Leveraging Complementarity in Creating Business Value for E-Business

Leveraging Complementarity in Creating Business Value for E-Business

Ada Scupola (Roskilde University, Denmark)
DOI: 10.4018/978-1-60566-026-4.ch384
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Abstract

The rapid developments of Internet and Web-based applications has shaped the era of the digital economy and changed the way enterprises operate. Internet is increasingly becoming part of the basic business model for many companies as organizations around the world are adopting new e-business models and integrated solutions to explore new ways of dealing with customers and business partners, new organizational structures, and adaptable business strategies (Singh & Waddell, 2004). According to Kalakota and Robinson (1999), e-business is the complex fusion of business processes, enterprise applications, and organizational structure necessary to create a high performance business model. E-business is therefore more than just having an Internet presence or conducting e-commerce transactions, it is a new business design that emphasizes a finely tuned integration of customer needs, technology, and processes (Kalakota et al., 1999). When discussing e-business, it is important to make a distinction between physical and digital products. A digital product is defined as a product whose complete value chain can be implemented with the use of electronic networks, for example it can be produced and distributed electronically, and be paid for over digital networks. Examples of digital products are software, news, and journal articles. The companies selling these products are usually Internet-based “digital dot coms” such as Yahoo and Google. On the contrary, a physical product cannot be distributed over electronic networks (e.g., a book, CDs, toys). These products can also be sold on Internet by “physical dot coms,” but they are shipped to the consumers. The corporations adopting e-business are distinguished into “bricks and mortar” companies, hybrid “clicks and mortar” companies (such as Amazon.com) and pure dot coms (Barua & Mukhopadhyay, 2000a). Many studies from the early days of deployment of information technology (IT) in organizations have struggled to measure the business value and profitability of information technology (Barua et al., 2000a). Many of these studies have showed that productivity gains are small or not existent and that the effects of information technology and e-commerce have to be often looked upon from a competitive advantage point of view (Barua, Konana, Whinston, & Yin, 2001; Porter & Miller, 1985; Scupola, 2003). Recent research has argued that to increase the business value of electronic commerce to a corporation is important to shift the focus from whether electronic commerce creates value to a company to “how to create value” and “how to optimize such value” (Barua et al., 2001). This can be achieved by exploring complementary relationships between electronic commerce, strategies and value chain activities (Scupola, 2002, 2003). Here this argument is taken further to show the importance of complementary relationships for the business value of e-business.
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Introduction

The rapid developments of Internet and Web-based applications has shaped the era of the digital economy and changed the way enterprises operate. Internet is increasingly becoming part of the basic business model for many companies as organizations around the world are adopting new e-business models and integrated solutions to explore new ways of dealing with customers and business partners, new organizational structures, and adaptable business strategies (Singh & Waddell, 2004). According to Kalakota and Robinson (1999), e-business is the complex fusion of business processes, enterprise applications, and organizational structure necessary to create a high performance business model. E-business is therefore more than just having an Internet presence or conducting e-commerce transactions, it is a new business design that emphasizes a finely tuned integration of customer needs, technology, and processes (Kalakota et al., 1999). When discussing e-business, it is important to make a distinction between physical and digital products. A digital product is defined as a product whose complete value chain can be implemented with the use of electronic networks, for example it can be produced and distributed electronically, and be paid for over digital networks. Examples of digital products are software, news, and journal articles. The companies selling these products are usually Internet-based “digital dot coms” such as Yahoo and Google. On the contrary, a physical product cannot be distributed over electronic networks (e.g., a book, CDs, toys). These products can also be sold on Internet by “physical dot coms,” but they are shipped to the consumers. The corporations adopting e-business are distinguished into “bricks and mortar” companies, hybrid “clicks and mortar” companies (such as Amazon.com) and pure dot coms (Barua & Mukhopadhyay, 2000a).

Many studies from the early days of deployment of information technology (IT) in organizations have struggled to measure the business value and profitability of information technology (Barua et al., 2000a). Many of these studies have showed that productivity gains are small or not existent and that the effects of information technology and e-commerce have to be often looked upon from a competitive advantage point of view (Barua, Konana, Whinston, & Yin, 2001; Porter & Miller, 1985; Scupola, 2003). Recent research has argued that to increase the business value of electronic commerce to a corporation is important to shift the focus from whether electronic commerce creates value to a company to “how to create value” and “how to optimize such value” (Barua et al., 2001). This can be achieved by exploring complementary relationships between electronic commerce, strategies and value chain activities (Scupola, 2002, 2003). Here this argument is taken further to show the importance of complementary relationships for the business value of e-business.

Key Terms in this Chapter

E-Commerce: Is the buying and selling of information, products and services via computer networks and especially the Internet.

Business value: It can be defined as the overall value that an investment brings to a corporation. Examples of performance measures of the business value of electronic commerce can be: (1) profitability, that is whether electronic commerce contributes to an increase in the profitability of the corporation; (2) competitive advantage that could be measured as an increase in market share, shareholder value or customer satisfaction.

Complementarity: Several activities are mutually complementary if doing more of any one activity increases (or at least does not decrease) the marginal profitability of each other activity in the group. Complementarities among activities imply mutual relationships and dependence among various activities whose exploration can lead to higher profitability.

E-Business: Is more then e-commerce and is a new business design based on integration of technology, business processes and customer needs.

Re-Engineering: Is the redesign of a corporation’s business processes (or part of them) to take place over the Internet. The main goal is reduced costs, lower product cycle times, faster customer response, and improved service quality.

Strategy: Strategy is a planning, rational process through which the company chooses a certain mode of development, among all the possible ones, and maintains that direction through a well defined period (design view). In the process view, strategy is a process that might change on the way, giving rise to an emergent strategy. The realized strategy might be different then the original intended strategy.

Value Chain: Represents the activities of a corporation such as procurement, production, marketing and sales, and customer support.

Business Processes: The business processes corresponding to each activity of the value chain are the specific processes into which each primary activity of the value chain can be decomposed.

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