Developing an E-Commerce Strategy

Strategy formulation is a creative process and the chances of going wrong tend to be high. Intel's approach to developing an e-commerce strategy is similar to Cisco's which has been described as having "moved from an opportunistic look at the Internet to a core strategy" (Kraemer & Dedrick, 2002, p. 17). We can safely assume that e-commerce strategy creation is at an experimental stage. The difference now (compared to the period before the dot-com bubble burst) is that such experiments need to be far better thought out and the general hype about the potential for e-commerce has given way to healthy skepticism. The strategic view, exemplified by Porter's five forces model, is adequate in many situations. In other words, once an organization clearly delineates its strategy (which is not trivial), the e-commerce strategy needs to be aligned to such an organizational strategy. However, in many situations the development of an organizational strategy depends on the power relationships within an alliance that the organization is a part of. This alliance is almost always the extended organization. The core idea for the integrated framework is premised on the complementarity among technologies and processes across the extended value chain that the Internet enables. Konsynski (1993) provides prior research in a similar context.

There are many approaches to help with developing an e-commerce strategy. Any such approach tends to adopt a cookbook stance and purports to encapsulate the complexities associated with the strategy-making process. Such approaches also tend to crystallize "best practices" based on what is seen as successful in the e-commerce domain.

Plant (2000) provides a detailed approach to e-commerce strategy formulation. He identifies four positional factors (technology, service, market and brand) and three bonding factors (leadership, infrastructure and organizational learning). We find it useful to think of the bonding factors as the necessary factors and the positional factors as those that accord sufficiency to the e-commerce strategy initiatives. Leadership is required to provide the stewardship for e-commerce related changes that bring with them as much uncertainty as the potential to add value. Envisioning and articulating such value is a critical leadership role. Infrastructure inside the organization—as well as outside it (Kisiel, 2002) is a prerequisite to envisioning the positional factors. For instance, while Ford's infrastructure can be labeled as world-class, its e-commerce strategy is determined, in large part, by the quality and nature of infrastructure (see other Case 4) that other stakeholders create. Lastly, organizational learning needs to be a preexisting trait that is crucial to e-commerce strategy because, as has been mentioned before, e-commerce strategies tend to be emergent. Hence, a learning stance is not just important to ensure course corrections but also to ensure a proactive organizational stance at reading negative and positive feedbacks as well as early warning signals. The four positional factors allow an organization to seek technology leadership, brand leadership, service leadership, market leadership or leadership positions based on a blend of two or more thrusts. This is explained in greater detail in Jain and Kanungo (2002).

Another approach to looking at e-commerce strategy creation is provided by Jutla et al. (2001). Their stakeholder model is premised on the importance of stakeholders (customers being the ones that drive the initiative) and the explication of value propositions per stakeholder. This approach resonates with the notion of complementarity. This approach also recognizes the importance of thinking beyond the existing organization and identifying attributes of the extended organization. This approach also formalizes the importance of managing the interand intra-organizational interfaces in e-commerce. Jutla et al. (2001) identify many such aspects as shown in Table 3.

Table 3: Stakeholders and Components.

Stakeholder	Major component
Agent	Research and analysis, content management, sales, marketing and service, community, education and entertainment
Community	Engage, community interaction, community services, community governance
Customer	Engage, order fulfillment, support
Governance	Socio/economic (stability of the geographic area), marketplace rules (stability of market), piracy/trust (stability of customer), technological (stability of architecture)
Internal operations	Productivity, e-culture, information systems infrastructure and services Contracts management, identification mechanism, assurance, dispute resolution,
Operational partner	relationship management, transaction management, content management, intellectual asses management
Strategic partner	New alliances, account planning, new market research, macro resource planning, product or service development

An often under-discussed aspect of e-commerce strategy is the formal management of risk. There are three broad sources of risk—not doing anything at all about e-commerce, getting the strategy wrong and getting the implementation wrong (Smith, 2000). Organizations need to ensure that there is a deliberate and rigorous risk-management process applied to e-commerce—just as such a process would be applied to any new organizational initiative. Organizations will quickly realize that such an approach will form the basis for the knowledge management initiative in the context of e-commerce. This is because each organization will have to discover for itself what works and what does not. The risk management process will allow an organization to establish internal and external benchmarks for performance and expectations.

While proposing a methodology for creating an e-commerce strategy, Jutla et al. (2001) state that managing relationships with stakeholders is key. We can restate that by saying that managing complementarities is the key in e-commerce strategies because e-commerce virtually integrates the value chain vertically. The value chain can only be as strong as the weakest link. Hence, choosing e-commerce partners, in many ways, determines the potential strength of the value chain or the extended enterprise. For instance, Cisco decided to develop a strategy to use the Internet extensively because it was and is essentially a virtual organization. Its core competence is designing network devices. It outsources most of the manufacturing and logistics activities. In order to maintain the high level of research and development, Cisco buys companies and assimilates them. Cisco's e-commerce strategy formed a smaller part of a larger Internet strategy whereby both internal and external information systems were standardized based on uniform technology architecture. The broad strategic direction was relatively easier for Cisco because it is the dominant firm in the extended enterprise (what customers see is that they place an order with Cisco—what they do not see is that another organization is responsible for manufacturing and fulfilling that order). The decision on stakeholders was primarily driven by which firms to acquire and who to outsource manufacturing to—and in general who to deal with.