developing a framework to investigate the impact of e-commerce on the management of internal...

& Research Article

Developing a Framework to Investigatethe Impact of E-commerceon the Management of InternalBusiness Processes

David Barnes*, Matthew Hinton and Suzanne Mieczkowska

Open University Business School, UK

This paper develops a theoretical framework for use in research investigating the impact ofe-commerce on the management of internal business processes. Managing the business processesthat facilitate order fulfilment and delivery of goods and services supplied to customers is theprime concern of operations management. Despite the growing importance of e-commerce toorganizations of all types, e-operations is a neglected area of study. Yet many of the problemsassociated with e-commerce have centred on an inability to ‘deliver the goods’, often literally.Effective and efficient operations management is as important in e-commerce as it is in tradi-tional business. The framework, developed by integrating literature from the academic tradi-tions of operations management and information systems, identifies three key issues: businessprocess integration (the extent to which business processes for clicks and mortar e-commerceare integrated with those for bricks and mortar), information systems integration (the extent towhich intra- and inter-organizational information systems are capable of communicating andsharing information with each other) and the operating context (types of customers, thee-commerce business model and organizational factors). The framework is being used incase study-based research that aims to describe and model current practice in organizationsengaged in e-commerce. The paper describes how the framework was applied in three financialservices companies. The framework proved to be a useful basis for the research, enabling keyemergent themes to be identified. However, in order to fully explain all of the research findingsit was subsequently necessary to modify the framework to take account of the strategic contextof each organization. The modified framework will be used as the basis of further case studiesbeing conducted in organizations in other sectors. Copyright # 2002 John Wiley & Sons, Ltd.

INTRODUCTION

There can be little doubt about the growing impor-tance of e-commerce. In the UK an estimated 63%of companies now have a website (ONS, 2001); total

e-commerce revenues, including the business toconsumer (B2C) and business to business (B2B)transactions, were worth over £11 billion in 2000and are forecast to rise to nearly £200 billion by2004 (Forrester, 2001). As well as technologicalimplications, the advent of e-commerce seemslikely to have far-reaching economic and socialimplications for all organizations, irrespective ofthe industry in which they operate. For organiza-tions that adopt e-commerce, there are likely to

Knowledge and Process Management Volume 9 Number 3 pp 133–142 (2002)Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/kpm.144

Copyright # 2002 John Wiley & Sons, Ltd.

*Correspondence to: David Barnes, Open University BusinessSchool, Milton Keynes, MK7 6AA, UK.E-mail: [email protected]

be significant effects on all of their functionaldisciplines. However, much of the debate is cur-rently dominated by the concerns of the finance(e.g. the liquidity and profitability of the dotcoms),the marketing (e.g. the design of user-friendly websites) and the human resource (e.g. IT skillsshortages) functions. To date, operations has beenthe neglected function in e-businesses.

E-commerce has been defined as ‘the sharing ofbusiness information, maintaining business rela-tionships, and conducting business transactionsby means of telecommunications’ (Zwass, 1996).At its simplest, electronic commerce may bedefined as ‘doing business electronically acrossthe extended enterprise’ (Till, 1998). The operationsfunction is that part of an organization that is con-cerned with the management of the business pro-cesses that produce the goods and servicessupplied to customers. These processes of orderfulfilment and delivery are at the heart of any busi-ness as they are the means through which an orga-nization satisfies its customers. An organizationcan be considered to have e-operations if it usesinformation and communication technologies(ICT) in the management of its order fulfilmentand delivery processes.

The academic study of e-operations is inevitablyembryonic, and as such there is a dearth of repor-ted research studies examining the impact ofe-commerce on internal business processes. A lot ofwhat has been written about e-commerce to datehas either been predictive, with varying degreesof hyperbole, or prescriptive (i.e. the ‘how to suc-ceed’ type of publication). Much of the literatureappears to emanate from those with direct com-mercial interests (e.g. consultants selling advice,computer hardware or software sales agents).Descriptive work, including any that concerns itselfwith the operational aspects of e-commerce, hasusually come from journalistic sources, often withscant detail and usually little analysis. E-commerceseems to be following other advances in technology-driven operations practice such as MRP and ERP,and indeed even some non-technologically basedadvances like JIT and TQM, in being led by practi-tioners, rather than academics. In short, while e-commerce is enjoying rapid advances in practice,the theory has been left lagging behind. The roleof academic researchers is to analyse such phenom-ena in order to provide additional understandingthat can form the basis of future developmentand application.

E-commerce may impact on customer-facingoperations, relationships with suppliers, and inter-nal operations throughout the whole organizationwhether in the front office (i.e. those areas that

involve contact with customers) or in the backoffice (i.e. areas with no customer contact). Consid-eration of the impact of e-commerce on operationsmanagement has, to date, focused primarily on theexternal links in the supply chain. This may be dueto an assumption that e-commerce is associatedwith moves to more outsourcing, linked with con-cepts of the virtual organization (Hedberg et al.,1997). It may also be due to the need to managethe greater connectivity afforded by e-commerce,especially with external supply chain partners.However, irrespective of the level of operationalactivity retained within the organization, the adop-tion of e-commerce seems bound to have signifi-cant implications for the way that businessprocesses are managed internally and externally.As Grover and Malhotra (1999) assert, ‘in conjunc-tion with marketing, operations and informationsystems may very well form the backbone ofe-commerce advances in organizations’.

LITERATURE

The literature from both operations managementand information management can usefully informthe study of e-operations. Although operationsmanagement and information management haveevolved from different roots (operations manage-ment from scientific management and operationsresearch; information management from computerscience) they have some common conceptualunderpinnings. Three principal commonalitiesare: systems theory (and in particular the transfor-mation model), the concept of process flows andthe differentiation between constituents of hard-ware and software.

An operation can be thought of as an activity inwhich resource inputs are transformed into out-puts. This may involve the transformation of custo-mers, materials and information in the productionof outputs of physical goods and/or intangible ser-vices (Slack et al., 2001). Traditionally the academicstudy of operations has tended to focus on opera-tions at the micro-level (e.g. Vollman et al., 1997).However, modern approaches to operations man-agement take a more holistic view of organizationalactivity, emphasizing the linkages between the var-ious micro-operations that constitute an organiza-tion’s macro-operations (see, for example, Slacket al., 2001). From this follows the idea of a businessprocess as a logical sequence of interconnectedactivities that uses organizational resources to cre-ate products and services to meet customer needs(Childe et al., 1994). Such perspectives of operationsfit well with the broader strategic models of

RESEARCH ARTICLE Knowledge and Process Management

134 D. Barnes et al.

organizational activities, such as Porter’s (1985)value chain. Operations management is especiallyconcerned with the business processes that com-prise order fulfilment and delivery. The businessprocess literature (using titles such as business pro-cess improvement, business process reengineeringand business process redesign) draws extensivelyon systems theory (Armistead and Harrison,1995). This literature emphasizes that business pro-cesses are likely to cross boundaries inside organi-zations (typically those between functions) andbetween organizations. Thus operations manage-ment needs to be viewed holistically within thebroad context of the organization rather than with-in the narrow confines of a functional discipline(Armistead and Machin, 1997). Supply chainmanagement literature (e.g. Christopher, 1992)takes the business process perspective of opera-tions management further, and goes beyond theboundaries of the organization to encompass rele-vant operations inside the organizations of suppli-ers and customers (and suppliers’ suppliers, andcustomers’ customers).

The notion of flow, as exemplified in the busi-ness process perspective, is prevalent in operationsmanagement. Techniques such as production flowanalysis, process flowcharts, and service blueprint-ing are widely used to assess the movement ofmaterials, people and information within businessprocesses.

Writers taking a strategic perspective, notablyHayes and Wheelwright (1984), distinguishbetween two broad elements of operations manage-ment: structure (the physical elements of opera-tions especially the nature, extent and scope ofits technology) and infrastructure (the way inwhich the technology of the operation is plannedand controlled, the quality managed, the workforcemanaged and organized, etc.). These may bethought as the hardware and software respectively,of operations management.

Information management literature also displaysthese key features of transformation, flow, and softand hard infrastructures. Like operations manage-ment, systems theory underpins much of the think-ing in information management (Checkland andHolwell, 1998). The transformation model lies atthe heart of the consideration of any informationsystem, although its focus is the processing ofinformation. Similarly, the analysis of informationflows is central to the understanding of informationsystems.Aswith operations, the boundary-spanningproperty of information is emphasized. The addedvalue to be realized from information, as inputand output to business processes, has been reco-gnized throughout and between value chains,

most notably by Porter and Millar (1985) andwith respect to e-business by Evans and Wurster(2000).

Information management also has its own set ofmethods and techniques to aid this analysis (e.g.SSADM, data flow diagrams, systems flowchartsetc.). Commonly, these methods identify a systemas having a set of inputs, a set of outputs, and aset of processes that convert inputs to outputs(Avison and Fitzgerald, 1995).

The differentiation between hardware and soft-ware has long been a key consideration in informa-tion processing, despite the inextricable linkbetween the two. Indeed, the recent and rapidapplication of information technologies seemsmainly to be driven by a kind of technologicaldeterminism from within the organizations thatthese technologies serve. As Checkland andHolwell (1998) have observed: ‘There is a propen-sity to focus on the computer-based IT and to dowhat the technology allows us to do, almost, itseems for its own sake ( . . . ). Technically, the Inter-net seems certain to have a significant effect on ISdesign and development ( . . . ). It provides goodexamples of the fact that technological develop-ment can lead to changes in social thinking andactivity.’

Consequently, the study of the processes oforder fulfilment and delivery in the Internet eranecessitates an understanding of the interactionbetween operations management and informationsystems (Lyons, 1998). As Grover and Malhotra(1999) note, ‘this interface is critically important atthis juncture, particularly more so since it is highlyrelevant and not very well understood’. Yet this isnot virgin territory. The impact of e-commerce onsupply chain management has clear echoes of aprevious IT application in operations management,namely EDI (Threkel and Kavan, 1999). The busi-ness process re-engineering (BPR) literatureemphasizes the use of IT in the transformation ofoperational activity (Knights and Willmott, 2000;Jahnke and Tijok, 1998; Loeffler et al., 1998) andthe impact of information systems integration onbusiness process improvements (Bhatt, 2000;Weerakkoddy and Hinton, 1999). However, pre-vious research has mostly focused on IT applica-tions which were commonplace prior to thewidespread adoption of the Internet and its asso-ciated technologies. For example, Venkatraman’s(1994) framework for assessing IT-driven organiza-tional change could, perhaps, be used in the exami-nation of transformations driven by the adoption ofe-operations. However, as it precedes the advent ofe-commerce, both historically and technologically,it may have its limitations.

Knowledge and Process Management RESEARCH ARTICLE

E-commerce and the Management of Internal Business Processes 135

The dramatic increase in connectivity offered bythe Internet can create almost unlimited informa-tion flows within, and especially into and out oforganizations. It can be conjectured that the suc-cessful adoption of e-commerce in an organiza-tion’s operations will largely depend on theextent to which information flows can be harnessedto enhance the management of the affected internalbusiness processes. As Amar (1999) argues, ‘howwell a business of any form or size repositions itselfin the marketplace and adjusts its practices in thelight of the evolving principles of the Internet willdecide for it the difference between success and thestruggle for survival’. Therefore, the implicationsfor e-operations, including the potential benefitsavailable, seem to centre on the degree of integra-tion that an organization can achieve within andbetween its business process and its informationsystems. Chan and Swatman (2000) note that‘industries ( . . . ) are finding the adoption ofInternet-based forms of e-commerce a more com-plex process than they had anticipated. This is par-ticularly the case when this adoption involvesintegration with internal applications systems andexisting methods of doing business’.

THEORETICAL FRAMEWORK

Investigation of the management of business pro-cess in an e-commerce organization needs to con-sider the extent of integration both internally andexternally. Consideration of integration can bedrawn together under three headings that can beused as the basis of a theoretical framework forempirical research.

1. Business process integration

Internal business process integration concernsthe extent to which the business processes fore-commerce within a clicks-and-mortar organi-zation (i.e. one conducting both e-commerce andtraditional business) are integrated with the tradi-tional business processes. External business processintegration is the extent to which the business pro-cesses are outsourced, including the extent towhich any such outsourcing for e-commerce is inte-grated with outsourcing for traditional business.Another key concern is how the interface with theexternal supply chain, forwards and backwards, ismanaged, especially any disintermediating effectsof the new technology. Equally, where there is re-intermediation, or the formation of strategic alli-ances, lack of standardisation can be a key issue.As Choi and Whinston (2000) state, ‘e-commerce

business interoperability is built upon technolo-gical interoperability, which provides an opencomputer and networking structure. However,technological standards at the infrastructure levelare relatively easier to reach than those at the appli-cations and business process levels’.

2. Information systems integration

The consideration of information systems integra-tion needs to encompass the extent to which infor-mation systems are integrated internally (bothacross functions, and between e-commerce and tra-ditional activities) and externally (along the supplychain to suppliers and customers). It also needs toinclude the extent to which existing (i.e. legacy)information systems are able to facilitate integra-tion (e.g. through the use of EDI, ERP or CRM)or, indeed, to circumvent the Internet altogether.As Davenport (2000) says, ‘EDI is sometimesdescribed as an expensive technology, but its costspale in comparison to the human costs of agreeingon information and process standards’.

3. The operating context

Due regard also needs to be paid to the operatingcontext in which e-commerce is taking place. Thiscan be considered under three broad headings: cus-tomer context, e-commerce context, and organiza-tional context. The customer context is the extentto which the organization is engaged in B2B and/or B2C e-commerce. As Mahadevan (2000) notes,‘the Internet economy allows an organization toposition itself at an appropriate level of the supplychain, depending on the nature of its business’. Thee-commerce context is concerned with the presentbusiness model (i.e. whether it is a dotcom, or aclicks-and-mortar organization), the path to thatmodel and the extent to which the business pro-cesses and information systems have had to changeto facilitate the adoption of e-commerce. The orga-nizational context concerns factors such as theorganization’s objectives (profit-seeking or not-for-profits), its size (multinational, SME), its organi-zational culture, its industry sector, and other rele-vant factors that influence its business activities.

Figure 1 illustrates this theoretical framework,demonstrating the interrelationship between thesefactors.

METHODOLOGY

The main aim of the research project is to des-cribe current practice in the management of



internal operations of organizations engaged in e-commerce, identifying problems and issues in thebusiness processes of order fulfilment and delivery.As such, the research is empirically based, focusingon emerging practice. It seeks to model the internalbusiness processes in e-businesses, identifying anycommon patterns and contingent organizationaland environmental variables.

The research is intended to be essentiallydescriptive in character. This, as Meredith et al.(1989) argue, is the start point of the ‘the normalcycle of research’, in which description is used toform the basis for explanation which can then betested against reality until, through a series ofresearch studies, a theory can eventually be built.

The level of detail needed to achieve the type ofin-depth understanding required in this research isalmost certainly best achieved through a case studyapproach. A case study is ‘an objective in-depthexamination of a contemporary phenomenon with-in some real-life context where the investigator haslittle control over events’ (Yin, 1994). For areaslike this where there is a paucity of empiricalresearch and existing theory seems inadequate,case studies can also offer a route to theory build-ing (Eisenhardt, 1989).

A series of comparative case studies is beingconducted, matching organizations operating dif-fering e-business models within similar industries.In order to compare and contrast practice across arange of different organizational types, the researchincludes examples of organizations engaged in B2B(business to business) and those in B2C (business toconsumer) e-commerce, those engaged solely ine-commerce (dotcoms) and those also engagedin traditional business (clicks and mortar). Thecontext will be further amplified within thee-commerce models investigated by includingexamples of businesses producing physical goods,and those delivering intangible services; profit-seeking and not-for-profit organizations, multi-nationals, SMEs, and so on.

Data collection is principally through semi-structured interviews with operational managersfrom each organization. Gathering a sufficiency ofdata on business processes can only be achievedfrom within an organization, and so organizationalaccess is a prerequisite for this study. Semi-structured interviews give researchers the freedomto explore interesting avenues for investigation asthey emerge. It is particularly important to beable to get close to the key organizational actors,not only to gather factual data from them, but—perhaps more importantly—to gain an ‘under-standing of actions and meanings in their . . . con-text’ (Bryman, 1988). The use of multipleinterviewees in each organization not only affordsgreater depth and breadth of data, but also over-comes the problems of unreliability associatedwith the use of single respondents (Bowman andAmbrosini, 1997). The questioning is based on thetheoretical framework developed from the litera-ture discussed above, to focus and bound thework (Miles and Huberman, 1994). Interviews aretape recorded to facilitate subsequent transcriptionand analysis.

THREE ILLUSTRATIVE CASE STUDIES

In this section of the paper the preliminary findingsfrom three cases are described to illustrate theapplicability of the framework. All three companiesare in the financial services sector in the UK.

Case A—The Market-maker

The company is a London based market-maker,primarily trading shares in small and medium-sized companies. The company has recently movedfrom a bricks-and-mortar to a clicks-and-mortarbusiness model. Previously, all share dealing wasdone over the telephone, but recently the companyhas developed a web-based information system to

Figure 1 A theoretical framework for investigating e-operations



provide information to investors and enable themto buy and sell shares online. The online tradingfacility is aimed at small private investors, ratherthan large-scale institutional investors whom thecompany expects will remain as telephone traders.

Despite the move to some online trading, thecompany has not yet made significant changes toits internal operations. All share transactions arechannelled through the dealers, whether they arereceived via telephone or via the website. Assuch, the company’s business processes are fullyintegrated. The company does not outsource anyof its key business processes, so external businessprocess integration is not an issue in this case.The company has recently invested in new infra-structure for its internal information systems,which appear mostly to have been integrated. Thenew system has enabled a reduction of back-officestaff by approximately one-third. The integration ofthe company’s information systems with externalsuppliers is not an issue, because the aim is delib-erately to create a business model not being usedelsewhere, which can nurture and operate a specia-list, niche market.

The company’s main motivation in usinge-business processes is to test the connectivity ofInternet-based operations. The company is seekingto transfer what it describes as its ‘bread and but-ter’ B2C trade from the telephone dealing system,into a discrete, online system. The company main-tains that online dealing can improve efficiencythrough lowering transaction costs, and will alsoenable the company to charge lower fees. Althoughthe online trade is described as low margin busi-ness, the company will achieve acceptable returnsif volumes are high. The overall proportion of busi-ness being conducted electronically is still verysmall, but the company partially attributes this tothe current bear market, especially in high-technol-ogy shares.

The company’s concerns about managing thechange to e-commerce include the question ofwhat level of profitability might be achieved. Thereis also concern about the unknown costs of technol-ogy required for e-commerce processes. The com-pany hopes that its move to e-commerce willattract new investors, especially as an online stock-broker might convey a more positive image thanthat which often attaches to the traditional Citystockbroker. One other significant issue is that ofthe over-abundance of information: the companysaid it did not always know whether there wasvalue in the information it had, or whether valuecould be generated from the vast amounts of infor-mation flowing through it. One consequence of themove to online trading is that the company now

recognizes the ‘vital’ role played by its IT depart-ment, which it now regards as ‘key personnel’.

Case B—The Retail Bank

This case concerns the central mortgage office of alarge retail bank. Previously, mortgage sales wereobtained from customer contact with mortgageadvisers based in local branches. Customers whowished to secure a loan were required to fill in anapplication form manually, which would then beposted to the bank’s central mortgage office forprocessing. Here the application would be pro-gressed by conducting credit checks on the appli-cant and a valuation of the property to bepurchased. Alternatively, customers could applyover the telephone by calling the central mortgageoffice directly. Here, operators would take the call-er’s details over the telephone, completing anapplication form for them based on the verbalinformation provided. As part of the bank’s moveto Internet banking, it is now attempting to movesome of its mortgage services online. However,the company’s retail website presently only has a‘call me’ button to trigger a telephone call to thecustomer from the central mortgage office.

The situation is complicated by the fact that thebank has recently taken over a major competitor,whose mortgage products are more developedthan those of the bank; applicants are able to sub-mit a mortgage application electronically. Theonline mortgage applications are currently stillprocessed within the former competitor’s offices.The bank is in the process of merging the twooperations, but currently it is obliged to run themin parallel. When the operations are merged, allmortgage applications will be dealt with by thebank’s central mortgage office. Whether receivedonline, by telephone or by post, applications willbe handled by the same staff, using the samebusiness process: potentially, an example of inter-nal business process integration. But to date thisinternal information systems integration has notbeen realised, and achieving it remains a majorissue.

Currently, the bank’s central mortgage office hastwo distinct channels for the receipt of mortgageapplications arising from the online operations. Inthe case of the bank’s own mortgage products,applications are received over the telephone andare keyed in by the bank’s operators. For the formercompetitor’s products, applicants can key in theirown application online and this is then transmittedto the bank’s mortgage processing department.However, because of the incompatibility betweenthe two systems, the processing department



currently must generate a hard copy of each appli-cation. For applications received for the formercompetitor products, this means that the onlineapplication submitted by the customer has to bemanually re-keyed by the bank’s operators.

Although e-commerce in the form of Internetretail banking is a priority for the bank, onlinemortgage application processing is not. However,the bank is carrying out further development ofits website and intends to extend the onlineapplication process to its own mortgage products.The bank feels that a clear demonstration ofcustomer benefit from e-commerce will be a signi-ficant issue in generating more online mortgagebusiness than it handles at present, which itestimates to be around 2–3% of its total mortgagebusiness.

Case C—The Insurer

This case examines the use of e-commerce withinthe reinsurance and specialist insurance divisionsof the UK subsidiary of a large US insurance bro-ker. E-commerce is used mainly in business-to-business (B2B) dealings, as the company operatesas an intermediary between its corporate clientsand underwriters on the London insurance market.The company is focusing its e-commerce activitiesmainly on its ‘low-value’ business, where the risksare perceived to be low, and the potential benefitsfrom cost-savings high. E-commerce is primarilyused in the company’s supply market where asecure website offers access to information forunderwriters. In some instances, depending onthe quoting arrangements, a structured workflowenables the contract to be negotiated wholly elec-tronically.

The company has not integrated its e-businessprocesses with other internal business processes.The e-commerce processes are run separatelyfrom all other processes and the staff that handlee-commerce do not handle any other business. Assuch, e-commerce has brought little internal changefor most of the company. At the same time, thereappears to be a high degree of internal informationsystems integration, and considerable effort seemsto have been made to overcome legacy system pro-blems. The company does report that externally,information systems integration problems areemerging, due to the lack of agreed standards with-in the insurance markets. External changes havealso been very slow, owing to cultural issues—inparticular, the reluctance to accept new technologywithin the insurance markets. The company has alonger-term strategy in place to continue to extendand develop its e-commerce activities, with the

aspiration of becoming a technological leader with-in the industry.

Currently, the company’s main motivation forengaging in e-commerce stems from the threat ofcompetition and the potential for disintermediationby insurance companies dealing directly withclients. The company is also attracted by the effi-ciency and cost-savings offered by e-commerce.The main issues and obstacles identified by thecompany are cultural issues around the accept-ance of new technology, and the reluctance tomove away from the face-to-face dealing whichhas been fundamental to the maintenance of truston which the insurance industry relies.

THE APPLICABILITY OF THETHEORETICAL FRAMEWORK

The theoretical framework provides a useful basisfor data collection and subsequent data analysis.It is especially helpful in providing a commonbasis for cross-case analysis. The main emergentfindings are discussed in this section under eachof the three main headings of the framework.

Business process integration

For all three organizations, the e-commerce appli-cation is not transactional: it serves either to conso-lidate or to disseminate the information inputs andoutputs from the business processes involved. Forthe market-maker and the retail bank, the transac-tion is effected through the organization’s normalstaff and conventional processes, i.e. the dealersand mortgage processing staff respectively. It isonly the insurer that has allocated separate staffand processes for its e-commerce operations. Theretail bank is the organization making poorest useof e-commerce. Unable to integrate applicationsreceived from its own online operation with thosereceived from the competitor that it had acquired,the net effect of e-commerce is to vastly increase thevolumes of information that the bank must pro-cess—in the case of the fomer competitor’s applica-tions, through firstly re-keying them. In thecircumstances, it is not surprising to learn that thebank does feel there is a business case to be madefor e-commerce.

The investments made in e-commerce by thethree companies are tending to result in the auto-mation of existing processes, rather than the re-design of those processes. This in turn tends toreinforce the existing, largely functionally-basedorganizational structures, rather than creating pro-cess-based structures. This is perhaps, a surprising



finding especially given all the interest in BPR overthe last decade, much of which was driven by thosewho saw the possibilities for IT driven businessprocess improvement. It very much runs counterto ‘don’t automate, obliterate’ entreaty of Hammer(1990) and other advocates of BPR.

Information systems integration

There is variation in the extent of internal informa-tion systems integration between the three cases.The insurer and the market-maker have achieveda high degree of internal integration across theirfunctions. The retail bank, however, suffers fromincompatible information systems, having todownload and re-enter information between twodepartments. Where business processes are runseparately for e-commerce and traditional business(as is the case for the insurer and the market-maker) the level of internal information systemsintegration between the processes appears to behigh. It may be that there is an association betweenhigh levels of internal IS integration and low levelsof business process integration, requiring furtherinvestigation.

The availability of the open systems of the Inter-net is an illustration of how the Internet can facili-tate external IS integration with customers, asexemplified by both the market-maker and theretail bank (although it can be argued that the latterhas been slow to take advantage of this connectiv-ity). The insurer still seems to rely on more tradi-tional methods of communication with itscustomers.

Operating context

Consideration of the operating context fore-commerce is useful in two ways. It offers a routeto the categorization of potential contingent vari-ables; and it will also highlight specific conditionsin any organization which need to be taken intoaccount in the cross-case analysis. In the threeexamples reported in this paper, each case com-pany is operating in a different sector of the finan-cial services industry, with different e-commercecustomers. The retail bank is operating B2Ce-commerce, the insurer operates B2B e-commerce,and the market-maker is using an e-commerceapplication to increase its B2C business. Allthree companies were similar in that each was inthe early stages of adopting e-commerce to becomea clicks-and-mortar operator in an industry with aconservative culture. As such, different barriersarose for each organization, but with the consistent

effect on all three being a slow and cautious imple-mentation of e-commerce processes.

LIMITATIONS OF THE THEORETICALFRAMEWORK

The interviews have highlighted a number of issuesthat go beyond the scope of the theoretical frame-work. These centre on the organizations’ motivesin adopting e-commerce and the intended pur-poses in the use of e-commerce. Although thesewere many and varied, their articulation was com-mon to interviewees in each of the three case com-panies. This seems to point to the need to place aconsideration of impact of the adoption of e-com-merce on internal business processes into the stra-tegic context for each company. Strategic contextcan be taken to be the relationship between organi-zation’s motives and intentions in its use of e-com-merce and its corporate strategic objectives.

The theoretical framework as originally pro-posed thus seems to be limited and the findingsfrom these cases points to the need to incorporatean explicit consideration of an organization’s stra-tegic context.

Strategic context

The main emergent findings arising from a consid-eration of the strategic context of the three compa-nies are now discussed. As with the varying levelsof business and information process integration,differing and sometimes contradictory reasonscan be identified for each company’s decision toimplement e-commerce.

The market-maker and, to some extent, the retailbank are both largely driven by internal, strategicfactors. The market-maker perceives itself as a com-pany offering a service which is unique and whichit would like to extend to its (mainly retail) custo-mers through an online Internet channel. The retailbank is also operating e-commerce mainly becauseof internal strategic factors, namely the acquisitionof a competitor and its range of online Internet-based mortgage products. Of the three, it is theinsurer whose application of e-commerce is mostdriven by external factors: the perceived externalthreat from competitors and a sense of vulnerabil-ity at the hands of its broker intermediaries. Thecompany is concerned that the brokers, throughwhom it deals with many of its clients, mayattempt to provide a direct service to those clients,thus by-passing them in the supply chain. With theinsurer there is also a certain amount of internalstrategy driving its applications of e-commerce:



the company has stated that it wishes to become atechnological leader within the insurance industry.

To a greater or lesser extent all three case compa-nies appear to display confused motives in adopt-ing e-commerce. Although all three companiesrecognize the importance of e-commerce, thereremains confusion about how best to harness itspotential. Consequently, their investments ine-commerce, whether internally or externally dri-ven, seem to arise mainly from a fear of ‘beingleft behind’ by competitive actions. In particular,the retail bank had no clear business objectivesfor its online mortgage processing operations, apartfrom its perception that it was in some sense desir-able to incorporate mortgage products on theirwebsite. Meanwhile, the insurer is concerned tobe an industry leader in e-commerce, but at thesame time had chosen to operate e-commerce inwhat might be termed an expendable application:low-margin, low-risk business, where e-commercecould be withdrawn if it did not prove to be oper-able. Of the three, the market-maker appeared tohave a much clearer aim, in using e-commerce togrow and sustain a niche market.

There are similarities here between the market-maker and the insurer. Each is applyinge-commerce because they can afford to, and wishto do so on a quasi-experimental basis: themarket-maker in order to ‘test the connectivity’ ofInternet-based e-commerce; and the insurer withthe ultimate aim of reshaping the market, becom-ing a ‘technological leader’. Both are applyinge-commerce in low-margin high-volume business,where the risk is perceived to be low, but potentialreturns high. The retail bank, on the other hand, isapplying e-commerce almost in spite of itself, and itcan be argued that the main push to reform thebank’s current online offering of mortgage pro-ducts comes from its inheritance of the moreadvanced online products and processes of the

competitor. Currently the bank is applying e-com-merce to business that it does not perceive as eitherstrategically important or particularly profitable.The business is low in volume and low in marginand the bank has stated that it would like to con-centrate on its retail online banking, which it seesas the main thrust, and potentially the most profit-able of its online operations.

In the case of the market-maker and the insurer,e-commerce is being applied in a highly selectivemanner, destined to serve a small and pre-determined group of customers. By contrast, withthe retail bank the customer cohort served bye-commerce is not controlled by the bank itself,but is determined instead by the channel used bythe customers to obtain mortgage products. Thebank does not appear to have much direct controlof these channels at present, although the develop-ment of the bank’s website for online mortgageproducts will no doubt be accompanied bymore assertive marketing of the products, in duecourse.

CONCLUSIONS

The conclusions to be drawn from this research aretwofold. First, the emergent themes from the threecases studied can be summarized as follows:

* The adoption of e-commerce is tending to auto-mate rather than re-design existing business pro-cesses

* High levels of internal information systems inte-gration appear to be associated with low levelsof business process integration

* The barriers to increased use of e-commerce areboth social (e.g. conservative organizational andindustry cultures) and technological (e.g. lack ofindustry standards and open systems)

Figure 2 The revised theoretical framework for investigating e-operations



* Organizations have various and often confusedmotives for adopting e-commerce. These includereducing costs, fear of being left behind by com-petitors, targeting specific niche markets, andexperimentation (learning by doing)

It is, of course important to recognize the limita-tions of findings from only three cases in a singleindustry sector. However, these are all issues thatseem worthy of further investigation especially ifthe research can be extended to include other sec-tors.

Second, although the framework as originallyproposed proved a useful basis for the research, itwas limited in that it was unable to fully explain allthe research findings. As such, it is proposed to thatthe framework be modified to account for an orga-nization’s strategic context. The revised frameworkis shown in Figure 2.

The modified framework will be used as thebasis of further case studies being conducted inother organizations in other industry sectors.

REFERENCES

Amar AD. 1999. E-business: selection and adaptation ofproducts and services for e-commerce. Mid-AtlanticJournal of Business 35(1): 5–9.

Armistead C, Harrison A. 1995. Business Process Re-engineering: lessons from operations management.International Journal of Operations and Production Man-agement 15(12): 46–59.

Armistead C, Machin S. 1997. The implications of busi-ness process management for operations management.Industrial Management 17(9/10): 886–899.

Avison D, Fitzgerald G. 1995. Information Systems Devel-opment: Methodologies, Techniques and Tools. McGraw-Hill: Maidenhead.

Bhatt GD. 2000. An empirical study of the effects of infor-mation systems integration on business processimprovement. International Journal of Operations andInformation Management 20(11): 1331–1359.

Bowman C, Ambrosini V. 1997. Using single respondentsin strategy research. British Journal of Management 8:118–131.

Bryman A. 1988. Quantity and Quality in Social Research.Unwin Hyman: London.

Chan C, Swatman P. 2000. From EDI to internet com-merce: the BHP Steel experience. Internet Research10(1): 72–82.

Checkland P, Holwell S. 1998. Information, Systems andInformation Systems. John Wiley: Chichester.

Childe S, Maull R, Bennett J. 1994. Frameworks forunderstanding business process re-engineering. Inter-national Journal of Operations and Production Management14(12): 22–34.

Christopher M. 1992. Logistics and Supply Chain Manage-ment. FT-Pitman: London.

Choi SY, Whinston AB. 2000. Benefits and requirementsfor interoperability in the electronic marketplace. Tech-nology in Society 33–44.

Davenport T. 2000. The winner’s circle. CIO June: 60–62.Eisenhardt KM. 1989. Building theories from case studyresearch. Academy of Management Review 14(4): 532–550.

Evans P, Wurster T. 2000. Blown to Bits: How the New Eco-nomics of Information Transforms Strategy. Harvard Busi-ness School Press: Harvard, MA.

Forrester Research Inc. 2001. Forrester Findings—InternetCommerce. http://www.forrester.com/ER/Press/ForrFind/0,1768,0,FF.htm [accessed 17 July 2001].

Grover V, Malhotra MK. 1999. A framework for examin-ing the interface between operations and informationsystems: implications for research in the new millen-nium. Decision Sciences 30(4): 901–920.

Hammer M. 1990. Re-engineering work: don’t automate,obliterate.HarvardBusinessReview July–August: 104–112.

Hayes RH, Wheelwright SC. 1984. Restoring our Competi-tive Edge: Competing through Manufacturing. John Wiley:New York.

Hedberg B, Dahlgren G, Hansson J, Olve N. 1997. VirtualOrganizations and Beyond. John Wiley: New York.

Jahnke B, Tijok C. 1998. Identifying IS support alterna-tives for business process re-engineering. Knowledgeand Process Management 5(1): 41–50.

Knights D, Willmott H. 2000. In The Reengineering Revolu-tion: Critical Studies of Corporate Change, Knights D,Willmott H (eds). Sage: London; 1–25.

Loeffler TR, Striemer R, Deiters W. 1998. A frameworkfor identification and support of semi-structured busi-ness process. Knowledge and Process Management 5(1):51–57.

Lyons G. 1998. The role of information technology inenterprise re-engineering. Knowledge and Process Man-gement 4(4): 268–277.

Mahadavan B. 2000. Business models for Internet-basede-commerce. California Management Review 42(4): 55–69.

Meredith JR, Raturi A, Amoako-Gympah K, Kaplan B.1989. Alternative research paradigms in operations.Journal of Operations Management 8 (4): 297–326.

Miles MB, Huberman AM. 1994. Qualitative Data Analy-sis. Sage: London.

Office of National Statistics. 2001. First E-commerce Surveyof Business. London.

Porter M. 1985. Competitive Advantage: Creating and Sus-taining Superior Performance. Free Press: New York.

Porter M, Millar V. 1985. How information gives you acompetitive edge.HarvardBusinessReview63(4): 149–160.

Slack N, Chambers S, Johnston R. 2001. OperationsManagement, 3rd edn. Pitman: London.

Threkel M, Kavan C. 1999. From traditional EDI toInternet-based EDI: managerial considerations. Journalof Information Technology 14(4): 347–360.

Till R. 1998. Transforming the way we do business. InElectronic Commerce: directors and opportunities for elec-tronic business. Institute of Directors: London.

Venkatraman N. 1994. IT-enabled business transforma-tion: from automation to business scope redefinition.Sloan Management Review 35(2): 73–87.

Vollman TE, Berry WL, Whybark DC. 1997. Manufactur-ing Planning and Control Systems, 3rd edn. McGraw-Hill: New York.

Weerakkoddy V, Hinton M. 1999. Exploiting informationsystems through business process improvement.Knowledge and Process Management 6(1): 17–24.

Yin RK. 1994. Case Study Research. Sage: London.Zwass V. 1996. Electronic commerce: structures andissues. International Journal of Electronic Commerce 1(1):3–23.



developing a framework to investigate the impact of e-commerce on the management of internal...

Documents