The e-commerce conundrum

Confusion is creeping into the implications for business of booming electronic commerce. On one level, this is good news: the days of undifferentiated hype are over. But there is bad news as a corollary. The uncertainty being displayed over its impact implies that locating your business amongst the winners, and avoiding the pitfalls of the losers, requires reading a map of increasing complexity which few as yet appear able to navigate.

The big question is over business models. Organisations remain unclear both as to what customers want and how much they are prepared to pay for it, and also just how new channels can deliver returns, beyond a nebulous `added value'. New research published last week, carried out by the Bathwick Group on behalf of Oracle and Sun Microsystems, has revealed that business managers and IT managers are `at loggerheads' over the take-up of electronic commerce. The project involved questioning 100 of the UK's largest organisations and shows that there is a strong mismatch in the beliefs and expectations of the two groups, crucial issues to overcome if robust business models are to be established.

For example, in the finance sector basic questions revealed major disparities. Consider one: `Will having electronic interface with your customers increase or decrease their loyalty?' This is all important for customer retention, vital for survival in a competitive space. And yet, of the chief executive officers who replied, 42 per cent said it would increase loyalty and 26 per cent said loyalty would decrease. Whereas only 21 per cent of chief information officers believe it will build loyalty and a massive 63 per cent believe loyalty will suffer as a result of electronic interfaces.

This difference of opinion is reflected in the other industry sectors that the research surveyed, including retail and manufacturing, so that overall some 60 per cent of IT managers are worried about the impact on their business whereas only 20 per cent of business managers feel the same concern.

The conclusion drawn is that those in IT see the issue from a technology perspective, where it is perceived as a disintermediating force that leads to customer promiscuity - individuals surfing around to find best price or service regardless of brand or past experience. Business executives, on the other hand, view electronic commerce as an opportunity, a way to offer more choice and flexibility, such as 24-hour availability or services delivered to the home. These, they believe, will act as differentiators and encourage clients to stay with them rather than move away.

Philip Crawford, managing director of Oracle in the UK and Ireland, agrees that the research is revealing and points to another area of contention. "One of the most surprising differentiations between responses from companies was in connection to whether they have already begun to implement electronic contact with their customers," he said. "A number of CEOs are obviously unaware that their companies are already using this technology. For companies concerned about being left behind by their competition, having senior managers across the company unaware of their current position could be a major problem." The right hand does not know what the left is doing, either!

Another worry that financials revealed is over the emergence of new entrants into their field. Some 74 per cent of CEOs and 84 per cent of CIOs reckon that electronic commerce opens the door to non-traditional competitors, including retailers, foreign banks and `big brands' like Virgin. Interestingly, there is a difference of opinion again about the nature of the threat these pose. Business executives are generally less intimidated, believing that established financial brand is important to customers with few changing company unless there is a very good financial reason or service has been particularly bad. CIO's seem less sure that simply being a big player will enable them to defend their turf.

However, for Jonathan Steel, managing director of the Bathwick Group, the most surprising result is that business is so positive about electronic commerce.

Perhaps the primary lesson to be learnt is the need to increase awareness about new channels, especially at the board level. And with 43 per cent of business managers thinking that the IT industry is immature and 25 per cent of IT managers believing their business managers do not understand technology, it seems fair to conclude that reconciliation is a good place to start in order to avoid confusion and reach a common mindn