Annotated Bibliography
tchyar
ManagingtheDynamicsofE-mCommercewithaHierarchicalOverlappingBusiness-Value-Framework.pdf
Managing the dynamics of e/mCommerce with a hierarchical overlapping
Business-Value-Framework
Andreas Rusnjak Business Information Technology
Christian-Albrechts-Universität zu Kiel Kiel, Germany
Hristomir Hristov Business Economics
Christian-Albrechts-Universität zu Kiel Kiel, Germany
Marwane El Kharbili Model Driven Engineering Université du Luxembourg Luxembourg, Luxemburg
Andreas Speck Business Information Technology
Christian-Albrechts-Universität zu Kiel Kiel, Germany
Abstract: Many e/mCommerce-Projects are failing because of insufficient planning, poor management, conflicting ideals and objectives between all involved stakeholders. In order to deal with these conflicts, we need to manage these projects using easily understandable business values over all hierarchical levels of enterprises, in agile fashion. In our framework, business values provide support for goal- and value-based eCommerce software development. Due to the fact that there's little to no empirical research in eCommerce Business Value, this work is showing an approach to a Business Value Framework which enables better prioritization over multiple business domains, an enhanced focus on strategic goals and a better understanding of market needs.
Keywords: Business Value, Project Management, eCommerce, Website-Engineering
I. INTRODUCTION A majority of innovative business models are technology-
driven. The customers in digital markets are predominantly accessing companies via software-interfaces, e.g. a website. Because of this and due to changing consumer behavior, a technology- and innovation-orientation as well as an efficient Project- Management (PM) are becoming more and more im- portant as a critical success factor (CSF) for e/mCommerce companies. Rusnjak & El Kharbili [1] state that CSFs "are elements, determinants or conditions which are having a deci- sive influence to success of entrepreneurial actions" and creat- ing competitive advantages. [1; 2]
Usually eCommerce-Websites are representing a frame- work for the realization of all electronic commerce activities of a company in the WWW. They are an automated part of the whole information system "company" to create and sell goods and services. Nearly the whole turnover of eCommerce-based business models is realized over information systems.
Beyond this, a website is an instrument for marketing, for (e.g. legal) information, communication and processes. There- fore it is a complex system and requires a Website-Engineering in form of situation analysis, strategic goal setting, modeling and implementation [5]. Besides hard- und software require- ments Website-Engineering needs to focus also on findings in marketing, communication design, graphic design, desktop publishing, typography and multimedia science with a specific significance given to external influences, high (speed of) adap- tability to changing markets, actual information and integration of different disciplines [8]. The application of Business Values, e.g. used in agile software development, is an attempt to deal with these different focuses. Business Value refers to any measures of worth of a business entity [12].
This paper introduces the development of a new framework for Business Value and shows a first approach for discussion. Based on a literature review and interviews with (project) man- agers it explains the usage of a capacious Business Value which includes the findings mentioned before.
II. SITUATING THE PROBLEM Project Management (PM) has become very important for
every possible way of modern corporate landscape but it's not a perfect process by itself. McLaughlin (2009) is showing in his case study [7] typical problems causing the failure of eBusi- ness-Projects. The problems were ambiguous objectives, unrea- listic goals, unclear references to strategy, poor communication and an insufficient leadership. In addition, concerned stake- holders were not involved in the formulation of requirements and not involved during the realization. The project was mostly driven by technical employees without any exact knowledge of the real requirements of the stakeholders/ market.
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After three years with significant investments the project was stopped without any result, and neither delivered compo- nents nor clear dates for deployment. Remarkably, selling complex technology-based business solutions was the core business of the researched company. [7]
The reasons for the failure of eCommerce-Projects are vari- ous. Both empirical experiences as well as scientific work are showing that most of the reasons are insufficient planning (time, costs, and resources), poor management and different ideals and goals of the involved stakeholders. In order to suc- cessfully manage eCommerce-Projects all stakeholders need to understand the vision of the project, the strategic goals, the ideals and the objectives of all concerned parties. Top- Management-Support is a key factor for a successful realiza- tion of eCommerce-Projects or implementation of eCommerce- Systems. It helps to emphasize the need for technology or in- novation and obtain strong commitment from all involved parties in the project. If top management doesn't provide a clear direction or vision, involved stakeholders may get confused and projects will fail [8; 9].
An important application for prioritization, project transpa- rency and performance measurement is necessary to manage the dynamics of e/mCommerce regarding to all involved stake- holder.
III. BUSINESS VALUE Mahmood et al. [4] state that there's "little or no empirical
research in ecommerce business value, but some related con- cepts already identified include business value; e-commerce impact; and e-commerce businesses success and failure. We drew useful insights from IT business value and other related literature. There are studies on factors contributing to IT sys- tems success or failure". We agree on this point and want to roughly describe this point way as a base for later discussion. Defining Business Value seems to be a difficult task. In order to do it adequately, it is imperative that one appreciates the variety and complexity of factors that determine Business Value and those that influence it at every hierarchical level within an organization.
Williams & Williams (2003) define Business Value (of an investment) in economic terms as "the net present value of the after-tax cash flows associated with the investment" [10]. Matts & Pols (2004) identify a possible creation of Business Value from a certain project when "it increases or protects profit, cash flow or return on investment in alignment with the com- pany’s strategy" [11]. Tosic et al. (2007) recognise the Busi- ness Value as "a broad concept that refers to any measures of worth of business entity. It includes not only financial aspects (e.g., income, costs, profit) but also many other aspects (e.g., market share, customer satisfaction) important for business operations" [12].
The meaning of Business Value, depending on one’s per- spective, spreads out into different dimensions of both tangible and intangible values with structural significance to the differ- ent stakeholders. Its implementation requires both financial assets and human resources that can guarantee its achievement and steer it in the right direction.
Business Value should be described as a model, rather than a single statement or (just) a number. Considering the fact that the Business Value of an organisation depends on numerous influences, e.g. the level of information or environmental issues that are dynamic in their nature, it would be easier for man- agement to deal with a model that has assumptions, input and output, instead of using some prognosticated statements. Possi- ble determinants for success of eCommerce and part of Busi- ness Value are performance, productivity and perception (e.g. companies image and customer satisfaction).
Performance is measured by financial indicators (hard fac- tors) like return on investment, return on equity, return on sales, growth in revenue, etc. and productivity in sales to total assets, total sales and sales by employee, etc. The perception can be expressed by soft factors like company image as well as customer satisfaction, product-service-innovation and number of returned customers. Finally Business Value is understanda- ble as an integrative parameter, expressing the relationship between strategy, organizational performance and ICT via hard factors (e.g. financial power, turnover, etc.) and soft factors (e.g. market position, image, etc.). [4]
IV. BUSINESS-VALUE-FRAMEWORK (CET-MODEL) "When designing an e-business, practitioners must pay at-
tention to creating a Web site that is visually attractive and easily navigable. Practitioners must also focus on online sys- tem quality and effectiveness. Attention must be paid beyond online system components, toward establishing relationships and networks that endure and thus provide real and sustainable competitive advantage" [4].
This section describes a model to deal with the dynamics of e/mCommerce and a short case about the proposition of a new eCommerce-project in a small and medium-sized enterprise (SME). To keep it anonymous we call it "Blue Travel" (BT). The approach of the model (CET = Company – Environment – Technology), which is presented in this paper, is based on the work about "Website Engineering" of Schwickert [5] and Win- ter et al. [6]. In relation to this model we classify the drivers of Business Value over three domains into three basic dimen- sions: Company, Environment and Technology. The hierar- chical levels "Strategy", "Tactics" and "Operation" are used as domains.
Figure 1. CET-Model
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Every Domain is having its special focus, named "Dimen- sion" with own ideals, goals (general intentions) and precise objectives. Dimensions are primary fields for decisions and responsibility of domains. Therefore there is an own under- standing of Value and priority on every domain, like a Busi- ness Value but in this case named Domain Value (DV).
According to [13] it's advisable to link every Domain Value like CSFs to a responsible domain manager. A hierarchical overlapping Business-Value-Framework regarding to the three hierarchical levels (Strategy, Tactic and Operation) enables the management as well as the stakeholders to identify where, how and how much value is provided or destroyed, strategic re- sources and the grid of projects and processes. Furthermore it provides a clear view about the actual value-situation of a company, a better communication and cooperation. It is sup- porting a better satisfaction of all stakeholders, explaining the correlations of Business Value and complex strategies becom- ing transparent and explainable. [3]
It is an interesting fact that technology, which is a signifi- cant factor for an eCommerce organisation, can be classified with an internal as well as an external focus. An eCommerce company depends strongly on technology, its innovations and trends. The final decision as to whether an organisation wants to implement a new technology or not, is made by the company itself, depending on market trends, user adoption and consumer behaviour. As a result a hierarchical overlapping Business Value is an expression of the Domain Values.
A. Case of failed "Blue Travel"-Project BT is running its core business in the tourism branch and
owning many travel agencies in different cities. Due to the increasing popularity of eCommerce and increasing competi- tion the owner decided to start an eCommerce-Initiative with focus to actual trends in eCommerce.
Management Situation:
Top-Manager of BT is the Founder. A vision or mission statement doesn't exist in his company and all strategic deci- sions are made by the Top-Manager himself. The Headquarter owns five travel offices and is responsible for the allocation of financial and human resources as well as for strategically and organizationally guidelines. The managers of the travel offices are representing the lower management and they are basically responsible for operative tasks, e.g. customer care, local mar- keting activities and the realization of the input from headquar- ter. BT is having no middle management and all activities to customer are managed by the travel offices.
Failed eCommerce-Project:
BT started a first eCommerce-Initiative in April, 2008. The Top-Manager authorized an extern eCommerce-Agency with the realization of an eCommerce-Service which enables the selling of travels and related services (e.g. insurances) online. The objectives were (1) winning 10.000 new customers and (2) increasing the turnover and profit up to 30% within three years. Only the Top-Manager and the managing director of the eCommerce-Agency were involved in the project-planning and –realization.
In May 2008 the agency presented the concept of a travel- portal (i) for placement of travel services (ii) with special community features. After a development time of seven months the eCommerce-service (website) was implemented in December 2008. The features were (a) enabling customers to create a simple profile, reviews and recommendations, (b) enabling customers to send travel inquiries direct to the head- quarter of BT and (c) enabling the headquarter of BT to publish travel offers via a content management system on the website.
Result:
After six months of operation the preliminary conclusion was disappointing. (1) The number of visits was approx. 7.000, (2) the number of new customers less than 50, (3) the turnover approx. 20.000 EUR, (4) the organizational effort to forward the travel inquiries into the right travel offices was huge with unclear processes and responsibilities (5) and there was no coherent marketing concept. The project failed on broad-front. A problem-analysis shows that (i) the Top-Manager wasn't present enough, (ii) the priority, concrete goals and ideals were not communicated adequate, (iii) the employees with their special know-how about market and internal processes were not involved, (iv) the project-manager of the eCommerce- Agency had underestimated the goals and ideals, (v) the project reached a momentum of its own and (vi) it was predominantly developed by technical employees without any knowledge of market mechanisms, customer needs, etc. By the end of July 2009 the eCommerce-Website was turned offline. At this time the costs were more than 50.000 EUR and a lot of employees, confused, frustrated and demotivated.
Possible Solution:
The objectives and ideals, formulated by the Top-Manager as well as the strategic meaning of the project for BT are legi- timating the installation of a new business unit named "eSer- vices". With this business unit a new "middle" management level will be created as well. The manager of eServices, named "eCommerce-Manager" is responsible for tactical tasks of eCommerce regarding all involved stakeholder, resources, etc.
Figure 2. Organizational Structure of "Blue Travel"
His job is to coordinate the development of the eCom- merce-Initiative with the Top-Manager and the managers of the travel offices (lower management) with the responsibility to achieve the strategic goals, objectives and ideals. Some impor- tant points of his coordination activities are the alignment of existing processes to new eCommerce-processes, identifying CSFs, customer needs as well as achieving eCommerce- readiness within the BT-organization.
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Concerning to as-is-analysis and a reference concept as well as the concrete implementation the manager of the travel office with the highest turnover is becoming the manager for operational responsibilities regarding to the eCommerce- Initiative.
Via the CET-Model - based on Business Value and some selected examples - we want to show an approach for an effi- cient communication as well as prioritization of objectives and ideals over each management-level of BT in an easy unders- tandable and transparent way. The illustration of the objective-, ideal- and value-dependencies is based on Eric Yu's i*- framework [14; 15] with an own notation for ideals (rounded rectangle with four triangles) and values (small circles). Goals/ objectives are regular modeled via rounded rectangles.
B. Strategic Domain (Dimension: Company)
Task and responsibility of top-management is to realize the vision/ mission of a company via the formulation of strategic programs and goals. Every strategic program or goal is representing a value for this domain and a goal for other do- mains. Due to the fact that the management is having an overall view to a company, this Domain Value is mainly having an internal focus expressing values about vision/ mission, corpo- rate culture, strategy, leadership system, shareholder, stake- holder, organization, etc. A direct alignment between strategy and information system is having a significant positive influ- ence to workflows and eCommerce-Programs and to the achievement of online efficiency, e.g. online presence in a higher quality. A strategic commitment brings a substantial and significant importance to the development of a Website and therefore this causes a better performance and marks a critical success factor for software development [4].
Due to the case of the SME the strategic objectives (1) in- creasing SMEs profit/ turnover up to 30% and (2) number of new customers up to 10.000 during the next three years for a new eCommerce-Initiative were formulated by the top- management. The ideals, goals of the top management are (1) improving the market position and the return on investment of the SME, (2) satisfying its shareholders and (3) an efficient organization as well as (4) motivated and qualified employees which are carrying the new eCommerce-culture in best way.
Figure 3. 2 Goals & 4 Ideals of Strategic Domain
DVS(eComm) = OBJECTIVESS1,2 | IDEALSS1,2,3,4
C. Tactical Domain (Dimensions: Environment, Company and Technology)
The tactical domain with a focus on all dimensions is the central body of our framework. As the rule it is represented by the middle and lower management and linking the top man- agement level to the operative level. Beside its tasks, e.g. im- plementing strategic programs and goals, coordination, infor- mation and controlling, the primary focus of this domain is to set its Domain Value of eCommerce-Projects and processes with a view for stakeholders involved outside a company, e.g. customers, supplier, co-operation partner and market-based innovations. This domain is also responsible for a clear, simple, transparent communication and measurement of Business Val- ue over all hierarchical levels of a company. Tactical decisions served for concretion of strategic goals and reference to every involved sub domain of a company (e.g. areas of operation, business processes, branches, etc.). At this level web-based objectives of tactical fields will be selected to develop goal- focused plans for design and structure of a website. [5]
According to our case the eCommerce-Manager of the SME - who got the ideals, goals and objectives from the stra- tegic domain - analyzed the market situation and CSFs. He decides to launch an eCommerce-Service for consumer and travel offices with special services and features. This service shall enable customers creating a (semantic) profile with per- sonal data and special travel data in an easy way. It shall also enable travel agencies to match consumer travels with their portfolio and allowing offerings in a transparent form. Some tactical objectives are (1) eCommerce-instruction for 10% of the employees during the first year, (2) establishing the eCom- merce-service within one year and an investment of 300.000 EUR, (3) reducing marketing costs up to 20% via special community-features during the next two years and (4) offering a full-service-application-programming-interface for the processing of travel bookings to reduce transaction costs up to 15% by start of the eCommerce-service.
The ideals, goals of the eCommerce-Manager are (1) win- ning more customers, (2) establishing an eCommerce-service with best usability and transparency, (3) cooperating with ser- vice partner for content and more products as well as (4) reduc- ing process and transaction costs.
Figure 4. 4 Goals & 4 Ideals of Tactical Domain
DVT(eComm) = OBJECTIVEST1,2,3,4 | IDEALST1,2,3,4
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D. Operative Domain (Dimension: Technology)
For technology-based companies this domain is understood as a very critical "Enabler" for entrepreneurial activities with an important impact on the value chain. Products, services and processes of eCommerce-companies are created, established, improved via projects. Besides the concrete design, structure, development and implementation of an eBusiness-Project the focus and Business Value-expression of the operative domain is mainly aimed to technological innovations and software- requirements like scalability, performance, security, impact on existing processes, etc. Based on the goals of the strategic and tactical domain and a vision briefing in our case the manager for technical development creates a requirements sheet.
Among other things his operative objectives are (1) as-is analysis and reference concept of all involved processes and features within 2 months, (2) develop a technical eCommerce- infrastructure with new server for web, database, communication, development, replication, backup and security within three months and maximum cost of 30.000 EUR, (3) recruitment of a project team with core competences in JavaScript, Ruby on Rails, (User-centered-)Design within three months, (4) development of widgets for social networks to generate traffic from other websites (1.000.000 Visits during the first two years) and an application programming interface (API) for easy processing and automated transactions with travel agencies to reduce transaction time and costs up to 10%.
The ideals, goals of this manager are (1) delivering a scala- ble and secure system, (2) easy to use and understand which (3) allows high loads on traffic and performance as well as an (4) efficient support of processes and information of the organiza- tion by technology.
Figure 5. 4 Goals & 4 Ideals of Operative Domain
DVO(eComm) = OBJECTIVESO1,2,3,4 | IDEALSO1,2,3,4
V. LINKING DOMAIN-VALUES TO BUSINESS-VALUE To speak and measure with a hierarchical overlapping
Business Value it is necessary to link each Domain Value to one Business Value which can be related to a strategic pro- gram, a special product development, a software-project, etc. In our case the Business Value of the eCommerce-Project is the inclusion of all related Domain Values:
BV(eComm) = DVS(eComm) + DVT(eComm) + DVO(eComm)
In the form of a well structured Business Value-Sheet every involved stakeholder is able to see his Domain Value, the Do- main Value of other domains and the overall Business Value referring to its focus, e.g. a software project, a product, a strat- egy, etc. This helps to understand the ideals and goals of the other stakeholders as well as enable stakeholders to set prioriti- zations in their objectives regarding to other domains. Due to the case of the SME the top management and the managers of the tactical and operative domain can identify how value is created over the three hierarchies, what the preferences, the main tasks and ideals of every domain and their contribution to value.
Figure 6. Linking Domain Values to Business Value
VI. CONLUSION & FUTURE WORK Our first approach seeks to allow better prioritization re-
garding other domains, e.g. in agile software development- projects, an enhanced focus on strategic goals and develop- ments, a better understanding of market needs (especially for technical employees), a strategic/value-control- and a strateg- ic/value-feedback-system over all hierarchical levels.
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With a widespread view over all important business fields, the CET-Model leads to a better business/strategy-orientation in agile software/process development in eCommerce as well as other branches. The introduced framework aims to bridge the existing gap between business strategy and e/mCommerce- Development. Tasks in the development process are planned (i) in a timeline, (ii) following priorities according to the interests of the different business domains (hierarchical levels)/ market views/ technical views (iii) and results/ increments are better traceable/ checkable (e.g. for controlling, improvement, busi- ness planning) by every domain.
In future iterations of this work, we will discuss the interac- tion of Business Values and Domain Values as well as further study value drivers and influence factors. Our next steps will be a more precisely evaluation of the measurement possibilities of Ideals as well as Domain Value and Business Value as a priori- ty-setting and a performance-measurement-tool to build a common meta model of Business Value and Domain Value followed by an analytic and empirical validation of the CET- Model.
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