innovation found that there is hardly any English
language literature investigating dot-com experiences from a perspective of
entrepreneurship and innovation. Some studies have dealt with the process,
structure, and strategy of either entrepreneurship or innovation (Littunen, 2000;
Cornwall & Perlman, 1990: Caird, 1988; Casson, 1982), and others have touched
on the conceptual relationship between the two (Schumpeter, 1934; Drucker,
1994; Legge & Hindle, 1997; Kanungo 1998; Sundbo, 1998). However, there
have been few empirical studies that explore the synergies between the two.
Thus, the aims of this chapter are:
• to contribute to an understanding of the complementary nature of entrepre-
neurship and innovation through an empirical study of dot-com companies,
and
• to develop an integrative framework for building entrepreneurial and
innovative organization.
Data for this qualitative study were collected from three sources, using comple-
mentary methods. First, a review of principal literature about entrepreneurship
and innovation was undertaken to collate the existing theories about the two and
explore the conceptual relationships between them. Second, semi-structured
interviews were conducted to examine the perceptions of senior managers in e-
business regarding entrepreneurship and innovation and the factors that contrib-
Entrepreneurship and Innovation in E-Business 3
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ute to the development and integration of entrepreneurship and innovation.
Eleven senior managers involved in e-businesses in Australia were interviewed
between April and August 2004. These interviews focused on how the dot-coms/
e-businesses have been managed, how they have succeeded or failed, and what
lessons can be learned from their experiences. This chapter reports part of
findings of the interviews relevant to the main theme of the study. Third, case
studies of five dot-com companies were undertaken to explore organisational
practice and behaviour, and the correlation between business practice entrepre-
neurship and innovation in dot-com industries. Three of the case studies rely
on documentary research, while the other two rely on semi-structured interviews
with their senior managers. The companies that were selected for the case
studies and interviews encompass various business sectors (e.g., search engine,
online auctioneer and retailing, digital music provider, and online speaker portal),
operating in different nations and cultures, and have different histories, varying
in size and length of existence, but they serve to illustrate the main focus of the
chapter — the interaction between entrepreneurship and innovation in e-
business.
Literature Review
There has been no consensus in defining entrepreneurship and innovation in the
existing literature. Some studies have dealt with entrepreneurship and innovation
by investigating the personality and psychology of entrepreneurs and innovators
(Littunen, 2000; Caird, 1988; Casson, 1982). Others have talked of the nature of
entrepreneurship and innovation in organisations (Goffin & Pfeiffer, 1999;
Martin, 1994). This literature review summarises a diverse spectrum of views
about entrepreneurship and innovation and the relationship between them. The
review also touches on cultural issues because they have a profound influence
on the development of entrepreneurship and innovation (Herbig, Golden, &
Dunphy, 1994).
Entrepreneurship
“Entrepreneurship, in its narrowest sense, involves capturing ideas, converting
them into products and/or services and then building a venture to take the product
to market” (Johnson, 2001, p. 138). A noticeable trend in the study of entrepre-
neurship in recent years has been away from the subject of small business per
se toward the concept of entrepreneurship (Cornwall & Perlman, 1990; Chell,
2001). The chapter reflects this trend by emphasising the concept of entrepre-
4 Zhao
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neurship itself, rather than the personality or psychology of small business
entrepreneurs.
Entrepreneurship represents organisational behaviour. The key elements of
entrepreneurship include risk-taking, proactivity, and innovation (Miller, 1983).
However, Slevin and Covin (1990) have argued that the three elements are not
sufficient to ensure organisational success. They maintained that “a successful
firm not only engages in entrepreneurial managerial behaviour, but also has
the appropriate culture and organisational structure to support such behaviour”
(Slevin & Covin, 1990, p. 43). This chapter adopts a similar approach and treats
entrepreneurship as organisational behaviour that is related to change and
innovation.
Entrepreneurs and Small Business Owners
Entrepreneurs are different from small business owners. Garland, Hoy, Boulton,
and Garand (1984) and Steward, Watson, Garland, and Garland (1998) argued
that small business owners were concerned primarily with securing an income
to meet their immediate needs and that they did not usually engage in innovation,
whereas entrepreneurs had higher achievement motivation and risk-taking, and
were inclined to innovation and change. This chapter presents a related
perspective in arguing that entrepreneurship and innovation are closely related
and complementary.
Corporate Entrepreneurship or Intrapreneurship
Drucker (1994) made an important contribution to the theoretical construct of
entrepreneurship in large organisations when he referred to “corporate entre-
preneurship” or “intrapreneurship.” Antoncic and Hisrich (2003) argued that
intrapreneurship goes on within organisations, regardless of their size.
Intrapreneurship research has studied the individual intrapreneur, the formation
of new corporate ventures, and the characteristics of entrepreneurial organisation
(Antoncic & Hisrich, 2003). In this chapter, entrepreneurship includes corporate
entrepreneurship and intrapreneurship.
Innovation
For more than half a century, research and development (R&D) has been closely
associated with technological innovation (Miller & Morris, 1999). Invention is the
narrowest definition of innovation. Drucker (1994) maintained that there are
Entrepreneurship and Innovation in E-Business 5
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seven basic sources of opportunities to innovate. Only one of them is to do with
inventing something new. Thus, innovation is more than invention and does not
have to be technical. There are numerous examples of social and economic
innovations (Drucker, 1994). Innovation is a proposed theory or design concept
that synthesises extant knowledge and techniques to provide a theoretical basis
for a new concept (Sundbo, 1998; Bright, 1969). Hence, innovation has many
facets and is multidimensional. The most prominent innovation dimensions can
be expressed as dualisms: (i) radical vs. incremental; (ii) product vs. process; and
(iii) administrative vs. technological (Cooper, 1998).
Innovation can be radical and incremental. Radical innovations refer to path-
breaking, discontinuous, revolutionary, original, pioneering, basic, or major
innovations (Green, Gavin, & Aiman-Smith, 1995). Incremental innovations are
small improvements made to enhance and extend the established processes,
products, and services. However, this contradistinction does not “necessarily
[correspond] to the more fine-tuned reality” because “radicality is a continuum”
(Katila, 2002 p. 307). Product innovation, as the name suggests, “reflects change
in the end product or service offered by the organizations, [whereas] process
innovation represents changes in the way firms produce end products or
services” (Utterback cited in Cooper, 1998, p. 498). Some researchers have
categorised innovation into technological and administrative innovations. Tech-
nological innovation is about “the adoption of a new idea that directly influences
the basic output processes, [whereas] administrative innovations include changes
that affect the policies, allocation of resources, and other factors associated with
the social structure of the organization” (Daft, 1978, cited in Cooper, 1998, p.
497).
For the purpose of this chapter, innovation is defined broadly to include new
products, new processes, new services (including new uses of established
products, processes, and services), new forms of organisation, new markets, and
the development of new skills and human capital.
The Conceptual Relationship between Entrepreneurship
and Innovation
The conceptual relationship between entrepreneurship and innovation has been
discussed in the literature for many years. The economics of innovation, in
particular, have attracted increased attention in recent years (Grupp, 2001;
Arora, Fosfuri, & Gambardella, 2002; Stoneman, 1995). Sundbo (1998)
summarised the basic theories of the economics of innovation and identified
three competing paradigms in the current theoretical discussion of innovation: (i)
the entrepreneur paradigm; (ii) the technology-economics paradigm; and (iii) the
strategic paradigm.
6 Zhao
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The entrepreneur paradigm can be traced back to the 1930s when Schumpeter
(1934) first attempted to establish a linkage between entrepreneurs and innova-
tion in theory, and viewed the entrepreneur as innovator. He maintained that
innovation contributes to the growth of the economy because entrepreneurs
produce innovations. The concept of the entrepreneur as innovator underpins the
entrepreneur paradigm in which the role of the entrepreneur is highlighted in the
innovation process. According to this paradigm, only a person who founds a new
company on the basis of a new idea can be called an entrepreneur. Entrepreneur-
ship is viewed as a creative act and an innovation. Entrepreneurship is about
creating something that did not previously exist. The creation adds value to the
individual and the community, and is based upon perceiving and capturing an
opportunity (Johnson, 2001). Bygrave and Hofer (in Legge & Hindle, 1997) held
similar views. They regarded entrepreneurship as a change of state, a dynamic
process, and a unique event. Legge and Hindle (1997) believed that people who
lead teams and organisations to introduce innovations are entrepreneurs. Entre-
preneurs seek opportunities, and innovations provide the instrument by which
they might succeed. Corporate entrepreneurship often refers to the introduction
of a new idea, new products, a new organisational structure, a new production
process, or the establishment of a new organisation by (or within) an existing
organisation. As Herbig et al. (1994, pp. 37 and 45) have observed: “Innovation
requires three basic components: the infrastructure; the capital; and the entre-
preneurial capacity needed to make the first two work.”
Innovation is the specific tool of entrepreneurship by which entrepreneurs exploit
change as an opportunity for a different business or service. There is consider-
able overlap between entrepreneurship and innovation (Kanungo, 1998; Sundbo,
1998; Drucker, 1994; Schumpeter, 1934). Moreover, innovation has to address
market needs and requires entrepreneurship if it is to achieve commercial
success (Zhao, 2001).
Case Studies of Synergies between
Entrepreneurship and Innovation
This section summarizes key findings from the 11 interviews and five case
studies conducted for the study. The interviews with senior managers from dot-
com companies in Australia were aimed to examine their managerial practices
and perceptions of the role of entrepreneurship and innovation in running an e-
business. The majority of the managers interviewed considered that entrepre-
neurship and innovation share an interdependent and synergistic relationship and
cannot actually be separated. For example, the CEO of Destra, a successful
Entrepreneurship and Innovation in E-Business 7
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dot-com company based in Australia, believes that entrepreneurship means
“creating something out of nothing,” and that it is a mindset, where “anything is
possible and the only boundaries are those that we create ourselves.” To him,
innovation means “doing something that hasn’t been done before or doing
something differently.” His company’s Destramusic.com was the first digital
music provider in Australia, going live between 1997 and 1998, far in advance of
their current competitors.
SpeakerDirect (www.speakerdirect.com.au) is a young Melbourne (Austra-
lia) based dot-com, providing an online speaker portal. The online speaker portal
business idea was developed in December 2003, and the portal was formally
launched in March 2004, illustrating the fact that the founders believed that speed
to market was one of the essential elements of their strategy, and a characteristic
of the e-market. The Web site system was developed from scratch with the
premise that the company wanted a corporate friendly and comprehensive tool
for both speakers and speaker-seekers. SpeakerDirect is actually a business
resource as well as a promotional platform. SpeakerDirect.com.au provides a
free service for corporations to search and select corporate speakers, however,
unlike their competitors, the company does not take engagement fees. The
company has an ambitious goal of becoming the number one global speaker
portal within five years and to connect up the entire business community.
From the perspective of the company’s founders and directors interviewed for
the study, entrepreneurship and innovation mean risk (financial, emotional, and
personal):
Entrepreneurship is taking control and action on a concept or a dream in
the face of adversity. The tangible aspect of making that happen is where
innovation comes in. For example, I want people to communicate with each
other over long distances (the dream), therefore I am going to do something
about it and invest time and dollars to do it even when everyone is saying
it cannot be done/I am mad/it is too risky (entrepreneurship/the risk) and
a phone is designed to achieve this (the innovation to achieve the dream).
A combination of both is the ‘big picture’ that requires tenacious and
passionate people to turn an idea into reality by being independent and in
control. (Interview Data, 2004)
The business model that the company has developed is in itself an example of a
combination of entrepreneurship and innovation — it is the first of its kind,
replacing the idea of the client having to deal with many agencies separately, by
creating a one-solution portal. Another example of entrepreneurship and innova-
tion is the system behind the Web site. This was designed to be multi-functional
(but streamlined) and very user-friendly for both speakers and seekers. One of
8 Zhao
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the most innovative features is a bulletin board where companies can advertise
an event for which speakers can express an interest in being engaged for — this
would be a useful tool for anyone who is time-pressed or needs a speaker at short
notice. Another key e-dimension of entrepreneurship and innovation that the
case company demonstrates is responsiveness to client and market needs. For
example, SpeakerDirect.com.au is seeking to position itself as a media tool
(e.g., by providing a service whereby speakers are available to journalists for
“expert comment,” gaining valuable and credible exposure, but without actually
being engaged on a fee basis). In the director’s words, they have “flipped the
agency concept on its head,” and as a result, many seeker clients believe the free
service is “too good to be true.”
eBay, a widely successful start-up, is a classic example of entrepreneurship and
innovation in the e-business world. From its humble origins as a trading post for
Beanie Babies, eBay has become one of the world’s largest online trading
centres. It has created a whole new business arena which hosts over 150,000
entrepreneurs and about 30 million customers worldwide. The company has
constantly pursued new ways of doing business. For instance, eBay created an
innovative feedback system in which buyers and sellers can rate each other
following a transaction, thereby enhancing users’ experience and satisfaction.
Its PayPal payment-processing system also allows buyers to make electronic
payments to eBay sellers who cannot afford a merchant credit card account.
This opens up a whole new medium of exchange. As a result of such innovations,
it is estimated that eBay’s net revenues will grow to US$3 billion by 2005 (Hof,
2003).
Google, the Web search engine giant, is not only an entrepreneurial company in
terms of its aggressive growth strategy but also a pioneer of innovation. To
enhance the level and efficiency of its features and services, Google has
continuously improved its technologies. It created a services and tools section in
its Web site known as Google Labs to demonstrate its innovation and ask its users
to experiment with and provide feedback on the features and tools. Google
toolbar, Google Groups, and Google Answers are a few of their other innovative
e-business developments (Anonymous, 2004). The founders of Google, two
graduate computer students expressed their innovation mindset quite frankly,
“Google is not a conventional company. We do not intend to become one.” In this
respect, Google has persistently taken an unconventional way of designing its
business and concentrated on building a better search engine rather than
spending millions on marketing campaigns. It has innovated the existing technol-
ogy to provide a fast, accurate, and easy-to-use search service that can be
accessed from anywhere at anytime. “Never settle for the best” is one of the
company’s philosophies (Google, 2004). In fact, Google’s strategy against the
fierce competition in the search engine provider market is one of constant
innovation and entrepreneurship through creating new and innovative services
Entrepreneurship and Innovation in E-Business 9
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and tapping new channels of revenues. For example, Google has recently
launched a string of new services, such as the free Webmail service, G-mail, and
Froogle, an online shop price comparison service (BBC News, April 29, 2004).
Most recently, Google took another unconventional step to sell its company to
the public. The floating approach is innovative and “peculiar” (in some analysts’
view) as Google’s management decided to sell its shares through an online
auction rather than the traditional allocation by big banks. It was reported that
this approach to the initial public offering (IPO) aimed to give the general public
a better chance to buy Google’s stock before the shares begin trading, rather than
let investment banks decide who should own the shares. However, the floating
plan caused concerns that the impending float would fuel a second Internet
bubble. Analysts expected that Google would attract a market valuation of up to
US$40 billion (Clarke, 2004, BBC News, April 29, 2004). Amid a weak stock
market and a lukewarm investors’ response to Google’s IPO proposal, the
company’s executives had to reset the opening price from US$108-US$135 to
$85 and cut the number of shares offered from 25.7 million to 19.6 million. After
two days trading, Google’s share price jumped 27%. All of a sudden, the value
of the young start-up dot-com became worth more than the Ford Motor Company
(Wood, 2004). By October 22, 2004, about two months after the IPO, Google’s
share price had reached US$169, which almost doubled the initial IPO price
(Perez, 2004).
Amazon.com’s success has everything to do with innovation and entrepreneur-
ship. The company has been a pioneer in the dot-com industry since its beginning.
It was the first company to move a book retailing business online; the first to offer
its customers a “one click” program to streamline the buying process by storing
detailed customer information including credit numbers; and the first to use
collaborative-filtering technology to give customers an idea about what other
people with similar purchase histories have bought. Amazon.com was the first
company to develop the comparison-shopping program that directs its customers
to other retailers if it does not sell a certain product. Its affiliates program also
was also the first in the dot-com industry, having directed millions of customers
from its partners’ sites to Amazon.com. Undoubtedly, Amazon.com has always
been a first mover in e-business through continuous innovation (Mellahi &
Johnson, 2000).
These empirical studies of e-entrepreneurship and e-innovation demonstrate that
the success of e-business is inextricably linked to a combination of entrepreneur-
ship and innovation, and that the two are enablers and key drivers of e-business.
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Issues and Challenges
Facing Entrepreneurship and
Innovation in E-Business
Today’s e-business operates in a highly competitive marketplace where sustain-
able competitive advantage is almost impossible as there are minimal barriers to
new entrants and competitors in the marketplace. Innovation faces constant
challenges of imitation and erosion. There have been different views in the
literature about the benefits of first movers in e-business marketplace. Mellahi
and Johnson (2001) asked the question “does it pay to be first to market or should
e-commerce firms wait for first movers to make an investment and then
cannibalize the idea with lower entry cost?” The cause of the concerns are raised
by a general belief that it is safer and less expensive to imitate the first mover
in the e-business environment, where there is a higher level of technical
uncertainties and rapid rate of technological innovation. For instance, many new
dot-coms rushed to build an e-marketplace and chose imitation as a business
strategy rather than innovation. This author maintains that it is the lack of a
combination of innovation and entrepreneurship capacity that has caused the
demise of many imitators in the dot-com industry. The essence of innovation and
entrepreneurship is taking a new idea to market, not imitating a new idea without
taking into account the special needs of local markets, and being innovatively and
proactively responsive to environmental changes by introducing a new product,
process, service, or implementing a distinctive business model as did the case
companies studied in this chapter.
In the early days of e-business, it was likely that most businesses could be applied
differently online and off-line. “Irrational exuberance” was prevalent within the
market, and venture capitalists were prepared to take on much more risk.
However, since the dot-com crash, the market appears to have reverted to
traditional models and methods. More attention has been given to the fundamen-
tal structural components of e-business, such as flow of revenue. E-business, to
many companies, is now just seen as another channel to market (rather than
signalling the demise of off-line business as originally prophesized). Likewise,
many senior managers interviewed for the study indicated that there was no
difference in the concepts of entrepreneurship online and off-line. Traditional
business models are here to stay. For new e-businesses to succeed, they need
an innovative idea incorporated into a sound business model which is viable
economically and which is facilitated by knowledgeable and experienced people.
As such, those entrepreneurial and innovative e-business activities which
genuinely have utility for the customer (e.g., e-banking) are more likely to be
successful. For example, the difference between retailing and banking is that
Entrepreneurship and Innovation in E-Business 11
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while one is seen as an emotive and/or social activity, the other is perceived to
be a chore. Therefore, offering an electronic channel to facilitate the latter is
more likely to succeed than the former — people want convenience and speed
when they bank, but they are more likely to value other factors which an online
channel may not necessarily be able to offer when they shop for goods and
services. In this respect, dot-com companies should endeavour to enhance
customer experience by offering tools on their Web sites which enable custom-
ers to personalize the shopping process and provide more personalized business
services.
In summary, the issues facing e-business today are that entrepreneurship and
innovation needs to respond closely to market needs and gain market credibility.
Ideally, there should be credibility built within the marketplace before inception
of the business. In addition, the intangibility of an online service needs to be
addressed in order to build brand awareness.
An Integrated Framework for
Building Entrepreneurial and
Innovative Organizations
Both the theoretical and empirical studies of this chapter demonstrate that a
combination of both entrepreneurship and innovation is crucial to e-business
success, and that they require systematic and organizational behaviour. In this
respect, organisations can foster entrepreneurship and innovation behaviour
internally through their strategy, structure, and processes (Cornwall & Perlman,
1990). Therefore, this author proposes an integrated framework for developing
innovation and entrepreneurship to help organizations including dot-coms to
obtain competitive advantage. The framework involves the “5 S’s” of strategy,
system (structure), staff, skills, and style. This model is developed on the basis
of the principal management literature of Bartol, Martin, Tein, and Matthews
(2001), Robbins, Bergman, Stagg, and Coulter (2000), and Drucker (1994).
However, the complex and evolving nature of entrepreneurship and innovation
as shown in this chapter means that the proposed model might address only some
of the issues pertaining to entrepreneurship and innovation behaviour. Therefore,
the model should be seen as a starting point in developing effective organisational
strategy, structure, and culture to stimulate entrepreneurship and innovation
behaviour in organisations.
12 Zhao
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Strategy
A well-defined and proactive strategy is central to an entrepreneurial and
innovative organisation. Such an organisation needs internally focused strategies
that propel growth and stimulate change within the organisation, as well as
externally focused strategies that actively seek out new ventures, acquisitions,
mergers, or joint ventures to achieve commercial success through innovations.
The strategy should be diverse enough to address a spectrum of technological,
financial, and human issues, and should be congruent with the future scenario
envisaged for the organisation. Given the close synergies between entrepreneur-
ship and innovation, the strategy should be both entrepreneurial and innovative,
and should include methods of transforming established products and services
into something new that will add value to existing businesses. Meeting and
exceeding the changing needs of customers, as well as an emphasis on marketing
and the development of new markets, should be key management and entrepre-
neurial strategies.
Moreover, in the current turbulent e-business environment, developing
organisational capacity to acquire, create, accumulate, and exploit knowledge
should be an essential strategy in gaining a competitive advantage through
innovation. A good strategy depends on effective execution and requires an
appropriate system, a capable staff team, a wide range of skills, and an
encouraging and supportive management style that fosters an innovative and
entrepreneurial organisational culture.
System and Structure
The case studies of this chapter suggest that size, industry sector, and type of
organizations do not determine the extent of organisational capability in entrepre-
neurship and innovation, and that cultural and structural elements play a crucial
role. Generally speaking, flexible, adaptive, and open organizations are more
conducive to innovation and entrepreneurship, because a highly centralised
decision-making process restricts information flows and communication with
inter-firm partners and also stifles the motivation of e-innovation and e-
entrepreneurship. The control and management system should be flexible —
depending on the changing situational conditions affecting each project or
program. Generally speaking, innovation is not fostered in tightly controlled
structures. Empowerment and delegation are needed, especially during the early
stages of innovation and product development. However, to secure a niche
market, an appropriate control system should be maintained to monitor quality
and costs, to meet tight deadlines, and to achieve predetermined objectives as the
project develops. An effective balance between freedom and control is required.
Entrepreneurship and Innovation in E-Business 13
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Staff
People are the most important assets in today’s knowledge-based economy.
Staff members in an innovative and entrepreneurial organisation must be
creative people with a flair for innovation and entrepreneurial spirit, to realize its
value. They must be keen to change, and keen to exploit such change as an
opportunity. To succeed in its economic environment, an innovative and entre-
preneurial organisation needs entrepreneurial project managers to promote and
coordinate the development of innovative projects as well as creative and
conscientious supporting staff to implement the projects. The right mix of people
is essential to the successful commercialisation of innovations.
Skills
Drucker (1994) maintained that systematic innovation requires the capturing and
monitoring of seven sources of opportunity: (i) the unexpected; (ii) incongruities;
(iii) process need; (iv) industry and market structures; (v) demographics; (vi)
changes in perception; and (vii) new knowledge. Clearly, an innovative and
entrepreneurial organisation needs a range of managerial and entrepreneurial
capacities and skills to handle innovation. These can be summarised as follows:
• an ability to search for and identify innovative opportunities
• a proactive attitude to the promotion of innovation through a strategic vision
• the ability to create a cultural environment that fosters innovation and
entrepreneurship
• the ability to develop effective plans to implement innovation and
commercialisation procedures
• the ability to integrate research, design, and market information to convert
new ideas and inventions into commercially viable innovations
• the ability to develop effective and realistic procedures for the evaluation
of R&D projects in terms of innovation, quality, and commercial value
Style
An ideal entrepreneurial management style for innovation should be open and
supportive, should encourage and nurture new product development, and should
identify new needs of customers, new users, and new markets through an ability
14 Zhao
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to absorb information from various sources. The style of an innovative and
entrepreneurial organisation should provide employees with a culture of
empowerment and should enforce a reward system that provides incentives for
innovative and entrepreneurial behaviours, values, and assumptions.
Conclusion
This chapter has explored the synergies between entrepreneurship and innova-
tion through a review of the principal literature in this field and case studies of
entrepreneurial and innovative organisations in the dot-com sector. The argu-
ment of the chapter is that a combination of entrepreneurship and innovation is
a crucial factor to the long-term sustainability of e-commerce and e-businesses.
The author has found that:
• Entrepreneurship and innovation are positively related to each other and
interact to help an organisation to flourish.
• Entrepreneurship and innovation are complementary, and a combination of
the two is vital to organisational success and sustainability in today’s
dynamic and changing environment.
• Entrepreneurship and innovation are dynamic and holistic processes in
entrepreneurial and innovative organisations.
The chapter also broadly discussed key issues and problems in the implementa-
tion of entrepreneurship and innovation in e-business. Because entrepreneurship
and innovation are systematic behaviours (Drucker, 1994), systematic efforts
are required to incorporate them into the operations of organisations. The “5 S’s”
model is designed to address this need. Entrepreneurship and innovation should
be regarded as ongoing, everyday practice in organisations, and this chapter has
contributed to the development of such an attitude.
However, given the small sample size of interviews and case studies, and the
nature of this qualitative study, there are methodological limitations which do not
permit any generalization of the findings of the chapter to other situations. The
perceptions of the people interviewed may not represent those of the industry as
they are personal understanding of entrepreneurship and innovation based upon
their respective experiences. To minimize the limitations, this author chose two
small dot-coms in Australia to complement the case studies of the three leading
global players in the dot-com industry — Amazon.com, Google, and eBay.
Entrepreneurship and Innovation in E-Business 15
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Nevertheless, these limitations infer that further systematic and comprehensive
research would be useful — especially if it involves quantitative studies of a
larger sample size in different settings.
Acknowledgments
This author gratefully acknowledges the valuable assistance of Ms. Carmen
Gould in the data collection of the research project. The author is deeply indebted
to all the participants in the interviews for their constructive inputs to the project.
Special thanks go to RMIT University for an Entrepreneurship Research Fund
which entailed this research.
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Chapter II
Exploring Rhizomic
Becomings in
Post Dot-Com
Crash Networks:
A Deleuzian
Approach to Emergent
Knowledge Dynamics
Alexandra Steinberg
The London School of Economics and Political Science, UK
Abstract
This chapter introduces the work of Deleuze and Guattari, particularly
their notion of rhizomic becomings to the study of emergent knowledge
dynamics in contexts of innovation. It shows how an analysis of rhizomic
becomings can assist to explore new and emergent patterns, channelling
interpretation toward the discovery of new combinations and creative
assemblages in knowledge. This is exemplified by the example of a qualitative
study exploring knowledge dynamics in e-business entrepreneurship since
the dot-com crash. The results highlight the forging of the conditions for
innovation in new combinations of lines of affect and lines of technology.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 19
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Introduction
The reader may engage with this chapter in two different modes. First, it can be
approached in a social psychological mode as an exploration of the idea of
networking in e-business entrepreneurship, especially of the idea of new forms
of technological interaction in order to consider the issue of the emergence of
new knowledge. Specifically, I have in mind the issue of networking amongst e-
business entrepreneurs via communication technologies (predominantly the
Internet), which specifically since the dot-com crash has brought forward new
creative dynamics of interaction not captured in the ways in which knowledge
dynamics is addressed in present studies. The aim is to get a better understanding
of these dynamics in order to explain emergent conditions of innovation.
On a second level, the chapter speaks to a post-structuralist literature, in that it
is an elaboration of the notion of knowledge dynamics as rhizomic becoming,
adopting Deleuze and Guattari’s ontology of non-dialectic, aconceptual differ-
ence. This elaboration moves toward a critique of the very ubiquity and endless
utility of the dialectic idea as a way to address knowledge dynamics through the
suggestion that its appeal may conceal moments and movements where more
unexpected effects are taking place. Indeed, I suggest that there may be some
twists in the knowledge dynamics of post dot-com crash networks, where some
selected thoughts from a reading of Deleuze and Guattari specifically around the
notions of “difference-in-itself” and “the rhizome,” may lead one to read other
stories than pre-offered through contemporary literature on networks and
innovation.
Researching Knowledge Dynamics in
E-Business Entrepreneurship
E-Business Entrepreneurship, Knowledge, and
Innovation
Today, e-business entrepreneurship brings together two signs of change: ad-
vances in technological communication culture and changes in the organisation
of business life centred on the management of knowledge. E-business entre-
preneurship is a young business sector, roughly 10 years old. With the develop-
ment of the World Wide Web
1
in the mid-1990s, new business opportunities
emerged for selling products and services. The new ways to spread information
20 Steinberg
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quickly in digital form around the globe led to an explosion in the number of small
entrepreneurial businesses that focused on the use of new information and
communication technologies (ICTs) for business that is wholly or predominantly
conducted through Web sites. Over a short period of time, this new “Internet-
enabled business” (Whinston et al., 2001) emerged as a highly successful new
business type. Especially in the latter half of the 1990s a high level of new
business activity developed, a period that is often referred to as the “dot-com
boom”
2
.
In this new business arena, knowledge is seen as one of the most significant
levers of innovation and its effective management is seen as a route to successful
innovation (Seely-Brown & Duguid, 2002). Internet-enabled business developed
quickly into a “knowledge-based” business arena of innovation, with the majority
of businesses concentrating on the selling and trading of services and solutions
over the Web (Whinston et al., 2001). Business types include firms that focus on
the provision of systems and solutions for infrastructure or service applications
on the Internet, Web pages offering specific information content (content
aggregators), Internet intermediaries such as consultancies through or about e-
business, and firms concentrating on electronic commerce (business-to-business
and retail) (Whinston et al., 2001).
The development of the new sector of e-business entrepreneurship co-exists
with what is widely referred as the “dot-com crash,” a stockmarket crash in April
2000. What seemed to be an unstoppable growth of the e-business sector in the
1990s ended abruptly in April 2000 in a worldwide stockmarket collapse of high-
tech firms’ values (Ellis, 2001). In the UK alone, hundreds of dot-com firms
experienced bankruptcy (DTI, 2002). The dot-com crash meant a major turning
point, and its aftermath has opened up a “start-from-scratch” scenario that has
raised new questions as to how entrepreneurial innovation can be approached.
It also has reinforced the general focus on the importance of knowledge and its
management, both in business practice and policy.
Networking “Post Dot-Com”
In this chapter, I suggest that new theoretical flexibilities are required in response
to the dynamics that emerge when attention is focused at the meeting point of
communication technologies and business centred on knowledge. The network
may indeed be the central dynamic at this meeting point. There is increasingly
social scientific evidence that networks play an important role in the ways in
which business is conducted (Agre, 1999; Aldrich & Zimmer, 1986; Castells,
1996). Wittel (2001), most notably, argues for a new network sociality, a new
way of socialising via networking that is reshaping not only contemporary
business life but also social life in general.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 21
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During the dot-com boom, new networking practices emerged, such as “First
Tuesday” networking events where entrepreneurs and venture capitalists
mingled every first Tuesday of a month at an informal face-to-face event. The
aim was to bring people with business ideas together with people who could
potentially fund such ideas. First Tuesday networking enjoyed great popularity
nationwide and many similar but more locally focused e-business networking
events mushroomed during the dot-com boom.
However, with the dot-com crash, these networks changed. While the focus on
potential investors disappeared, the concept of networking has had a revival in
the form of online networking that offers ways for entrepreneurs to place each
other in contact in a combination of online introducer systems
3
with face-to-face
networking. In these networks, the scope of networking had been extended to
a wider, seemingly more general theme: being connected. This is illustrated in the
two networks that I will examine in this chapter. Web-based networking with
integrated introducer systems have been highly successful in the UK with
growing membership numbers in the past three years; several of them have
membership numbers in the ten thousands and are expanding on an international
level.
The question this chapter is concerned with is how we can better understand how
these new and highly popular networks contribute to innovative dynamics in e-
business entrepreneurship. When it comes to explaining innovation in knowl-
edge-centred business, the predominant logic of thinking about knowledge
dynamics adopted is the dialectic one. This is evident in several streams of
research that focus on interaction and knowledge creation.
In organisation and management theory, for instance, knowledge dynamics in
innovation are studied as the social creation of knowledge through social
relations and social interaction (cf. Nonaka & Toyama, 2003; Nonaka, Toyama,
& Konno, 2000; Von Krogh, Ichijo, & Nonaka, 2000; Wenger, 2000). This work
emphasises social interaction as a key factor in knowledge emergence and bases
recommendations for innovation management on it (Kenney, 2001). Interaction,
crucially, is presumed to constitute innovation because of the dynamics of
learning that the dialogue amongst proactive agents engenders (cf. Seely-Brown
& Duguid, 1991). At the centre stands the assumption that it is mainly a dialectic
dynamic that brings forward creativity and innovation (Chell, 2000; Hoang &
Antoncic, 2003). Dialectics, in this context, is understood in a Hegelian way,
meaning a progressive evolution of ideas in the interplay of thesis, antithesis, and
synthesis (Hegel, 1977; Rosen, 1982).
The Hegelian stance of theorising dynamics is emblematic for a growing post-
Cartesian literature that counters the classic individual-centred and static view
on knowledge by Descartes, which separated knowledge from its embodiment
and its social context (Hosking, Dachler, & Gergen, 1995). Most prominently,
22 Steinberg
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Cook and Seely-Brown (1999) have drawn attention to the legacy of Cartesian
epistemology for organisation theory and have argued that in order to go beyond
the static Cartesian notion of knowledge units “possessed” by individuals, a
dynamic epistemology grounded in interaction is necessary.
Social psychologists also have argued for dialectics with regard to explaining
knowledge dynamics. They have shown how a dialectic perspective is useful to
highlight the dynamics of knowledge transformation in the inter-subjective and
mutual constitution of the social (Jovchelovitch, 2001; Marková, 2003; Moscovici,
2000). Consistently, authors seek to map out the knowledge relations that
individuals create in communicative interaction and explain social change
through the dialectic dynamics of social construction in everyday dialogues and
argumentation (Moscovici, 2000; Howarth, 2002). Similarly to organisational
theorists, the underpinning assumption is that new knowledge emerges from the
evolutionary progression of ideas in controversial debate. Argument and counter-
argument and the synthesis of different concepts is taken as the exclusive pattern
to explain how new knowledge emerges.
Beyond Dialectics
In this chapter, I suggest that in order to capture and explore knowledge
dynamics in the contemporary context of post dot-com-crash networks we need
to leave behind certain assumptions about the nature of knowledge dynamics
which we have tended to rely on to explain knowledge creation. Particularly, this
concerns the dialectic model as a way of thinking about knowledge dynamics.
Surely, there might be dialectic dynamics in network relationships engendering
new understandings about networking. However, dialectics no longer suffices as
the exclusive pattern through which we address the dynamics that networking
engenders.
Two issues are at stake here. First, if we want to account for innovation in
knowledge business, we need to be able to think about the emergent character
of knowledge, that is, we need to be able to capture not merely how existent
knowledge transforms but how new and unprecedented aspects arise that might
lead to new knowledge. Typically, with innovation what emerges is a “some-
thing” (Wagner, 1998) that does not relate to any pre-existent socially mediated
concept we might have in mind. Rather, this “something” forms a potentiality of
a new concept being forged. Second, if we are to better understand the dynamics
of such new and unprecedented aspects arising, we need to be able to think about
the creative patterns that foster such a process of emergence. By creative, I
mean patterns that might be different each time. Innovation can “happen” in
various “different” ways; they do not follow a proven, routine pattern or
procedure. Both aspects point to the unpredictable and surprising character
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 23
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of innovation. While the dialectic perspective is useful to highlight how people
collectively reconstruct existent meanings and identities (Steinberg, 2003), it,
however, fails to address this precise aspect; the unpredictable and the new in
emergent patterns cannot be addressed, as the dialectic logic directs attention
predominantly to the realignment of a pre-existent, familiar concept or pattern
with the novel.
Emergence as Rhizomic
Post-structuralist thinkers Deleuze and Guattari (1987) argue that emergent
phenomena are part of a much larger, more diverse, and multiple becoming than
is represented by an epistemic logic of dialectics (Deleuze & Parnet, 1987).
Dialectics, they hold, subordinates our thinking about dynamics to conceptual
difference (Lambert, 2002) which exclusively addresses differences between
pre-existent concepts and directs attention to the emergence of the novel only
in relation to pre-existent concepts. Deleuze and Guattari radically oppose
dialectics and turn to an ontological notion of becoming that is continually
engendered by the repetition of difference-in-itself (Deleuze, 1994). For
Deleuze and Guattari, what moves a system forward is not conceptual differ-
ence, but rather a rich and multiple form of difference that bypasses the pre-
existent because it does not relate to it. Difference-in-itself is a difference that
is unprecedented, multiple, and, most importantly, one that “makes itself”
(Deleuze, 1968).
This philosophy of becoming emphasises that the dialectic of thinking is not
groundless. It depends upon an ontological work of dividing the world which
ensures that it can visibly bear the marks that ongoing communicative interaction
cuts into it. Deleuze and Guattari describe this work of dividing with the image
of the rhizome. In their seminal work A Thousand Plateaus, Deleuze and
Guattari (1987) write:
Non-parallel evolutions, which do not proceed by differentiation, but
which leap from one line to another, between completely heterogeneous
beings; cracks, imperceptible ruptures, which break the lines even if they
resume elsewhere, leaping over significant breaks …. The rhizome is all
this. (Deleuze & Parnet, 1987, p. 26, emphasis added)
The rhizome challenges the notion of a unique direction of emergence; rather, it
portrays a dynamic that grows in simultaneous, multiple ways (Deleuze &
Guattari, 1987). Furthermore, the rhizome has no central or governing structure;
it has neither beginning nor end. A rhizome spreads continuously without
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beginning or ending and exists in a constant state of play. It does not conform to
unidirectional or linearly progressive reasoning. This provides a stark contrast to
the dialectic assumption that emergence progresses linearly in tree-like patterns
of thesis, antithesis, and synthesis.
For the present purpose, the rhizome offers a logic of thinking about emergence
as a series of combinations of different (in-themselves) streams of becoming.
This is what Deleuze and Guattari describe as the emergence of new assem-
blages (Deleuze, 1990) through the crossing of different lines of becoming.
Assemblages can be defined as “multiplicities”; they express the potentiality of
multiple differences that are enmeshed variably and without a pre-existent fixed
concept or pattern of how they should be linked. Following Deleuze (1987), all
life consists of processes of assemblages, of new, unforeseen connections,
patterned in rhizomic ways. Consistently, any human body or object is the result
of a process of multiple connections (Colebrook, 2002).
Despite its appeal to address unforeseen connections and creative patterns of
emergence, the advantage of the rhizome image also is its disadvantage, as Eco
(1983, p. 57) points out, as the notion of connections and assemblages becomes
easily limitless:
The rhizome is so constructed that every path can be connected with every
other one. It has no center, no periphery, no exit, because it is potentially
infinite. (Eco, 1983, p. 57)
Those within and those engaging with new connections, therefore, have to
engage in forms of “cutting” that halt the flow of the rhizome in order to be able
to perceive it and to speak about them (Strathern, 1996). Here it is important to
bear in mind that Deleuze and Guattari’s philosophy is an ontology of becoming
(Hayden, 1998), which implies that we are concerned with flow and movement
in the material and natural world rather than exclusively the meaningful world of
social sense (the case of dialectics).
Deleuze (1968) emphasises that as human beings we are part and parcel of both
worlds — the social world of understanding and the material and natural world.
But in contrast to Hegel and other classic metaphysics, sense-making and
understanding do not provide the main and superior faculty that orders all sense
experiences in the material world (Bryant, 2000). Rather, Deleuze suggests a
disjunctive rather than harmonious functioning of the faculties of human recep-
tion. This means that, different human faculties such as understanding or feeling
are equally important in the creative process of movement. Different sense
experiences consistently disrupt each other, with different faculties of reception
being involved, such as intuition disrupting understanding.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 25
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Thus, a cutting of rhizomic becoming would mean its disruption by the faculty of
understanding in order for it to become incorporated in the social world of
meaning. The networks I explore next illustrate this: They enmesh contact and
friendship with elements of technology in new ways, which emerges as a
rhizomic dynamic that disrupts existent understandings of friendship and technol-
ogy. What the interpretation then hones in on is how people’s understanding of
technology is variously cut by affect and how people’s affect is variously cut by
their understanding of technology.
In what follows, I illustrate the notion of rhizomic becoming that is variously
cut at the example of an exploration of two post dot-com crash networks.
Specifically, I present a new individuation that emerged from central cuttings of
new connections amongst various lines of technology and lines of affect: the
personal profile page.
The Study
An interpretative study was conducted exploring London’s e-business networks
using participant observation, interviews, and a focus group. The enquiry was
conducted over a period of four months (September 2002 to December 2002) and
featured 33 e-business entrepreneurs as well as seven e-business networks. At
the time of the study, the business arena of e-business entrepreneurship was in
a phase of reassessment of business after the dot-com crash. It was a time of
radically new phenomena of interaction being shaped, which made it particularly
relevant to an exploration of emergent knowledge dynamics.
In this chapter, I report a particular result from the participant observation, which
surfaced when exploring rhizomic becomings in networks. Networks had
emerged as the most important site for observation in the interviews. The course
of observation was determined through a snowball process (Huck, 2000). This
was a two-stage purposive sample that first turned to a social milieu that exposed
the minimal criteria of the context in question (e-business entrepreneurship as
defined by Whinston et al. (2001)), and second, was helped by respondents to
complete the sample by pointing to further locations of observation.
Through snowballing, the natural context of social life in the context in question
can be reproduced (Gaskell, 2000). This was a key aspect in establishing the
quality and public accountability of this qualitative exploration. As Gaskell and
Bauer (2000) have suggested, it is crucial for qualitative exploration to ensure the
openness of the research for the discovery of local surprise and novelty, enabling
the exploration to unfold according to the local context under study rather than
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the expectations of the researcher. The snowball process addressed this
successfully and yielded seven networks altogether; two of which I report here.
Deleuzian Analysis
The notion of rhizomic becomings by Deleuze and Guattari (1987) indicates an
approach to analysis that lets us “think beyond dialectics” and that enables us to
channel interpretation in such a way that it lets us surface the emergence of
creative new assemblages. Essentially, Deleuze and Guattari introduce a new
vocabulary to think about dynamics and emergence. Their philosophy animates
analysis to “think otherwise,” which is in their sense to approach philosophy as
a tool kit from which to draw selectively in order to think about becoming in the
light of the analytical task at hand (Deleuze & Guattari, 1994).
Deleuze and Guattari were prolific inventors of concepts, to embrace this logic.
Their work teems with such concepts as nomadology, deterritorialization, lines
of escape, assemblage, intensity, rhizome, becoming, machinism, plateaus,
heterogeneous series, body without organs, and plane of immanence, to name but
a few. The Deleuzian approach is often loosely described as “artistic” by critics;
yet, authors increasingly take notice of Deleuze’s approach because of his
capacity to overturn taken-for-granted assumptions (Bogue, 1989).
In what follows, I employ particularly three notions which suit the present
purpose of accounting for emergent knowledge dynamics in e-business entrepre-
neurship: lines, connections, and individuations. What lies behind this is not a
desire to be trendy, but the realization that in order to account for the emergence
of new concepts we need new words to express this — especially in an
exploration of the dynamics of innovation.
To change my thinking to “rhizomic mode” when interpreting, I looked beyond
the dialectic categories of similarity (with existent concepts) and opposition (to
existent concepts) when interpreting. Rather, I wanted to highlight the various
and startling phenomena I had come across in the observation, pointing me to
events which did not translate into any pre-existent concepts about networking
and to new connections that would seem counterintuitive to be working together
(according to pre-existent categorisations of concepts), yet, nonetheless, worked
extremely well together.
First, lines provide the main routes of the rhizome. Some such lines will cross
over one another, others will merge, and yet others will proliferate chaotically.
A rhizomic line is any non-attributable micro-becoming that we can follow and
that proceeds in-between points. Lines are the routes that make a rhizome what
it is: de-rooted. Deleuze and Guattari (1987) describe lines as follows.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 27
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These lines are constantly crossing, intersecting for a moment, following
one another. …it should be borne in mind that these lines mean nothing. It
is an affair of cartography. They compose us, as they compose our map.
They transform themselves and may even cross over into one another.
Rhizome. It is certain that they have nothing to do with language; it is, on
the contrary, language that must follow them, it is writing that must take
substance from them, between its own lines. (p. 203)
Lines can connect to anything, yet can be broken at any instant, only to take off
again in any direction. A line can be an event, a nonsense, a something, a
movement. Importantly, in comparison to dialectic lines of progression, lines do
not function in terms of lines with a beginning and an end. They do not translate
into pre-existent concepts, but rather pass “in-between” (Deleuze & Parnet,
1987) them. As Ansell-Pearson (1997) puts it, “in rhizomatic-styled becomings,
becoming denotes the movement by which the line frees itself from the point and
renders points indiscernible” (p. 136). In my thinking when interpreting, lines
were thus about attempting not to look for origins or destinations, but to focus on
the “in-betweens,” that is, on those aspects that were ambivalent to existing
evaluative dimensions such in the present networks which were breaking down
existent categorisations of online versus off-line networking and of business
versus private life.
Second, I focused on connections. Connections signify new combinations and
assemblages arising from “lines twisting, converging, and crossing as well as
diverging; not aborescent but rhizomaniac” (Mackay, 1997, p. 264). A connec-
tion can be a disruption, a rupture, a divergence, as well as a convergence. The
important aspect about connections is that what is connected “functions well
together” (Deleuze & Parnet, 1987) as this is what creates a dynamism of
movement. Furthermore, connections are, similarly to lines, ambivalent to pre-
existent categories. They are new, heterogeneous phenomena that do not allow
an interpretation in terms of unity, resemblance, or contradiction, but bring forth
new (non-dialectic) orderings. Hetherington (1997) has described a conceptual,
non-dialectical ordering as an ordering through similitude:
Similitude, … is all about an ordering that takes place through a juxtaposition
of signs that culturally are not seen as going together, either because the
relationship is new or because it is unexpected. What is being signified
cannot easily be attached to a referent … Similitude is constituted by an
unexpected bricolage effect. (p. 9)
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It is this unexpected bricolage effect that is at the centre of innovation — usually
perceived only in hindsight. They are the new connections that do perhaps not
make sense in terms of existing concepts or categorisations but nonetheless work
well together.
Third, the analytical focus on ambivalent lines and non-dialectic connections let
me concentrate the interpretation overall on the cutting of becomings, in the
sense that I looked for emerging patterns that came close to what Deleuze and
Guattari call “haecceity”:
There is a mode of individuation very different from that of a person,
subject, thing, or substance. We reserve the name of haecceity for it. A
season, a winter, a summer, an hour, a date have a perfect individuality
lacking nothing, even though this individuality is different from that of a
thing or a subject. They are haecceities in the sense that they consist
entirely of relations of movement and rest between molecules or particles,
capacities to affect or be affected. (Deleuze & Guattari, 1987, p. 261,
emphasis in original)
A haecceity is an intensity and new ordering that is becoming a new concept, yet
was not defined in its emergence through the relations to other pre-existent
concepts. Rather, through individuating, it gradually intensifies the energy of
lines running through it and enmeshes connections in new orderings to forge a
dynamic that allows them to be grasped by the faculty of understanding — in that
it can be named and interpreted in meaning.
In the following section, I concentrate on the particular example of such an
individuation: the personal profile page. It came particularly close to forming a
haecceity: It was an intensity that emerged from a rhizomic becoming of lines of
affect and lines of technology that crossed and cut each other in new ways that
were ambivalent to the existent dialectic between virtual versus real world and
business vs. private life. These new cuttings worked extremely well together; the
personal profile page was at the centre of a dynamic of movement that
engendered new potentialities for interaction. To illuminate this, throughout the
following, I include excerpts from traces of the dynamics of the personal profile
page such as postings, visualisations and announcements on networking-sites,
personal messages, guestbook entries, and other micro-events that I experienced
when participating in networking.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 29
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Personal Profile Page and New
Emergent Orderings in Networks
Amongst the seven networks that were sampled in the snowballing process two
networks — Ecademy and Ryze — did not compare to the other networks. While
most networks would use their Web site as an online space to inform about the
network and advertise upcoming face-to-face networking events, the network-
ing-sites of Ecademy and Ryze featured free personal profile pages for
members — embedded in online introducer systems. The personal profile page
was highly popular amongst entrepreneurs: Almost every respondent in the
present study was a member of either one or both of the networks and had a
personal profile page.
Ecademy was initiated in the UK in 1998. In 2002, it had 20,000 members, with
a rising trend. Its mission reads as follows: “… to build the world’s largest
Trusted Business Network by connecting people to each other — enabling
knowledge, contacts, and opportunities to be shared for World Wide Wealth.”
(Excerpt from Web site Ecademy.com, 2002). Ryze has existed since 1996,
originated in California’s Silicon Valley and had 80,000 members in 2002, also
with a rising trend. Its mission was “Extending members’ business networks”
(excerpt from Ryze.com Web site, 2002). In addition to online networking, they
both feature monthly face-to-face networking events for members. Ryze had its
first face-to-face networking event in London in 2002.
In both networks, a membership is free and acquired via an online registration.
Membership can be upgraded to an advanced service (providing special member
search functions) for a monthly fee. Once one is registered, one gets assigned
a personal Web page (the personal profile page) through which one can publish
all kinds of information about oneself and one’s business. Figure 1 shows the top
section of a (randomly selected) personal profile page on Ryze.
Once one is present on the network with a personal profile page, one is connected
to an online universe of personal profile pages and can browse the pages of other
entrepreneurs in related business fields or sub-networks (called “tribes” on
Ryze). Also, one’s own page can be accessed by all other members of a network;
it also is searchable via a search tool. Browsing through personal profile pages,
one is presented with a rich and colourful range of “personal universes” of
knowledge, ambition, and experience. Besides a small standardised part of the
page (on Ryze, for instance, the top of the personal profile page features a pre-
structured space where entrepreneurs list their “have’s” and their “want’s”), the
larger part of the personal profile page is open to the content preferences of the
entrepreneur. On the personal profile page, network members post their profiles,
30 Steinberg
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biographies, and photos, list their vitals, favourite quotations, hobbies, previous
jobs, and future career interests.
Members also have a range of profile and communication management tools at
their disposal. Via these tools, entrepreneurs can “manage” their contacts and
can track potential new network contacts. Examples are private messaging, a
guestbook feature via which a member’s message is publicly displayed on the
personal profile page of the addressee as well as the “list of friends.” To appear
on the list of friends (also on the personal profile page) requires that both
members have requested and confirmed their friendship online. Figure 2 shows
Figure 1. Randomly selected personal profile page on Ryze.com (2005)
Figure 2. Cut-out from a personal profile page on Ryze.com — guestbook,
networks, and list of friends
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 31
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a cut-out from the lower section of a randomly selected personal profile page,
depicting the guestbook, next to the list of friends and a list of sub-networks that
this member is involved in.
Hence, a common way of interacting was to contact other entrepreneurs by
browsing personal profile pages, and subsequently by sending a guestbook note
or personal message. As part of my own participation during the study, I would
receive networking messages such as the example shown below.
Ryze Guestbook entries
Anurag Mehra, 12/10/02
Hi, Alex, I have just started an e-learning company myself. Do check it out.
Let me know if you need anything.
Anurag
Karen Edelman, 10/25/02
Hi, Alex – Just dropping by to say hello. Your profile is very interesting.
Stop by my site perhaps my services would be useful for you at some point.
Karen
Crucially, contacts acquired in this way were in-between business and private
interaction as on the one hand, the contact in the network could be for any
purpose or reason and had a feel of online chats to close friends to them, but at
the same time usually involved some form of assertion that for future business
opportunities one would keep each other in mind. This form of interaction was
ambivalent to business versus private interaction, but also, as we shall see, to
virtual versus real interaction.
The personal profile page brings together two lines of becoming: the technology-
becoming of friendship and the friendship-becoming of technology, to phrase it
in Deleuzian terms. This means that friendship becomes a technology of
networking (technology-becoming of friendship), and technology becomes part
of the entrepreneurs’ socializing apparatus (friendship-becoming of technology).
Both the lines of technology running through the various tools of contact and
communication and the lines of affect emerging from the online communication
crossed each other in new ways and became each other. Together, this lets the
personal profile page emerge as a phenomenon that is “different-in itself” and
that intensifies around a large amount of creative energy, given the sheer
limitless ways in which technology and affect could intersect via this page.
The phenomenon of the personal profile pages is remarkably close to a “perfect
individuality” in the sense of a Deleuzo-Guattarian haecceity as it has a capacity
to affect others or to be affected by others (capacity to move and to bring forth
dynamics). On the surface, it seemed to form a technology image, but, in fact,
32 Steinberg
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it was far more multiple: Emerging from new connections of lines of affect and
lines of technology, it created a dynamic in that ”what” each becomes changes
no less than ”that which becomes” (Deleuze & Parnet, 1987, p. 3). This means
that both new crossovers of affect and technology emerged as well as rearrange-
ments within each of these lines. The personal profile page emerged as an
individuation from the various ways in which these lines cut each other; each of
which ordered technology-becomings and affect-becomings in different ways,
but highlighted the importance of their difference-in-themselves for the dynam-
ics the personal profile page engendered.
Friendship as a Technology of Networking
The technology-becoming of friendship can be described as the dynamic
engendered by two lines crossing. First, as the slogan from Ryze illuminates
(Figure 3), there is the aspect of the sheer limitless potentiality of expansion of
one’s personal network via the technology of the personal profile page. At the
same time and second, this potentiality of unlimited growth is variously cut by
several tools that make one’s contacts publicly visible on the personal profile
page.
The list of friends is the tool at the centre of this becoming. As we have seen in
Figure 2, it is featured on each personal profile page, embedded into an
automatism that tracks online interaction. More precisely, the list of friends is a
dedicated space on the personal profile page that is automatically generated; it
adds the names of one’s contacts to a list whenever a new friendship is
confirmed. The list of friends opens up one’s potentiality of interaction to an
unlimited array of contacts. The list of friends can extend widely without any
rules about where the lines of connection should stop and the boundaries of the
personal circle of friends are defined. Consider the statement by the network
user below.
“ …‘If there’s someone with whom I have common business interests, I add
them to my list of friends, and then a link to their page appears on my page,’'
explains Kaup’s friend Anne Fitzpatrick, Executive Director of the Boston-
based Rock & Roll Library and a Ryze user.” Excerpt from "The Press on
Ryze,” published on Ryze.com, 2002
The statement also illustrates how friendship is not attributed via the notion of
face-to-face interaction: This is the image of friendship qua network — it is also
the image of friendship that becomes a tool, a technology.
This technology-becoming of friendship extends one’s private network and despite
the sheer limitless expansion of one’s network, the crossing of lines of technology
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 33
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that made contacts visible cut the rhizomic growth of the network. On Ryze, for
instance, in addition to the list of friends as a list of names, the entrepreneurs’ ties
to other network members also is depicted graphically on the personal profile page,
featuring thumbnail photographs of one’s contacts (Figure 4).
This feature in Ryze creates an image of the lines of connection running through
the network, illustrating the chain of people via whom one is connected to other
entrepreneurs. While, again, this feature invites one to make new contacts in
order to become more connected to other entrepreneurs, the visibility is
important as it cuts into the limitlessness of this line. Through the guestbook, the
photographs, and the list of friends, the visibility of friendship became a
technology that connected “making contacts online” with one’s “real” reputation
and thus enabled it to make sense in the “real world” of entrepreneurs. Consider
the following excerpt from a networking message distributed to all members by
Ecademy.
Ecademy Networking Message
Check your personal reputation with fellow members
Fellow Ecademist.
Now you can check your personal reputation with fellow
Ecademy members and rate members in your personal
Ecademy network:http://www.ecademy.com/module.php
Figure 3. Cut-out from Ryze
Figure 4. Cut-out from Ryze.com — visualisation of friendship
34 Steinberg
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The visibility of one’s friends creates a relationship of similitude, seen from the
outside, “from the standpoint of another perspective” (Hetherington, 1997, p.
43); in other words, it creates an ordering of the lines of connection “established
by their difference in a relationship between sites rather than their Otherness
deriving from a site itself” (ibid, p. 43). In this way, the network becomes real
for entrepreneurs in such as way that the technology of the network becomes
part of one’s socialising apparatus. This is the friendship-becoming of technol-
ogy.
Technology as Part of Entrepreneurs’ Social Life
The lines of technology that run through the network take another route of
crossing lines of affect: The technology-becoming of friendship also is a
friendship-becoming of technology. The technology of visualisation of one’s
acquaintances becomes part of one’s everyday way of socialising with others.
I wrote that the ways of interaction via these networks are ambivalent to the
concept of virtual (online) vs. real (off-line). There are various new tools that
reinforced the “becoming entangled” of the technology with the daily life of
entrepreneurs. An example is e-mail notifications informing the network mem-
ber about a “movement” on one’s personal profile page. This can be, for
instance, a notification about a profile visit (see e-mail excerpt below), a
guestbook entry, or a request for friendship.
Profile Visit
Alexandra,
Steve Collins has looked at your profile.http://www.ecademy.com/
You can see who else has looked at your profile here:http://www.ecademy.com//
Ecademy Connecting Business Peoplehttp://ecademy.com
Another example is a weekly summary e-mail of one’s online activities in the
form of statistics of visits and traffic on one’s personal profile page.
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 35
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email « Ryze stats »
HITS
Your Ryze page : 6* (cumulative)
Average Ryze home page : 91*
Average Ryze home page w/photo: 260*
To increase your hits, add a photo on your Ryze
homepage, at:http://www.ryze.org/photo.php?lr=weekly
FRIENDS & GUESTS
Friends you link to: 0
No Friends yet?? GET THE MOST VALUE or of RYZE by
leveraging your Friends Networks:http://www.ryze.org/invite.php?lr=weekly
Friends linked to you: 0
Guestbook entries: 0
Contacts: 0
The friendship-becoming of technology also is present in other ways. Entrepre-
neurs would often post photographs of friends on their personal profile pages.
These photographs usually show friends and acquaintances in a leisurely setting
such as in homes, holidays, restaurants, or occasionally, at weddings. The
important aspect hereby is that these friends are mostly friends from the network
shown in the private context of the entrepreneur: The friendship technology has
begun to cross over affect in “real life” — there is no distinction into real or
virtual.
As a newly-appointed CEO, I have special needs for business contacts.
Thanks for creating Ryze! I’ve not only made many great business contacts,
but also lots of personal ones! Great job.” Bob Glass, CEO, Creative
Science SystemsExcerpt from “Member Testimonial Section”. (published on
Ryze.com, 2002)
While some authors have drawn attention to problems of establishing trust via
online communication, focusing attention on the lamentable absence of proximity
in online networking or “virtual networking” (cf. Lash, 2000; Rheingold, 1994;
Tucker & Jones, 2000), I suggest that in the present networks the new ways in
which lines of technology and lines of affect become enmeshed create conditions
for rearrangements in lines of affect that depended primarily upon technologies
rather than the face-to-face aspect of human interaction. The more a member
can prove via the list of friends, guest-book sign-ins, and photographs that he or
she “has” friends, the more this person is deemed trustable and successful.
36 Steinberg
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Together, these new connections of business and private life, of real and virtual,
forge the conditions for a new ordering of the network; it creates the conditions
for new creative assemblages. The personal profile page generated new
potentialities for “trusted” interaction and allowed lines of affect that are in-
between the flow of the real life and the virtual, blending them together in a new,
different, and innovative form of business-private interaction. This is an unprec-
edented form of interaction that has reinvented the concept of networking; as it
creates new conditions for interaction, it presents in itself an innovative and
different becoming.
Implications and Conclusion
In his reading of contemporary society as a highly technologically mediated
network society, Manuel Castells suggests that in informational networks a
culture of “real virtuality” emerges. This is a reality in which “appearances are
not just on the screen through which experience is communicated, but they
become the experience” (Castells, 1996, p. 373).
The findings presented in this chapter have shown a particular mode in which two
post dot-com crash networks become such a real virtuality. The Deleuzian
analysis uncovered the dynamics that make these networks a phenomenon of
movement and creative energy. The personal profile page stands at the centre
of it, ordering the experience of networked entrepreneurs in new ways.
Entrepreneurs’ social lives are no longer connected mainly to a local community
of businesses, but come via the list of friends and network messages; via lines
of technology that get intermingled in new ways with friendship. Reputation and
business credibility is no longer solely created in face-to-face relations.
These findings raise new questions about the future reverberations of these new
connections. The rearrangements in lines of affect and lines of technology go
beyond those potentially captured in dialectic relations between real and virtual
and between business and private. They are different in-themselves, that is, they
do not translate into a mere synthesis between these classic divisions. Rather,
they are likely to forge new concepts, just like the personal profile page has
emerged as a new concept of networking, assembling elements such as the
guestbook, the list of friends, and photographs of close friends.
The Deleuzian analysis has been invaluable to recognise the personal profile
page as an intensity of creative becomings as such; it has enabled me to single
out the personal profile page as an individuation of a dynamic process of
emergence in-the-making. This aids our analytical possibilities of distinguishing
creative and emergent dynamics from other dynamics that might merely
Exploring Rhizomic Becomings in Post Dot-Com Crash Networks 37
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reproduce and recreate existing concepts. It gives us a handle to describe the
micro-cosmos of becomings, which might not be realised conceptually at the time
but which bears first cuttings that allow us to “see” new emergent conditions for
innovation.
The present analysis was only possible by keeping the analysis itself “in-
between” — bypassing what Deleuze (1987) calls the “grille” of invested
evaluative dimensions (such as online versus off-line or business versus private
life) when interpreting. This mode of engaging with emergent dynamics does not
dictate the story that emerges, and indeed, that has not been the objective. But
in following these paths that the Deleuzian philosophy suggests, this chapter has
promoted an exploration in the spirit of rhizomic connections in an attempt to
estrange the conventional and taken-for-granted, while opening the interpreta-
tion up to the imagination of new emergent concepts.
This chapter has been an illustration of what could be developed into a new
method of the explorative interpretation of conditions for innovation in knowl-
edge-related contexts. Far from being complete, this chapter has merely
presented a first attempt in this direction. Somewhere between the ethno-
methodological and the sceptical, the social psychological and the ontological,
this chapter has itself been something of a rhizomic journey connecting points of
a story rarely narrated as such.
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Endnotes
1
Graphical user interface of the Internet
2
Since then, entrepreneurship in e-business is often referred to as “dot-com
business.” The name derives from the “com” suffix of many business Web
sites. A dot-com firm is one whose business is wholly or predominantly
conducted through such a site, as opposed to traditional businesses which
may be represented online but continue to operate primarily off-line.
3
An online introducer system is software that can be integrated into a Web
site to support the registration and interaction management of an online
community. It allows registered users to send messages to other registered
users, to visualise their networking contacts, and to create links between
other users.
Innovation and B2B E-Commerce: Explaining What Did Not Happen 41
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Chapter III
Innovation and
B2B E-Commerce:
Explaining What
Did Not Happen
Steve New
University of Oxford, UK
Abstract
The massive wave of enthusiasm for B2B (business-to-business) e-commerce
generated with the “dot-com” boom led many to believe that a fundamental
transformation of how firms bought and sold products was just around the
corner. The new “wired” world of commerce would lead to real-time,
Internet-driven trading, with significant implications for — amongst other
things — the nature of buyer-supplier relationships, pricing, and the
management of industrial capacity. Despit e the excitement, such a
transformation has largely failed to materialise, and whilst there has been
a limited uptake of B2B innovations (for example, the use of online reverse
auctions), the fundamental character of B2B trade has remained mostly
unchanged. Drawing on a multi-stranded empirical study, this chapter
seeks to explain the divergence between the expected and realised degrees
of innovation.
42 New
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Introduction
The extraordinary rise and fall of the late 1990s technology bubble was not the
first speculative boom of its kind — and presumably will not be the last. As with
the successive 19
th
century booms relating to the railways, the frenzy was
accompanied by an astonishing explosion of rhetoric, folklore, and intellectual
and managerial fashion — crudely, “hype.” This led to a significant flurry of
innovation, particularly in the founding of large numbers of Internet-based
intermediaries (“hubs” or “exchanges” Bakos, 1991, 1998; Bloch & Catfolis,
2001; Barratt & Rosdahl, 2002; Le, Rao, & Truong, 2004). Investors and
organisations poured vast sums into these ventures and, for the most part, lost
their money. Consultants and investment banks made shrill claims that
interorganisational trade would be transformed, but the predicted revolution
failed to materialise.
I address two central questions in this chapter. The first is the simple question:
Why did the revolution not happen? The second is: What substantive ideas for
business practice can be salvaged from the wreckage? This is an important task;
to adapt George Santayana’s famous quip, those who do not understand the past
are condemned to repeat it.
One feature of published work in this field is that there has been relatively little
solid empirical material; on the other hand, there has been a great deal of
generalised comment and unsupported speculation regarding the causes and
consequences of the bursting of the B2B bubble. Day, Fein, and Ruppersberger
(2003) present an analysis that emphasises the similarities with other “shakeouts”
associated with disruptive technologies.
This chapter reports the results of a multi-stranded investigation into the extent
to which organisations are prepared to make use of the Internet in buying and
selling, and into the patterns of life and death of B2B exchanges. Unlike much
of the literature in this area, which has largely focused on leading companies or
the few successful hubs, this chapter concentrates more on the opportunities and
obstacles that face “ordinary” organisations, and the innovations which failed.
The logic behind this is that there is often much to be learnt about the process of
innovation from the mundane and the typical. The purpose of this study was not
to recount the organisational success stories of leading firms — others have done
that before, and the potential benefits of B2B e-commerce are well documented
(e.g., Sculley & Woods, 1999; Timmers, 2000; DeMaio, 2001; Raisch, 2001). For
this study, the challenge was to understand the reality of organisations’ experi-
ences, and to gauge the key issues and obstacles that they face.
Innovation and B2B E-Commerce: Explaining What Did Not Happen 43
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Background: The B2B Phenomenon
A simple starting point to the complex origins of the B2B e-commerce
phenomenon lies in the well-established technologies of electronic data inter-
change (EDI). At the beginning of the 1990s, for many industries, the direct
system-to-system transfer of data over proprietary networks following industry
standard protocols had become a routine element of doing business. The
technology allowed significant savings from both increasing the speed and
accuracy of data transmission, and in some cases was progressing to more
advanced uses whereby buyers and suppliers could not only manage routine
transactions but also “see” into each others’ systems, facilitating such opera-
tional innovations as collaborative planning forecasting and replenishment,
and vendor managed inventory. In addition, electronic linkages also were
developing for the easier sharing of technical and design data, encouraging inter-
firm collaboration in technical design. The downside of these “inter-
organisational information systems” were the considerable “hook up” costs
incurred by the parties involved, a fact which limited the adoption of the
technologies by smaller suppliers, often faced with meeting the costs of linking
their own systems with the non-matching requirements of several customers. In
parallel, in the academic literature, there was a limited debate as to the long-term
effects of these technologies on firms’ switching costs, and good arguments
could made for expecting both a reduction and increases in market “stickiness,”
and the consequential shift to purer “markets” or growing ”hierarchies,”
respectively (Malone, Yates, & Benjamin, 1987; Bakos, 1991). The debate was
rather theoretical, and was rather neglected outside of a handful of learned
journals.
The arrival of the Internet, and its adoption by businesses as a serious tool for
business, however, radically changed the character of the debate. Three key
features of the Internet and two innovations transformed the horizons of
possibility. The Internet was ubiquitous, cheap, and — being built around the idea
of a standard and simple set of technical protocols — relatively easy for firms
to adopt. The two innovations — the search engine and the online auction —
opened up a range of new possibilities for online B2B trading. Over time, two
basic connected perceptions emerged regarding the potential for a new ap-
proach.
The first of the perceptions was that the Internet could radically transform
procurement and sales processes, collapsing the costs and timescales of trading.
Prospective buyers could seek out prospective suppliers very rapidly, and
suppliers could present vast quantities of searchable information on their
products and capabilities. Furthermore, buyers could use Internet mechanisms
to identify the cheapest supplier in real time using multilateral reverse auctions.
44 New
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Correspondingly, suppliers could be more responsive in their pricing. The scope
for these new approaches to yield substantive benefits was widely acknowl-
edged.
The second perspective, however, took these new potentials as heralding
something far more significant than some dollars shaved off administrative
transaction costs. As Bill Gates (1995) stated, the Internet will “carry us into a
new world of low-friction, low-overhead capitalism, in which market information
will be plentiful and transaction costs low.” This vision of the future initially
fuelled enthusiasm for online business-to-consumer (B2C) retailing, but after
a while many observers realised that the B2B market was of a vastly larger
scale. B2B e-commerce was held to signify a “fundamental change in the way
capitalism works” (Prigg, 2000; Tapscott et al., 2000). A report by AT Kearney
(2001) suggested the emergence of “differentiated value networks” that would
“redefine entire industries and value chains,” and that that e-markets “can
dramatically affect the power balance in today’s value chain.” Partly driven by
an almost ideological faith in the nature of “markets,” this position assumed that
supply markets for corporate purchasers would be transformed: The features
which stopped industrial markets behaving like the theoretical, equilibrium-
finding markets of the neoclassical model (small numbers, constrained flows of
information, high switching costs, high barriers to entry) could be removed by the
new technology, reaping substantial efficiency gains. For these gains to be
realised, however, new market institutions would be needed to act as “hubs”
between buyers and sellers, and these — even if charging just a tiny fraction of
the throughput — stood to reap phenomenal economic rewards. These hubs
were to be the “killer application of the B2B Internet revolution” (Sculley &
Woods, 1999). As a result, an Internet “land grab” emerged as entrepreneurs and
existing market participants sought to establish themselves in the controlling
positions in their chosen market or industry.
As time has passed, many of these new intermediaries have fallen by the wayside
— and their fate is examined later in the chapter. However, it is important to note
that there is far more to B2B e-commerce than online exchanges and market-
places, and some organisations have achieved significant advantage through the
use of e-procurement and the use of so-called “private exchanges.” However,
many organisations have struggled to develop their e-procurement or e-market-
ing activities, and it is interesting to explore why this might be so.
Methodology
The investigation described here used multiple research methods. First, an e-mail
questionnaire was sent to over 4,000 firms who supply the major UK utilities,
Innovation and B2B E-Commerce: Explaining What Did Not Happen 45
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generating 240 usable replies that provided information on these companies as
both buyers and sellers. Second, follow-up telephone interviews with a dozen of
these firms helped provide greater insight into their experiences. Third, this was
complemented by nine case studies (involving site visits, multi-informant inter-
views, and documentary analysis) involving a range of both public and private
sector organisations. Fourth, the work used a database of 663 e-marketplaces
and B2B hubs constructed by Meakin (2002). This large database represents a
significant slice of the population, although there is no way of definitively
establishing what percentage it represents. Grubb (2000) estimated 1,400 B2B
exchanges had been launched; Levaux (2001) “estimated a thousand or so.”
Caspar (2000) cited an Andersen Consulting study that claimed there were 7,500
by late 2000. Day et al. (2003) claim a peak of 1,520. (For reasons discussed next,
all these figures must be taken with considerable caution).
The sample for the e-mail survey was firms in the Utilities Vendor Database
of the Achilles Group — a B2B company whose activities concentrate on public
and regulated procurement (see www.achilles.com). The pool of companies
represented a broad range of firms supplying the UK utilities sector. Our
approach was to initially use a very brief questionnaire and to use the immediacy
of e-mail feedback to refine the structure and examine the effect on response
rates by adapting the number and sequence of questions asked. The survey was
administered in the autumn of 2001, and we e-mailed just over 4,000 organisations,
reaping over 240 usable replies (we asked firms about either their purchasing or
selling, or both). However, due to our adaptive design, we did not collect data on
all questions from every respondent. Participants were entered into a drawing to
win a £50 gift voucher.
The mechanism of the questionnaire was to send a plain text e-mail, for which
the answers could be simply overtyped on the reply and returned. We did this to
avoid using e-mail attachments (which might be blocked by firms’ firewalls), and
to avoid the need for respondents to access a Web page (we knew that for at
least some of the smaller firms involved, whose access to the Internet was by
standard telephone line, this requirement would be a disincentive). We also
offered each participant access to the findings of the report, and a brief
benchmarking report comparing their response with other (anonymous) firms.
Due to the exploratory nature of the research, we have not employed formal
scaling or rigorous hypothesis testing in the interpretation of the data; the full
analysis is still in progress. Here, we present an overview of the descriptive data,
which in this case we believe is more instructive than looking for intricate
correlations of scores. As we were dealing with non-anonymous returned
questionnaires, we were able to additionally incorporate further public domain
information about the organisations into our analysis, including financial informa-
tion and (subject to data protection constraints) data from the original database.
46 New
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The median turnover of the respondents was £11m, with the median number of
employees being 124.
The qualitative aspects of the research entailed a series of visits to nine
organisations with a view to finding out which issues and aspects of B2B e-
commerce at the top of their agendas; we sought (within the time and budget
available) as wide a selection of organisations as possible (large, small, public,
and private sector), and sought to let managers and staff in these organisations
largely steer the direction of the discussions. This rather unstructured approach
meant that we did not (nor did we expect) to collect commensurate or matching
data from these organisations; however, it helped us engage with some of the
underlying issues regarding B2B and e-procurement, which we suspect would
have been rather lost if we had framed the meetings too strictly in our own terms.
We believe this trade-off to be particularly important given managers’ propensity
to discuss aspiration in these areas as if it were current fact, and the way in which
interviewees’ responses may sometimes encapsulate that which they have read
in professional magazines rather than the actual experience of their organisations.
However, the serious downside to this approach is that much of the material
generated is not directly relevant to issues at hand, and of course generalisations
are even more problematic than with survey data.
Methodological trade-offs also were needed in the analysis of the B2B hubs.
Much of the writing on these initiatives has assumed that relatively few of them
would survive, for example, Levaux (2001) estimated that only 200 would still be
around by 2003. Drawing from the prior database, this phase of the research
worked through 302 e-marketplaces with a highly structured search process
which entailed examining the Web site (where available) and using two search
engines (Factiva
™
and Lexis-Nexis
™
) to collate news and PR-agency coverage
(typically from trade journals). There are obvious problems with these secondary
sources not being wholly accurate or reliable; on the other hand, for some of the
initiatives we examined, these reports are the only accessible information left.
Where necessary and possible, e-mail messages were sent to the exchange to
gain further information.
This highly structured process allowed the systematic analysis of data regarding
each of the initiatives and also allowed a rational decision to abandon the search
for information on a particular exchange and move on to the next one. This
Taylorist approach to data gathering proved particularly effective, as experimen-
tation showed that without a programmed cut-off point, a great deal of time could
be spent searching fruitlessly for exchanges which were the equivalent of
“vapourware” — initiatives which were announced in the press but subsequently
disappeared without trace.
A key aspect of the data collection process was the classification of the B2B
initiative according to a set of dimensions (such as type of exchange, industry,
Innovation and B2B E-Commerce: Explaining What Did Not Happen 47
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etc.). These included whether the site was alive, dead, or had a continued
existence via merger with or acquisition by another initiative. Sites that appeared
to be dormant were contacted via e-mail, but if the link was broken and the e-
mail returned, it was assumed the operation had closed. If the site appeared to
be in a state “yet to go live” it was left until the end of the project and then
rechecked — if it was still pending, it was ignored.
During the course of the data collection, it became clear that it was not easy to
judge the level of activity or indeed in some cases the seriousness of intent of the
initiatives. Many of the marketplaces described what they did in principle, but
displayed no evidence that the site or the services provided were genuinely
operational. This transpires to be a major problem when investigating organisations
that may or not be viable, and which exist in a business context where it is not
in the actors’ interests to be completely honest about their current degree of
success. What was needed was an indication of substantive activity — an
“Activity Test.” We eventually settled on a simple proxy for being “genuinely
alive”: whether there was any reported quantitative indication of the transaction
volume (in number of transactions or dollar value) or throughput. These were
deemed to be “Actives.” However, this does not imply that the initiatives were
financially viable; an exchange could have throughput but not make any profit.
There is clearly a risk of “type one” error in this classification, in the cases where
an Active site has simply not gotten around to releasing some indicative numbers,
or there is some other strategic reason for obfuscation. There is also a “type two”
error for marketplaces that falsely declare activity. However, as there will be a
general incentive for initiatives to publicise their vitality in order to attract
participants, this seems a reasonable criterion to apply. Büyüközkan (2004)
describes another attempt to “score” the activity of e-marketplaces, but, from
the experience gained in the current study, it is difficult to see how his approach
could be operationalised in practice.
Sudden Birth and Lingering Death
of B2B Exchanges
Figure 1 illustrates that — given the extensive reportage of the death of B2B —
a surprising number of initiatives remained “alive,” in that there was still a Web
presence of some kind. However, out of the 302 studied, we identified only 29
who passed the “Activity Test” of providing quantitative evidence of any
substantial kind of any kind of activity.
Interestingly, the small difference between sites passing the Activity Test and
those not was not statistically significant (using the chi-squared test at the 0.1
48 New
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level of significance). So marketplaces able to publish throughput figures seem
to be no more likely to be still “alive” than those not. This can be explained by
two ideas: The relatively low capital and operating costs for “pure play” Internet-
based businesses (and the relative ease of fundraising during the boom years)
can mean that sites with meagre levels of real activity may be able to sustain
some type of Internet presence for some time as they simply burn off the initial
investment. This is a significant point. Day et al.’s (2003) study uses the
construct that a marketplace “exists and continues to operate” — our work
points to the fact that these two things are separable concepts.
Second, one way of attracting sufficient buyers and suppliers to participate in an
exchange would be to charge minimal fees, or to offer attractive but expensive-
to-provide services, thereby making continuing operations unviable.
There are a very wide range of schemes for classifying different types of
exchange. Here we adopt that proposed by Ramsdell (2000), which is summarised
in Table 1.
Figure 1. Survival of B2B e-marketplaces — comparison of whole sample
with those passing the ‘success test’
Table 1. B2B marketplace types (after Ramsdell, 2000)
0.0% 20.0% 40.0% 60.0% 80.0%
Dead
M&A
Alive
Activity Test (N=27) Overall (N=302)
Type
Typical
Owners
Type of
Market
Description
Product
Suppliers or 3
rd
Parties
Fragmented
Horizontal e-marketplace usually formed around a supply
market that cuts several industries (e.g., MRO market)
Industry Buyers
Buyer power
dominated
Vertical e-marketplace, usually revolving around an
industry sector (e.g., Chemical Industry)
Function 3
rd
Parties Non-fragmented
Focuses on services and capabilities rather than products,
such as Supply Chain Integration (SCI) or Project
Management.
Innovation and B2B E-Commerce: Explaining What Did Not Happen 49
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The classification of exchanges transpires to be a rather complex matter, as
there are many instances of hybrid and unconventional approaches. However,
in this study we found that the total sample — where categorisation was possible
— was split roughly equally between the categories as shown in Table 2. Figure
2 illustrates the status of these categories; again, there is no statistical signifi-
cance between the types of exchange.
The lesson that emerges here is that despite the widespread assumption in the
prescriptive and speculating writing at the time, no one particular exchange
model turned out to be dominant.
The emergence of B2B needs to be understood in the context of the technology
boom of the late 1990s, and Figure 3 plots the date of first announcement against
the value of the NASDAQ composite index. This pattern is illustrated in more
detail in Figure 4, which illustrates the lifelines of exchanges by category.
The data presented in Figures 3 and 4 points to some interesting speculation. On
the one hand, the close match of announcements to the NASDAQ index is
suggestive that much of the enthusiasm for B2B intermediaries was driven as
much by the potential of making money from investors in the heat of the
technology investment boom as it was by the desire to build genuinely viable
businesses. Simply setting up some kind of intermediary B2B organisation is not
in itself capital intensive (although making it really deliver value to buyers and
Table 2. Breakdown of marketplaces by category
0% 20% 40% 60% 80% 100%
Function
Product
Industry
T
y
p
e
o
f
B
2
B
percentage
Alive M&A Dead (N=231)
Figure 2. Status of exchange types
Type Percentage
Function 38%
Product 35%
Industry 27%
50 New
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suppliers may be). Therefore, it seems unlikely that the decline in the launching
of B2B initiatives is completely explained by the difficulty of raising funds as the
boom subsided. If, on the other hand, the motivation for many of the enterprises
was simply to get to the investment markets quickly, then the sharp drop off in
announcements between April 2000 and February 2001 makes more sense.
Figure 4, however, suggests that the fate of the initiatives cannot be explained
by looking at the launch date. A very cynical view might expect that those
Figure 4. Birth and death of e-marketplaces (n = 193)
J
a
n
-
9
4
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l
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l
-
0
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a
n
-
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3
Time
DEAD
MERGED/
ACQUIRED
ALIVE
Figure 3. Announcements of marketplaces
0
5
10
15
20
25
30
J
a
n
-
9
4
J
u
n
-
9
4
N
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v
-
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A
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r
-
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e
p
-
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e
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-
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o
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e
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e
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F
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e
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2000
3000
4000
5000
6000
p
r
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c
e
First Announcement (N=209) NASDAQ Composite
Innovation and B2B E-Commerce: Explaining What Did Not Happen 51
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launched at or just before the frenzy might be the least likely to survive, being the
most driven by fashion and being subject to the least rigorous degree of scrutiny.
However, if this is the case, it is not clear from the data. Furthermore, it does not
seem that the early initiatives were more or less likely to fail than the later
starters. A key point in the consideration of this data is that many of the initiatives
may well be alive, and yet not very active, and not generating very much or any
revenue. As nearly all the initiatives are small private businesses, it is generally
very difficult to get convincing or informative data on their financial and
operating performance. The fact, however, that so few pass the “Activity Test”
is perhaps indicative that the task of bringing buyers and suppliers together is far
more complex than many initially thought. To explain why this might be, it is
sensible to begin by reviewing the impact of e-commerce to “ordinary” compa-
nies — and this brings the discussion to the survey and case studies.
Experiences of B2B E-Commerce:
Initial Observations
Before we turn to the substantive data gathered by the survey and the cases, it
is worth noting some incidental aspects of the research that we found interesting.
First, an immediate feature of the survey was the large number of e-mails
(roughly 10%) that were returned as undeliverable — even though we had used
contact e-mails provided by the firms themselves to a database to which they
paid a fee. Following up these cases revealed several potential problems: Many
firms had changed the format of their e-mail addresses; individuals had left the
organisation; and a surprising number were addresses based on non-company e-
mail systems (for example, Hotmail™ or Freeserve™), and the addresses were
no longer active. For reasons we discuss next, we think this is a significant
finding. A second and surprising observation was that eight of the responses
were returned by conventional post rather than by e-mail.
For reasons of available space, we concentrate here on just three aspects of the
substantive research findings: the impacts of e-commerce on buying, selling, and
the character of the buyer-seller relationship.
Buying: Commodification and Specification
We suspected that much of the hype surrounding B2B e-commerce was based
on a naïve view of corporate procurement. For example, many of the B2B
enthusiasts over-emphasise the extent to which corporate purchasing is about
52 New
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buying commodities or highly standardised products for which price is the only
salient variable. We sought data from supplier organisations about the nature of
their sales on two dimensions: First, the degree to which their output was
commoditised — in the sense that the goods or services provided were standard
“off-the-shelf” items, or bespoke for a particular customer’s needs. Second, we
asked about the extent to which buyers play a role in the specification of their
own requirements: In some cases, buyers spell out exactly what they want; in
others, the seller specifies the solution according to an assessment of the buyer’s
needs; in many cases, the exchange requires a process of dialogue between the
buyer and seller. Much of what has been written about B2B e-commerce has
assumed a particular model of inter-company trade, emphasising standardized
products specified by the customers (e.g., from an online catalogue). From the
supplying firms who responded to the e-mail questionnaire in this study, this
amounted to less than 19% of sales. This is a significant finding, as it indicates
that (if the result were indicative of the general case) more than 80% of B2B
trade is not amenable to the impersonal, price-oriented, online catalogue mecha-
nisms which have been one of the key archetypal images of B2B. Firms also
differ from each other by supplying different combinations of goods, services,
and works. The firms in the e-mail survey provided a good mix here, with 60%
providing goods alone or in some combination with works and services, and the
remainder selling some combination of works and services. Of the firms that sold
goods, three quarters sell them as part of a more complex package involving more
intangible elements. Again, much of the discussion about B2B has thought only
in terms of simple “products,” but the reality is far more complex.
Buying: Use of the Internet
We asked organisations about the use of the Internet in the purchasing process
and found extensive use, especially in terms of seeking information from
suppliers’ Web pages (see Figure 5).
Telephone interviews confirmed that respondents interpreted the term “online
marketplaces” very broadly — and organisations often view distributors in these
terms. Also, it seems that a crucial role of suppliers’ Web pages is simply
providing further contact data — postal addresses and telephone numbers. The
“other info” response includes using standard search engines to find, for
example, press coverage on a supplier. This mundane but valuable facility
transpired to main current impact of the Internet on the procurement function,
and is a significant observation only in as much as that it falls considerably short
from the idea of a “closely-coupled supply chain” or a “virtual community.” In
our case studies, we noted that the opportunity for “finding new suppliers” did
not seem to excite much enthusiasm amongst the organisations; the Internet
Innovation and B2B E-Commerce: Explaining What Did Not Happen 53
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could make getting information slightly faster, but was not perceived by the case
participants as being fundamentally different from using the Yellow Pages. This
is an apparently mundane but significant finding; much of the early excitement
about the role of the Internet was based around a notion that it would reduce
search costs (see Bakos, 1991). This appears not to be much of an issue — or,
if it is, there is only marginal advantage in a marketplace system over a simple
™
search.
Buying: Inter-Organisational Systems
Although the B2B hype emphasises the electronic linking of organisations’
procurement systems to their suppliers’ systems, we found that only half of the
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Computerised
Purchasing System
Centralised Purchasing
Department
Formal Tendering
Procedures
(n = 165 for this question)
P
e
r
c
e
n
t
a
g
e
o
f
R
e
s
p
o
n
d
i
n
g
F
i
r
m
s
Figure 6. Purchasing organisation and methods
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Internet -
Supplier Web
Pages
Internet - Online
Directories
Internet - Other
Info
Online
Marketplaces
None of the
Above
(n = 167 for this question)
P
e
r
c
e
n
t
a
g
e
o
f
R
e
s
p
o
n
d
i
n
g
F
i
r
m
s
Figure 5. Purchasers’ use of the Internet
54 New
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supplying firms had computerised purchasing systems, with the same proportion
having centralised purchasing systems (see Figure 6).
These findings are interesting in that it suggests that for smaller organisations at
least, the idea of inter-linked systems along the supply chain is likely to remain
something of a fantasy without considerable innovation in both information
technology and business practice amongst many firms. This is not to say that this
cannot or will not happen; however, were these findings to be representative, it
would appear that there is a major task of supplier development ahead for those
firms which wish to cascade integrated supply chain practices.
Buying: Purchasing Measurement and Control
Much of the enthusiasm for e-procurement has focused on the enormous scope
for reducing the costs of purchasing bureaucracy and transactions processing.
Rather than go through an internal purchasing department, “users” can order
what they need from their desktop, with automatic budget controls keeping
spending within predefined limits: Many B2B enthusiasts have predicted the
demise of purchasing departments as a result.
While not denying the great potential for these types of savings, this study points
to some important qualifications. This is because there is more to purchasing than
transaction processing. First, effective procurement requires higher-level, stra-
tegic management in regard to external issues — such as supplier development,
collaboration on business processes, and supply policy. In other words, there is
much more to good purchasing than simply finding the lowest price. Second,
there are more complex internal issues than simple budgetary controls — a prime
function of procurement systems is the control of fraud, and, in the public sector
in particular, organisations’ procurement systems are constrained by a complex
regulatory framework. So while e-procurement can yield significant savings on
elements of the procurement process, it does not do away with the need for
specialist procurement staff with real purchasing expertise.
These considerations of organisation and structure lead to the questions of
measurement. The participants in our study all struggled with quantifying both
the performance of purchasing and in determining reliable costs for the purchas-
ing process itself. This issue has two important consequences for the adoption
of e-procurement and B2B.
First, without effective metrics of how well a purchasing process is performing,
the appeal of using Internet-based innovation to reduce costs is rather blunted.
Indeed, for managers in some of the organisations in this study, the key
motivation was to ensure compliance with a system of bureaucratic controls
rather than a hunger to reduce expenditure. This seems a particular issue if an
Innovation and B2B E-Commerce: Explaining What Did Not Happen 55
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permission of Idea Group Inc. is prohibited.
organisation’s culture rewards risk aversion; we found organisations where
purchasing managers’ principal goals seemed to be to stop things going wrong
and to maintain a steady equilibrium. In such organisations, mechanisms of
measurement and reward work against dynamic innovation in procurement
systems.
Second, in other types of organisations, the measurement of purchasing works
to give a misleading focus on short-term savings. In some organisations, the
dazzle of dramatic savings in headline prices achieved by B2B innovation (for
example, online reverse auctions) has mesmerized firms into forgetting that the
important cost is the total cost of acquisition and ownership. The phenomenon of
suppliers “lowballing” to win a contract, then working hard to claw back their
margin by, for example, raising post-contract complexities, is well known and
understood by procurement professionals. Equally, costs associated with deliv-
ery, quality, warranties, and post-sale support can easily dominate the initial
purchase price. It appears, however, that in some organisations it has become
politically convenient to brush aside these concerns and focus on impressive
sounding reductions in headline prices. In such cases, there is a clear risk that
such an approach may backfire in the longer term.
Selling: Communication and Customer Relationships
B2B has often been presented as though it is all about purchasing. But is essential
to understand the other side of the coin — how it affects selling organisations.
We asked suppliers about various aspects of their relationships with customers
(see Figure 7).
0%
20%
40%
60%
80%
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(n = 140 for this question)
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Figure 7. Customer relationships
56 New
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permission of Idea Group Inc. is prohibited.
Although only roughly one-third used electronic links such as EDI, the use of e-
mail was very widespread. E-mail is clearly a dominant aspect of firms’ use of
the Internet, but it is useful at this point in the discussion to consider the earlier
finding regarding the poor quality of e-mail addresses. It seems fair to say that
although the firms in our study are largely reliant on electronic communications,
there are many examples where the process of managing these communications
is rather amateurish, and, specifically, where the organisational infrastructure
for managing these systems are underdeveloped. (It is worth noting that in the
author’s own institution, there are cases of administrators continuing to use e-
mail addresses to send and receive messages from accounts labeled after long-
departed colleagues; published “contact” e-mail addresses are often personalised;
and there are few managerial systems for systematically managing the “filing”
of e-mails). Electronic communication — for all its benefits — brings with it a
need for an administrative infrastructure, and associated investment and train-
ing.
Selling: Use of Web Sites
The use of Internet pages for selling firms varied considerably, with many firms
using the opportunity for both information and handling queries. Far fewer
organisations used the Web sites for transactional purposes — and for many the
mechanism for handling orders was merely the provision of an e-mail address for
the sales department (see Figure 8).
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(n = 241 for this question)
P
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e
Figure 8. Use of Web sites for selling
Innovation and B2B E-Commerce: Explaining What Did Not Happen 57
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permission of Idea Group Inc. is prohibited.
Figure 9. Predicted effects on price changes to customers
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
UP DOWN NO CHANGE
Expectations
P
e
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c
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n
t
a
g
e
o
f
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s
p
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d
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F
i
r
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s
Total (N=184)
High Impact (N=83)
Low Impact (N=101)
The study highlighted the various roles that the Internet might play in the sales
and marketing strategies of supplying firms. Much of the B2B literature presents
a very passive role for suppliers — their role reduced to supplying commoditised
goods and participating in price-driven auctions, or merely providing the fulfilment
of orders placed through online catalogues. In contrast, we found that organisations
have various proactive approaches to using the Internet. Our case studies
included a small manufacturer of specialist architectural electrical equipment,
who made considerable use of the Internet as a marketing intelligence tool — a
member of the marketing team systematically trawled the Web for news relating
to suitable building projects in key overseas markets. For this firm, the crucial
marketing activity was working with the “specifiers” rather than the immediate
customers, and to avoid any type of marketing which presented their products as
commodities, or easily comparable to competitors’ products. In this case, the use
of online catalogues was not at all a priority, as this would be entirely out of step
with its relationship marketing philosophy.
Impact on Buyer-Seller Relationships
A key question for B2B e-commerce is its effect on the power balance in supply
relationships. Figures 9 and 10 indicate some interesting contradictions in
participants’ perspectives. (“High” and “Low Impact” here refer to participants’
expectation of the impact of the Internet on customer relationships in the next
five years. “Don’t Knows” and “Not Applicables” are not included on these
graphs).
58 New
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permission of Idea Group Inc. is prohibited.
An interesting contrast here is that a large group of respondents expect their
suppliers’ prices to decline while the prices they charge to customers remain
unaffected. This imbalance is also reflected in the way in which firms viewed the
likely shifts in power (see Figures 11 and 12).
One interpretation of these data is that there is perhaps an unwarranted degree
of optimism — and maybe even complacency — in the responding firms. This
intriguing and contradictory finding echoes previous findings regarding firms’
views regarding the power consequences of supply chain integration and
partnership relationships (see Burnes & New, 1996; New, 1998).
0%
10%
20%
30%
40%
50%
60%
70%
MORE Powerful LESS Powerful No Change
Expectations
P
e
r
c
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n
t
a
g
e
o
f
R
e
s
p
o
n
d
i
n
g
F
i
r
m
s
Total (N=158)
High Impact (N=75)
Low Impact (N=83)
Figure 11. Predicted effect on power position relative to customers
0%
10%
20%
30%
40%
50%
60%
70%
80%
UP DOWN NO CHANGE
Expectations
P
e
r
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e
n
t
a
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e
o
f
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s
p
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d
i
n
g
F
i
r
m
s
Total (N=136)
High Impact (N=67)
Low Impact (N=69)
Figure 10. Predicted effect on prices paid to suppliers
Innovation and B2B E-Commerce: Explaining What Did Not Happen 59
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permission of Idea Group Inc. is prohibited.
Conclusion
This chapter has presented some of the data from a multi-method study into the
reality of B2B e-commerce. Its general conclusions are to point toward a picture
which is considerably at variance to the extraordinary hyperbole generated by
the business media, consultants and some academics about the potential impact
of B2B.
A key element of this picture is that much of the theorising about the potential
impact of B2B has started from an inaccurate and deeply misleading image of
a) what organisational buying and selling is like, and b) the degree of sophistica-
tion of much of the supply base. Here, we found firms who were a considerable
distance from “supply chain cybermastery” (Berger & Gattorna, 2001) and
appeared not to be “surging forward on the crest of the Internet wave”
(Friedman & Blanshay, 2001, p. 2) and for whom the reality of B2B relationships
are more complex and richly textured than the rather Spartan and highly
depersonalised images of the electronic marketplace.
The boom and bust in B2B e-commerce could be accounted for by a number of
explanatory stories. Day et al. (2003) focus on the idea of a competitive
opportunity attracting many players, many of whom die in the rush. The fact that
so many of the e-marketplaces have failed simply reflects brutality of the “land
grab.” Good ideas attract much interest, and there is not enough gold to go
around. An analogy could be that the innovations at the turn of the 20
th
century
that initially encouraged the founding of hundreds of car companies — but only
a few can become Ford and GM.
The story that emerges from the research described here is different. It suggests
that the B2B hype was based on a fundamental misreading of the nature of inter-
0%
10%
20%
30%
40%
50%
60%
70%
MORE Powerful LESS Powerful No Change
Expectations
P
e
r
c
e
n
t
a
g
e
o
f
R
e
s
p
o
n
d
i
n
g
F
i
r
m
s
Total (N=184)
High Impact (N=86)
Low Impact (N=96)
Figure 12. Predicted effect on power position relative to suppliers
60 New
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organisational buying and selling, and the rush was for fool’s gold. Many of the
presumptions of the B2B model were not true, and, in consequence, innovators
lost a great deal of money. From this wreckage, one might salvage a reminder
of the idea that innovators have a duty to understand in detail the nature of the
markets into which they wish to enter.
These observations are clearly contingent on the degree to which the data
gathered here is representative of other populations. However, the use of the
triangulated approach in the broader research project has indicated to us that this
line of inquiry is worth continuing.
Acknowledgments
The author would like to acknowledge the significant contributions of Tony
Meakin, Ruth Southworth, and Mark Siddall, to this work, and to Achilles Group
Ltd for financial assistance. Earlier versions of this work were presented at the
EurOMA conference, Lake Como, in June 2003.
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New, S.J. (2002). Understanding the e-marketspace: Making sense of B2B.
Saïd Business School, Oxford.
Prigg, M. (2000, December 3). How sharing can change the way business
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Raisch, W.R. (2001). The eMarketplace: Strategies for success in B2B
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62 Zutshi, Zutshi, and Sohal
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permission of Idea Group Inc. is prohibited.
Chapter IV
How e-Entrepreneurs
Operate in the
Context of Open
Source Software
Ambika Zutshi
Deakin University, Australia
Samar Zutshi
Monash University, Australia
Amrik Sohal
Monash University, Australia
Abstract
The Internet has become an integral part of our everyday lives and it is
often difficult to imagine how we ever functioned without it. This chapter
presents experiences of two entrepreneurial companies, one of which has
survived the ‘dot-com bubble burst.’ The chapter identifies current and
future online business environments especially in light of open source
software (OSS) being accepted globally. Unlike proprietary software (such
as Windows), OSS comes with its internal implementation details (source
code) visible both to its developers and users, along with the freedom to
change and redistribute this source. The significant implications of this
unique style of software distribution for e-entrepreneurs are examined.
How e-Entrepreneurs Operate in the Context of Open Source Software 63
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permission of Idea Group Inc. is prohibited.
Having a flexible strategic plan; possessing management skills; providing
excellent service; and having patience are some of the recommendations
provided by interviewed e-entrepreneurs. When made part of the decision-
making process, these recommendations would enhance current and future
e-entrepreneurs in sustaining their business.
Introduction
The aim of this chapter is to explore the usage of OSS in e-entrepreneurship and
to identify the attributes and skills necessary for an e-entrepreneur. E-entre-
preneurship is defined as the notion which principally uses the Internet to
strategically and competitively achieve vision, business goals, and objectives. E-
entrepreneurs use the World Wide Web (WWW) to interact and complete
virtual transactions both with other businesses (B2B) and their consumers/
customers (B2C).
The notion of an e-entrepreneur has recently gained recognition amongst both
academics and practitioners. An e-entrepreneur has many similarities with that
of an ‘entrepreneur,’ especially with respect to the attributes and traits required
to be successful. Concurrently, the major differences between the two are
primarily in the resources (such as infrastructure and setup costs) required to
start the business.
Over the last two decades, most businesses have experienced substantial change
brought about as a result of globalisation and the Internet. Maintaining a
competitive advantage to simply survive is a continued battle for many busi-
nesses. The Internet, however, has provided companies with numerous oppor-
tunities irrespective of the nature of the products and services offered to
customers. Many companies now make use of the Internet and provide custom-
ers through their Web site information such as store opening hours, store
locations, contact details, and listing of their products and services. However, for
a majority of these businesses a large proportion of the sales revenue is still
generated through activities conducted at the physical stores. One example is
Telstra, which in addition to having nationwide physical stores also does sales
and online billing (Telstra, 2004).
The number of companies performing their business activities through the
Internet is increasing rapidly while still maintaining a physical store presence to
enable customers to ‘see and feel’ their products before making a purchasing
decision. Satisfying the needs of conventional customers who prefer to complete
‘face-to-face’ transactions is recognised by many businesses. One example
being the Borders bookstores (Borders, 2004). Then, there also are companies
64 Zutshi, Zutshi, and Sohal
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who only have a virtual presence and complete all their advertising, marketing,
and transactions through the Internet. Amazon.com (Amazon.com, 2004) is a
perfect example of this type of organisation. Brand recognition, customer
service, and customer satisfaction are the main ingredients for any company,
whether operating solely as ‘bricks and mortar,’ ‘online,’ or a mix of the two
(Mottl, 2000).
The concept of ‘entrepreneurship’ has been in existence and researched by
academics for some time. Due to the lack of literature in the area of e-
entrepreneurship, the authors have sought guidance and direction from the
entrepreneurship literature to realise the following objectives:
• Identify attributes of e-entrepreneurs.
• Identify the similarities and differences between entrepreneurship and e-
entrepreneurship.
• Identify if being an e-entrepreneur is more advantageous than simply being
an entrepreneur.
• Examine open source software in the context of e-entrepreneurship.
Chief executives of two e-entrepreneurial organisations were interviewed to
obtain insights into the concept of e-entrepreneurship. Some of the issues
explored in the interviews included:
• attributes of an e-entrepreneur,
• role played by open source software (OSS) in the information technology
sector,
• impact of OSS on existing and future e-entrepreneurs, and
• role played (if any) by government in supporting e-entrepreneurs.
The next section presents an overview of the literature examining the dot-com
crash, entrepreneurship, and open source software (OSS). This is followed by
the section that describes the research methodology used to conduct the
interviews. Case studies of the two companies interviewed is then presented
identifying the various aspects of being an e-entrepreneur with respect to the
current technological environment including OSS. The last section presents the
conclusions and future research directions.
How e-Entrepreneurs Operate in the Context of Open Source Software 65
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permission of Idea Group Inc. is prohibited.
The Dot-Com Crash:
Did It Change the World?
The arrival of the 21
st
century was accompanied by the ‘dot-com crash’ with
hundreds of companies around the world laying off thousands of employees and
filing for bankruptcies. Competition amongst the remaining companies, however,
has not diminished. Companies that have survived have merely “shifted their
value propositions to meet (or chase) new marketplace needs” (Spiegel, 2002,
p. 30). Success stories of companies that have survived and moreover thrived
following the crash are no less amazing (see Anonymous, 2003; Spiegel, 2002).
A number of parties have been blamed for the ‘dot-com crash’ that include but
are not restricted to venture capitalists, investment banks and brokerages, and
the Federal Reserve Bank (Mills, 2001). Another factor that has been attributed
to the dot-com crash was that the majority of these businesses were established
and run by young entrepreneurs who lacked the “essential experience in
planning, organising, and managing businesses” (Foster & Lin, 2003, p. 456).
These arguments also have been substantiated by The New York Times and The
Industry Standard studies (Infante, 2001) where lack of human resource
planning has been noted as a contributing factor leading to sexual harassment and
legal suits against the companies, further crippling them following the crash (see
also Dvorak, 2001). Duck (2004, p.14) listed seven mistakes that resulted in the
crash: “too many competitors; short-term mentality; undisciplined growth;
unrealistic revenue projects; inexperienced management; underestimated costs
of establishing a national brand; and lack of customer-centered focus.” It is the
authors’ view that as opposed to the traditional models, entrepreneurs and
investors alike failed to foresee long-term funds allocation and put in place
contingency plans.
The ‘dot-com crash’ has not meant that the Internet is no longer used for
undertaking business transactions, rather it is being used more than ever before.
Whether a company started using e-technologies before or after the crash, it is
imperative that they offer security to their customers and avoid hackers from
their Web sites. Conry-Murray (2001) and Dvorak (2001) have highlighted
security issues that companies should address to protect their customers such as
debugging their sites regularly, minimum use of cookies, and not putting too many
advertisements on their Web sites.
Over the past decade there has been a substantial increase in the uptake of the
Internet by businesses primarily as a marketing tool. The Internet has enabled
even small businesses with limited resources to instantly communicate their
products and services to their target markets and audiences globally. Worldwide
companies are being encouraged to join this phenomenon. For instance, speakers
66 Zutshi, Zutshi, and Sohal
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at the Dubai Strategy Forum mentioned a number of attributes required to
improve economic performance. This included the need for accepting informa-
tion technologies and a “strategic structure that wipes out bureaucracy and
encourages entrepreneurialism, where managers manage, innovators innovate,
and the teams are rewarded for their successes” (Anonymous, 2002, p. 1).
The next section identifies the attributes of entrepreneurs and reviews the
relevant literature in the area of e-entrepreneur(ship).
Entrepreneurship and Its Relationship
to e-Entrepreneurship
The concept of entrepreneurship has been evident in economics and sociology
studies since the early 18th century (Becker & Knudsen, 2004). A number of
entrepreneurship definitions have been mentioned in the literature. Mulcahy
(2003, p.165), while citing the Oxford Dictionary defines an entrepreneur as “a
person who undertakes or controls a business or enterprise and bears the risk of
profit or loss.” Thompson and Randall (2001, p. 290) describe entrepreneurs as
those individuals who “sense opportunities and take risks in the face of
uncertainty to open new markets, design and develop new and improved products
and processes” (see also Legge & Hindle, 1997; Kuratko & Hodgetts, 2001).
A number of traits and skills that entrepreneurs possess are cited in the literature.
According to Chris Dyson, a business analyst, there are nine traits that depict a
person’s entrepreneurial characters. These traits include: “personality, integrity,
initiative, commitment, drive and determination, directiveness, confidence, self-
direction, selling, and leadership” (cited in Tams 2002, p. 399). Cherwitz and
Sullivan (2002, pp. 24-25) similarly comment that an “intellectual entrepreneur”
is depicted by having attributes such as “realistic and attainable vision, taking
risks and seizing opportunities, using available resources to achieve the vision by
using collaboration, teamwork, and innovative strategies” (see also Jablecka,
2001, p. 376). From these definitions, it can be inferred that successful
entrepreneurs need to possess attributes such as vision, opportunity-seeking,
leadership, and management skills.
As highlighted earlier, for the purpose of this chapter, the authors have defined
e-entrepreneurship as a concept which principally uses the Internet to strategi-
cally and competitively achieve vision, business goals, and objectives. e-
entrepreneurs have been defined as those individuals who use the World Wide
Web (WWW) to interact and complete virtual transactions both with other
businesses (B2B) and customer (B2C) (see Thompson & Stickland, 2003). E-
entrepreneurs have come under focus after the dot-com crash that resulted in the
closing of hundreds of businesses and thousands of people left unemployed.
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Practitioners, consultants, academics, and governments are investigating the
causes behind this crash that left many other industries dependent on information
technology crippled for months. Contingency measures are now being put in
place to avoid similar crashes in the future. A study of 42 entrepreneurs based
in the Greater London Business area who survived the dot-com crash was
conducted during the last quarter of 2002 by the London School of Economics
and Political Science (Steinberg, 2004). Using a triangulation method, the study
found that businesspeople were “in the process of jointly developing a new
[under]standing of what success and decision-making means via e-business
networks” (Steinberg, 2004, p. 4) and, accordingly, developing coping strategies
to avoid similar downfalls in the future.
One of the factors that contributed toward the demise of many e-entrepreneurial
companies was the lack of human resources and communication between sellers
and customers. To address such issues and provide potential e-entrepreneurs
with an understanding and practicalities of the business world, many multina-
tional organisations are now working with their prospective employees with the
aim of providing them with an in-depth understanding of business operations.
“Media entrepreneurship” is one such program that has been launched by
Hewlett-Packard (Canada) Ltd. (Bolan, 2002). The program primarily uses
Linux as being open sourced, allowing users (students) to acknowledge that there
are no limitations in software development. Robert Miller, national business
development manager responsible for education and healthcare at HP, com-
menting on the program said (Bolan, 2002, p. 19):
The dot-com boom/bust saw a lot of technologically astute people become
empowered with vast amounts of capital funding, but they lacked the
business sense or financial management skills to fully exercise their plans.
Some of them were smart enough to bring in business people that had that
kind of savvy, but it was a very awkward culture mix because there were two
totally different kinds of mindsets.
Globally, companies and individuals are being encouraged to embrace the
Internet as a means of developing a business advantage. For instance, the e-
Business Forum Working Group D5 (WG D5) in June 2003 identified the key
challenges (including those encountered in communication and policy formula-
tion) to encourage Greek companies to enter the area of e-business (Neofotistos
& Yagoulis, 2003). WG D5 consulted with a number of Greek private and public
sector companies involved in e-business and provided a number of recommen-
dations to smooth the process of conducting business through the Internet. These
included being aware of issues of privacy, protection of personal information,
promoting communication, and the training the e-entrepreneurs (Neofotistos &
Yagoulis, 2003).
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An individual’s prior understanding and knowledge in business studies and
cultural background affects how much new knowledge and information is
required to develop a collaborative business plan. This finding was realised by
Foster and Lin (2003) when exploring the impact of individual students’ learning
in e-business and e-commerce environments. By using cognitive perspective in
the study of students from different cultural backgrounds, Busenitz and Lau
(1996) found that people from some cultures produced more entrepreneurs than
others (see also Thornton 1999). Similar results have been found in a recently
completed study across eight countries including Australia, Slovenia, Mexico,
North America, Finland, Scotland, South Africa, and Kenya (Morrison, 2000).
Business plans of new ventures in New Zealand in 2000 were compared to
identify the percentage of Internet usage as part of the e-entrepreneurship
competition based on the Mckinsey model (McQueen, 2004). At the end of the
phase two of the competition, it was found that individuals with pervious IT
background, education, business experience, or personal interest had a much
higher Internet component in their business plans than participants with tradi-
tional business experience such as those for the fields of accountancy, retail,
entertainment, and games.
Open Source Software (OSS)
vs. Proprietary Software
Proprietary Software Model
In the recent past, much high-profile software (including Microsoft products
such as Word and Windows XP) have been distributed under a license that treats
the software as a ‘black box.’ The software is supplied in ‘compiled’ or ‘binary’
form, meaning that a computer can read and execute it directly. However,
programmers are unable to study the internals of the program. They are
forbidden to understand in detail how the program works, they are not permitted
to modify its working and they can redistribute neither the software in its original
form, nor in any derived or modified form. Typically, a single company or an
individual holds copyrights on proprietary software (Anonymous, 2004). These
copyrights are used in conjunction with licensing agreements to deny the
“freedom” or “openness” to modify and redistribute the software. “Proprietary
software is software that is not free or semi-free. Its use, redistribution, or
modification is prohibited, or requires you to ask for permission, or is restricted
so much that you effectively can’t do it freely” (FSF 2004).
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From the point of view of the software vendor, the proprietary software model
utilises restrictive licensing and secrecy to safeguard intellectual property
(IP). It is possible that the development of the software could be regarded as
entrepreneurship.
However, from the point of view of an e-entrepreneur looking to leverage
existing technology, proprietary software may not seem like an attractive option,
since modification and redistribution of existing proprietary software is forbid-
den. Furthermore, providing key services related to deployed proprietary soft-
ware may not be possible due to the unavailability of the internal source code.
Another problem is what is commonly referred to as ‘vendor lock-in.’ A
proprietary software vendor by definition is the only organisation with the legal
capacity to improve and enhance their proprietary software products. Hence, an
e-entrepreneur wishing to deploy proprietary software is “locked in” to the
vendor. No other organisation or individual (including the e-entrepreneur) can
provide improvements or custom modifications. For instance, Microsoft is the
only organisation that can provide security updates and bug fixes for the
proprietary Windows operating system. In effect, any user of Microsoft Win-
dows faces vendor lock-in. Unless and until Microsoft decides to issue a security
update or a bug fix, users must helplessly use the software in whatever condition
it is in. This argument is developed further under the discussion of OSS below.
Free and Open Source Software Model
When referring to OSS, the authors have used the Open Source Initiative (OSI)
definition (OSI, 2004a). OSS involves access to the underlying source code. In
addition, for a license under which software distributed is to be considered open
source, it must permit redistribution of the software without requiring a royalty.
Redistribution must be permitted in source as well as compiled (ready-to-run)
form. Modification of the software and creation of derived works must be
permitted. There are some other clauses that must be satisfied for a particular
software package to qualify as OSS (OSI, 2004b). However, the criteria are
arguably the most fundamental and, to someone not familiar with the OSS
paradigm, perhaps the most revolutionary. Many organisations and Web sites
use the term “free software” (FSF 2004) whose meaning and interpretation is
very similar to OSS, with ‘free’ implying freedom to access and modify the
source as well as redistribute unmodified and modified versions. Strictly speak-
ing, the definition of ‘free software’ might preclude certain software from being
considered “free” even though it might be considered OSS. Since all ‘free’
software would be considered OSS, we will use that term for simplicity and to
avoid the confusion that comes from ‘free,’ meaning ‘at no charge.’ Interest-
ingly, while it is possible that OSS and ‘free’ software can be obtained for no or
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very little cost, e-entrepreneurs should note that it is entirely possible for OSS and
‘free’ software to be ‘commercial’ (i.e., a source of revenue). For instance, Red
Hat produces an open source product called Red Hat Enterprise Linux, an open
source operating system that is sold by annual subscription. Subscribed custom-
ers are entitled to receive ongoing security updates, errata fixes, and new
features as they become available for the duration of their subscription.
Research Methodology
In this chapter, we have adopted the exploratory methodology (see Peil et al.,
1982; Spencer, 1982) to identify the trends of how OSS has been and would
impact the entrepreneurs as the usage of Internet and other technological
methods to conduct business continues to increase. Conducting interviews as a
method of exploratory research has been accepted in academia. For instance,
Murray (1996) used case study methodology to identify the role of venture
capital investments in newly established technological firms. Conducting inter-
views as a research methodology offers a numbers of advantages: giving
flexibility to both interviewers and interviewees in setting up a mutual time;
increasing the interviewers’ control on the direction of the questions and an
opportunity to further explore issues; providing undivided attention of the
interviewees; and, last but not the least, providing insight into non-verbal
observations such as body language (see May, 1993; Burns, 1998; Peil et al.,
1982; Spencer, 1982; Reddy, 1987; McNiff, 1988; Yin, 1994).
As previously mentioned, e-entrepreneurship is a new and under-researched
area, hence, the authors were working in unfamiliar terrains. Case study as a
research methodology has been accepted when attempting to overcome the
uncertainty of having clear measuring instrument (see Wallace, 1984; McCutcheon
& Meredith, 1993; McGuire, 1995; Palmer & France, 1999; Corbett & Cutler,
2000).
Chief executives from two entrepreneurial organisations were interviewed in
September 2004 for their experiences of setting up, running, and maintaining their
businesses in light of growing technological changes. According to the Australian
Bureau of Statistics (ABS) classification, Company A can be classified as
“micro” with only four employees, while Company B can be classified as “small”
with 25 full-time employees (see Steinberg, 2004). The focus of the interviews
was on the role of OSS in today’s entrepreneurial world where considerable
focus is being placed on functions of the Internet for completing business
transactions. After receiving consent from the interviewees, the interviews were
tape-recoded and subsequently transcribed and written up as case studies.
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These were then sent back to the interviewees for verification of the content, and
any changes as required, were accordingly made. This step was undertaken to
reduce limitations (e.g., generalisation, reliability, information overload, validity,
rigour) accompanied by the case study methodology (see McNiff, 1988; McGuire,
1995; Burns, 1998; Kitazawa & Sarkis, 2000).
Please note that to protect the confidentiality of the interviewees and their
respective organisations, their names have not been disclosed and are referred
to here as Company A and Company B, respectively. Nonetheless, as far as
possible, direct quotes from the interviewees have been incorporated in the
following sections.
Case Study Findings
Company A
With its head office currently based in regional New South Wales (NSW),
Australia, the company was established and registered as a partnership business
in early 2003 and then become a proprietary limited company in January 2004.
The company is “focused on developing and deploying Web commerce and
Linux-based network solutions” (Company A Web site) and has successfully
secured and completed projects in both the open source area and commercial
world projects for both Australian and foreign-based companies including in the
UK and the United States. The company’s open source content management
product has been ranked in the top 2% of the active projects at the SourceForge
dot-net site which has over 8,000 projects and downloads listed on its Web site
(Company A Web site). Even though the company and its members have a strong
background and focus on Linux, it also provides software solutions for pocket
PCs, the Palm Operating System (Palm OS), and Microsoft Outlook.
The mission and vision of Company A, in addition to generating and increasing
its revenue, is to move toward the area of “embedded media.” Interviewee A
considers embedded media to “employ devices and solutions on single chip
computers running on open source software.” Each of the Company A directors
have expertise in areas of programming, administration, and management,
respectively, and are on the path of expanding the company.
The motivation and flexibility offered by working for oneself was one of the
driving forces for the interviewee to establish his own company. The interviewee
also wanted to have the flexibility to adjust quickly as changes in the external
environment and technology took place without going through the bureaucratic
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levels often found in a large organisation. Technology itself is also the passion
of the company. This is still a motivating factor for all the personnel involved,
which is steadily pushing the company forward. The interviewee believes that
this is true of other companies such as Adobe and Apple, where he feels that the
vision of the company and the passion of its technologists had kept them going
despite management changes.
One of the themes that intrigued the interviewers was how the concept of OSS
that involves freely distributing your knowledge can result in generating business
for the company. Under an open source license the ‘source code’ is distributed
along with the ready-to-run version of the software product. The interviewers
were keen to ascertain how this apparent giving away of intellectual capital could
result in profit for the person/organisation involved. It appears that OSS is gaining
momentum and acceptance around the world, and these issues are becoming
more relevant, especially for e-entrepreneurs.
To answer the query, interviewee A commented that the writers of a program
are generally accepted as having the authoritative knowledge. To elucidate his
point he gave the following example: If a program is released as OSS, the writer
not only shares, but also demonstrates, his or her knowledge in a manner that can
be subject to scrutiny by experts. In addition, other organisations that require
tailoring of the program to their specific needs may contact the writer to do the
customisation for them.
This is where dollars come into the picture. The interviewee has had similar
experiences. A London-based company contacted the interviewee when they
wanted him to make changes to their program source code so that it was
compatible with the company’s accounting system. Since the company’s experts
had the source code of the product available to them, they could, in theory, do the
customisation themselves. However, this would involve them first becoming
familiar with the internal details of the software and then modifying it. Cost-
benefit analysis by the company showed that it was easier and more economical
for them to ask the interviewee to utilise his knowledge and expertise to deliver
the modified code. The interviewee estimates that the work took him approxi-
mately 20 hours to complete while his customers might have had to spend several
man-days to achieve the same result. So, the interviewee was able to acquire
highly specialised, lucrative business without having invested in marketing or
publicity services. The client, on the other hand, was able to procure a software
system that fitted their needs in less time and for less money than if they had done
it by themselves. So, it was a win-win situation for both parties involved.
In interviewee A’s view, the Internet, due to its ubiquitousness and near universal
accessibility, can be very effectively used as a marketing medium and MySQL
AB, the popular open source database product vendor, is a classic example. In
less than a decade, the MySQL database server has become internationally
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recognised and widely used, including in customised forms. High-profile clients
include Sony, Suzuki, and Sabre Holdings (MySQL, 2004).
It should be noted that not all the software produced by Company A is OSS. Some
software is released under the “general public license” (GPL) (Derekgnu, 2004)
and qualifies as OSS. In other cases, clients may purchase software under a
“commercial licence agreement” from Company A. This agreement allows the
client to use the product and to view the source code and covers the provision
of regular service by Company A such as providing further customisation and
enhancements. Under this license, the clients are not allowed to modify the
source. Essentially, this is Company A’s strategy to be able to effectively support
their clients. If too many modifications are made to the code, Company A would
have to extensively study the modified version before being able to provide
enhancements. It also can be seen as a precaution taken by Company A to avoid
legal repercussions arising from claims of failing to provide adequate support as
per the license agreement of the customised program. However, if the buying
organisation changes the source code without obtaining prior consent from
Company A, the latter is under no legal obligation to be able to support the
changed version of the code. Of course, the client is free to approach Company
A and/or other software solution providers to collaborate on customised versions
subject to additional costs.
During discussions with Interviewee A, an interesting point emerged: Company
A does produce open source software but also utilises open source software
tools. Company A has obtained commercial services from Red Hat Linux related
to their open source Linux-based operating system. They also are developing
some software for embedded systems which may turn out to be a derived and
open modification of existing open source software.
If an individual is contemplating to become an entrepreneur or change himself or
herself from an entrepreneur to an e-entrepreneur, they have to first consider a
number of alternatives and subsequently take appropriate decisions. One needs
to decide whether they would be deploying new software or leverage the existing
software. Further considerations regarding licensing agreements (OSS or pro-
prietary or a mix of both) also would be required.
In views of Interviewee A, “Open source [should be considered] as a serious
alternative for people [who] are trying to do [something new]. Statistically, more
than 50% of the Web servers in the world run open source software, which is
generally […] Apache, […] the most popular Web server in the world.
1
MySQL
is the best or the most popular database for Web-based projects.” Company A
does still utilise proprietary software, such as MYOB for its accounting needs
since it helps them conform to the appropriate standards and legislation. MYOB
runs on the proprietary Microsoft Windows operating system. Except in in-
stances where the clients request that supplied programs remain closed source,
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Company A generally licenses its software as OSS and believes that other
organisations should do the same.
Interviewee A commented that the decision whether or not to go OSS for their
software is a business decision and dependent on its vision, current position in the
market, current/existing new code development, and future plans. One needs to
keep in mind that like any other material product, software and code have their
own life cycle and the business decision should incorporate the potential life of
the code, accordingly.
Interviewee A also made two points of direct relevance to e-entrepreneurship.
First, as an e-entrepreneur, if you are trying to develop a novel solution, you can
focus on the entrepreneurial aspects by using existing, reliable, open source
software to avoid “re-inventing the wheel.” Second, as a provider of innovative
IT solutions, an e-entrepreneur faces a more level playing field since organisations
are not “locked-in.” Hence, they can turn to the e-entrepreneurs to provide
support, maintenance, and enhancement of OSS.
The interviewers also were interested to know the support, if any, provided by
the government to Company A and whether being based in a regional area it was
eligible for any specific government funds. Interviewee A indicated that he had
approached the state government for assistance and there had been some
progress. The response, however, has not always been very speedy which
sometimes is a challenge for small, struggling firms looking for assistance as they
may not be operating after a few months. The problem is sometimes further
compounded by the bureaucratic structure of the governments. The difficulty
experienced by regionally based organisations is convincing the officials of their
innovative ideas who are sometime reluctant to provide capital for new ideas that
may be regarded as being too risky. A classic example is trying to get funds for
OSS projects as the question raised by government officials is the same as the
authors: How can one make money by giving away their knowledge and
expertise?
Company B
The company has been providing innovative, competitive solutions based on open
systems and open source technology to its customers since the late 1980s. The
company aims to “develop strong, ongoing relationships with its clients and long-
term partnerships, based on mutual growth and respect with industry vendors”
(Company B Web site). Services provided by the company fulfil customers’
needs in areas of: consulting; application development; and training in software
programs such as Unix, Linux, Windows systems administration and network
management, and Web-based solutions to name a few. In addition to serving a
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number of small and medium-sized Australian-based customers, Company B
also has successfully completed projects and provided training to a number of
large organisations including Hitachi, Telecom Australia, Kodak Australasia,
University of Melbourne, Mobil Oil Australia, CSIRO, RACV Insurance,
Rockwell Areospace, ANZ Bank, Ericsson Data Australia, and VDO Instru-
ments (Company B Web site).
When the interviewee first started working in the computer industry, not only
was the industry in its infancy with huge-sized computers, a much smaller
percentage of people had access to computers as compared to today. The
majority of people involved in the industry at the time were young males generally
categorised as ‘geeks.’ Only large professional organisations such as insurance
companies and banks were using computers. The interviewee’s introduction to
the potential for online collaboration and the spirit of OSS occurred in the late
1980s. At the time, only a small team of professionals had access to the Internet.
He recalls participating in an online newsgroup where he would ask questions
about the C++ programming language and on occasion receiving advice from
Bjarne Stroustrup — the creator of C++. However, the state of the technology
at the time meant that only technically skilled people could take advantage of this
online community and near-instantaneous communication. Interviewee B realised
that there was a “great business opportunity” in this area if people at large could
access the Internet using tools that they could learn to work with relatively easily.
Unfortunately, initial feasibility studies indicated that the level of capitalisation
available was not sufficient to fund the infrastructure needed to realise such an
opportunity. The way to make an entry into the field was by doing consulting
work based on the emerging Internet technologies and the related open standards
and software.
One of the areas in which Company B has competitive advantage is in the area
of OSS as it was one of the pioneering companies. The company also has a very
high reputation in providing superior client service and catering to clients’
specific needs. Hence, the company receives many of its projects through
referrals as has happened in one of its recent projects when an Australian
University on recommendation from another university contacted the company
to tailor its student database to comply with the federal government’s reporting
guidelines by using the ERP system. In this instance, the company made use of
existing codes from “open source framework called Open for Business,” along
with their expertise in programming to successfully complete the project in less
than half of the time and cost than if the company had to write the source code
from scratch. By using existing codes on the OSS, the company can reduce the
price of their products and accordingly is more competitive than its counterparts.
By having access to codes and research and development (R&D) at their
disposal, the company also is able to provide prompt service as compared to other
large software companies who may not have their respective service offices in
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Australia. The company does not bind its clients into a lifetime contract and the
latter have full access to their codes that they can decide to move to another
vendor/company if they wished without being penalised/disadvantaged in any
way.
Working toward the “betterment of the mankind” by sharing his knowledge and
expertise with others while operating in an exciting, dynamic sector are the
motivations for Interviewee B to remain as an e-entrepreneur. One of the
challenges encountered by the company and others in the information technology
sector is when trying to market their products to third parties and businesses. It
has been noted that most technology experts do not have marketing and business
skills that can often disadvantage them in the marketplace.
Interviewee B and his company had different experiences while interacting with
the government sector. At the time of the interview, Interviewee B had been
working with the federal government to create a document/database that would
provide access to all government “agencies on the procurement of open source
software.” The document would explain legal ramifications if the third party
decides to take up the OSS modules from the document. The database also would
act as a networking site for individuals and organisations who wish to safely use
OSS modules. The federal government is consequently working to “remove
impediments towards the adoption of open source.” At the state government
level, the focus is still at industry development. The New South Wales (NSW)
government recently announced a US$40m Linux project which is one of the
largest in the world.
Company B had been in operation long before the dot-com crash, and the authors
were interested in understanding how the company had survived it as opposed
to many other unfortunate competitors. Interviewee B noted that unlike other
new companies emerging at the time with hundreds of people being employed in
the company within weeks, the number of employees had remained more or less
the same in Company B. Many people contemplating to expand their wealth also
had invested huge funds in their newly established companies. Company B,
however, did not receive any such funds. This does not imply that Company B’s
products and services were any less reliable or competitive. Nonetheless, its
experience had cautioned them against investing or accepting impulsive projects
and funds alike. Thinking and operating strategically as well as employing
experienced staff saved the company while other businesses vanished within
days after the dot-com crash. In an attempt to capture the already saturated
market, new information technology companies spent huge amount of resources
and was another reason for their failing: not conducting sufficient market and
competitive analysis, a prerequisite for establishing and running any type of
business.
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Interviewee B cautioned existing and new entrepreneurs of being aware of
globally existing patents for various programs and software codes as even
without their knowledge the programmer could be held liable for potentially
plagiarising other patented softwares. He proposed that for emerging economies
and businesses to be successful, it was essential that the software patent system
be either made redundant or more flexible with clear guidelines with a database
for searching all the existing patents.
When asked about the future of e-entrepreneurship, Interviewee B commented
that this was going to expand in the coming years. To emphasise his point, he gave
the example of the music industry. Until very recently, popularity in the music
industry was gained by singing face-to-face to a wider audience and generally
it took years to get a reputation and make money. In this current era, however,
by using the technology and the Internet, the singer can make hundreds of copies
of the music on CD and simultaneously distribute it worldwide capturing the
global music market. This would not have been possible using the traditional
manufacturing and distribution system.
Interviewee B strongly believes that for existing and future e-entrepreneurs and
information technology companies it is essential that laws relating to patents
should be changed, otherwise the progress could come to a standstill. Entrepre-
neurs also need to be aware and cautious of the situation and take comprehensive
legal consultation and protection.
Discussion
For an e-entrepreneur, the software tools used are likely to be the enabling factor
of the novel service being provided. In fact, the entrepreneurial product may be
software or a combination of hardware equipment and software. Given that such
is the case, how should various entrepreneurs decide whether to use software
solutions and/or which model to use for development?
To become a successful entrepreneur, it is essential that a person learns from the
experience of others and avoids making the same mistakes. The reoccurring
themes within the literature and interviewees complement each other. Halloran
(1991), for example, discussed the 20 commonly experienced pitfalls which
should be avoided, including: having unrealistic expectations; short-sighted
financing arrangements; missing the target market; buying costly and ineffective
advertising; and inconsistent and chaotic management.
Explaining the similarities and differences between an entrepreneur and an e-
entrepreneur, Interviewee B viewed that both have similar attributes and skills.
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Both need to be able to “visualise future potential [that is] above and beyond just
the vision for making money.” One major difference between the two is that
while working in the information technology sector, an e-entrepreneur requires
comparatively less funds and infrastructure when starting a business and,
consequently, less total investment dollars. Once a comprehensive market and
competitor analysis has been undertaken and the service that would be delivered
has been finalised, only access to the Internet is required to start the business,
which can be done from any location.
Andal and Yip (2002) postulate that companies should combine traditional and
new-economy bases of competitive advantage into their business models in order
to be successful in e-business. The generally accepted “e-bases” (Andal & Yip,
2002, p.1) include community effects, first mover advantage, fulfilment/delivery,
technology, teamwork, and scalability. They also suggest that some e-business
start-ups failed to implement these advantages effectively or found that they
needed to be augmented with traditional bases of competitive advantage. For
instance, the e-base first mover advantage should be combined with traditional
product/service advantages. Getting to the market first with a novel product or
service can result in significant benefits such as in the case of Amazon.com and
Yahoo. Also, while the use of new and emerging technologies is considered an
e-base of competitive advantage, realistically, most technology can be easily
replicated. Despite this, some companies, notably Google, have been able to
convert technology into an asset and sell it.
The interviewees’ comments indicate that they are at least intuitively aware of
such implications. Both Interviewees A and B perceived a business opportunity
in connection with an emerging technology, namely, embedded devices and the
Internet, respectively. At the same time, they also realised that over-committing
themselves merely on the basis of new technology did not make business sense,
and they relied on other sources of revenue such as consulting work and Web
development to acquire the infrastructure and capital to develop their e-
entrepreneurial ideas.
Interviewee B mentioned that the fact that they were the pioneers in the industry
of open source solutions was a major source of competitive advantage, thus,
underscoring the first-mover e-base of competitive advantage. However, Inter-
viewee B regards their use of OSS as another — and perhaps less traditional —
source of competitive advantage. By candidly disclosing to their clients the fact
that a solution is based on open source software, the clients are reassured that
they can, should the need arise, go to other vendors for maintenance, support, and
development. There is also an undercurrent of transparency at work; when a
company agrees to provide an OSS solution, their entire system is potentially
subject to scrutiny by their clients. This may give the clients a sense of
confidence; a vendor supplying a completely open solution that can be verified
How e-Entrepreneurs Operate in the Context of Open Source Software 79
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by independent technical staff must surely believe in the technical quality of their
product.
A possible interpretation of the comparative ease with which certain technologi-
cal functionality can be replicated is that the intrinsic value of the software that
provides such functionality does not amount to much. In cases like these, OSS
offers the opportunity for an e-entrepreneur to focus on services that are enabled
by or based on technology rather than wasting resources developing technology
which will soon be replicated and widely available anyway. Certainly, it is still
possible to try and sell technology, as Google has done. But this involves ensuring
that one’s technology is constantly evolving at a rapid enough pace to consis-
tently stay ahead. As pointed out by Interviewee B, such research and develop-
ment (R&D) can be prohibitively expensive for e-entrepreneurs, particularly in
the Australian market where capitalisation can be harder to come by than, say,
in the United States.
Teamwork amongst a diverse mix of people with varied skill sets and experience
is another commonly cited e-base of competitive advantage (Andal & Yip,
2002). Apart from the contributions from team members within the organization,
making software available in open source form allows participation from the
wider community. One of Interviewee A’s open source projects has built up a
virtual community of users, some of whom are able to contribute by asking
questions and reporting errors that enabled Company A to enhance the quality
of their product. In some cases, they are even able to offer “patches” — snippets
of software code that add functionality or repair an error. Interviewee B also is
aware of this effect and mentioned that Company B is an organization that tries
to contribute its expertise and knowledge to the improvement and enhancement
of OSS that they deploy. Interviewee B considers the process a way of
“bartering IP.” In this sense, releasing software developed by an e-entrepreneur
as OSS is not giving away something at no charge, it is an offer to exchange and
share expertise, knowledge, and time with the possibility of mutual benefit to the
developer(s) of the software and the wider community. Successfully trading IP
with the global community is potentially a very powerful way of harnessing the
synergy arising from a team of diverse backgrounds and abilities.
Based on the understanding developed from the experiences of the interviewees,
the authors have identified the following three key requirements for being a
successful e-entrepreneur in the field of OSS.
1. Being Technically Competent
Both interviewees recognised the critical importance of technical ability.
Interviewee B mentioned the depth of knowledge required and the “wiz-
ards” on Company B’s staff. Interviewee A also is emphatic on the need
80 Zutshi, Zutshi, and Sohal
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to be “technically sound.” By definition, e-entrepreneurial activities are
strongly dependent on the underlying technology. The e-entrepreneur must
not only be thoroughly familiar with the state of the art of the relevant
technology but also possess a deep understanding of the underpinning
principles in order to be able to analyse trends and foresee opportunities.
Interviewee B does caution that in the context of Company B, high quality
technical ability is often found in people who are unable to liase well with
customers, and it can be a challenge to find staff that strike the right balance
between being “tech” and “suit.” Hence, the latter can act as a marketing
challenge when “tech experts” need to explain their product in layman’s
language to their customers.
2. Taking the Customer Service Perspective
Interviewee A, while emphasising technical ability of the product, insisted
that the focus should be on what the technology can do for the consumer.
Ideally, the technology should be transparent and the customer should see
the benefits of the technology without needing to understand the details. In
many cases, they should not even have to care whether the solution is open
source or not. What should be clear to the consumer is what the technology
can enable them to do and what the e-entrepreneur can make possible for
them via the services related to the technological product. These views hold
for Interviewee A’s e-entrepreneurship plans in embedded media – small,
portable devices which must, by their very nature, be consumer specific.
They are also relevant to Company A’s online content management system
products. The base product itself is available to everyone, but the true
source of revenue comes from consumers wanting services based on the
existing product. These services include maintaining the customers’ online
presence and customisation of the base product to deal with customer-
specific requirements.
Interestingly, while Company B operates in a slightly different arena, the
customer service and technology transparency issues are the ones that they
strongly identify with. For instance, they have a product called the small
business server. This is meant to be a turnkey solution that can be set up
quickly and easily. It provides small businesses the most commonly needed
functionality such as Internet connection sharing and acceleration, e-mail,
anti-virus, fire walling, and file and printer sharing. It so happens that the
software installed on the server is all OSS. However, in Interviewee B’s
experience, the customer does not necessarily care — or need to know —
that this is the case, as long as they are instructed on how to use and
administer it. Further, Interviewee B asserts that the open source nature of
the software in this product ensures that they have full access and complete
control over all aspects of the software functionality, thus placing them in
How e-Entrepreneurs Operate in the Context of Open Source Software 81
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a position to provide maintenance and service as long as the customer is
willing to pay for such services.
3. Being Clear on the Reasons for Going OSS
Neither interviewee recommends OSS as a panacea. It is clear from both
their interviews that a number of factors influence their choice of whether
a solution is made OSS or not. In fact, while doing some consulting work,
Interviewee B recalls being specifically asked to provide proprietary
software-based solutions, which Company B was comfortable providing.
Hence e-entrepreneurs should not perceive OSS as the next “bandwagon”
or something to be done purely out of ideological reasons. The interviewers,
as well as some existing literature (see Cusumano, 2004), caution against
this. Still, there can be solid business reasons for focussing on OSS as
evidenced by the activities of big business such as IBM, Sun, Red Hat, and
Novell (Mahoney & Naughton, 2004). In fact, both Companies A and B
produce or have produced offerings and services based on proprietary and
open source software. One or more of the following reasons have been
compelling enough for both Companies A and B to go open source:
• To harness the distribution and marketing power of the Internet
Interviewee A decided to release Company A’s content management
system under an open source license over the Internet. The idea was to
make it easy and obligation free for prospective customers to download and
use the product. If they were technically inclined, they also could inspect
the source and assure themselves that the product was technically sound.
While there are a large number of people who have chosen to use this for
free, they have at least become aware of the existence of the product and
Company A. Further, some of the users have requested services and
support for which they have paid Company A. Interviewee B made the
observation that in order to get commercial entities to try out one’s
software, the fact that it is open source gives them further incentive. This
is because a potential customer is ensured that they can make some use of
the software even if the original vendor is not readily available because they
have the code and can modify it to suit their purposes, if the need arises.
• Avoid re-inventing the wheel. When the functionality of the product and
the services are paramount (such as Company B’s turnkey product), the
software itself is the means to an end. Therefore, it makes sense for an e-
entrepreneur to make use of the readily available OSS rather than having
to devote valuable resources to rebuild what has already been done (and
often done well). For e-entrepreneurs seeking to move quickly and offer
novel services, this can be a major motivation. Interviewee B finds that by
82 Zutshi, Zutshi, and Sohal
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avoiding a lot of duplicated R&D, they are able to provide cost-effective
solutions.
• Interaction with the community. Interviewee A acknowledges that Com-
pany A has indeed benefited from the questions, suggestions, and contribu-
tions of the online community that uses their open source content manage-
ment product. Interviewee B views his Company B’s building solutions
based on existing OSS as bartering IP. Company B benefits from the IP of
the developers of existing OSS and in turn feeds back expertise to these
open source projects.
• Get an edge over proprietary software vendors. An e-entrepreneur may
have an idea for a new product or service that can be enabled by a software
package (or, indeed, the product may be a software package itself). It is
often the case that the e-entrepreneur would struggle against the big
businesses that offer similar products/services based on proprietary soft-
ware. By releasing their product as OSS, the e-entrepreneur can get the
attention of some potential customers who are deterred by the higher prices
or the closed nature of the proprietary vendors. These potential customers
could become a source of revenue based on custom modifications and other
support-related activities. Of course, if there are already a number of OSS
solutions available, then the e-entrepreneur should try to come up with a
different idea.
Apart from the discussed business reasons, a strong ethical undercurrent did
seem to underlie some of the issues outlined by the interviewees. For instance,
Interviewee A saw releasing a proprietary product as OSS after it had reached
its end of life as one way of letting customers know that they were not being left
in the lurch. By granting access to software that Company A had previously
developed under a proprietary license, users of that software would be able to
continue to use and maintain the product well after Company A declared it as
discontinued, if they so wish. For Interviewee B trying to “make the world a
better place” is more important than “making a buck.”
Another common factor is the passion for technology and the excitement that
comes from developing new technology or watching the technology evolve by
following and perhaps collaborating with the open source software community.
As a result of these findings, we agree with Mahoney and Naughton (2004) when
they say that for some companies, OSS can be a strategically valuable weapon.
However, the idealistic tendencies of both interviewees would cause us to stop
short of agreeing completely with them when they say that it is difficult to find
the “ideals of freedom, volunteerism, and a shared community of values in
today’s world of Monetized Open Source.”
How e-Entrepreneurs Operate in the Context of Open Source Software 83
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Conclusion
In this chapter, we have examined the increasing usage and growing acceptance
of open source software within the technological world. E-entrepreneurship is a
growing field and the experiences of two e-entrepreneurs trying to survive in this
competitive field were presented. The underlying attributes and skills necessary
for an e-entrepreneur are very similar to that of becoming an entrepreneur.
These include: being a visionary; the ability to develop short- and long-term
strategic plans; providing leadership; developing flexible structures; and remain-
ing responsive to changing environmental and market demands.
Presented next are the recommendations we have elicited from the interviewees
that can enable e-entrepreneurs to be successful in their ventures.
Flexibility in Strategic Planning and the Work
Environment
There is a need for maintaining flexibility when doing business irrespective of the
organisational size. Especially in this technologically-dominated business world,
the organisation needs to have a flexible structure so as to be able to respond to
the ever-dynamic and ever-changing environment. At the same time, long-term
strategic decisions should be made which reinforce the vision of the company.
Provision of High Levels of Service
A high emphasis needs to be placed on providing regular and outstanding service
to clients. A company’s reputation (communicated though “word-of-mouth”)
plays a major part in obtaining repeat business from existing clients and attracting
new clients.
Developing Basic Management Skills
A successful e-entrepreneur must acquire basic management skills and at-
tributes such as leadership, negotiation, and business planning. Furthermore, a
balance needs to be maintained between the technical demands and the business
demands of the company, especially those relating to people management —
customers, suppliers, and employees. Motivating employees will remain a key
task for managers regardless of the type of organization.
84 Zutshi, Zutshi, and Sohal
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Taking the Long-Term Perspective
Establishing a new business requires significant commitment in terms of effort
and financial resources over a significant period of time. Hence, returns in the
short-term should not be the motivating factor. Building a robust and stable
business requires patience. One way of maintaining motivation over a long period
is to ensure that all individuals involved keep an open mind and enjoy the journey
that can provide numerous challenges and highly satisfying outcomes.
Listening to Technologists
In order to maintain a competitive advantage, it is imperative that managers
regularly communicate with their technical personnel since they are ones who
will have firsthand knowledge of what is happening in the technological world.
This chapter has contributed to our understanding of OSS and e-entrepreneur-
ship. The literature highlights the need for further research in this area,
particularly to do with small businesses with Internet usage (Steinberg, 2003).
Gaps in the existing literature in the area of OSS and e-entrepreneurship needs
to be filled with more studies. One way this could be initiated is by more
qualitative studies incorporating both in-depth case studies and focus-group
discussions exploring experiences of e-entrepreneurs in the current technologi-
cal environment. The experiences of entrepreneurs who have now become e-
entrepreneurs also need to be further explored.
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Endnote
1
Netcraft (www.netcraft.com), in fact, reports a 67.92% market share for
the open source Apache Web server in October 2004, which is a bare
0.07% change since October 2003.
Acronyms Used
ERP enterprise resource planning
IP intellectual property
MYOB Mind Your Own Business (accounting software package)
OSS open source software
SAP “Systeme, Anwendungen, Produkte in der Datenverarbeitung,” mean
ing “Systems - Applications - Products in data processing” [url:wiki_sap]
SQL structured query language
Personalized Relationship E-Marketing 89
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Chapter V
Personalized
Relationship
E-Marketing and the
Small Medium-Sized
Enterprise
Clare Brindley
University of Central Lancashire, UK
Diane Wright
Manchester Metropolitan University, UK
Abstract
Many small businesses are beginning to adopt at least tactical solutions to
enhance relationships between themselves and their customers. This chapter
focuses on a UK-based marketing communications company which has
developed an innovative personalized relationship e-marketing tool, utilizing
mobile technology aimed at the SME sector. Current marketing practices,
such as database marketing and CRM systems, are discussed in terms of
SME adoption and whether the tool, Sign-Up.to is an effective replacement
for established CRM systems. The authors conclude that while the case
study company has developed a tool that will aid SMEs with their relationship
marketing, the philosophy of relationship marketing must already be
imbedded within the SME. The authors’ intention is to illustrate how
90 Brindley and Wright
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technology can be implemented in the SME sector and to explore how
technology and marketing can help each other.
Introduction
It is recognized that the small business demonstrates certain characteristics that
are not conducive to long-term strategic planning. Indeed, many small businesses
perceive that the level of risk associated with marketing and marketing decisions
is prohibitive and any marketing undertaken by a small business tends to be
limited to a more tactical marketing communications approach as opposed to a
strategic approach.
Studies (Ritchie & Brindley, 1999) indicate, however, that the small or
medium-sized enterprise (SME) is rapidly becoming aware of the potential
for competitive advantage that can be gained via e-marketing. Research has
indicated that the initial primary impact of e-marketing is in terms of the
business–to-customer relationship, with SMEs developing Web sites to provide
basic product range information (Ritchie & Brindley, 2000). The evidence
suggests that while some SMEs are developing their strategic thinking about the
potential use of the Internet, this is still primarily focused on the marketing
communications and sales strategies. Changes in the wider business environ-
ment have led to significant adaptations of technological advancements in the
field of marketing, such as the use of specific software. Much of these
developments have taken place alongside the shift from transactional aspects of
doing business with a customer to relational aspects. Technology has therefore
provided businesses with a means of collecting and manipulating customer data
that will aid loyalty management, such as the introduction of sophisticated
measurement systems, customer targeting based on lifetime value, and defection
analysis. In confirmation of this, Zineldin states “Relationship marketing will not
be established without IT-based relationships using advanced technological
tools” (2000, p. 7). As a consequence, therefore, the use of CRMsoftware
systems is becoming more widespread. At the same time, smaller businesses are
starting to address the wider opportunities associated with e-marketing (Brindley
& Ritchie, 2001), and many are beginning to adopt at least tactical solutions to
enhance relationships between themselves and their customers.
This chapter focuses on a case study of a UK marketing communications
company which has developed an innovative personalized relationship e-mar-
keting tool, utilizing mobile technology aimed at the SME sector. The majority
of current technological systems designed to aid the marketing efforts of
organizations are geared to the larger companies rather than to the SME sector.
Personalized Relationship E-Marketing 91
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The aim of the chapter is to explore whether the new e-marketing tool, Sign-
Up.to, can help SMEs use technology to develop their relationship marketing
efforts, while avoiding the issues and costs of implementing the more “estab-
lished” CRM systems. The chapter begins with a discussion of marketing
practice in terms of database marketing and CRM before moving onto explore
the experience of SMEs and technology application. A section on CRM and
SMEs is included. The e-marketing tool developed by the case company is then
described and examples of its application are given. Conclusions are then drawn
to its effectiveness in aiding SME relationship marketing strategies.
Background
As mentioned, many of these tactical solutions have been focused on marketing
communications, as the SME begins to take advantage of the technological
developments. To consider these developments in more detail, it is clear that the
manipulation of customer data is important to feed the new obsession with
measurement reinforced by the argument put forward by Buchanan and Gillies
(1990) that what gets measured or lends itself to measurement is likely to be
implemented. Measuring relies on the manipulation of data; in the case of
marketing, this is customer data. The use of specific customer data, while
fundamental to many aspects of marketing, is traditionally associated with two
specific areas, namely database marketing and direct marketing. Given the
confusion that surrounds the distinction of these terms, it is appropriate at this
point to dwell on them in some depth.
Fletcher, Wheeler, and Wright (1997) define database marketing as how to use
market data to the best advantage through whatever medium. They list three
aims for database marketing: strategic improvement through better use of
marketing information; the identification of strategic advantage through the use
of customer and market information (product/service development); and the
development of long-term customer loyalty evident in the reduction in brand
switching and the enhancement of cross selling. The basic requirements for
database marketing also are presented, namely a relational database (informa-
tion from different files linked by a common field), a query language for access,
software for market segmentation analysis, forecasting, merge/purge functions,
and others. Thus, the database should be able to be manipulated in a useful
manner. Peters (1997) argues that companies need to use customer information
in a structured fashion if they are to gain value from it and build customer
relationships. Customer information files for relationship marketing purposes
should include profitability information, so that the lifetime value of the customer
can be forecast (Gronroos, 1996).
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The functionality of database marketing is recognized by Sisodia and Wolfe
(2000, p. 185) who refer to it as “automated transactional marketing.” Murphy
(2000) notes that databases are often product-oriented, not customer-oriented,
again underlining their functional (short-term) as opposed to their strategic (long-
term) nature. Morris, Brunyee, and Page (1998, p. 361) indicated even earlier
that database marketing is nothing more than “building detailed customer
intelligence files, that permit ongoing, customized communications.” Thus,
database marketing is seen by many as a tool to help maintain contact with a
customer. By contrast, relationship marketing goes much further than that,
focusing as it does on the development of an ongoing long-term relationship.
The other area of marketing often associated with concentrated data manipula-
tion is direct marketing. Bird (2000, p. 16) defines it as “any advertising
activity, which creates and exploits a direct relationship between you and your
prospect or customer as an individual.” Fletcher et al. (1997) see it as a way of
using direct media for a target market. There is a strong emphasis on measur-
ability and return on investment, thus often encouraging a short-term focus.
While still thought to be primarily used for marketing communications, Long et
al. (1999, p. 5) recognize the role that both database marketing (DBM) and
direct marketing (DM) have played in the development of relationship market-
ing (RM): “Companies have identified personal data as the foundation of direct
marketing and database marketing, which are two of the immediate forbears of
relationship marketing in consumer markets.” Thus, in the academic world, there
is a developing recognition, that while undisputedly linked, RM is not the same
as DBM or even DM.
Customer relationship management (CRM) is a further development in technol-
ogy and appears to be even more closely linked to relationship marketing if only
by name. Definitions of CRM focus on the organization driving the relationship.
For example, Galbreath and Rogers (1999, p. 162) define CRM as “activities a
business performs to identify, qualify, acquire, develop, and retain increasingly
loyal and profitable customers by delivering the right product or service, to the
right customer, through the right channel, at the right time and the right cost.
CRM integrates sales, marketing, service, enterprise resource planning and
supply-chain management functions through business process automation, tech-
nology solutions, and information resources to maximize each customer contact.
CRM facilitates relationships among enterprises, their customers, business
partners, suppliers, and employees.” Another definition offered by Hamilton
(2001) interprets CRM as being “the process of storing and analysing the vast
amounts of data produced by sales calls, customer-service centres, and actual
purchases, supposedly yielding greater insight into customer behaviour. CRM
also allows businesses to treat different types of customers differently, in some
cases, for instance, by responding more slowly to those who spend less or
Personalized Relationship E-Marketing 93
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charging more to those who require more expensive hand-holding.” Therefore,
the use of CRM software systems presents on the face of it a potential solution
to the small business and it is understandable that the SME may consider
exploring CRM developments as the next stage on from database marketing and
direct marketing when seeking to develop the opportunities presented by e-
marketing.
Indeed the SME sector has generally been recognized as the seedbed of
inventiveness, creativity, and innovation (DTI, 1994). Smallbone, North, Vickers,
and Roper (2001) identified a positive link between innovation and business
performance within SMEs. However, differences between sectors (e.g., manu-
facturing and services) may prevent the treatment of SMEs as homogenous in
regard to developing conclusions and advice on imbedding organizational learn-
ing to foster and sustain innovation. As well as sectoral differences, there also
is the issue of size. For example, the micro business may be totally dependent on
the owner/manager to sustain innovation.
Unfortunately, the owner/manager’s zeal for the development of new concepts
and ideas — an “innovation orientation” — can dominate or exclude a dedication
to the principles of customer orientation. The idea comes first and the check for
market acceptance second. Thus, innovation and entrepreneurial flair without
the application of marketing may not only prove unsuccessful in the short-term
but also in the failure to imbed the knowledge and cultural changes necessary to
sustain longer-term performance. Ideally then, there should be a symbiotic
relationship between marketing and entrepreneurship. Doyle (1998, p. 225),
quoting Peter Drucker’s view “that management have only two key tasks:
marketing and innovation,” reinforces the accepted view that the two are
intimately interlinked. As Geroski (1998, p. 1) illustrated, “it is vital to think
creatively about markets…as it forms the basis for successful strategic innova-
tion.”
It is widely recognized that innovations in the areas of knowledge transfer and
communications represent significant opportunities for competitive advantage
(de Geus, 1988; Slater & Naver, 1995). Kanter (1997) believes that engendering
innovation is key to ensuring companies remain competitive and are market
leaders. According to Kanter (1997), appropriate skills and attributes include
comfort with change, clarity of direction, thoroughness, participative manage-
ment styles, persuasiveness, persistence, and discretion. Quinn (1985) produced
a similar inventory of the necessary characteristics for the innovators and
entrepreneurs, which are crucial to success for innovative small companies.
Often, the role of organizational learning is explored as a possible explanation
for the failure of SMEs to sustain their innovative advantage, although they are
still continuing to survive. The issues associated with the time that they needed
to devote to innovation encompass being too busy running the business to worry
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about such developments and is perhaps a reflection on the nature of the
problems encountered by the smaller organization. At issue here is not the
recognition of the importance of innovation, but the human resource capacity
necessary to devote to this work and therefore become acquainted with new
technology. In terms of technology, Smallbone et al. (2001, p. 305) identified that
“technology may be underutilised” and is more commonly used in medium-size
firms as opposed to small firms.
Research suggests that SMEs possibly lag behind in their utilization of e-business
technology because of the lack of opportunity for organizational learning. A view
supported by Dawn, Bodonik, and Dhaliwal (2002) who identified that Canada
is exemplified by low e-business readiness due to the low adoption of e-business
applications i.e. if they don’t use the available technology how can the SMEs
exploit its benefits? Similarly, Brown and Lockett (2004) also identify the low
engagement of SMEs in e-business as do Houghton and Winklhofer (2004). They
argue that trust in a third party is an important requirement in the adoption of
higher-level complexity e-business applications by SMEs. Trust is a key anteced-
ent of take-up, either by the SME themselves or their customers. This is what
Houghton and Winklhofer (2004, p. 380) call “a trusting and committed relation-
ship.” Similarly, Smallbone et al.’s (2001) survey indicated a slow take-up of
online selling within their sample of SMEs, suggesting that this may be due to
consumer reluctance in terms of trust/security.
If it is assumed that there are barriers to innovation within SMEs, then it seems
pertinent to explore Smallbone et al.’s (2001) premise that supply-chain initia-
tives may support innovation — perhaps what Dawn et al. (2002) call opportu-
nities to co-commercialize innovations. Indeed for Smallbone et al. (2001), there
is a clear link between innovative propensity and the involvement of the SME in
external networks. External links that may help reduce risk, improve costs. Yet
Freel (2000) and Chell and Baines (2000) recognized that smaller firms tend to
have fewer external linkages. However, Coviello et al. (2000) point out that
focusing on the tactical approach limits marketing to its traditional framework of
transactional marketing. They point out that what is likely to happen is that by the
very nature of a small business it could adopt a relational approach and may be
more likely to practice an interaction and network approach to marketing.
Thus, there is a dichotomy between SMEs being innovative but not necessarily
in all quarters; for example, they may develop an innovative product that is not
innovative in terms of process (Damanpour, 1991). This viewpoint is contextualized
by Dawn et al. (2002) who argued that SMEs inherently facilitate innovation and
that the Internet can facilitate clusters of SMEs, with members of the supply
chain working together (Ritchie & Brindley, 2001). The issue is compounded
when one views e-business innovation as a continuum (Daniel, Wilson, & Myers,
2002; Peet, Brindley, & Ritchie, 2001). In this chapter’s case study, Sign-Up.to
is operating like a portal cluster.
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For Dawn et al. (2002, p. 139), it is SMEs (like Sign-Up.to) that “create and
commercialise evolutionary new technologies and directly output new innova-
tions.” It is argued that innovation networks enable communication facilities to
reach the right people, creating partnerships of stakeholders and aggregation of
their competencies for greater chances of innovation success (Jutta, Bodorick,
Weatherbee, & Hudson, 2002; Kaufmann & Totdling, 2001 cited in Dawn et al.,
2002). These networks and partnerships may be viewed as another form of
relationship. Similarly, CRM systems are developed to enable communication
between buyers and suppliers.
Main Focus of the Chapter
CRM Systems
Consequently, these issues could go some way to explaining why the recent
development of CRM systems has tended to focus on larger organizations and
are apparently inappropriate for the smaller business. More recently, there have
been criticisms related to the implementation, effectiveness, and success of
CRM systems, and Gartner Research (2001) suggests that the failure rate is
around 65%. A key factor is that vendor hype, product immaturity, and product
cost are contributing to user dissatisfaction (Frost & Sullivan, 2000). Bearing in
mind the potential costs involved both financially and in terms of the time taken
to implement fully, the risks could be great for the SME where resources are
often limited. These issues serve to confirm the scepticism of small businesses
toward marketing, especially when their specialisms are often outside marketing.
Consequently, marketing is not always a priority, so the steps taken to begin to
utilize technology from a more strategic approach could be thwarted.
Taking a more philosophical approach, further problems can be found in today’s
implementation of CRM. Law, Lau, and Wang (2003) suggest that such an
approach is dated and that customers should no longer be treated as passive
groups and assigned “to” some categories. They state that the approach to CRM
should be changed, focusing on the customer as the starting point. Although many
organizations may accept that relationships should be two-way, putting this into
practice becomes difficult and the technology available under the guise of CRM
perpetuates this problem. Research undertaken by Wright and Hurlstone (2004)
questioned whether CRM systems were indeed customer focused, as many do
not provide products that focus directly on benefits to the end consumer but “sell”
benefits based on increased efficiency to the organization. Another criticism is
that CRM systems tend to embody standardized views of relationship manage-
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ment processes, and therefore are a long way from the “customer managed
relationships” talked about by Law et al. (2003).
The Case Company: Sign-Up.to
This chapter uses a case study of a UK-based marketing communications
company that has attempted to identify and address the issues and risks of
existing CRM tools for the SME while exploiting the benefits that technological
developments have brought. The company has consequently developed an
innovative personalized relationship e-marketing tool, aimed at the SME sector.
This tool is called Sign-Up.to and has been designed to establish a personal
dialogue with potential customers, gradually exposing them to the organization’s
messages.
Sign-Up.to is an online application that allows the user to take control of data
capture, processing, campaigning, management, and analysis, across all chan-
nels without technical expertise. In this tool, the threads of database marketing,
direct marketing, and relationship marketing are evident and are discussed.
In the Sign-Up.to model, the basic requirements for database marketing as
referred to by Fletcher et al. (1997) are evident including a relational database,
software for market segmentation analysis, forecasting, and a merge/purge
function. The Sign-Up.to database can include a wide range of information about
the consumer, which can be updated at any time by the consumer. Whenever it
is updated, all member company databases are immediately updated, so consum-
ers do not need to remember to change their details with every company they are
subscribed to. This encourages cross selling across member companies. Data
can be captured from Web forms and SMS messages or can be transported from
an existing database. Any survey questions or additional data can be added to the
registration process, and all captured data is automatically verified via a double
opt-in. It also is possible to perform very detailed targeting of the database. The
Sign-Up.to model handles and structures data by using “products” and “con-
sumer profiles” to organize information. The “product” is a powerful form of
mailing list (a product could represent a Web site newsletter, a competition, or
a special offer for example) whereas a “consumer profile” contains an individual’s
contact information and basic personal details. Products are created in the
system and people “subscribe” to these products. This is how data is captured
and allows the organization to gain the user’s permission to contact them. When
someone subscribes to one of the products, details from their profile are attached
to the product and disclosed to the organization — a product, therefore, contains
a list of consumer profiles. The distinction between products and profiles allows
a business to perform very detailed targeting of their database. This targeting
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allows them to send relevant and personalized information to subscribers, thus
catering to individual needs.
Since Sign-Up.to is designed to be a communication tool using direct media to
reach a specific target market, then the influence of direct marketing is also
obvious. Messages can be created and sent via mobile and via e-mail directly to
the target market. The correct type of message can be sent to recipients based
on their preferences, so personalized, regular contact can be maintained with
thousands of contacts easily. The time and date for sending can be selected at
any point up to a year in the future. Sign-Up.to seems on the face of it to conform
to the definitions for direct marketing as tracking and data manipulation is an
important feature of the tool — a point that is raised by Bird (2000) as being a
feature of direct marketing. Whenever an e-mail campaign or an SMS is
executed, the tracking feature allows the company to keep a copy of each
message sent, details of who it was sent to, and statistics about the message.
These statistics provide an invaluable insight into the target audience, allowing
the organization to see what particular content and subjects work best with
specific groups of consumers, what time they read the messages, and even see
how different content structures affect click-through rates. By paying attention
to this information, the business can constantly improve campaigns, making them
more relevant for the audience.
Sign-Up.to vs. CRM Systems
The research indicates that the Sign-Up.to tool has moved down the CRM path
as the messages become personalized and individual needs are catered for. If
CRM and RM are about building loyalty and loyalty has been identified as one
of the enduring factors of a positive relationship, then Sign-Up.to should be able
to secure such loyalty with permitted, appropriately targeted messages and take
the small business in this direction. A particular feature that is useful for small
businesses is the ability to target by location and often — making it local can
make it much more personal. For example, if someone’s favorite restaurant
around the corner from their office gets permission to contact them and then e-
mails the consumer on Monday with a lunch special offer, there is a high chance
that they will redeem it because they have already expressed an interest by
signing up. Indeed, mobile is such a personal medium that local offers work far
better as it is less intrusive when the consumer knows the sender. They also are
more likely to use word of mouth communications when the sender is local —
another feature of relationship marketing.
The tool also has addressed some of the issues associated with CRM systems.
As mentioned, a CRM system would be prohibitive in cost terms for a small
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business, whereas the Sign-Up.to tool is much more accessible to the small
business, with an initial setup fee, no charge for e-mails sent, and SMS charges
at low rates. A further criticism is the passivity of the customer and the
customer’s lack of involvement in what should be a two-way relationship.
However, because Sign-Up.to is a permission marketing system, it ensures that
the customers, who are being communicated with want the relationship because
they have volunteered (opted-in) to be marketed to. This enables the organization
to begin to establish a dialogue and ensure that communications are personal,
anticipated, and relevant to each consumer. As the dialogue progresses, this
offers consumers an incentive to give deeper levels of permission — more
information on themselves and agreement to offer them more services and
information on offerings. So in this sense, Sign-Up.to begins to develop (albeit
tentatively) what was customer relationship management to customer managed
relationships.
However, although Sign-up is going someway to address the issues raised
regarding CRM systems and their drawbacks for the small business, it also has
highlighted an interesting anomaly regarding innovation. Although the SME
sector has been seen as innovative, the sector has not taken-up the opportunity
of the Sign-Up.to product in the numbers originally anticipated in its business
plan. The product has been actively sold to the small business sector and received
with great enthusiasm, but has yet to be adopted by a significant number of
SMEs. However, what is interesting is the type of organization that has adopted
it with tremendous success. One such organization is V2 Music, Richard
Branson’s record label. After a highly successful trial, V2 Music, home to artists
such as Paul Weller, Stereophonics, and Estelle, adopted the Sign-Up.to platform
to manage their worldwide e-mail and mobile marketing and fan communication.
The Sign-Up.to platform has allowed V2 to integrate more than 100 separate
databases into a single system used by all worldwide offices — providing a global
view of fan data and allowing localized e-mail and mobile campaigns to be run
by V2 staff without the need for technical training. This integration has already
saved V2 an estimated £150,000. The adoption has been hugely successful,
consolidating V2’s databases and improving communications to their fanbases.
The features have meant that V2 staff can be creative but, more importantly, can
measure how effective their communications are on a case-by-case basis,
creating a responsive community environment.
Another organization that has successfully implemented the product is BT and
their Mobile Commerce Platform. Sign-Up.to designed, produced, and now
maintain the mobile commerce system for BT, named Click&Buy. This uses a
system based on the Sign-Up Mobile Marketeer platform to enable BT’s micro-
payment systems to securely accept and authorize orders by SMS. Other
organizations adopting the Sign-Up.to tool are Duracell as well as the Thai
government.
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These are not organizations that were originally targeted as potential customers
and indeed came upon Sign-Up as a result of an Internet search and saw the
potential for their own business. In the case of V2 and BT, awareness of
technological developments are crucial as a means of establishing a competitive
advantage, as well as providing means of communication that will appeal to their
own target audiences, who, especially in the case of V2, are likely to be
progressive innovators or early adopters. It could be this awareness and the need
to adopt innovative techniques that have enabled these organizations to see the
potential of such a tool.
In response to this shift in their target market, Sign-Up.to have developed a tool
named FanBase which allows artists and labels to capture and store fan data, run
e-mail and mobile marketing campaigns, track results, and even generate
revenue directly using premium SMS from what is probably their most valuable
asset — their fans.
Paradoxically, although a huge technical or training investment is not necessary
and indeed is a feature of the tool, it is those organizations for whom the tool was
designed (i.e., the small businesses who have not adopted it) and yet those that
have the expertise and the financial backing to adopt more expensive and more
technical solutions have welcomed the simplicity and effectiveness of Sign-
Up.to.
Future Trends
In functional terms, the developers of Sign-Up.to have seen the potential for
future developments, and an optional feature is recently available that allows
acceptance of mobile payments, which could signify a further step along the e-
commerce pathway for SMEs. However, there is still the need to continue to
address the issues that have been raised in the context of the small business and
the need for a more strategic approach to their e-marketing. Possibly, therefore,
the next set of developments could be to move SMEs further along the e-
marketing developmental pathway by offering comparative data, or there could
be a greater opportunity to develop the theme of customer managed relationships
by generating more customer feedback, so that ultimately the customer is the
starting point. There could be the potential for further integration of messages,
not only between mobile and e-mail but also via other channels. As McDonald
(2003) pointed out, a single integrated process, shared information, and a shared
technology platform make for a total customer experience, decrease the chance
of “experience disconnect” and increase the potential to retain customers.
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The reasons for the apparent lack of acceptance of this product among small
businesses may be threefold. First, it could be seen that the customers (i.e., the
SMEs ) lack of familiarity with the technology could be acting as a barrier to
purchase. Smallbone et al. (2001, p. 305) identified that “technology may be
underutilised” and is more commonly used in medium-size firms as opposed to
small firms which may suggest that the target market for Sign-Up.to needs to be
reviewed. There also is the owner’s/manager’s technical competence to con-
sider; a distinction may be drawn between those that are comfortable with
technical developments and those who are not. The dependence on the owner/
manager, typical in the SME sector, could be limiting take-up.
Smallbone et al.’s (2001) survey indicated a slow take-up of online selling within
their sample of SMEs but they suggest that this may be due to consumer
reluctance in terms of trust/security. Thus, if the case company while exempli-
fying the innovativeness recognized by the DTI (1994) is to be successful, it
needs to act as a trusted bridge with its supply chain partners. The company
mirrors a number of the characteristics of innovative best practice (DTI, 1994)
in that the owner is a visionary, enthusiastic champion of change and knows his
customers. These are characteristics that bridge the marketing/entrepreneurial
interface. However, as the product is sold online, larger companies who may
have the necessary technical expertise in-house are comfortable with the
technology, whereas the smaller company needs a trusted individual to sell them
the proposition in the first place. By removing the Sign-Up.to owner from the
equation, trust becomes more difficult to engender.
Moving customers of Sign-Up.to along the adoption continuum (Peet et al., 2001)
is the next challenge. One set of customers, the early adopters of Sign Up.to,
have realized its benefits and are open to more innovative applications as seen
with V2 and “Fanbase.” These early adopters also have put their trust into Sign-
Up.to and are now viewing the company as part of their supply chain. Therefore,
these customers become the product champions that can cascade the innovation
to members of their own networks (e.g., other suppliers, chambers of commerce,
business clubs). Thus, the low take-up of the Sign-Up.to product means that its
benefits are not cascading through the SME network.
Also, as technology is renowned for its “me too” products, it is necessary for
Sign-Up.to to continue to innovate. Innovation for the product lies in the hands
of the owner of Sign-Up.to and as he exhibits the innovative characteristics
identified by Roffe (1999), then it seems likely that product innovations will
continue. Roffe (1999) argues that different skills are needed for the different
steps of the innovation process, namely:
• idea generators,
• information gatekeepers in touch with knowledge sources,
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• product champions to promote new practices,
• project managers to keep the work on track, and
• leaders who encourage and sponsor.
Sign-Up.to has moved through the first three phases and now has to focus on the
final two stages.
Indeed, on the one hand, these leaders may be seen as other SMEs or SME
support agencies, or, on the other hand, the Sign-Up.to owner has to be prepared
to sell the product face-to-face and employ staff to act as demonstrators to keep
the work on track and instill the confidence that necessary support is available
online.
Conclusion
Although Sign-Up.to is providing small businesses with the opportunity to gain
competitive advantage via new technological developments, there is still the
argument that this is a tactical tool used as a substitute for the more strategic
approach that is often lacking in the small business. The tool also focuses
primarily on marketing communications rather than developing more strategic
thinking about the potential use of the Internet. Despite these limitations, the tool
addresses some of the criticisms that have been levelled at CRM systems in
terms of cost and customer involvement. It has taken advantage of technological
developments to adapt database marketing and direct marketing and make them
accessible and workable. The tool enables the small business to enhance
relationships with customers and potentially start to address the wider opportu-
nities associated with e-marketing. If SMEs are encouraged to think strategi-
cally, then the tactical tool (Sign-Up.to) will aid the implementation of the
strategy and help them achieve their objectives. However, the lack of strategic
thinking, inherent techno-phobia, and the issue of trust hamper Sign-Up.to’s
marketability. As Sign-Up.to operates in a highly competitive, technologically-
driven market, then the issue for the owner is how to maintain an innovative
advantage. Organizational learning, both in his own company and within his
customer companies, appears to be a key factor.
The chapter has discussed whether Sign-Up.to is an effective replacement for
a CRM system or if indeed it is one. It is certainly marketed as a relationship
marketing tool, but the authors argue that although it has a role to play in
implementing a relationship marketing strategy, to call it a CRM system is a
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misnomer. However, Sign-Up.to uses permission marketing, so it could be
argued that it can take the SME along the relationship marketing pathway.
So, is Sign-Up.to better than other CRM tools in engaging SMEs with technology
to aid relationship development? Certainly this is an innovative relationship
development tool insofar as it is technically simplistic and affordable, but its
success depends on whether the SME that adopts Sign-Up.to has a RM
philosophy in place. If Sign-Up.to is only used as a tactical tool, then it could
possibly be subject to the same criticism as established CRM systems.
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106 Brindley and Wright
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Appendix
Terms and Definitions
CLV (Customer Lifetime Value)
The value that a customer brings to an organisation over time
CRM (Customer Relationship Management)
The process of storing and analysing the vast amounts of data produced by
sales calls, customer-service centres and actual purchases, supposedly
yielding greater insight into customer behaviour. (Hamilton, 2001)
DBM (Database Marketing)
The ability of a company to use the vast potential of today’s computer and
telecommunications technology in driving customer-oriented programmes
in a personalised, articulated, and cost-effective manner. (Rapp, 1989)
DM (Direct Marketing)
An interactive system of marketing which uses one or more advertising
media to effect a measurable response, from a defined target market.
Permission Marketing
A two-way permitted dialogue between business and customer that fo-
cuses on providing relevant, timely, and specific information to a specific
target market.
RM (Relationship Marketing)
Relationship marketing is the ongoing process of engaging in cooperative
and collaborative activities and programmes with immediate and end-user
customers to create or enhance mutual economic value at reduced cost.
(Parvatiyer & Sheth, 2000)
SME (Small/Medium Enterprise)
Defined by the EU as a company that has less than 250 employees.
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 107
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Chapter VI
Strategies for Virtual
Learning and
E-Entrepreneurship
in Higher Education
Juha Kettunen
Turku Polytechnic, Finland
Mauri Kantola
Turku Polytechnic, Finland
Abstract
This chapter presents the strategies of higher education institutions and
how they can be described using the balanced scorecard approach. The
pedagogi cal ICT st rat egy descri bes t he vi rt ual l earni ng and e-
entrepreneurship in higher education. Strategic themes are presented to
describe what management believes must be done to succeed and achieve
the desired outcomes in virtual learning and e-entrepreneurship. Strategy
maps are used to describe the strategy in a graphical representation. In
addition, the study presents an example of the cooperation between a
higher education institution and a spin-off company. This chapter helps the
educational administrators to better describe and implement strategies for
virtual learning and e-entrepreneurship.
108 Kettunen and Kantola
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Introduction
Higher education institutions (HEI) usually try to adapt their strategies to the
local community, to society as a whole, and to educational policy. HEIs are trying
to ensure competitiveness and employability for their students. To a large extent,
the competitiveness is based on good skills in information and communication
technology (ICT). They are linked to entrepreneurship, which is seen by the
local stakeholders and educational authorities to create economic growth and
welfare.
The primary purpose of this study is to explore the strategies for virtual
learning and e-entrepreneurship in higher education. The pedagogical ICT
strategy is a specific functional strategy, which describes the strategic outlines
for virtual learning and e-entrepreneurship. The aim also is to explore the
methods to communicate and implement the strategy in an understandable and
efficient manner.
Strategic management is a matter of developing the organisation and its
present activities to achieve the desired objectives in the future (Fidler, 2002;
Davies & Ellison, 2003). The new strategies of HEIs typically reflect the existing
strategies, which are tailored to meet the needs of the organisation and its
stakeholders. The strategies are typically fairly stable, but they reflect the
changes in society, economic development, and educational policy.
The strategies typically focus the activities on specific fields of education
according to the needs of the local community or society. Another typical
strategy is the operations excellence theme. HEIs usually try to improve their
quality, achieve more, and reduce costs. These strategies also can be found in
the business literature, where Porter (1990) has presented the strategies of focus
and overall cost efficiency.
The balanced scorecard (BSC) approach developed by Kaplan and Norton
(1992, 1993) is used in this study to describe a pedagogical ICT strategy. The
strategy must be understood before it can be implemented. The balanced
scorecard creates a shared understanding of the selected strategies because it
translates the strategy into tangible objectives and balances them into four
different objectives: customer and regional development; financing; internal
processes and structures; and learning and growth. The significance of the
present study is to show how the competitive strategies and the balanced
scorecard can be applied in HEIs.
A qualitative study is made based on the concepts of strategic planning and the
balanced scorecard approach. The focus on interpretation in how the partici-
pants make sense of these rather than numerical exactness is the strength of
qualitative research. When a qualitative study is carried out, qualitative data are
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 109
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required to clarify and illustrate the meaning of findings. Typically, a relatively
small number of cases is studied preserving the individuality of each of these in
the analyses.
The overall strategy of Turku Polytechnic emphasises high-quality learning. The
pedagogical strategy is a functional specific strategy, which provides outlines for
the development of education to promote the overall strategy. The pedagogical
ICT strategy focuses on the pedagogical strategy to the virtual learning and e-
entrepreneurship. The strategies of the educational departments are aligned with
the functional strategies. The balanced scorecard can be used to communicate
and implement both the overall and specific strategies.
The establishment of new businesses is an effective way to transfer new
knowledge from higher education to the local environment. The spin-off activi-
ties result from the transfer of people and know-how from the HEI. The transfer
of the skills and tacit knowledge embodied in the human capital differentiate this
technology and knowledge transfer mechanism from technology sale, licensing,
joint ventures, and alliances (Davenport, Carr, & Bibby, 2002). The spin-off
activities and e-entrepreneurship are means to implement the strategic plan of
HEIs.
This chapter is organised in that the next section presents the overall strategic
outlines of the HEI and presents how balanced scorecard can be used to
communicate and implement the strategy. Then, the pedagogical ICT strategy is
presented, including virtual learning and e-entrepreneurship. Strategic themes
and strategy maps are used to describe the strategy. An example of a spin-off
company and e-entrepreneurship are then presented. Finally, the results of the
study are summarised and discussed in the concluding section.
Strategic Planning in Higher Education
Strategic Outlines for Educational Institutions
Strategic planning is needed to move an organisation from its present position
to a desirable but uncertain future position. The strategic plan is a description of
the route described by the mission to a desirable future position described by the
vision (Wheale, 1991; West-Burnham, 1994). The strategic plan is a holistic
description of how an organisation adapts to its environment and develops its
activities for a better future.
The competitive strategies by Porter (1990) provide the general strategic
framework for the planning of the strategy in different kinds of organisations.
110 Kettunen and Kantola
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These strategies also have been applied successfully in educational institutions
(Treacy & Wiersma, 1995; Kettunen, 2002). Turku Polytechnic has selected
the focus strategy, which concentrates on the most promising clusters of
Southwest Finland. The focus strategy is combined with the strategy of cost-
efficiency, which enables resources for high-quality learning and research and
development.
The focus strategy means that the organisation selects a market segment and
builds bonds with the most important partners within the selected segment.
Finnish polytechnics are higher education institutions, which aim to serve their
geographical regions particularly well. Each polytechnic has selected its occu-
pational groups, where they educate experts. The focus strategy enables the
polytechnics to enhance their knowledge in their specific market segments.
The most promising growth clusters in Southwest Finland are ICT, biotechnol-
ogy, and the metal and maritime industries. ICT is especially suitable for
entrepreneurship training and incubator activities, because the ICT industry is
based to a large extent on the knowledge of graduates obtained in education. ICT
is not a capital-intensive industry with high entry barriers for most graduates.
When an organisation selects a cost-efficiency strategy, it delivers a combination
of price and quality that is recognised by customers and stakeholders. It is a
natural choice for educational institutions, which typically have predetermined
unit-priced funding and annual budgets. The strategy aims to remove the
overlapping activities to achieve cost reductions. Even though the cost-effi-
ciency strategy does not primarily aim to focus the activities it achieves also
focusing on specific activities. The focus and cost-efficiency strategies com-
plete each other.
Balanced Scorecard Describes the Strategy
The balanced scorecard is used to translate the strategy and vision into tangible
objectives and measures, which can be communicated and translated to the staff
and external stakeholders. The balanced scorecard approach also can be used
to plan and evaluate strategies (Kettunen, 2004). The balanced scorecard has a
balanced mix of objectives in the different perspectives to indicate the strategy.
The perspectives can be defined according to the needs of the organisation.
The perspectives can be defined in higher education as follows:
1. Regional development and customer. The perspective includes the
desired objectives of regional development. It also describes the value
created for students and employers in the internal processes.
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 111
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2. Finance. The financial perspective describes the public funding and
external outcome. The funding is aligned with the internal processes and
structures in the budget of an organisation.
3. Internal processes and structures. The internal processes and struc-
tures perspective describes the internal sequential processes and struc-
tures of organisational units. These processes create value for customers.
4. Learning and growth. The learning and growth perspective describes the
drivers for future performance and what learning and capabilities are
required in the internal processes.
These perspectives have been found to be necessary and sufficient across a
wide variety of organisations in the private and the public sectors (Kaplan &
Norton, 1996, 2001). The balanced scorecard was originally developed for
business companies. The desired objectives of the private sector are typically in
the financial perspective, but in the public sector organisations the financial result
is typically not the primary objective. Therefore, it is reasonable to place the
customer or recipient of the services at the top of the hierarchy.
The customer-oriented process begins by defining the objectives of the regional
development and customer perspective asking, “What value do we create for our
customers in the internal processes?” Then, the process continues by asking,
“What are the objectives in the financial perspective to enable the internal
processes?” and “What is the cost-efficient way of producing the services?”
Finally, the process asks, “What capabilities and learning are required to achieve
the objectives in the internal processes?”
The Pedagogical ICT Strategy
The pedagogical ICT strategy of Turku Polytechnic is based on the development
plans of the Finnish Ministry of Education (1999, 2003a). The purpose is to
increase the pedagogical research and develop virtual learning in order to
increase the competitiveness. Education should provide skills for applying,
managing, and evaluating the information flow of the modern e-networks and
knowledge society. The plans emphasise the importance of local networks,
which combine ICT, modern cooperation methods, independent learning, public
and private partnerships, regional development, and entrepreneurship.
The pedagogical ICT strategy is part of the pedagogical strategy of Turku
Polytechnic. The pedagogical strategy is a functional strategy, which provides
general outlines for the development of education. The pedagogical ICT strategy
112 Kettunen and Kantola
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emphasises the development of virtual learning and e-entrepreneurship. The
pedagogical strategy is aligned with the other functional and department strat-
egies.
E-business is defined in the European e-business Report as automated
business processes (both intra-firm and inter-firm) over computer mediated
networks (European Commission, 2004). It has been done in full accordance
with the definition used by the OECD (2004). E-entrepreneurs can be generally
characterised as entrepreneurs who take advantage of the Internet. They are not
necessarily expert in ICT or Internet technologies, but there may be many who
are interested in including an Internet component in a more traditional business
(cf. Benjamin & Wigand, 1995; Bakos, 1998; Coates, 2004). Virtual learning and
e-entrepreneurship are tied to each other in education.
The pedagogical development includes new working and learning environments,
new content production methods, content production, communication and inter-
action in the e-networks, guidance and evaluation, information security, and
copyright. The pedagogical development produces a wide range of teaching
methods, contents, and cooperation with working life. The purpose is to provide
skills to meet the needs of the local, national, and international partners in the
public and private sector.
New forms of communication and virtual communities emerge in e-networks,
when virtual learning is developed. The Finnish Virtual Polytechnic, which is a
joint development network of all the 31 polytechnics in Finland, has adopted a
widely used approach of developing virtual education. Guidance and support are
important at the beginning. These are followed by independent learning and
support. Finally, teachers and students can use various flexible methods of virtual
teaching and learning (cf. Collis & Moonen, 2001). The approach of developing
virtual learning can be described as follows:
1. Guided and supported virtual learning. Guided and supported virtual
learning is based on teaching based on collaboration in groups where the
teacher and students interact with each other using different kinds of digital
software and equipment. The education may include pair and group tasks,
which may entail discussions and negotiations on the e-networks.
2. Independent learning in e-networks. The students study and solve
problems independently using the virtual material in e-networks supported
by the instructions. Independent learning does not include interactive
support given by the instructor or interactions with other students.
3. Various methods of learning. Implementation includes several kinds of
flexible learning methods. The teaching has long-distance and contact
sessions. The study takes several forms. The students may study indepen-
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 113
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dently, in pairs, larger teams, or they may take lectures. The students use
e-networks, and the learning may take place on campus, at the working
place, or at home. The presence of the students is required both in the live
meetings and virtual environments.
Strategic Themes
Strategic themes describe what management believes must be done to succeed
and achieve the outcomes in the different perspectives. They are in line with the
objectives and describe the causal relationships between them. Each organisation
has a unique set of strategic themes, which are specific to the organisation’s
potential to create value in its environment. The strategic themes also are linked
to the organisation’s internal processes because the essence of the strategy is
in the activities (Porter, 1996).
The strategic themes of the pedagogical ICT strategy have their roots in
educational policy, the needs of local community and the practices of the
development work in virtual learning and e-commerce. The specification of
strategic themes caused extensive thinking at Turku Polytechnic. The general
strategic statement and strategic themes can be written as follows:
Virtual learning skills and e-entrepreneurship for working life:
• Various pedagogical methods are used in virtual learning.
• Virtual learning is included in the curriculum.
• Teacher teams are used to plan and implement the study modules.
• The learning material is used in a broader context.
• The change of virtual learning contents between the HEIs is increased.
• The entrepreneurship and intrapreneurship culture of the HEI is promoted.
The pedagogical methods include especially problem-based and virtual learn-
ing with the emphasis on the interactive skills and self reflectivity of students.
Virtual learning requires a shared understanding and teamwork of teachers. The
virtual learning material is mobile and is used in other degree programmes, the
Open Polytechnic, and other polytechnics through the National Virtual Polytech-
nic. There are cooperative production teams for virtual learning material. The
material is bought and sold by the partners of the production teams among the
different institutions. This supports the entrepreneurship of teachers.
114 Kettunen and Kantola
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Strategy Map
The strategy map developed by Kaplan and Norton (2001, 2004) is a graphical
representation of the functioning of the organisation. The strategy map helps the
employees and stakeholders to understand why the objectives of the organisation
have been set and how the desired objectives can be achieved. It is like a road
map, which describes only the essential characteristics of the strategy in a simple
way.
The description and communication of strategy requires an understandable
“organisational theory” of value creation. Strategy maps can be used to translate
the strategic themes into objectives located in the different perspectives. They
also provide tools to describe the causal linkages between the objectives. The
measurement system indicates the strategy through a sequence of relationships
between performance drivers (leading indicators) and outcome measures (lag-
ging indicators).
The strategy map clearly communicates the objectives of an organisation and
describes why they have been set. The strategy must be understood before it can
be turned into action. The objectives, corresponding measures, and performance
targets are derived from the organisation’s strategy and vision and balanced into
four different perspectives. The performance of organisational units and work-
ers can be directly linked to the strategy.
Figure 1 describes the strategy map of the pedagogical ICT strategy of Turku
Polytechnic. The regional development and customer perspective includes
lagging indicators that report on the desired outcomes of an organisation. The
financial perspective is always linked with the internal processes and structures.
The internal processes illustrate the value chain describing the sequential internal
processes and organisational units cooperating with each other. The learning and
growth perspective includes the capabilities and learning of employees, which
are the driving forces of future performance.
Regional Development and Customer Perspective
The first objective of this perspective is to equip all the students with good virtual
learning skills so that they can use them in working life and adult education.
According to the pedagogical strategy, Turku Polytechnic is moving from a
closed learning environment toward an autonomous and open expert organisation
and network facilitating continuous learning. The polytechnic develops and
provides learning and working environments, which enable the experiments and
study of new activities and procedures together with the companies and other
working life organisations.
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 115
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Another objective is to provide entrepreneurship skills. Various learning methods
include projects, practical training, and theses, which are part of the entrepre-
neurship training and shared with spin-off companies and other customer
organisations. Research and development produce methods of modern entrepre-
neurship training and incubator activities. In addition, continuing education
includes virtual learning and e-entrepreneurship training.
The objective also is to achieve customer satisfaction with e-networking.
Customer satisfaction is what virtually every organisation is trying to achieve.
The purpose of the Polytechnic is to support customers’ virtual learning skills,
working life skills, and e-entrepreneurship skills. The purpose is to create long-
lasting customer relationships, which enable life-long learning and continuous
cooperation between the educational institution and customer organisations.
The Financial Perspective
The first financial objective is to obtain sufficient funding from the Ministry of
Education. The degree programmes and longer educational programmes in
continuing education are funded by the Ministry. It also funds some part of the
research and development and certain development projects of major national or
regional importance.
Another financial objective is to obtain sufficient funding from the City of Turku.
The funding from the Ministry of Education is paid to the City of Turku, which
is the owner of Turku Polytechnic. The City of Turku contributes a minor share
of the funding. The city supports some software, which is used at Turku
Polytechnic. It finances and develops, for example, shared intranet and extranet
solutions of the city organisations.
The objective also is to increase the external funding. External funding is
obtained mainly for continuing education, research and development, and
services provided by the Polytechnic. The funding bodies include the European
Social Fund (ESF), other funds, companies, public sector organisations, and the
Finnish Virtual Polytechnic. The external funding is used to create new contents
and improve the quality of education.
Internal Processes and Structures Perspective
Research and development (R&D) is used to create content and methods of
virtual learning. Content also is required in cooperation and networking with
other educational institutions. The content of virtual learning is typically devel-
oped at the same time as the curriculum development. Research and develop-
116 Kettunen and Kantola
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ment also supports the development of infrastructure, library, and information
services.
The Pedagogical Support Unit of Turku Polytechnic promotes educational
development in many different ways. The support activities of virtual learning
include the development and implementation of new methods of virtual learning.
Educational development also includes many other development approaches
such as problem-based, work-based, and research-based learning. These ap-
proaches can be combined with virtual learning.
Quality assurance (QA) is based on documented procedures. The develop-
ment of quality assurance has been agreed in the Bologna Process by the
European Ministers (Berlin Communiqué, 2003). Quality assurance is at the
heart of the setting up of the European Higher Education Area (EHEA) by 2010.
Each HEI has the responsibility for quality assurance representing their aca-
demic and organisational autonomy. This provides the basis for accountability
within the national quality framework. The purpose of the EHEA is to increase
student and staff mobility in Europe.
The ICT infrastructure is a combination of data networks, systems, equipment,
and software. They include wireless networks, modern audiovisual solutions, and
personal mobile learning equipment. The ICT Unit of the Polytechnic is
developing an electronic learning portal constructed on the existing information
services, digital information sources, e-business instruments, virtual learning
environments, and existing network services of the departments. Physical and
virtual learning environments are developed interactively with each other taking
care of information security.
The library provides the main electronic sources and databases for students and
staff. The library helps them in finding the relevant pieces of information and
provides equipment for information processing. The librarians teach on the
degree programmes and personnel training and participate actively in virtual
learning projects. Cooperation between the support staff, teachers, students,
researchers, and the members of the working life organisations is necessary.
Electronic journals and books reduce the proliferation of printed material.
Virtual learning is expanding at Finnish HEIs. The government has set a target
to provide at least 30 credits of virtual education for each bachelor student
(Ministry of Education, 2003b). Virtual learning provides alternative ways of
studying, especially for those who work during their studies. The replacement of
contact learning with virtual learning helps the working students to avoid dropout.
The virtual learning platform also can be used to carry out other activities such
as tutoring during practical training, study counselling, international projects, and
continuing education.
Cooperation with other HEIs is an important characteristic of the internal
processes and structures. Turku Polytechnic participates in many production
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 117
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teams of the Finnish Virtual Polytechnic. Typically, the production team of
several institutions makes a written contract, agreeing to produce virtual learning
material. The contract also defines the financial transactions between the
institutions. Cooperative and entrepreneurial teacher teams are usually needed
within an institution to participate in the production teams.
Networking is a way of producing large study archives from small virtual
learning materials. The network itself is used as the instrument of guidance,
where the instructors and learners can select the information according their
specific needs (Silander & Koli, 2003). The purpose is to use the learning
material several times in different learning combinations or at different educa-
tional levels. Often the smaller modules correspond best to the various needs in
working life situations of adult education.
Learning and Growth Perspective
Strategic awareness is created in the strategy process, where the expert team
for virtual learning prepares the strategic plan with the experts and management
team of the polytechnic. The existing strategy and the changes in the environ-
ment and technology are evaluated in order to update the strategy. The strategy
is approved by the Board of Turku Polytechnic. Finally, the strategy is commu-
nicated and implemented using the balanced scorecard.
Personnel training is an important way of introducing new methods and software
used in virtual learning and e-entrepreneurship. The departments of the Poly-
Figure 1. Strategy map of the pedagogical ICT strategy
Regi onal
development and
customer
Finance
Internal processes
and structures
Learning and
growt h
• Virtual learning skills for working life and education
• Entrepreneurship skills
• Customer satisfaction of e-networking
• Funding of the Ministry of Education
• Funding of the owner of HEI
• External funding
• R&D
• Pedagogical
support
• QA
• Infrastructure
• Li brary
• Virtual
learning
• Cooperation
• Networki ng
• Strategic awareness of virtual learning
• Personnel training
• Capabilities of quality assurance
118 Kettunen and Kantola
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technic are responsible for the short-term education and working life periods of
the personnel. The Personnel Development Unit of the Polytechnic arranges
longer personnel training and creates preconditions for the implementation of the
pedagogical ICT strategy.
The capabilities of quality assurance have been developed constantly, while the
quality system of Turku Polytechnic was developed. The procedures of quality
assurance have been documented and are also used in virtual learning. The
procedures and documents include evaluations of the Finnish Higher Education
Evaluation Council, the quality manual of the institution, internal audits, internal
target discussions, and feedback from students and employers.
E-Entrepreneurship
of a Spin-Off Company
A Spin-off Company as a Partner
The spin-off companies result from the transfer of people and intellectual
property from educational institutions. The continuous transfer of skills and tacit
knowledge embodied in human capital differentiates the mechanism of technol-
ogy transfer from technology sale, licensing, joint ventures, and alliances
(Davenport et al., 2002). The supporting of start-up companies is an effective
way to transfer the expertise of HEIs to working life and make it commercial.
The case of Mansoft Tietotekiikka Ltd. is used as an example to illustrate how
the pedagogical ICT strategy of Turku Polytechnic is implemented and how
technology transfer takes place. Mansoft Tietotekniikka Ltd. is a spin-off
company in software business and application development. The company was
established by a senior lecturer at the Polytechnic. He is still the managing
director of the company.
The purpose of Mansoft Tietotekniikka Ltd. is to develop the expertise to achieve
customer satisfaction. In order to achieve this aim, the products are tailored to
meet the needs of the customers. The strategy of Mansoft Tietotekniikka Ltd.
also includes the cooperation with Turku Polytechnic as described by Adamsson
and Puukka (2004). The company has planned solutions for specific needs of
knowledge-based organisations. It also carries out consulting, maintenance
services, and several boxed products with a fixed service. As a financially
independent and customer-oriented company, it aims to be a productive and safe
partner in long customer relationships.
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 119
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The company has been developed in a sustainable way. The business profit has
always been ploughed back into the company and product development. All eight
young permanent employees of the company are graduates of Turku Polytech-
nic. One of the main principles of company policy has been to offer permanent
positions to young experts starting their careers in the ICT business.
The managing director of Mansoft Tietotekniikka Ltd. is a member of the Turku
Polytechnic’s Advisory Board. The advisory boards of Finnish polytechnics
include members from working life and help the polytechnics to develop the
curriculum to meet the needs of companies and other organisations. The advisory
board is a network of experts who helps the polytechnic and the participating
companies to adapt to the changes of the environment and conceive new
development ideas.
The recruitment of the company is focused on the final year students of Turku
Polytechnic. Turku Polytechnic has arranged the education so that students can
participate in the company’s projects. The arrangement of the ICT fair is another
mode of cooperation between Turku Polytechnic and Mansoft Tietotekniikka
Ltd. The ICT Fair is organised in Loimaa, where Turku Polytechnic operates.
The fair helps local small companies to recruit new staff, market their services,
and participate in regional development.
According to the company owner, some customers have expressed their opinion
that the company should have older experts to achieve credibility, but the
managing director has felt that the young staff brings more flexibility and fresh
ideas and fewer predetermined attitudes regarding the business culture. The
company is represented by the managing director, who takes care of the business
relationships and project management. The software and system development
are left to the younger colleagues. The long experience of the manager and the
fresh ideas of the young colleagues complement each other in the company. This
is an important characteristic of the social capital and competitive advantage of
the company.
Cooperation in Software Development
Turku Polytechnic has designed project management software for itself and
other knowledge-intensive organisations. The software Projektori was created
in association with Mansoft Tietotekniikka Ltd. Originally, Projektori was
created to manage development projects on the intranet. Then the R&D unit of
Turku Polytechnic expanded the use of the software into other project-related
activities. It can be used, for example, to manage project plans and disseminate
project information on the Internet. These features make the software a useful
tool in many publicly funded projects.
120 Kettunen and Kantola
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The software was designed to be used in data networks so that cooperative
projects can use different kinds of intranet and extranet options. There is a
general understanding about the roles between the partners. Turku Polytechnic
is responsible for content planning and production while Mansoft Tietotekniikka
Ltd. takes care of the database planning and implementation.
The guidelines for the cooperation can be found in the strategic plans and quality
assurance manual of the Polytechnic. The cooperation with the spin-off com-
pany is regional development, which is an important characteristic of Finnish
polytechnics. The quality manual contains guidelines for project management.
Many of the basic principles of cooperation and software solutions can be traced
from the commonly observed needs of databases and action models of large
organisations (Groth, 1999).
The Projektori software is not only a technical instrument to arrange documents;
the use of the software changes organisational behaviour into high-quality
project management. The software guides the individuals and units to the process
and team-oriented organisational culture. It also provides an interactive connec-
tion and a virtual meeting place for public sector institutions, private sector
companies, and other working life organisations.
Turku Polytechnic also has sold the Projektori software to some other large
knowledge-intensive organisations in Finland with the cooperation of Mansoft
Tietotekniikka Ltd. The user rights of the software can be purchased by installing
the application to the customer’s server. It also can be rented as an application
service provider (ASP) solution by locating the application and its database on
the servers of Mansoft Tietotekniikka Oy. The rent includes both the application
and its daily database back-up.
The Projektori software can be connected with other software such as the
Puplikaattori software which is software designed for e-publishing. This soft-
ware is the result of cooperation between the Publication Unit of Turku
Polytechnic and Mansoft Tietotekniikka Ltd. Both software can be purchased
and used as independent solutions. The software helps to increase the Web-
based resources, which are increasing in educational practice (Collis & van der
Wende, 2002).
Conclusion
Information and communication skills are needed in the modern knowledge
society. These skills are among the basic professional skills in most industries.
The ideal is an individual who is aware of the information sources, has the
information reading skills, is capable of acquiring and communicating information
Strategies for Virtual Learning and E-Entrepreneurship in Higher Education 121
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efficiently, evaluating the information acquired, and using the information in an
ethically and legally correct way.
High-quality and flexible learning is the overall strategic statement of Turku
Polytechnic. The strategy focuses on the needs of the growing clusters in
Southwest Finland. The ICT cluster is one of the most prominent clusters
including software development and mobile telephones and TV production.
Nokia Mobile Phones Ltd. is one of the best-known companies in this region. The
strategy also focuses on entrepreneurship training, which includes e-commerce,
incubator activities, and other forms of entrepreneurship.
The pedagogical ICT strategy is a specific functional strategy aligned with the
overall strategy, other functional strategies, and department strategies at Turku
Polytechnic. The pedagogical ICT strategy describes the strategic plan of virtual
learning and e-entrepreneurship. The strategic themes of the pedagogical ICT
strategy include various pedagogical methods, the inclusion of virtual learning in
the curriculum, the role of teacher teams, the use of learning material in a broader
context, transactions between other educational institutions, and entrepreneur-
ship culture.
The balanced scorecard approach is useful in accomplishing the strategic
themes, objectives, and measures for virtual learning and e-entrepreneurship.
The strategy map was used to translate the strategy into a graphical represen-
tation which clearly describes the objectives in the different perspectives of the
balanced scorecard. It was used to describe the main characteristics of the
strategy to achieve better expertise in virtual learning and e-entrepreneurship.
An example of the implementation of the pedagogical ICT strategy was
presented. This example illustrates a case of how a spin-off company was
established and how it cooperates with the educational institution. Project-based
education is followed by recruiting graduates. The competitive advantage of the
spin-off company is based on continuous cooperation with the HEI and the
innovative and fresh ideas of the graduates employed.
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124 Hassall and Welsh
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Chapter VII
The Beginnings of a
Postal E-Marketplace:
Innovation or Natural
Evolution?
The corProcure Story
Kim Hassall
Melbourne University, Australia
Karyn Welsh
corProcure, Australia
Abstract
This e-business case study of the corProcure enterprise is instructive as it
reflects three recurrent themes of the dot-com period:
1. First, the seemingly powerful but unstable corProcure’s business
model was created between a number of large corporate institutions in
response to the corporate pressure to enter the dot-com world.
2. The quick revelation that the initial business model was incompatible
for the founding corporate partners.
The Beginnings of a Postal E-Marketplace 125
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3. The buyout of the venture by one of the partners, Australia Post, and
re-engineering the direction of corProcure for a more workable e-
marketplace business direction. This was considered to be the way
forward.
This evolution, learning curve, and redirection of the e-purchasing cartel
was in one way just a snapshot at the macro-level of what happened to many
ventures during the dot-com boom. At the micro-level, the change in
direction was reflective of a more pragmatic business sense approach,
when all the late 1990s hype was stripped away from the initial e-business
model. The new business model incorporating an e-marketplace also
reflected the need for the new owner to diversify into non-traditional
products as part of new e-business and e-logistic strategies. These strategies
were being examined globally by Postal Authorities.
Introduction
In 2001, the Universal Postal Union and the World Bank released a report that
proposed that the Post Office was potentially headed for being a sunset industry
unless it addressed the issue of its product erosion (UPU, 2001). A further
international postal e-logistics report examined various ways that this “postal
sunset industry mentality” could be addressed and the actual declines arrested
through the introduction of some critical strategies (Hassall, 2003). In Australia,
however, since the advent of the dot-com wave, what was the local postal
authority doing to stem the stagnation in the demand for its traditional postal
products? Was it trying to leverage the new Internet-based technologies, thus
enabling a range of new services?
What the Post Office did was change its focus to internal e-procurement and
implement utility bill payments. As well, Australia Post instigated a warehousing
and fulfillment business, which ran in parallel to the existing postal network.
What was perceived to be the e-business “showstopper” was its partnership with
13 other major corporates, in a buying consortia called “corProcure”
(www.corprocure.com). This buyers’ club began life at the tail end of the dot-
com hype in 2000. By January 2002, the 13 partners cleared the deck chairs and
allowed Australia Post to purchase the corProcure entity and technology. Why
had the potentially largest buying cartel failed so quickly? What lessons were
learned and what was the obvious e-business strategy that needed to be
implemented?
126 Hassall and Welsh
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Background to the Evolution of a Postal E-Marketplace
In 2003, a study into the impacts of e-logistics and e-business and what it might
mean to the traditional post office was published through the Universal Postal
Union (Hassall, 2003). The research surveys spanned 40 countries with the
summary findings being refereed by the e-commerce Unit, Postal Technology
Branch of the Universal Postal Union (UPU). The UPU, which is a division of
the United Nations, is the coordinating and representative body of all national
postal authorities at the international level. The research findings were listed on
the UPU’s Web site in January 2004.
E-Postal Research Findings
In a reassessment, (Universal Postal Union and World Bank Report, 2001), the
global post office needs not become a sunset industry, as was suggested, if it
were to embrace new electronic products. Many of these products could be
facilitated by the adoption of new Internet-based technologies and the processes
that this technology may play in enhancing the traditional postal services. The
first round of this research was conducted by the Centre for Freight & Logistics
Research, as a Delphi survey through 28 interviews across some 11 countries.
The highest scoring strategy emerging from the survey was to embrace “new
electronic products.” With regard to the specific electronic and logistics products
described in Figure 1, the proposition for a postal e-marketplace scored highest
in the future directions estimates with some 43% more important in future
strategic and business focus than at the current time. In fact, 8 of the 12 options
had a future importance factor of some 25% greater than their current perceived
importance. This chapter examines the history and potential for the launch of a
major postal e-marketplace from Australia in what is a rapidly changing
electronic and Internet environment.
Fundamental Business Issues for Markets and Even
Postal E-Marketplaces
To be effective, markets require participants to share their business processes
(e.g., purchasing). Companies are increasingly unwilling to standardise these
processes as they seek to maintain their uniqueness as a competitive advantage
and control over their supply chain for purchasing direct goods. This is not the
case, however, for indirect goods. For this reason, horizontal marketplaces have
better success in connecting traders than do vertical ones.
The Beginnings of a Postal E-Marketplace 127
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Marketplace security is another big issue for corporations. Most will purchase
direct and indirect goods from online environments that sit behind the corporate
firewall.
The Need for New Services as Deregulation Grows on
the Home Front
While postal volumes were declining in many countries during the 1990s (UPU
database of Postal Statistics, www.upu.int), on the Australian domestic scene,
micro economic reform also was occurring. This meant continued deregulation
across many industries including the Postal Industry. Following an Industry
Commission review in 1992, Australia Post’s monopoly was reduced in 1994 and
more services were opened up to competition. Australia Post retained a
monopoly over mail weighing up to 250 grams and with a minimum charge of
$1.80. This meant that couriers and freight operators could pick up and deliver
much business and industrial mail, which was heavier or cost more than this price
threshold. In 1995, “GiroPost,” a multi-bank Eftpos option was introduced as
part of a range of financial transactional services, such as utility bill paying, at
Post retail outlets. In 1995 as well, a five-year postal network renewal program
costing $500 million began, aiming to equip Post with the latest technology for
mail processing and delivery operations.
Figure 1. List of postal options sorted by of future “strategic and business”
importance
Future Increase in Importance Of
e-Postal Strategies
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45
e-Marketplace
Freight&Warehouse Ability
Delivery Strategies
Freight Ability
Track/Trace
Warehouse Ability
Bank License
Multi Language
Utility Payments
Customs Clearances
Site Evaluation
Pre-Paid Products
Source: UPU Web site 2004
128 Hassall and Welsh
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The Australian National Competition Council (NCC) again reviewed Australia
Post’s operations in March 1998 and recommended an almost complete deregu-
lation of mail services by 2000, except for standard personal letters sent by
households within Australia. Australia Post would be exposed to competition in
93% of its services, compared with only 50% in 1998. Australia Post’s
submission to the Council had argued for the retention of the current position,
with a review in 2003. Linda Nicholls, the chair of Australia Post, had com-
mented that the report went further and faster than Post believed was practical.
She noted that the NCC had no plans for any safeguard if the changes had
unexpected outcomes. Graeme Samuel, the then president of the National
Competition Council, responded that Post was abnormally profitable with returns
double that expected from such a business.
The New Focus at the Global Postal Level
Australia Post, and other postal organisations around the world, are challenged
as revenue from traditional sources is under threat from electronic alternatives.
Post’s competitors, including other postal organisations, have increasing global
ambitions and search for new markets and opportunities that exploit network
economies of scale. Post’s customers expect them to understand the customer
and their businesses to a greater degree than ever before and to be able to
interact with them online.
E-business is acting as a catalyst for innovation and value creation. Online
shopping, although turbulent, will continue to grow providing Post with a raft of
opportunities. The proportion of personal bills being presented and paid electroni-
cally is increasing at the expense of payment by mail or payment in person at post
offices. There also is renewed growth in purchasing goods and services online
as industries review areas that can save cost and add efficiency to the day–to-
day procurement process. Improved productivity through efficiency gains is a
key driver of e-business in many organisations including Postal Authorities.
Thomas E. Leavey, director general of the Universal Postal Union, was quoted
in Australia Post’s 1999-2000 Annual Report:
For postal services the challenge is to be totally immersed with customer
concerns, proactively seeking to determine their needs and listening to
their evaluation of the services provided. Customer focus is now central to
the strategy of every successful business — from banks to manufacturers —
and dominates the dynamics of the business environment of the new
millennium.
The Beginnings of a Postal E-Marketplace 129
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What has Changed on the E-Logistics
and E-Business Front to Support a
Postal E-Market Business?
The major “operational” finding from the first round of Delphi analysis into future
Postal e-business options (Hassall, 2003) was that some “track and trace”
mechanism be available to customers for “selected postal products.” The major
future “strategic and business” initiative, however, was to “offer an e-market-
place” to small businesses (SMEs) and to large businesses. Such an e-
marketplace concept is new to Postal Authorities. As such, there are many
variations in both applications and marketplace business rules that will sit behind
any chosen e-postal marketplace model.
Gaining acceptance for such a new product, be it an e-marketplace itself, is
fraught with many challenges for the traditional Post Office culture. However,
should the e-marketplace become successful in any particular country, then this
concept will generate considerable interest internationally, perhaps more so than
any postal product has done within the last 30 years.
An Overview of E-Marketplace Fulfillment
In the case of an e-marketplace, fulfillment and delivery services can be
achieved:
1. through a number of third party logistics providers selected by the buyer,
2. through the marketplace owner’s fulfillment processes and services, and
3. through logistics providers that are also e-booth holders on the marketplace.
(This is certainly a powerful option for international buyers who want to
attain fulfillment in the offshore country where the purchase will be
fulfilled.)
This third option is a considerably important option for international companies
wanting to physically trade in, for example, Australia. Who do you call for service
X? Try the marketplace. This could be for office space, financial advice, freight-
forwarding services, even a bottle of champagne for a birthday, and so forth.
Getting the balance right with fulfillment is often very customer specific. Various
marketplaces offer B2B and B2C services through express carriers, non-
express transport carriers, and even through the post office itself. A postal e-
130 Hassall and Welsh
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marketplace should offer similar services for B2B and B2C clients, that is, those
services that also are offered by other online trading hubs or other e-market-
places.
Difficulties with B2B Fulfillment through the Post Office
It is very simplistic to talk of B2B, however the subclassifications of B2B are
quite large. This was pointed out at the OECD/ECMT e-transport and e-
logistics Summit (Nemoto & Visser, 2001). However, for a marketplace, the
easiest way to offer B2B services is in fact to list B2B providers that offer B2B
services. Certainly Postal authorities such as LaPoste and Deutsche Post, via
Danzas and AEI, as well as New Zealand Post have all acquired a range of
premium and non-premium B2B logistics providers to supplement their postal
parcels capability.
Provision of a “warehousing and freight capability,” did in fact score second to
the establishment of an e-marketplace in terms of future strategic importance
(see Figure 1). It is probably in the best interests of a traditional postal authority
who may be inexperienced to the requirements of B2B that B2B fulfillment
services be available through its own marketplace, as opposed to a single channel
offered by a long-term preferred supplier. In this way, much wider combination
of fulfillment services can be offered, with significant flexibility to any customer
requiring these B2B services.
A third B2B option was examined in the initial research (Hassall, 2003): that B2B
capability be offered by the postal authority but with differing customer service
standards to those offered to existing Postal products. In discussions with both
La Poste’s warehousing and fulfillment divisions, as well as Deutsche Post
Logistics, it was seen as somewhat unfavourable to mix B2B with the existing
postal network. To provide B2B freight and warehousing at differential service
External
Logi stic
Services
Int ernal Logistic
Services
E-Pl atform
Products
Source: Supply Chain Review, August 2001
Figure 2. Variations of marketplace fulfillment
The Beginnings of a Postal E-Marketplace 131
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levels, new freight entities were acquired specifically for such purposes. These
operations often worked out of independent terminal and distribution centres.
From a marketplace perspective, B2B fulfillment agents and services should be
listed on the e-marketplace These services will not be sought through the
marketplace owner but from specialised buyers that may even be e-booth
holders on the marketplace themselves.
B2C can be Expanded in the Marketplace through New
Delivery Options
B2C is considered the expert domain of each domestic Postal Authority. But
could this change in the future? Table 1 lists 12 home delivery strategies. The
several Postal authorities that participated in the e-postal business research
(Hassall, 2003) offered less than half these listed options.
STRATEGIES for
Household Delivery
Greater Channel
Complexity
Greater
Recipient
Complexity
Land Use
Variation
1. Continual Household Attempt Yes/Maybe No No
2. After-Hours Delivery No/Maybe No No
3. Attempt one delivery, phone
follow-up for second attempt.
Yes Yes No
4. Phone booking for initial
delivery slot.
Yes Yes Yes
5. Attempt home delivery,
failure redirected to retail
agent for customer pickup
Yes Yes Yes
6. Attempt delivery to home
parcels box
No Yes Yes
7. Customer pickup from retail
key-hole site
No Yes Yes
8. Customer pickup from secure
depot storage
No Yes Yes
9. Delivery agent to retail agent,
by direct drop
No Yes Yes
10. Initial delivery to preferred
post office of choice.
No Yes Yes
11. Delivery agents loads orders
direct from retail site not a
specialised distribution hub.
No Yes Yes
12. Optional flexible delivery
strategies as stated on the
customer order form
Maybe Maybe Maybe
Table 1. Current and future variations of home delivery strategies
Source: Supply Chain Review, December 2001
132 Hassall and Welsh
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Certainly it is to be expected that further specialised home delivery services will
appear on the home shopping front, which will be competitors to the post office.
New mixtures of delivery strategies will emerge and will offer a higher level of
customer satisfaction, more so than any single option or delivery strategy.
Certainly the specific commodity to be delivered also will restrict many of the
householder delivery choices. High value goods and bulky goods such as garden
furniture have even generated niche operators for such deliveries where the
population base is very large.
International Fulfillment Opportunities Emerging for
B2C and B2B
Emerging from an analysis of international Internet purchasing requirements
(Supply Chain Review, December 2001), the following new demand patterns
became apparent. This shift showed that there was considerable scope for new
international postal services to emerge in the support of both B2B and interna-
tional B2C.
In both cases, an international 5-business-day service, or certainly a less than a
7-day service, would be a highly favourable option, well worth further consider-
ation by international postal authorities. This option of a “deferred express”
service can generally reach not only capital cities but also major regional cities
in other countries. The service would be far more acceptable than the 10-day
international air services, the basic international parcels’ service currently
offered by postal authorities.
Type of Order Service Standard
Domestic < 2 days 5 to 7 days
9% 91%
International Standards Offered 250
employees
1 0 0 0 0 0 1 0 1
A 1 5 6 1 1 0 19 0 19
B 6 0 3 0 1 5 0 0 5
Types of
emerging
forms of
organisation
C 0 0 0 0 0 0 0 0 0
Total 7 5 9 1 2 5 19 0 24
Keys: A: ½ Fusion, B: Fusion and C: e-organisation
Table 1. Size and industry sectors of the new organisational forms
Fusion
½ Fusion
0
20
40
60
80
100
Percent
Reasons
More
Purposes
Business or
Advertising
Figure 2. Driver for using network technologies
232 Azumah, Koh, and Maguire
Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written
permission of Idea Group Inc. is prohibited.
network technologies than the ½ fusion SMEs. For example, the use of online
order taking by the fusion SMEs has created many repeat purchases and
supported e-customer relations management (e-CRM). Nevertheless, the
fusion SMEs are not in a position to fully incorporate e-CRM (Jelassi & Enders,
2005), in their business due to lack of true understanding of its impact as well as
resource and skill shortages.
Figures 4 and 5 show whether the Internet, other network technologies, and ICT
help or facilitate SMEs to remove some organisational and geographical barriers.
A positive result indicated that both organisational and geographical barriers for
both staff and customers have been reduced. This view also was supported by
Bannett, Greve, and Park (1994) who stipulate that the impact of the Internet on
business processes and communication has increased access to such a large
audience and range of people, and this increased the ability of organisations to
leverage the value of information to a scale that has never before been possible.
The impact of the Internet, other network technologies, and ICT on the decision-
making process has revealed that these technologies help to facilitate faster
decision-making. Figure 6 shows once again that fusion SMEs who incorporate
Figure 3. Number of visitors to SMEs site
Fusion ½ Fusion
0
20
40
60
80
100
Percent
Visitors to Site
>10000
8000-9999
5000-7999
3000-4999