2Cities.com

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The Background

As early as 1999, a small group of interested parties came together to discuss whether the Internet could be used to facilitate a community portal for a regional community area north of Perth in Western Australia. The region was Joondalup, a rapidly developing suburban “new town” area. Founders realized that funding support would be needed and that they could substantially increase their bargaining power by extending the concept to their neighboring region, Wanneroo (only recently established as a separate council splitting out of the Joondalup council region). The stakeholders group thus included:

1. The two councils (Joondalup and Wanneroo)

2. The Joondalup Business Enterprise Centre

3. The two local Business Associations (Joondalup and Wanneroo)

4. Edith Cowan University (ECU) and two local colleges in the same education precinct

The stakeholders were approximately 220,000 residents, 7000 small businesses (2002 estimate carried out by local Business Associations), and three tertiary education facilities.

A survey of 1000 local businesses conducted in association with Edith Cowan University, comprising 600 businesses in Joondalup and 400 businesses in Wanneroo, indicated that current e-commerce usage was fairly high, as shown in Table 5.

Table 5: E-commerce usage in Joondalup and Wanneroo

Internet usage	Joondalup %	Wanneroo %	Australian Average
			Small %	Medium %
Internet Connection	58	60	60	89
Web Page	44	40	25	56
Purchase on Line	31	27	17	28
Sell on Line	31	N/A
Business needs Web Page	23	20

This indicated that businesses in the region were at least as well advanced as average Australian businesses, and possibly more advanced in the areas of online transactions and Internet technology business applications in general.

The project was given the go-ahead by the North Metro Community On-Line Association (NMCOA) in conjunction with business, for the benefit of businesses in the region and to develop the Northern Suburbs as an attractive location in which new businesses can develop and grow.

The stakeholder group together sought seed funding of AU$20,000 from State Government, and in 2000 developed a demonstration site to sell the concept.

Specifications were developed and budgets proposed, and when the extent of funding and commitment required was fully understood, the NMCOA was formed in March 2001. At this time, the three main players, the two councils and the university, were asked to make a substantial investment in the concept and provided funding of AU$190,000. In addition, the State Government was asked to contribute AU$100,000. NMCOA would act as an independent body to manage finances and control the development of the platform. Table 6 shows the development timetable, some of the key players, and the major milestones impacting the implementation of 2Cities.

Table 6: Milestones and key players in 2Cities platform development

Year	Stage	Project Manager	Situation	Income
1999	Joondalup Stakeholders Group	PM-A	Small group gathering	N/A
2000	Waneroo/Joondalup Regional Online Steering Committee +ECU	PM-A	Creating the basic group of stakeholders, the “demonstration site” is put online by Joondalup Business Association	20.000 AU$ from the State Government
March 2001	NMCOA	PM-A	The NMCOA is created to be a separate financial and political body from stakeholders that can receive and manage funds	90,660 AU$ from Federal Government (RAP) 108,000 AU$ from the 2 cities and ECU
Feb 2002	IBC wins contract	PM-A becomes part time consutant	Development of the Portal	70,000 AU$ for contract
May 2002		PM-B	PM-A resigns PM-B appointed TM (Team Manager) appointed	92,000 AU$ SBDC (Small Business Development Corporation) grant for TM
August 2002	Portal in test phase	PM-C	PM-B appointment withdrawn PM-C appointed TM resigns
Dec 2002	Portal completed (6 months overdue) 60 users	PM-C	Soft launch of 2Cities.com	A$190 each
Feb 2003	Intended launch	PM-C	Delayed – new business plan developed	$50,000 additional revenue sought from 2 councils
April	Official Launch	PM-C

2Cities Supported Relationships

The general objective of the project was to develop a VAP within the community of stakeholders mentioned above.

2Cities.com is meant to permit Joondalup and Wanneroo region-based businesses to sell, supporting basically a local “member to member” relationship, but theoretically anyone worldwide, once registered, can buy through the VAP. In fact, 2Cities.com can be accessed by anyone, but in order to sell through the VAP, businesses must be registered as members of the portal (AU$199). This means that tenders from buyers are accessed only by members.

This policy is intended to give to business settled inside this region an infrastructure that can be a competitive advantage, and it could also encourage relocation of business. This choice limits the potentials of the VAP, as it reduces dramatically the interaction opportunities between members and not-members, leaving only the ability to exchange basic information on products and services. On the other hand, requiring the registration before a transaction automatically changes the relationship into one of member to member.

Organizations seeking to purchase goods or services can use the VAP to send requests for quotations (RFQs), lodge orders, and segment members by locality. Seller members can be notified of RFQs by e-mail, fax, or SMS (Short Message Service), and orders can be placed in a similar manner.

In order to sustain the market, large corporate buyers have to commit to the market and to the support agreed from the cities of Joondalup and Wanneroo, Mindarie Regional Council, and the university. The VAP provides member buyers with easy access to a large range of suppliers and choice of goods, and increases their ability to obtain competitive pricing. In addition, it is anticipated that suppliers operating within the VAP will use the process to purchase their own requirements, thus increasing the level of trade within the region.

In addition, 2Cities is meant to develop the communities of Joondalup and Wanneroo and to offer a marketing service for promoting the area, through directories like environment, sport, tourism, and education.

Finally, the 2Cities.com project plans to foster local job recruitment as another way to improve the attractiveness of the region.

A possible future expansion of the system, allowing the domestic consumers to purchase online, has the potential to result in rapid growth in transaction levels. Furthermore, once familiar with e-trading and having benefited from increased regional sales, businesses will be in a position to expand outside the region, to state, interstate, and overseas markets.

NMCOA and the business associations will be well placed to assist companies in this type of expansion and, where required, arrange introductions to local companies already operating in these marketplaces. Such a mentoring process can lead to efficient entry into new markets. Training is an additional requirement, and the Small Business Development Corporation provided 92,000AU$ to recruit a training officer for the platform.

The conservative estimate used in the business model is that some 1200 companies will be operating within the VAP within 5 years. Indications from the business associations and seminars held by NMCOA are that uptake will be significantly higher than that allowed for in the business model. An example of this is that the Joondalup Business Association has recently approached NMCOA to incorporate 1100 companies onto the business listing section of the site.

The business model adopted by 2Cities.com is totally dependent on a critical mass of large corporate buyers. The platform, however, does not necessarily offer any advantages to these groups, because the sellers, typically SMEs, are unlikely able to offer discounted prices for large orders. Moreover, as indicated above, even though promotion is essential to build the success of the VAP, 2Cities.com has no marketing budget.

Table 7 presents the application of the IOR4VAP (inter-organizational relation- ship for virtual association platform) framework to the case of 2Cities.com: white cells represent supported relationships, while black corresponds to relationships not supported.

Table 7: Application of the IOR4VAP framework to 2Cities.com

Even though 2Cities supports nearly all the information flows relevant for a VAP, it does not offer support to four types of relationships:

1. From association to external suppliers and customers (A-directly related to product/money flows): The aggregation of both members’ supply and procurement activities is not supported. Each member is offering its products and is managing the procurement by itself.

2. From association to members (A-directly related to product/money flows): The information on aggregate production is not collected, and coordination does not exist. Thus, it is not possible to provide price control services.

3. From members to government (B-not directly related to product/money flows): 2Cities supports only a buyer and seller relationship with government.

4. From members to financial institutions (B-not directly related to product/ money flows): Only payments and transactions are provided by the platform.

The first two relationships are unsupported, mainly because they require a certain critical mass before being set up. The other two depend more on design choices made in the development phase.

Because the 2Cities project is still taking its first steps, its support to relationships is still basic. Available services are generally informative, and only commerce relations have received good support. Once the portal is well established, the set of supported relationships will be broadened.

Problems Faced

Given its high degree of innovation, the development of 2Cities.com encountered a number of critical issues and obstacles, impacting several aspects of the project:

• Poor business plan

• Low capitalization

• Project overrun

• Poor project management—three separate project managers

• Mistiming of training requirements

• No marketing and training budgets

The initial business plan was almost wholly dependent on grant income that did not materialize and with unrealistic costs for platform users ($500 per annum as compared to a final fee of $199). The founding members did not realize the extent to which additional funding would be required or the full extent of technical expertise that would be required to implement the portal. Project managers came and went (three over 1 year: PM—A, B, and C in Table 6), and a training manager was appointed over 6 months before the implementation of the portal and resigned prior to the test period. The 2Cities budget had no provision for marketing or training costs, and while the revised business plan now includes a provision for marketing, additional funds (through government grants or through voluntary contributions from the partners) must be obtained.

2Cities.com began operating in December 2002, although the “official” launch did not take place until March 2003. To date, 60 businesses and 39 community groups are registered in the portal, and communities need critical mass to remain active.

Furthermore, online community management is still poor, mainly because of the following:

1. The VAP stakeholders and customer communities are very different.

2. The differences in VAP-supported relations involve very different players but all are required to adopt some basic standards.

Both of these issues impact content creation and value generation from the online communities, thus reducing the ability of VAP to provide support to players’ interactions.

Development Process and Practical Implications

2Cities.com was developed without explicitly adopting a formal methodology, because ECU was not involved in the earliest stages of the project. The initiators’ group did not perform any real requirements analysis and no real business plan was drawn up. Instead, a semistructured deployment model was adopted that centered on three activities essential to the success of every online community (Williams & Cothrel, 2000): member development, asset management, and community relations. The following paragraphs discuss these activities and the related issues that arose within 2Cities.com.

Member Development

Communities need critical mass to remain active.The2Cities business model adopted is one that is totally dependent on a critical mass of large corporate buyers. The portal, however, does not necessarily offer any advantages to these groups, because the sellers, typically SMEs, are unlikely to be able to offer discounted prices for large orders. Promotion is essential to build the community, but, in fact, 2Cities.com has no marketing budget.

Asset Management

Assets in an online community range from content, to alliances with other groups, to the knowledge and experience of experts, to the community infrastructure. The community coordinator needs to capture the information members need, but 2Cities has two customer communities as a focus—the regional marketplace community and the social community. These two groups have very different needs from an online community, require different support, and need different training. Content generation is required for each of the five types of e-commerce supported in the portal, each involving very different players but all required to adopt some basic standards. An ongoing project manager is essential.

Community Relations

Interaction with other people is essential for successful creation of an active online community but requires online moderation and facilitation. The desired “village community” of 2Cities.com will require constant moderation, yet has to stimulate member-generated content that will be seen to be of value to a very diverse community. There is an additional political dimension here, because the two communities are, in fact, quite competitive and do not normally view themselves as a single group.

Ownership

A further factor identified in this review of 2Cities.com revolves around ownership. The portal is “owned” by a consortium, all with different motives, varying degrees of investment, and often conflicting aspirations for the outcomes. Inevitably, other factors such as politics intrude on the funding and operation of the portal. A recent proposal that may well be a longer-term solution is to sell ownership to the stakeholders.

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