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| The evolving definition of e-business |
| Version:
4 November 2001
John Mitchell, John Mitchell & Associates, Evaluator/Moderator ANTA E-business Initiative
E-business, according to analysts from Government, industry and the media, is starting to have a significant impact on whole industries in Australia, such as banking and finance, on businesses such as travel agents and stockbroking, on metropolitan and regional areas and on individuals working in many industries and businesses. E-business can lower costs, increase efficiencies, reduce inventories, expand market reach, increase speed to market and provide competitive advantages (NOIE, 1999a). In many firms, e-business is creating new jobs, changing many existing jobs and replacing some previous jobs. Hence the urgent need to identify competencies in e-business and to provide training in this field. The factors driving e-business are profound and include the availability of global communication networks, the expansion of global and national online markets, the emergence of new business models to take advantage of the new technology and the desire of governments and businesses to provide enhanced services for customers.
E-business is much more than buying and selling on the Net: e-business means doing business electronically, both within enterprises and externally, using computer networks or telecommunications. While there are many types of e-business transactions, including business-to-business, business-to-customer and government-to-customer, the type of e-business activity making the most impact on the economy is business-to-business. In particular, business-to-business market exchanges in some industries such as the automotive and mining industries are having profound effects on relationships between suppliers and manufacturers. By 2004, B2B e-business will represent 7% of total global sales transactions. (SMH, 14 Oct 2000)Currently media attention is focused on the staff redundancies or financial collapse of many dotcom businesses that offered business-to-customer services. Business-to-customer e-business is still hampered by customers' security concerns about providing credit card numbers over the Internet and by the majority of the population who lack the resources or imperative to communicate online. Customers also lack some confidence the purchased items will be delivered on time. E-business is predominantly a business issue, enabled by information technology. E-business is giving rise to increasing numbers of new business models, encouraging businesses to identify a range of alternative revenue sources for e-business, to develop new marketing strategies and to form new strategic alliances. Some business models for e-business failed during 2000, as the assumptions made about issues such as customer adoption rates and sizes of markets were flawed. A new trend in e-business emerged in 2000, involving the integration of e-business with conventional business activity, of bricks and clicks. This trend intensified in 2001.
This paper was developed for the Australian National Training Authority (ANTA) E-business Initiative in 2000-2001 and will be regularly updated at www.catalystinteractive.com.au/ebusiness/, in response to changes affecting e-business practice and theory. This is the version as of 4 November 2001.
The focus of the ANTA E-business Initiative in 2000-2001 is on the training implications of e-business and, specifically, on the development of competencies and qualifications in e-business for the vocational education and training (VET) sector. This paper draws attention to the fact that the definition of e-business is not, and may never be, settled. The changing nature of e-business sometimes makes it difficult to identify competencies and this will mean that new competencies may emerge each year and that competencies developed in one year may need revising in the next. However, it is important that the evolving definition of e-business be monitored and discussed publicly, to provide a framework and directions for the development of competencies and qualifications in e-business in VET. The main audiences for the paper are VET practitioners and other individuals, the Industry Training Advisory Boards (ITABs) and other bodies interested in the development of competencies in e-business for the vocational education and training sector. The definition of e-business will continue to be refined during 2001-2002, based on discussions with ITABs and industry and through tracking media reports and reviewing the literature. Readers are invited to send comments and views about the definition to the author John Mitchell johnm@jma.com.au from John Mitchell & Associates.
An historical summary of the changing definition between 1998-2001 is provided in the Appendix. One way to make e-business more tangible is to consider some basic types of e-business, as set out in Table 1 Table 1: Basic types of e-business
Each of these different types of e-business is coming under further scrutiny in late 2001, with some early e-business models falling over and new models emerging, as discussed below.
The year 2000 saw a high level of activity in e-business and substantial interest from the media and business analysts. The top ten Australian web sites in 2000 are set out below. This data suggest that Australians predominantly use web sites for news, entertainment, directories and banking. Table 2: Top Australian web sites in 2000 (SMH, 19 Jan 2001; Red Sherriff statistics)
Highlights of e-business during 2000 included:
An interesting story to emerge from the 'dotbomb' year 2000 is the success of online auction site e-Bay. In the third quarter of 2000 alone, e-Bay hosted 68.5 million auctions, facilitating the exchange of $US1.4billion in merchandise. (SMH, 30 Jan 2001). Its business model avoids two of the flaws of other dotcoms: it does not rely on banner ads for revenue (Yahoo's problem) and it does not need to warehouse goods (Amazon.com's problem). EBay's business model works: it is an online exchange connecting buyers and sellers and collects a fee for each transaction. (SMH, 30 Jan 2001)
In 2001, there are ongoing debates about a number of aspects of e-business, including:
These ongoing debates will ensure that the definition of e-business will continue to be challenged.
E-business changed in 2001 due to the implementation of new versions of previous technology and the availability of wholly new technologies. A report in the Sydney Morning Herald on 14 October 2000, drawing on research from Forrester Research, Gartner Group, Dataquest and Yankee Group, identified the following information technology and business trends likely to impact in 2001:
The current definition of e-business is set out at the front of this document. Major trends that impacted on the definition of e-business in 2001 included:
Despite the ongoing controversies and debates about e-business, industry analysts predict that the demand for e-business will rise extraordinarily in coming years, and that current levels of training will not meet future demand. Expansion in e-business occurred in a wide array of industries in 2000-2001, due to the increased efficiencies, improved revenues and enhanced customer services that are often delivered by e-business. The expansion in activity is evident by the proliferation of business-to-business trading exchanges in fields such as the mining industry, the increasing numbers of business-to-customer services such as buying shares online and the increasing number of government-to-customer services such as paying bills online. Industries that are regularly cited as experiencing growth in the use of e-business include banking and finance, tourism and hospitality, retailing, electronics and communications. As a result of this expansion in the use of e-business, training in e-business is needed in three separate domains: firstly, for IT specialists, such as web designers and programmers; secondly for workers in all those industries that are embracing e-business; and thirdly, for customers who want to be able to access online services. The first group -IT specialists - tend to gain most media attention, which is understandable, because without the technology experts there will be no tools to use in business. During 2000-2001 in Australia, the IT&T Skills Taskforce and Skills Hub drew public attention to the urgent need to address the shortfall in IT training. The report E-competent Australia (ANTA, 2000) also addressed the second area where training is required: for workers in all those industries that are embracing e-business. These workers often find themselves in jobs that require a hybrid mix of skills that pre-date e-business and skills that are required now because of the emergence of e-business. For instance, some farmers need to become very proficient in using the online medium for a range of uses: banking, selling, marketing, buying and researching. Some hospitality workers need to become very proficient in using the online medium to access the hotel chain's customer database, to maintain contact electronically with regular customers and to access on-the-job learning materials. The current ANTA E-business Initiative is addressing the need to develop competencies and qualifications in e-business in the VET sector that are thoroughly validated by industry. VET organizations around Australia report a growing demand for training in e-business, but the training needs to be based on a coherent definition of e-business.
The definition of e-business will continue to be debated, affected by the development of new technologies, new business thinking and changing business practices. While debate will continue about the best business models and practices, there will be no preventing the inevitable increase in e-business activity, leading to the need for additional training. This paper on The Evolving Definition of E-business will continue to be updated, to capture the changes in definition of e-business, as the VET training in e-business that is designed and delivered needs to be based on a clear understanding of the meaning of e-business. John Mitchell
The following discussion traces the changes in the definition of e-business from 1998-2001, showing that as the impact of e-business expanded, its definition widened. Definitional changes in 1998-99 To clearly identify the nature and understanding of e-business in late 2001, firstly we need to clarify the changing definitions in 1998-1999, as discussed in E-competent Australia (ANTA, 2000). The definitions of e-commerce shifted in 1998-99 in two major respects:
The National Office for the Information Economy (NOIE) demonstrated these changes to the definition in 1999. For instance, the following definition was provided by NOIE in April 1999 in Australia's e-commerce report card:
While e-commerce is dominated by online technologies, the scope of e-commerce covers 'all forms of electronic processes':
This 1999 definition is much more substantial than previous definitions of e-commerce as buying and selling over the net. A fuller definition of e-commerce was provided in NOIE's October 1999 report, E-Australia.com.au. The October 1999 definition widens the scope of e-commerce, and clarifies that e-commerce is not just about buying and selling goods, it is also about inter-company and intra-company activities:
This October 1999 definition is recommended as the main reference point for the ANTA E-commerce Initiative, taking into account the fact that the nature and definition of e-commerce may change in future, due to new developments in business and technology.
The Commonwealth Government has consistently emphasised the new business thinking underpinning e-commerce, as set out in Table 1 below, to the point where the Government is now 'viewing e-commerce as a business issue rather than an information technology issue' (Australia's e-commerce report card, 1999, p.20) Table 1A: Business principles of e-commerce highlighted by the National Office for the Information Economy in 1999
That e-commerce can create new ways of thinking in business was noted by Hammer and Champey (1993): The real power of technology (such as electronic commerce, telecommunications technology services or multi-media) is not that it can make the old processes work better, but that it enables organisations to break old rules and create new ways of thinking - that is, to reengineer.
The following interviewees for the E-competent Australia (ANTA, 2000) study placed a similar emphasis on e-commerce providing new ways of doing business:
The industry leaders quoted above are consistent in their view that business thinking needs to drive e-commerce, not technology.
The discussion above focused on the definitions of e-commerce provided by NOIE and by leaders in industry. Following is a brief discussion of definitions in the academic literature between 1998-99, which shows a similar tendency to expand the definition by 1999. In 1998, Lawrence et al noted that there has been an explosion of names to identify doing business electronically, 'such as electronic commerce, eCommerce, iCommerce, Internet commerce and digital commerce' (p.2). Lawrence et al use the terms 'electronic commerce' (or e-commerce) and 'Internet commerce' interchangeably. They then define e-commerce as follows:
Turban et al (2000) importantly add the word 'exchanging' to the definition of Lawrence et al, to cater for more than just financial activities:
Turban et al (2000, p.5) observe that e-commerce can occur in a 'pure' form (e.g. ordering and receiving software via the Internet) and in a partial manner (e.g. ordering a book via the Internet and receiving it from a courier). They suggest (p.5) that e-commerce ranges from 'pure' to 'partial' depending on the degree of digitization of the product (or service), the process and the delivery (or intermediary). The NOIE position on e-commerce can accommodate the refinements to the definition of e-commerce made by Lawrence et al (1998) and Turban et al (2000). The NOIE definition is close to Timmers (1999), who provides a broad but simple definition of e-commerce as 'doing business electronically' (p.4).
The definition of e-commerce provided in E-competent Australia, finalized in February 2000, is based predominantly on the three following sources: current international literature, interviews with Australian industry leaders and research by the National Office for the Information Economy (NOIE). These sources demonstrate that:
Of the three components of e-commerce in the definition set out in E-competent Australia (ANTA, 2000) and cited above, the first two remain intact in early 2001. However, the emergence of mobile technology such as the sending of text messages between mobile phones, illustrates that e-commerce does not always require computer networks. By 2001, this definition needs to be expanded, to include the new business practices that developed during 2000-2001 and the new business models for e-commerce that emerged in 2000-2001, which are discussed in the body of the paper, 'The evolving definition of e-business'.
The terms e-commerce and e-business require some comment, as different people distinguish between e-commerce and e-business in different ways. In E-competent Australia (ANTA, 2000), e-business was taken to mean an individual company, enterprise or organisation or business unit, that uses e-commerce, e.g. the online travel agency travel.com.au could be called an e-business. However, in defining e-commerce as 'doing business electronically' (Timmers, 1999), E-competent Australia (ANTA, 2000) was suggesting that e-commerce is an overarching set of business principles behind new ways of doing business electronically. Key participants in the ANTA E-commerce Initiative Projects agreed in April 2001 to use the term e-business as the descriptor of doing business electronically, both within enterprises and externally, using computer networks or telecommunications. E-business is used to describe both the overarching set of business principles behind new ways of doing business electronically and also to describe actual businesses or business units that put these principles into practice. E-commerce is now defined as it was some years ago, to narrowly mean the financial transactions of buying and selling electronically. The ANTA project is now referred to as the ANTA E-business Initiative. Different interpretations of the terms e-commerce and e-business may continue, in Australia, for some time, for the following reasons. Firstly, some people see e-business as interchangeable with the term e-commerce. Secondly, the popular media likes to use e-business instead of e-commerce and to place the prefix e- before many words, particularly in newspaper headlines. Thirdly, academics are divided in their definitions of the two terms, with some seeing e-commerce as the overarching concept and others seeing e-commerce narrowly as buying and selling electronically. While we can expect that e-commerce and e-business will continue to be defined differently, present indications are that the term e-business may emerge as the most popular one in daily use, even though the project started by using the term e-commerce as the basic reference point.
Electronic Trading Group, The Allen Consulting Group, Acuity Consulting, (1999), The Sectoral Impact of Electronic Commerce - A Scoping Study, Department of Communications, Information Technology and the Arts Hammer, M. and Champey, J. (1993), Reengineering the Corporation: A Manifesto for Business Revolution, Harper Collins, New York Lawrence, E., Corbitt, B., Tidwell, A., Fisher, J., Lawrence, J., (1998) Internet Commerce. Digital Models for Business, John Wiley & Sons, Ltd, Brisbane Mitchell, J.G. (2000), E-competent Australia. The impact of e-commerce on the National Training Framework, ANTA, Melbourne National Office for the Information Economy, April 1999, Australia's e-commerce report card, Department of Communications, Information Technology and the Arts, Canberra National Office for the Information Economy, October 1999, E-Australia.com.au, Department of Communications, Information Technology and the Arts, Canberra National Office for the Information Economy, November 1999, Summary of E-commerce- Beyond 2000, Department of Communications, Information Technology and the Arts, Canberra National Office for the Information Economy, 1999, Skill shortages in Australia's IT&T industries, Department of Communications, Information Technology and the Arts, Canberra National Office for the Information Economy, 1998, Where to go? How to get there, Department of Communications, Information Technology and the Arts, Canberra Office of Government Online December 1999, Commonwealth Government Online - Progress Report, Department of Communications, Information Technology and the Arts Sydney Morning Herald, 14 October 2000, 'Keeping on top of the technology wave' Tapscott, D. (1996), The Digital Economy, McGraw-Hill, New York Tapscott, D. (1999), Creating Value in the Network Economy, Harvard Business Review Book, Boston Timmers, P., (1999), Electronic Commerce, Strategies and Models for Business to Business Trading, John Wiley & Sons Ltd, Chichester Turban, E., Lee, J., King, D., Chung, H., (2000) Electronic Commerce, A Managerial Perspective, Prentice Hall, New Jersey |
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