Qualitative Market Research

Volume 7 Number 1 2004

ISBN 0-86176-920-1

ISSN 1352-2752

Qualitative Market Research An International Journal Special Issue: E-business Guest Editor: Professor Stanley Paliwoda

www.emeraldinsight.com

Qualitative Market Research: An International Journal Volume 7, Number 1, 2004

ISSN 1352-2752

E-business Guest Editor: Professor Stanley Paliwoda

Contents 2

Access this journal online

3

Abstracts & keywords

5

Guest editorial

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Consumer-driven innovation networks and e-business management systems Howard Cox and Simon Mowatt

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Bla-bla-bla: video chat service on the Internet – a market feasibility study Adam Lindgreen, Michael Antioco and Martin Wetzels

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A projectives perspective of international ‘‘e’’-services Elaine Ramsey, Pat Ibbotson, Jim Bell and Brendan Gray

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A consideration of the roles of business intelligence and e-business in management and marketing decision making in knowledge-based and high-tech start-ups Jimmy Hill and Terri Scott

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The importance of a strong business-IT relationship for the realisation of benefits in e-business projects: the experience of Egg Sue Clarke and Neil Doherty

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Online banking information: what we want and what we get Kathryn Waite and Tina Harrison

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entirely new application domain, which makes product innovation possible. Moreover, it is a new medium for reaching consumers, which is a central preoccupation to organisations in the current business market. Here interest lies in video chatting on the Internet. This is a type of service that adds video support to chatting using a Web cam and is gradually attracting more Internet users. The paper consists of a market feasibility study evaluating the potential commercialisation of a software program that enables the ‘‘cutting away’’ of the chatters from the original background filmed by the Web cam, and later re-integrates them into a new background. The software program could, therefore, be interesting for advertising companies.

Abstracts & keywords

A projectives perspective of international ‘‘e’’-services Elaine Ramsey, Pat Ibbotson, Jim Bell and Brendan Gray

Consumer-driven innovation networks and e-business management systems

Keywords Small to medium-sized enterprises, Innovation, Electronic commerce, Internet, Research

Howard Cox and Simon Mowatt Keywords Trust, Electronic commerce, Complexity theory, Consumers, Supplier relations, Inventory control

Given the growth of services and their importance in the economy, e-business and the Internet have the potential to increase the competitiveness and growth of small firms. However, the general pattern is that the smaller the enterprise, the less likely they are to be prepared to adapt their business processes to accommodate this ‘‘new’’ technology. To illustrate the inherent issues this qualitative research utilised various projective techniques: construction, completion, and associative ‘‘tests’’ that have challenged the pseudo-scientific age of business as a great human ‘‘subjective’’ exercise. A methodology that in the less traditional academic sense is ‘‘unusual, intriguing, fun and engaging’’ is innovatively employed in this small tradable service firm study to facilitate self-expression among the respondents about particular e-business scenarios in a less structured, indirect and more imaginative way. Consequently, the depth of the analysis and interpretation generated from the study has provided the researcher with a rich source of new leads and ideas about potential e-business inhibitors and facilitators among SMEs not previously considered.

This paper examines the use of consumer-driven innovation networks within the UK food-retailing industry using qualitative interview-based research analysed within an economic framework. This perspective revealed that, by exploiting information gathered directly from their customers at point-ofsale and data mining, supermarkets are able to identify consumer preferences and co-ordinate new product development via innovation networks. This has been made possible through their information control of the supply-chain established through the use of transparent inventory management systems. As a result, supermarkets’ e-business systems have established new competitive processes in the UK food-processing and retailing industry and are an example of consumer-driven innovation networks. The informant-based qualitative approach also revealed that trust-based transacting relationships operated differently from those previously described in the literature.

A consideration of the roles of business intelligence and e-business in management and marketing decision making in knowledge-based and high-tech start-ups

Bla-bla-bla: video chat service on the Internet – a market feasibility study Adam Lindgreen, Michael Antioco and Martin Wetzels Keywords Computer networks, Internet, Market research, Software engineering, Belgium

Jimmy Hill and Terri Scott

The Internet is changing the way that companies carry out their business and, in fact, constitutes an

Keywords Business analysis, Electronic commerce, Research methods, Entrepreneurialism, Network synthesis, Northern Ireland

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . Abstracts & keywords # Emerald Group Publishing Limited . ISSN 1352-2752

This paper considers the roles of business intelligence (BI) and e-business systems in enhancing the quality of decision making in knowledge-based and high-tech start-ups. A qualitative study, using

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Abstracts & keywords

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 3-4

in-depth discussions with 11 companies based in Northern Ireland, was conducted. The study examined the extent of BI usage and evaluated the extent of implementation of effective e-business systems in the sample companies. The study concludes that, whilst the sample firms recognized the value of both BI and e-business models, the modus operandi of the entrepreneurial high tech startup is very much rooted in the traditional small firm paradigm of personal contact networking.

on the evolution of a strong IT-business relationship that endures for the duration of the project. Shown that the maintenance of this strong relationship is undoubtedly aided by having shared and high priority activities, such as benefits realisation, that also last for the duration of the project.

The importance of a strong business-IT relationship for the realisation of benefits in e-business projects: the experience of Egg

Keywords Information searches, Consumer behaviour, Banking, Internet

Online banking information: what we want and what we get Kathryn Waite and Tina Harrison

This paper reports on young adults’ expectations and perceptions of online retail banking information. A combination of qualitative and quantitative research was used. Focus groups proved valuable in eliciting criteria grounded in the experience of users of bank Web sites. The subsequent questionnaire survey allowed the measurement of gaps between perceptions and expectations. The results indicate that respondents expect bank Web sites to be easy to use and to provide them with basic account/product details. These features are valued more than the technological aspects. Yet, perceptions of actual information provision differ. While basic account and price information is perceived to be provided, certain features are perceived to be less prevalent, rendering bank Web sites ineffective at aiding consumer decision making. The research questions the role of the Internet in information provision and suggests how banks can improve their Web sites to assist consumer decision making.

Sue Clarke and Neil Doherty Keywords Electronic commerce, Information strategy, Benefits management, Project systems There is a pressing need for research into the successful application of technology within organisations, given the high incidence of failure, with respect to information systems projects, in general, and e-commerce applications, in particular. A case study was conducted into system development approaches at Egg, one of the UK’s leading online banks. Presents a qualitative study in this important area of research which should be of interest both to information systems researchers and to all IT professionals with responsibility for, or involvement in, e-business development projects. The key finding of the research is that, while the balance between IT and business input does change over the course of a project, its successful outcome is highly dependent

4

World-wide, society is continually being challenged by change agents such as politics and finance, which created a common Euro currency zone out of 12 nation states, but also by technology. On the one hand, we have people expressing wishes for things to be different; on the other, we have almost, in response, a constant introduction of new products and processes. When the two forces stabilise we have equilibrium. However, in addition, technology has continued to offer us through the generations the necessary new vocabulary to cope with the many facets of change that it brings. The advent of the Internet has brought us many new terms which have outlasted the ‘‘dot.com’’ stock market bubble including ‘‘deconstruction’’, ‘‘disintermediation’’, ‘‘e-commerce’’, and ‘‘m-commerce’’. The Internet has unscrambled many of our traditional ways of working and in so doing has unscrambled some traditional organisational forms but has also created new ones. At the same time, new competitive pressures as well as new opportunities have been created. E-commerce provides a very good example and a good rationale, if one were needed, of how we must first attempt to understand before we rush to quantify. It is a precept on which this very journal was founded. E-commerce has changed behaviour both individual and corporate and it has changed our perspectives in very many ways as well. E-commerce has brought immediacy to the world economy. It is an enabling technology, which, in Western developed markets, has empowered the individual consumer. We are only now at the outset of an information revolution that still has a long way to run. Not only can we shop around internationally for the best bargains inside and outside the Euro zone but we can also use this same technology to do everything with the relative speed of light. Prior to the advent of the Internet, exchange transactions were cumbersome and costly but today we can purchase over the Internet using credit cards with greater security than we could hope for over the telephone. Similarly, the buying and selling of stocks and shares has always been surrounded with a good deal of pomp and circumstance, which have helped justify the high commission prices of the brokers. Today, though, we have the added

Guest editorial

About the Guest Editor Stanley Paliwoda is Professor of International Marketing at the Birmingham Business School, University of Birmingham. He has an interest in how the Internet has created new markets of existing, sophisticated customers who are searching for added value and convenience. This phenomenon has been witnessed across national markets and there are interesting segmentation possibilities yet to be explored, as Internet sales are still at a fairly low, embryonic level. He has contributed a number of case studies with colleagues at Birmingham who collaborated with the Council of Marketing in publishing a total of more than 100 case studies on the Web site: www.e4M.biz

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . pp. 5-8 # Emerald Group Publishing Limited . ISSN 1352-2752

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Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 5-8

incentive of being able not only to compare prices but also to knowingly take advantage of the many discounts that are available for things that we may care to buy through this medium. This applies to loans, mortgages, travel, hotels and car rental – the list is extensive. In many respects, the Internet has become a low cost distribution channel. However, there are inherent dangers in this strategy, for, as Porter (2001) has pointed out, to shift the basis of competition away from quality, features and service and towards price makes it harder for anyone in their industries to turn a profit. Ohmae (2001) refers to the challenge of this invisible continent which is harder to quantify, which is borderless but constantly accessible 24/7 and which has a fourth dimension of high multiples where leveraging based on imaginative assumptions takes place. Post-Enron, few would disagree with that statement. While invisible, this invisible continent is not totally uncharted territory but hosts new markets of existing sophisticated consumers. These new markets have been one of the major successes of this new medium. Auctions include closed sites such as Covisint, a grouping of five automobile manufacturers and their world-wide suppliers, currently numbering 76,000, which was established only in February 2000. This interactive medium allows for live transactions and so is sure to change the way in which we do business in an industry that has always been international in outlook. From auctions formed of automotive manufacturers and their suppliers to the successful e-Bay consumer auction, success has only become possible because of the ability of this medium to bring people together. Of course, there are dangers for both suppliers and customers. A Web site on its own gives the customer none of the reassurance of a bricks and mortar store. On the Internet, no one can confirm your size or your experience or your ability to deliver but the challenge is starting to be addressed. Buy from an individual seller on Amazon or one of the auction sites and you will see reviews from those who have purchased from this vendor before. Ultimately, it is the customer who defines the market but the boundaries are yet to be defined never mind regulated.

Convenience, ease of access, added value are all factors that are appreciated by all of us as consumers. As long as we can continue to meet consumer needs at relatively lower costs there will be a need for this medium. Yet not all companies have been able to quickly comprehend what has been happening to the Internet. Certainly, it started with the corporate world thinking that the Internet was just a massive filing cabinet for boring, unimportant wads of data that people might only want to search occasionally. However, from being this repository of unwanted data, the Internet has responded well to this challenge and has moved on to becoming an interactive information medium. Again, not all companies offer interactivity through their Web site but it is on the increase. From being simply a channel of one-way communication it has matured into a two-way communications tool and an important point of sale for many. Importantly, the Internet has also provided an opportunity to identify and to respond to the company’s most loyal customers. There are clear opportunities for information sharing here. Knowing your customers better means being able to provide better for them. From being an information dump, the Internet has become a means to go beyond providing information to targeting the needs of the chosen. This leads us then into finding areas of value added relevant to our customer base. The recognition of value added is recent but it has led to new definitions of marketing (Kotler and Armstrong, 2001), whereby companies are encouraged to put most of their resources into value-building marketing investments. The distinction is between short-term and long-term recognition of customer needs. To build true value for the customer will require investment but the flipside should be greater customer loyalty. In the compilation of this Special Issue, we must first acknowledge the investment made by IBM in encouraging research in this important area through their sponsorship of an annual e-commerce conference. This Issue has an interesting array of contributors and contributions. It is international in terms of author and research base but eclectic in terms of approach and content. Cox and Mowatt examine 6

Guest editorial

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consumer-driven innovation networks within the UK food-retailing industry and show how, through exploiting the information gathered directly from customers at point of sale, loyalty card information, Internet order histories and through data mining, supermarkets are able to identify consumer preferences and also co-ordinate new product development via innovation networks. Initially what were supply chain systems have become more sophisticated and have become capable of revealing and satisfying customer demand. As a result of this, supermarkets’ e-business systems have established new competitive processes in the UK food-processing and retailing industry and are an example of consumer-driven innovation networks. This has also strengthened their position within the industry and has created a new competitive structure. Lindgreen et al. focus on video chat on the Internet and their paper consists of a market feasibility study for software that edits video chatters from the original background and inserts them into a new background where you are able to insert advertising. This could prove to be an important application for the advertising industry. From a study of the Web cam market, Lindgreen et al. move into video chat and conduct a macro segmentation and then a micro segmentation of the video chat market and then into advertising, where they found their ideas were received positively. Advertisers are always looking for new products that are better targeted and are more interactive. This information then gathered the pertinent information on the potential clients’ needs and the amounts of money they were ready to pay for the service. An interesting study. The focus of the paper by Ramsey et al. is that of e-business scenarios for small and mediumsized firms (SMEs). The very nature of services, such as the intangibility, inseparability, heterogeneity, durability, perishability, customisation versus standardisation debates would, they say, suggest that they are well equipped to take advantage of Internet-based technologies in service delivery. The ability of SMEs to sense and respond to new technologies is an important area of research. Here, the research sought to elicit information from owner-managers associated with adopting,

adapting and assimilating Internet-based technologies for business/e-business purposes. The research methodology employed was a projective technique using word association. The survey, the tests used, and their interpretation are of interest to all in the research community. Companies need to apply the same rigour to the Internet as to any other area of business. The message here is that being able to sense and to respond to the market is important and so the Internet should therefore be a key tool for SMEs. Hill and Scott examine the role of business intelligence and e-business in management and marketing decision making in knowledge-based and high-tech start-up companies. This involved in-depth discussions with 12 companies. The study examined the extent of business intelligence usage and evaluated the extent of implementation of effective e-business systems in the sample companies. The study concludes that, while the sample firms recognised the value of both business intelligence and e-business models, the modus operandi of the entrepreneurial high-tech start-up is very much rooted in the traditional small firm paradigm of personal contact networking. The paper therefore provides a set of recommendations with respect to the successful implementation of business intelligence and e-business systems within these firms. Clarke and Doherty provided a case study of Egg to deliver on the importance of a strong business-IT relationship for the realisation of benefits in E-business projects. The case study was conducted into the system development approaches at Egg, one of the UK’s leading online banks. The paper presents a qualitative study in an important area of research. The key finding is that, whilst the balance between the IT and business input does change over the course of a project, its successful outcome is highly dependent upon the evolution of a strong IT-business relationship that endures for the duration of the project. The evidence indicates that the strong IT-business relationship at Egg has arisen as a result of the adoption of appropriate development processes, and the fostering of shared beliefs such as the absolute importance of customer service. Follow-up surveys might be useful to explore the 7

Guest editorial

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 5-8

prevalence of such close relationships, while detailed longitudinal case studies across a variety of organisations would allow their implications to be more thoroughly evaluated. ‘‘Online banking information: what we want and what we get’’ is the theme of the paper by Waite and Harrison. This reports on young adults and their expectations and perceptions of online retail banking information. This study employed focus groups and used a questionnaire survey to measure these gaps between perceptions and expectations. Results indicated that respondents expected bank Web sites to be easy to use and to provide them with basic account and product details. These features are valued more than the technological aspects. Yet perceptions of actual information provision differ. While basic account and price information is perceived to be provided, certain features are perceived to be less prevalent, rendering bank Web sites ineffective at aiding consumer decision making. The research

questions the role of the Internet in information provision and suggests how banks can improve their Web sites to assist consumer decision making. There is an abundance of rich research material here. I thank all the contributors for their patience over the last few months and for sharing this with me and with you. Stanley J. Paliwoda Professor and Head of the Department of Commerce, Birmingham University Business School, Birmingham, UK

References Kotler, P. and Armstrong, G. (2001), Principles of Marketing, 10th ed., Pearson/Prentice-Hall, Englewood Cliffs, NJ. Ohmae, K. (2001), The Invisible Continent, Nicholas Brealey, London. Porter, M.E. (2001), ‘‘Strategy and the Internet’’, Harvard Business Review, March, pp. 63-78.

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Introduction

Consumer-driven innovation networks and e-business management systems

This paper considers the impact of information and communication technologies (ICTs) on innovation within the UK food-processing and retailing industry. In recent years, the UK’s leading supermarket chains have successfully employed various elements of the e-business revolution to improve their services to customers. To date, however, the vaunted benefits expected to accrue from e-commerce (Hughes, 2002), in the shape of online shopping, have proved to be elusive. The leading exponent of this approach in the UK, Tesco plc, now holds 60 per cent of the UK Internet grocery provision market, with annual sales currently valued at £365 million (Tesco, 2002). While this amount is larger than the entire European market for online grocery sales (Key Note Report, 2002), it nevertheless represents only 1.7 per cent of Tesco’s UK sales turnover. Rather, it has been through application of ICTs to other parts of their operations that the UK’s supermarkets have been able to gain financial benefits and provide enhanced services to their customers. Specifically, by exploiting information gathered directly from their customers via scanning technology, and through the use of inventory management software systems, the UK supermarkets have been able to benefit directly from a strategy of new product development. In pioneering these innovations, the UK’s leading grocery retailers have created a web of inter-firm alliances and networks that have served to transform relationships within the industry’s value system. Knowledge about the requirements of customers can be a strategic asset (Stata, 1989) and the rhetoric of e-business places a strong

Howard Cox and Simon Mowatt The authors Howard Cox is Professor of International Business History, Centre for International Business Studies, London South Bank University, London, UK. Simon Mowatt is Senior Research Lecturer in Management and Employee Relations, Auckland University of Technology, Auckland, New Zealand. Keywords Trust, Electronic commerce, Complexity theory, Consumers, Supplier relations, Inventory control Abstract This paper examines the use of consumer-driven innovation networks within the UK food-retailing industry using qualitative interview-based research analysed within an economic framework. This perspective revealed that, by exploiting information gathered directly from their customers at point-of-sale and data mining, supermarkets are able to identify consumer preferences and co-ordinate new product development via innovation networks. This has been made possible through their information control of the supply-chain established through the use of transparent inventory management systems. As a result, supermarkets’ e-business systems have established new competitive processes in the UK food-processing and retailing industry and are an example of consumer-driven innovation networks. The informant-based qualitative approach also revealed that trust-based transacting relationships operated differently from those previously described in the literature. Electronic access

The authors would like to extend their thanks to the Leverhulme Trust for providing an Institutional Grant which supported this research project. The development of this paper would not have been possible without the contribution of interviewees from food retailers’ new product development and logistics departments, contract logistics companies, food-processing trade bodies and journals. The authors would like to express their gratitude to these contributors, while absolving them from responsibility for any misinterpretations or mistakes contained in the paper.

The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . pp. 9-19 # Emerald Group Publishing Limited . ISSN 1352-2752 DOI 10.1108/13522750410512840

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Howard Cox and Simon Mowatt

emphasis on the competitive advantages that firms can gain in the digital economy from integrating this information into their business systems (Moorman et al., 1992). Rowley (2002) reviews customer knowledge management that places the emphasis not on the information per se, but on the use of that information within organisations. By focusing on the UK food industry this paper offers an example of a particularly consumer-driven sector in order to highlight how e-business systems have allowed supermarkets both to gather information, which is used to control the organisation of business, and to turn this information into knowledge which can be exploited in various contexts. This process has made its greatest impact on the vertical relationships within the industry, where retailers have used inventory management systems to gain an intimate knowledge of suppliers’ routines and costs. Supermarkets have also refined their ability to exploit datagathering systems both to reveal and to satisfy customer demand through their control of consumer information. The food industry is an archetypal multidomestic industry with consumers having widely varying tastes both between and within nations (Wright et al., 2001) and consumer-driven systems of innovation are especially effective in markets where consumer requirements are constantly changing, or highly segmented. Studies in the 1980s by Senker (1986, 1988) showed that the impetus for innovation in processed food was beginning to move from branded manufacturers to retailers and this shift has been quickened by the introduction of generic-ICTs (Cox et al., 2002) and led to the creation of sub-industries such as the chilled-ready meals segment, which are outcomes of the changes made possible by e-business systems. This paper, therefore, focuses on this segment as a specific example of the impact of consumer-driven e-business systems in the UK grocery sector.

segments of the food-retailing sector. Building on a thorough grounding of secondary sources of information, we selected one of the value-chains in the industry centring on retailer A[1], a leading player in the chilled ready-meals market. The aim of this process was to derive in-depth information as to how relationships within the sector functioned, once we were familiar with the organisation of the sector from secondary sources. The empirical programme comprised carefully chosen key actors to act as high-level informants (rather than respondents answering only preformed questions ¨ stera˚ker, 2001)) who would be able to (O expand the frame of research beyond the structured component. The informants were willing to give frank tape-recorded interviews, as we had previously undertaken not to name companies or informants directly. The structured component was composed of several main questions (Rubin and Rubin, 1995, Ch. 7) and was included to ensure a degree of conformity between informants. For the examination of the control of the supply-chain we interviewed the general manager development consumer Europe and the development director Europe from logistics contractors that we termed M and N, and the project manager for chilled and perishable goods in retailer A. We built a similarly detailed picture of the innovation network in the sector through interviews with retailer A’s new product development section (principally the senior trading manager for fresh foods) and representatives of supplier firms and contractors. Wright (1996) has commented that, where statistical inference is not the intended outcome of a qualitative interview process, then a smaller sample can be more effective. This is especially relevant for obtaining information that is otherwise unpublished, concerns strategy in industrial markets or is complex as in innovation and new product development (Palmer, 2002). This approach is especially relevant in markets characterised by strong competitive forces, whereby information is closely guarded by firms (Crimp and Wright, 1995), a key feature of the sensitive grocery retailing industry especially with reference to own-brand and own-label goods. Interlocking testimony was used to verify information given across interview subjects,

Methodological approach This paper utilised an in-depth interview-based approach in order to understand the contemporary network relationships and the innovation process in the chilled ready-meals 10

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which was particularly successful in this case because of the nature of the career path within the industry (there was some overlap at times between actors simultaneously involved in both networks). The interviews had a built-in variety, as it was common for actors to have experience at different stages of the value chain, and for retailers, contractors and suppliers to have worked for other firms in the value-chain[2], whereby they had a view across companies in the sector (Lawrence, 1988). In this way, and by a brief examination of the retailer innovation network of another food retailer, designated as company E, the representative nature of the selected vertical chain was corroborated. The analysis adopted a networks-based approach in order to conceptualise and analyse the operation of consumer-driven innovation within the supermarket sector, principally the economic network-theory approach developed by Casson (Casson, 1997; Casson and Cox, 1997), emphasising the centrality of information within an economic framework. This framework reorientates the transactions cost paradigm developed most effectively by Williamson (1975, 1985), which has been important for the economic analysis of firms, but also is able to incorporate sociologicallybased studies focusing on the relationships between specific actors, allowing for a more sophisticated understanding of network processes within and between firms (for a review see Ebers, 1997; Grandori and Soda, 1995; Grabher, 1993). The role of trust within these relationships is also considered in this interdisciplinary approach (Casson and Cox, 1997; see also Lane and Bachmann (1998) for a review of trust in network organisations). This approach allowed an understanding of how the nature of control and organisation had changed within the relationships examined, and has been employed in studies of long-term shifts in competitive advantage in the food-processing industry (Cox et al., 2002).

(UPC), including scanning and the capture of consumer information at electronic point-ofsale (EPoS). Figure 1 gives an overview of the key developments in this area and shows the relative importance of the grocery sector in instigating and directing the technological path and standards. In conjunction with initiatives introduced in the 1990s, such as loyalty cards, supermarkets in particular have been increasingly able to assimilate information on purchasing patterns. Qualitative information through in-store activities and through marketing organisations has also helped develop knowledge of consumer trends and the increasing power and decreasing cost of computers since the mid-1990s have allowed supermarkets to invest heavily in datawarehousing and mining facilities (see Dobbs et al. (2002), for a review of the increasing penetration of data warehousing in the UK). Information is becoming ever more available to supermarket retailers, but success has come when they are able to leverage this into new products or services.

Figure 1 Development of IT systems in the food retail sector

Consumer-driven innovation The chilled ready-meals segment The principal technologies discussed in this paper are related to those developed in conjunction with the universal product code 11

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takeaway and restaurant meals, and retailers therefore need to be able to offer their customers an expanding range of high quality products. Retailer A, for example, offered a total of 141 different chilled ready-meals in 2000, having introduced some 44 new products in 1999 alone. Retailers tend to source from a great number of suppliers in order to respond quickly to new restaurant trends with new recipes, exploiting the flexibility of small suppliers. Many of these small suppliers can only function through the co-ordination of the supermarkets’ supply-chain system, as they are too small to have marketing or sales functions of their own. Maintaining a wide range of dishes is dependent on access to many specialist suppliers, as the production of ready-meals spans different product-bases (poultry, fish, meats, vegetables), market segments (healthy eating, luxury, etc.). and ethnic recipes (traditional British, oriental, French, Italian, Thai, Tex-Mex). Each retailer sources from a core group of larger manufacturers and has many small suppliers: Northern Foods, for example, supplies about 30 per cent of M&S convenience foods and Hazlewood Foods produces 20 per cent of all chilled ready-meals but the total number of ready-meal suppliers is more than 180 firms. Supermarkets’ access to information allows them to exploit these data within different contexts. Figure 2 shows the supermarkets’

The gradual adoption of EPoS replenishment systems in the early 1980s, and scanning technology in the mid-1980s also allowed the supply chain to be managed in a more efficient way. Grocery retailers, constrained by the perishable nature of certain products, were at the forefront of the move from inventory-based systems to customer-driven systems (Macdonald, 1994). The ability to use EDI between organisations in real time is a key feature of being able to manage inter-firm systems of co-ordination (Hughes and Merton, 1996; Mason-Jones and Towill, 1998). This ability to manage the supply-chain allowed retailers to switch to customer demand-driven systems of replenishment (Smart, 1995; Winters, 1996; Fernie and Pierrel, 1996; Ody and Newman, 1991 (Figure 1)). The emergence of the chilled ready-meals segment within food retailing can be best understood in the context of two primary factors: (1) the adoption by food retailers of new ICTs; and (2) the system of relational contracting established by the clothing and foodstuffs retailer Marks & Spencer (M&S). M&S was able to pioneer the chilled-ready meal product using organisational competencies in co-ordinating small suppliers, and these products have remained largely outside the control of the large, branded food manufacturers. Subsequently, the introduction and exploitation of e-business systems by mainstream grocery retailers also allowed them to enter this high-value niche market, through their provision of own-label and own-brand goods[3]. Chilled ready-meals are the prime example of retailers’ ability to differentiate quality own-brands, and are high value-added premium convenience products, which have displayed consistently rapid growth from the 1990s to date. They are ready-prepared complete meals and are chilled, not frozen, for freshness. As the meals are highly perishable, and have a very limited shelf life, they require a sophisticated chill-chain which can deliver meals from manufacturer to point of retail in a few days in small batches. The appeal of the sector lies not only in its convenience, but also as a substitute for

Figure 2 UK supermarkets’ value-chain information flows

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control of information flows, linking the supplychain to the information about consumer demand derived ultimately from purchasing behaviour. Supermarkets are able to exploit this control to co-ordinate the supply of short shelflife products such as chilled ready-meals and this is examined in later sections in more detail. This information control also puts retailers in the optimal position to gain marketing information directly from their intimate relationship with the customer through PoS monitoring, customer loyalty schemes exploited by data mining and their own market research. Retailers can also exploit this control by identifying new market niches, and fill them with new differentiated products as quickly as possible, and respond effectively to new eating trends. Retailers in the UK are able to coordinate the development of new products through internal hygiene and product development departments (Fernie, 1997; Hughes and Merton, 1996; Senker, 1986, 1988). From control of the information systems retailers are able to co-ordinate the innovation process.

Figure 3 The innovation network

long-term relationships is critical (Lane and Bachmann, 1998), as retailer A has no capital stake in suppliers and there are few formal contracts between retailers and food suppliers in the chilled ready-meal sector but instead many strategic alliances based on mutual advantage. Relations essentially take the form of a ‘‘gentleman’s agreement’’ and this is made possible by the structure of the industry created by the innovation network itself. Retailer A uses many small suppliers to ensure it has access to a large variety of recipes, but relies on supplier Z for 50 per cent of its ready-meals by sales volume. As is typical with the larger suppliers in the sector, supplier Z has a dedicated factory for retailer A, guaranteeing confidentiality and exclusivity. This trust has enabled retailer A to move from business plans of typically three years to longer terms of five years, and implement joint investment plans. These plans range from non-contractually based agreements, in which retailer A agrees to ‘‘deliver a volume of business to a manufacturer for five years and the manufacturer invests in a dedicated factory’’, to arrangements to supply small firms with technical assistance in return for access to new recipes. For this process to be effective the retailer must ensure that its quality standards and processes are adopted and integrated with its packaging and, crucially, own-brand marketing strategy. Information needs to be passed between the partners in this network.

Innovation through strategic alliances: retailer A’s innovation network The consumer information which retailer A collects is considered in conjunction with strategic alliance partners, whose activity is co-ordinated through the retailer’s control of the supply-chain, which we consider in the next section. Retailer A is an example of a firm that has been able to exploit its proximity to the consumer to develop and supply new products, deriving knowledge about consumer trends through the innovation network, especially from expert sources of information and small specialist companies. Retailer A accepts that ‘‘many new product ideas come from our suppliers and we work very closely with some of the top chefs . . . so we follow those consumer trends which are very fashionable.’’ The relationships engaged in this sector are best understood as inter-organisational networks, whereby manufacturers and packaging firms develop new products in conjunction with retailers. Figure 3 depicts the new product development network. Retailer A claims to have ‘‘very long-term relationships with [its] suppliers’’. Trust within 13

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specialised and the runs have become smaller’’ and in these cases the ongoing exchange of staff and knowledge for development and monitoring is especially important. This is of special importance in this segment, as the technical requirements of the packaging are so demanding. The NPD unit therefore co-ordinates between internal departments, external manufacturers and third-party packaging firms[4]. In the case of a microkitchen, retailer A supplies access to its packaging and food hygiene and production experts through the chilled ready-meals unit and ‘‘really do work very closely together’’.

The ‘‘relationships in this sector are different from when you are working with the big branded suppliers, as we work very closely with ready-meal suppliers and the confidences that we tell them we wouldn’t do on the branded side’’. This is especially significant for smallscale suppliers where the retailer is their sole client. This series of very close relations binds the network firms into mutual dependencies. In the case of large manufacturers the relationship centres on negotiation over exclusivity agreements, the use and development of dedicated manufacturing centres, and the co-ordination of new hygiene technologies and processes, such as the development of specific packaging systems. Relations with smaller firms were characterised more by an exchange of hygiene technician staff to co-ordinate basic standards and to transfer technological information, especially information about production systems from manufacturers, from the retailer to small producers.

Information control and knowledge in the supply-chain Control over the supply-chain has enabled retailers to move to strategic ordering systems, as shown in Figure 1. This has enabled them to engage in the supply of short shelf-life products such as chilled ready-meals but also to change the nature of relationships with firms in rhe supply-chain. Retailers’ control of the supplychain differs from the open-ended relational networks that they have established for innovation, and are characterised more by formal contractual arrangements. The radical changes that have occurred in the UK grocery supply-chain have been well documented, especially from the fields of logistics and supplychain management (Burt and Sparks, 1997; Fernie and Pierrel, 1996). By focusing on the economic relationships and drawing on our detailed interview-based research with retailer A’s internal logistics department and external contractors, we were able to identify new processes at work. Under traditional subcontracting arrangements, the retailer devolves process and operations to a logistics subcontractor. Much of the economics-based literature on the management of the supply chain focuses on ownership of assets such as warehouses and the mix between internalisation and externalisation (Buck, 1990; Ross, 1997; Bourlakis, 1998). However, this approach underplays the changing nature of the modes of externalisation employed, as in this example the retailer seeks to resolve these problems by retaining ownership of the key assets and by controlling supplier processes and the

Managing consumer knowledge Knowledge is developed and disseminated throughout the innovation network. The process of working in a network is itself important knowledge. Relations in the innovation network are ‘‘fluid and dynamic’’ within and between firms. Retailer A’s chilled ready-meal NPD unit is part of the fresh foods division and incorporates buyers responsible for recipe development. The chilled ready-meals unit is headed by the senior trading manager for fresh foods and has a permanent team of 26 people that includes a product development team, working on recipe development with suppliers, and six buyers who are responsible for the day-to-day administrative, commercial side of the business. Staff based in the chilledready meals unit liaise with the food technicians in the hygiene department, logistics, marketing, procurement, legal/technical department and packaging technologists. This organisation is mirrored in suppliers. The chilled ready-meals NPD unit and their supplier counterparts spend around 50 per cent of their time in each other’s firms or in other joint locations. ‘‘Some of the factories now are like large hotel kitchens, because it has become more and more 14

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process, they can manage the supply chain from beginning to end. Under this system of organisation, the RDCs no longer carry out a warehousing function, but consolidate goods for demand-driven direct delivery to retail outlets. The distribution and logistics structure, using both RDCs and PCCs, allows small manufacturers to join the supply chain efficiently, and for large manufacturers to supply products on demand, rather than by bulk-delivery. The ability of retailers to monitor many transactions made possible by the development of computerised information management systems significantly lowers the information costs of monitoring. Retailers are able to cement the tacit components of this by direct involvement in the process (such as running their own vehicles and RDCs as benchmarking operations) and transform information on costs into knowledge. This also applies, as was observed in the innovation network, when retailers are directly involved in the process. Retailer A remarked therefore that, when knowledge of real costs and processes is shared between parties, co-operation is a more likely outcome, although this does change the nature of power between partners. The outcome of these changes in logistics and RDC management subcontracting is a move towards open book negotiation with retailers based on low management fees in conjunction with reward structures for efficiency improvements.

co-ordination of information directly throughout the network via their control of the computer information system. In the following sections we will first examine the development of the supply-chain in the UK food retail industry, and following this we concentrate on examining how retailer A has used its control of the ICT systems to generate knowledge not only about the operation of the supply-chain but also about transforming business relationships to more open-ended long-term relationships. From a warehouse-based to a replenishment-based supply chain Grocery retailers’ strategic ordering systems not only enable them to economise on warehousing costs, but also allow them to correlate demand and supply with unprecedented accuracy. The retailer J. Sainsbury pioneered the development of dedicated regional distribution centres (RDCs) in the 1970s as an intermediate stage in the distribution process. These RDCs operated on Sainsbury’s behalf but were owned by one of the growing number of specialist distributors through a process of subcontracting. Transportation of products from the RDCs to the stores was then largely undertaken directly by Sainsbury’s own fleet of vehicles (McKinnon, 1989). By the 1990s, the RDC pattern had become established with UK food retailers, although they increasingly owned the RDCs, which they had either built themselves, or bought from contractors at the end of contract periods. In addition, retailers began to encourage the development of primary consolidation centres (PCCs) to which manufacturers were able to deliver increasingly small batch-driven loads, prior to their transfer to the RDCs. These allowed very small crate- (rather than pallet-) based deliveries to be made. Crates can accommodate partial boxes, ideal for the delivery of very short shelf-life low-volume, high value-added products such as ready-meals. Larger manufacturers can co-ordinate the collection of stock from small suppliers for delivery into the PCC. Therefore, as long as the retailers use their transparent electronic data interchange (EDI) and Internet-based supplychain systems to co-ordinate and control this

Retailer A: leveraging knowledge through supply-chain control A close examination of retailer A’s supply-chain illustrates the operation of the linkages within the control network. Retailer A’s logistics department is formed by a director operating with a team of four senior managers. Retailer A’s distribution network (in 2002) comprised 24 RDCs and 13 PCCs. The supply-chain is co-ordinated by retailer A’s hardware and software systems. Retailer A’s logistics manager commented that ‘‘If you go to (contractor O’s) RDC, it’s our hardware, even if they own the depot’’, explaining that this integration makes the supply-chain transparent to the retailer. ‘‘Unless you knew that RDC 2 was owned by us and RDC 12 was owned by (contractor N), you couldn’t see the difference . . . you have the 15

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This is in contrast with the literature, whereby trust is taken to be a precursor to opentransacting in networks (Casson, 1997, p. 122). The PCC network allows very small firms to enter the market for chilled ready-meals, and is significantly different from the RDC network and less under the direct control of the retailer. The PCC network allows larger manufacturers to make smaller, more regular demand-driven deliveries to RDCs and smaller suppliers to make small and infrequent deliveries. The large and medium food manufacturers with their own distribution systems and small regional logistics companies are in the ideal position to collect small crate loads from suppliers and make consolidated deliveries into and from PCCs. This is only efficient if these small loads are consolidated for multiple retailers, so retailer A’s logistics manager’s ‘‘job is to go round and convince the suppliers that it is in their interest to become part of this network, because (contractor O) is not going to a supplier and picking up just for us but for retailer C and retailer D as well’’. As in the innovation network, retailer A manages multiple relationships with suppliers and adds value by the central co-ordination made economically viable by e-business management systems.

same information and the computer systems dictate the processes and methods of working. Throughout the supply-chain really you have our systems.’’ The same condition applies in the case of physical distribution, where the contractors that operate retailer A’s fleet own only 50 per cent of the RDC-to-store vehicles. Logistics contractors explained that the transparency afforded to retailers both by the integration of their computer systems and the benchmarking provided by their own operations supplied them with a high-level of knowledge about true costs, contractor M relating that retailer A’s ‘‘knowledge about costs is as great as ours. There is nothing hidden there from which we could extract margins’’. Consequently contractor M’s management fee declined from 15 per cent to 10 per cent to 5 per cent to 2 per cent on each contract renewal. There was an accompanying change in emphasis in contractor’s reward structures, moving from management fees based on fixed-volume freight rates to a system based on low management fees with an incentive structure for productivity gains. ‘‘Quite often it is the retailer’s capital and the fee therefore becomes two-tier – a fixed fee and then a sum of money that is deliverable in addition, if service or costs are improved.’’ This profoundly alters the nature of the relationship between retailer and contractor, and this can be observed in longer contract lengths – retailer A’s contracts with contractor M having increased from two to five years. Within this longer-term relationship retailer A and its suppliers pool information on real incurred costs during negotiation in order to arrive at mutually acceptable distribution of costs and profits, with the retailer sometimes finding that contractor’s actual costs were higher than its own predictions and adjusting rewards to account for this. As a result of this framework, the close relations enable retailer A to use fewer contractors in more trusted, mutually advantageous relationships. The detailed information about the negotiation and operation within these relationships revealed that the information transparency afforded by the supply-chain and management information systems allowed contracting parties to negotiate as if they were already in an established trustbased relationships, and then to move towards a situation in which trust became engendered.

Conclusion It is clear that the increasing use of integrated generic ICT systems is having a profound impact on the organisation and activities of firms, in terms of both the scope of control that they have over the value-chain and the way in which they are able to build up detailed consumer information. The systems concerned here are generally generic supply-chain systems and data-processing systems, which were designed in order to manage the process of efficient inventory management and warehousing, eventually becoming more sophisticated and facilitating a move towards just-in-time systems and consumer demand prediction. In the example offered by the UK food-processing and retailing sector, supermarkets have been able to control and co-ordinate activities through their control over the supply-chain and consumer information. The nature of the competitive process in this 16

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industry has thus been substantially modified by these systems, not so much by their introduction as by their subsequent application as drivers of both innovation and quality-based differentiation. Significantly, the shift to ICT systems encompasses computer-mediated retail, where ordering can be made online and the supplychain extended to individual customers’ houses. While home-delivery and Internet shopping are likely to play an increasingly important role in the development of shopping behaviour (Dennis et al., 2002) in the grocery retail sector, however, the ultimate impact of this remains uncertain despite the high profile which has been afforded to these systems. In contrast it is apparent that the competitive structure of the industry has been changed due to the implementation of generic ICT systems. Initially, supply-chain management systems enabled supermarkets both to integrate new firms into the supply-chain, and to create competitive advantage through linkages with complementary firms in order to innovate new products. Even more significantly, grocery retailers have been able to integrate consumerdemand information from consumers at pointof-sale into their information systems. Crucially, it is the ability to gather and analyse consumer buying patterns and trends through PoS data collection, loyalty card information, Internet order histories and subsequent data mining which has driven both the shift to just-in-time ordering and stock control systems and the ability of retailers to target smaller target markets more accurately. This ability to reveal and satisfy consumer demand has ultimately enabled supermarkets to engage in the development and supply of new products using vertical network arrangements with supplier firms. The qualitative approach examining these networks in operation reveals that the information management systems information transparency results allow the networks to operate in ways different from expectations from the literature. While the introduction of ICTs into the supply-chain has been examined in the logistics management literature, a qualitative approach was able to shed new light on the operation of the supply-chain in terms of the changing nature of the relationships

between firms. Using these data in conjunction with an economic framework emphasising information gave context by which to interpret the relationships identified. Specifically in this example the creation of trust within transactions between logistics contractors and retailers appears to be an outcome of information sharing rather than a precursor. In other examples, however, information transparency has also allowed supermarkets to have much more power relative to suppliers and to focus on price-based relationships. The nature of power within these networks is one area where future research attention could be directed. One major impact of the control of inventory management systems through the supply-chain has been to extend the reach of supermarket chains through the distribution process and has enabled them to exert a significant degree of control over the strategies of food producers and manufacturers as well. Coupled with the major UK multiples’ ever-increasing share of the grocery retail market and proximity to the consumer, supermarkets appear to be increasing their power over the food retail and manufacturing sector including the perceived ability to charge excess prices. This perception resulted in the Office of Fair Trading launching an investigation into the activities of supermarkets by the Competition Commission (2002). A critical finding of the Commission’s report, completed in 2002, was the acceptance of the growing importance in the foodprocessing and retailing industry of efficient consumer response (ECR). This involves both supply management, through continuous replenishment and automated store ordering, and demand management in which retailers and suppliers jointly manage product categories. Both of these activities are based on the use of information systems of the kind discussed in this paper (Competition Commission, 2002, pp. 241-3). The shift made possible by the detailed consumer information gathered by supermarkets is therefore enabling them not only to exert greater power over other actors in the value-chain in order to drive their costs down, but also to charge premium prices to targeted consumers through the supply of high margin goods. 17

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In conclusion, the ability of firms to collect and then effectively exploit consumer information about demand and preferences is becoming a key aspect of competitive advantage. For firms in consumer-driven sectors such as retailing the control of this information has also strengthened their position within the industry, and enabled them to extend the number of suppliers within the industry’s value-chain through the use of networks in order to meet customer demand for new products. The control of the information systems needed to co-ordinate inventory and the movement of goods through the supplychain has also enabled the firms to initially collect consumer information and to leverage this information by combining consumer information with the ability for highly co-ordinated product supply. The convergence of discrete systems into an overarching system creating an information network controlled by supermarket retailers from final consumers to food manufacturers could be considered an e-business system that has in this instance created a new competitive structure. As Palmer (2002) has recently argued, it is the successful integration of different elements of ICTs into novel systems of operation, qualitatively distinct from previous forms of activity in the sector, which constitutes the essence of the e-business revolution.

References Bourlakis, M. (1998), ‘‘Transaction costs, internationalisation and logistics: the case of European food retailing’’, International Journal of Logistics, Vol. 1 No. 3, pp. 251-65. Buck, D. (1990), ‘‘Changing to contract distribution’’, International Journal of Retail & Distribution Management, Vol. 18 No. 1, pp. 35-41. Burt, S. and Sparks, L. (1997), ‘‘Performance in food retailing: a cross-national consideration and comparison of retail margins’’, British Journal of Management, Vol. 8 No. 2, pp. 133-50. Casson, M. (1997), Information and Organisation, Clarendon Press, Oxford. Casson, M. and Cox, H. (1997), ‘‘An economic model of inter-firm networks’’, in Ebers, M. (Ed.), The Formation of Inter-organisational Networks, Oxford University Press, Oxford, pp. 174-97. Competition Commission (2002), Supermarkets: A Report on the Supply of Groceries from Multiple Stores in the United Kingdom, HMSO, London, available at: www.competition-commission.org.uk/reports/ 446super.htm Cox, H., Mowatt, S. and Prevezer, M. (2002), ‘‘The firm in the information age: organizational responses to technological change in the processed foods sector’’, Industrial and Corporate Change, Vol. 11 No. 1, pp. 135-58. Crimp, M. and Wright, L.T. (1995), The Marketing Research Process, Prentice-Hall, Englewood Cliffs, NJ. Dennis, C., Harris, I. and Sandhu, B. (2002), ‘‘From bricks to clicks: understanding the e-consumer’’, Qualitative Market Research: An International Journal, Vol. 5 No. 4, pp. 281-90. Dobbs, T., Stone, M. and Abbott, J. (2002), ‘‘UK data warehousing and business intelligence implementation’’, Qualitative Market Research: An International Journal, Vol. 5 No. 4, pp. 235-8. Ebers, M. (Ed.), (1997), The Formation of Interorganisational Networks, Oxford University Press, Oxford. Fernie, J. (1997), ‘‘Retail change and retail logistics in the United Kingdom: past trends and future prospects’’, The Service Industries Journal, Vol. 17 No. 3, pp. 383-96. Fernie, J. and Pierrel, F. (1996), ‘‘Own branding in UK and French grocery markets’’, Journal of Product & Brand Management, Vol. 5 No. 3, pp. 48-59 Grabher, G. (Ed.) (1993), The Embedded Firm: On the Socioeconomics of Industrial Networks, Routledge, London. Grandori, A. and Soda, G. (1995), ‘‘Inter-firm networks: antecedents, mechanisms and forms’’, Organisation Studies, Vol. 16 No. 2, pp. 183-215. Hughes, D. and Merton, I. (1996), ‘‘Partnership in produce: the J. Sainsbury approach to managing the fresh produce supply chain’’, Supply Chain Management, Vol. 1 No. 2, pp. 4-6.

Notes 1 Because of the sensitive nature of competition and inter-firm relationships in the industry, we are not able to reveal the names of the companies and individuals who helped with this study. 2 For example, one of two managers interviewed at contractor A had worked in a similar role for both retailer C and supplier B, and retailer A’s logistics manager had worked previously for retailer C. 3 While own-label products are lower-price alternatives to those of branded manufacturers (Burt and Sparks, 1997), own-brand goods are innovative products developed by the retailer (Fernie and Pierrel, 1996). 4 In the case of larger manufacturers packaging is managed specifically for each customer, and often through third-party specialist firms as well. Where large manufacturers do produce packaging, this is in close development with the retailer’s hygiene, marketing, procurement and packaging departments through the chilled ready-meal NPD unit

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Rubin, H.J. and Rubin, I.S. (1995), ‘‘Assembling parts: structuring a qualitative interview’’, Ch. 7, in Rubin, H.J. and Rubin, I.S. (Eds), Qualitative Interviewing: The Art of Hearing Data, Sage Publications, London. Senker, J.M. (1986), ‘‘Technological co-operation between manufacturers and retailers to meet market demand’’, Food Marketing, Vol. 2 No. 3, pp. 88-101. Senker, J.M. (1988), A Taste for Innovation: British Supermarkets’ Influence on Food Manufacture, Horton Publishing, Bradford. Smart, R. (1995), ‘‘Quick response supply-chain management from the bottom up!’’, Logistics Focus, Vol. 3 No. 5, pp. 26-8. Stata, R. (1989), ‘‘Organisational learning: the key to management innovation’’, Sloan Management Review, Vol. 30, pp. 63-74. Tesco Plc (2002), Annual Report and Review, available at: www.tesco.com/corporateinfo/ Williamson, O.E. (1975), Markets and Hierarchies: Analysis and Anti-Trust Implications, Free Press, New York, NY. Williamson, O.E. (1985), The Economic Institutions of Capitalism, Free Press, New York, NY. Winters, T. (1996), ‘‘The effective implementation of co-managed inventory’’, Logistics Focus, Vol. 4 No. 7, pp. 2-7. Wright, L. (1996), ‘‘Exploring the in-depth interview as a qualitative research technique with American and Japanese firms’’, Marketing Intelligence & Planning, Vol. 14 No. 6, pp. 59-64. Wright, L., Nancarrow, C. and Kwok, P. (2001), ‘‘Food taste preferences and cultural influences on consumption’’, British Food Journal, Vol. 103 No. 5, pp. 348-57.

Hughes, T. (2002), ‘‘Marketing principles in the application of e-commerce’’, Qualitative Market Research: An International Journal, Vol. 5 No. 4, pp. 252-60. Key Note Report (2002), Supermarkets and Superstores, ICM, Pittsburgh, PA. Lane, C. and Bachmann, R. (Eds) (1998), Trust within and between Organizations: Conceptual Issues and Empirical Applications, Oxford University Press, Oxford. Lawrence, P. (1988), ‘‘In another country’’, in Bryman, A. (Ed.), Doing Research in Organizations, Routledge, London. Macdonald, J. (1994), ‘‘Quality in retail distribution’’, The TQM Magazine, Vol. 6 No. 4, pp. 11-14 McKinnon, A., (1989), Physical Distribution Systems, Routledge, London. Mason-Jones, R. and Towill, D. (1998), ‘‘Time compression in the supply chain: information management is the vital ingredient’’, Logistics Information Management, Vol. 11 No. 2, pp. 93-104. Moorman, C., Zaltman, G. and Desphande, R. (1992), ‘‘Relationships between providers and users of market research: the dynamics of trust within and between organisations’’, Journal of Market Research, Vol. 24, pp. 314-28. Ody, P. and Newman, S. (1991), ‘‘Speeding up the supply chain’’, International Journal of Retail & Distribution Management, Vol. 19 No. 5, pp. 4-7. O¨stera˚ker, M. (2001) ‘‘To put your cards on the table – collection of data through silent interviews’’, Management Decision, Vol. 39 No. 7, pp. 578-82. Palmer, R. (2002), ‘‘There’s no business like e-business’’, Qualitative Market Research: An International Journal, Vol. 5 No. 4, pp. 261-7. Ross, D. (1997), Competing through Supply Chain Management, Chapman & Hall, London. Rowley, J. (2002), ‘‘Reflections on customer knowledge management in e-business’’, Qualitative Market Research: An International Journal, Vol. 5 No. 4, pp. 268-80.

Further reading Bowersox, D. (1998), ‘‘Logistics: the route to quality’’, Focus, Vol. 7.

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Introduction

Bla-bla-bla: video chat service on the Internet – a market feasibility study

The Internet is changing the way in which companies carry out their business and, in fact, constitutes an entirely new application domain, which makes product innovation possible. Moreover, it is a new medium for reaching consumers, which is a central preoccupation for organisations in today’s business market. Two techniques currently allow the diffusion of videos on the Internet: (1) Web casting consists of an audio/video diffusion to a large number of non-specific users at the same time via the Internet[1]. (2) Video conferencing refers to the discussion between users in different locations that are linked together by a telecommunications network using image diffusion.

Adam Lindgreen Michael Antioco and Martin Wetzels The authors Adam Lindgreen is Senior Lecturer, and Michael Antioco and Martin Wetzels are both Professors, all in the Department of Accounting, Finance and Marketing, Faculty of Technology and Management, Eindhoven University of Technology, Eindhoven, The Netherlands.

Our interest lies in video chatting on the Internet. This is a type of service that adds video support to chatting using a Web cam and is gradually attracting more Internet users. The paper consists of a market study evaluating the potential commercialisation of a software program that enables the ‘‘cutting away’’ of the chatters from the original background filmed by the Web cam, and later re-integrates them into a new background. The software program could, therefore, be interesting for advertising companies. The paper is organised in the following manner. The analysis of the Web cam market examines the market structure and its evolution, and highlights the opportunities and challenges for a video chat service to be successful. Following that, the video chat market itself is considered. In order to evaluate the pertinence of inserting advertising in the new background – which is of financial importance for a start-up company – an in-depth approach to advertising on the Internet is carried out. After macro- and microsegmentation of the potential clients, the different commercialisation modes of the service are considered. Finally, we answer the

Keywords Computer networks, Internet, Market research, Software engineering, Belgium Abstract The Internet is changing the way that companies carry out their business and, in fact, constitutes an entirely new application domain, which makes product innovation possible. Moreover, it is a new medium for reaching consumers, which is a central preoccupation to organisations in the current business market. Here interest lies in video chatting on the Internet. This is a type of service that adds video support to chatting using a Web cam and is gradually attracting more Internet users. The paper consists of a market feasibility study evaluating the potential commercialisation of a software program that enables the ‘‘cutting away’’ of the chatters from the original background filmed by the Web cam, and later re-integrates them into a new background. The software program could, therefore, be interesting for advertising companies. Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm

The authors would like to thank Mr Se´bastien Deprez, Mr David Gelay and Mr Quentin Noirhomme for their invaluable help in collecting the data, and the reviewers of the 2002 e-Business Conference, held at the Birmingham Business School.

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . pp. 20-33 # Emerald Group Publishing Limited . ISSN 1352-2752 DOI 10.1108/13522750410512859

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implying a 100 per cent increase between 1997 and 1998, which appears to be a reasonable estimation for an expanding market. Annual sales were estimated at 2.2 million units in 1998, and 8.25 million units have been allocated each year between 2001 and 2004. The figures ranging between 2001 and 2004 are based on the 44 million units estimated for 2004 (International Data Company, 2001); sales have been equally spread over these four years as an indicator of future growth (Table I).

question of whether or not it is interesting to develop and commercialise the new cutting technique. For clarity, the methodology will be described throughout the paper, following the different stages of the research.

Discussion of findings The Web cam market The approach to the Web cam market follows a three-step analysis: an estimate of Web cam sales is made, followed by a market structure analysis based on Porter’s (1980) five-forces analysis, and, finally, an evaluation of the market evolution is carried out. These findings will enable us to evaluate the potential development of our service, which is dependent on the Web cam market. Indeed, the Web cams are a key object for the development of video chatting, as it allows video chatting to take place on the Internet. This justifies our interest in the market structure and the future evolution. In order to evaluate the current market size, as well as past and future sales, three sources are chosen: Web cam manufacturers, market studies, and public enquiries.

Market structure Porter’s (1980) five-forces analysis was then carried out in order to assess the Web cam market structure, as well as the influence on the future commercialisation of the service. The market structure consists of: (1) direct competitors; (2) suppliers; (3) clients; (4) potential entrants; and (5) substitutes. Strong competition between manufacturers, many substitutes (e.g. video cameras and digital cameras), low entry barriers due to the fact that the technology is easily mastered, and highly aware clients – especially because of high information accessibility – have been observed. These findings all positively relate to the service offering, as they increase, first, pressure on the Web cam manufacturers and, second, the potential market size, as well as facilitate market entry.

Market sales The five largest Web cam manufacturers (Logitech, Intel, Ezonics, Creative Labs, and Xirlink), all of whom were chosen on the basis of specialised magazines[2], were contacted, computer hardware retailers[3] and a market study (PC Data, 2000). Unfortunately, these manufacturers could not assist us with relevant information. Subsequently, three major companies – Emarketer, Me´diame´trie and StatsMarket, which cover major issues on e-commerce and online marketing, were contacted but, since they demanded to be paid for participating in an interview, we decided to rely on public enquiries carried out by five well-known research groups: the Gartner Group[4], Distributique (Distributique, n.d.), PC Data (PC Data, 2000), International Data Company (International Data Company, 2001) and InfoTrends Research Group (InfoTrends Research Group, 2001). Based on the above-mentioned public enquiries, sales of 500,000 units have been estimated for the time period before 1998,

Future evolution of the market The major drivers and restricting forces influencing the future market for Web cam sales were then identified. Four major restrictors have been identified: (1) the price of Web cams; (2) the quality of Web cams; (3) the band wave; and (4) the price of telecommunications. Although Web cam prices dropped from US$161 to US$96 in November 1999 (PC Data, 2000), their current price is still relatively high at around US$80 for one of good quality. With regards to the product quality, IDC’s International Data Company, 2001) market study identifies it as a major problem, although over the past few years improvements have been 21

Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

Table I Web cam market: sales and population, up to 2004

Annual sales, in millions of units Total population, in millions of units Percentage total population growth

1998

1999

2000

Year 2001

1.0 1.5

2.2 3.7 147.0

7.3 11.0 197.0

8.25 19.25 75.0

made (e.g. luminosity, sensitivity and image resolution). Band waves are also relevant, especially when the user connects to the Internet with a telephone line; a low band wave thus decreases the image quality. However, over the last couple of years, cable quality and ADSL have drastically increased the band waves, resulting in a better image quality. Finally, the price of telecommunications is identified as a restrictor, since chatters are connected to the Internet for a reasonably long period of time. Prices are decreasing, though, and many Internet access providers are practising a fixed price policy. Four drivers have been identified: (1) the ‘‘snowball’’ effect; (2) the increased interest of Internet users; (3) the building of alliances; and (4) the development of new applications.

2002

2003

2004

8.25 27.5 43.0

8.25 35.75 30.0

8.25 44.0 23.0

These factors positively influence the drivers and current restrictors of the Web cam market’s evolution. The video chat market The video chat market is now analysed in order to better understand the users, adapt the new product, and implement an adequate marketing strategy. According to an eTForecasts study[5] the number of Internet users should rise from 414 million in 2000 to more than 1,000 million in 2005. However, not all users will want a video chat service. Two types of profiles have been identified as potential video chatters with video chat satisfying two different needs: (1) the need to communicate with a group of people; and (2) the ‘‘fun-need’’ for chatters who appreciate use of the Internet, sharing their hobbies and passion in discussion forums.

As Web cam possession increases, more people will desire to own one in order to communicate on the Internet. Moreover, according to an AOL enquiry (Cyberstudy, 1999), 67 per cent of the people contacted are planning to practise a video chat activity. The third driver refers to the alliances taking place between Web cam and computer manufacturers: for instance, Logitech has signed an agreement with Compaq in the USA (Logitech, 2000). According to the InfoTrends Research Group, more than 50 per cent of the computers sold from 2003 onwards will have a Web cam; such alliances will inevitably favour market growth. Finally, the development of new applications for Web cams will make it more interesting to own one. In summary, the first part of the market study generates positive findings for the development of our service. Indeed, 11 million Web cams have been sold as of today, and the public expects an increase in sales. Moreover, the five-forces analysis suggests an increase in quality, and decrease in prices of Web cams.

According to a McKinsey & Co. enquiry McKinsey-Dad, 2001) these two types of chatters represent, respectively, approximately 23 per cent and 4 per cent of the Internet surfers. This means that the potential video chatters accounted for around 100 million in 2000, which may seem large compared with the 11 million Web cams sold, but it is an indication of the potential market size. Again, in order to analyse the video chat market structure, Porter’s (1980) five forces seems to be an adequate model. Searching the Internet for the available video chat services has identified the direct competitors. Two main categories have emerged from this search: (1) video chatting via a Web site; and (2) video chatting via a direct connection. Both these categories enable text and audio discussion modes and offer the possibility of viewing small size videos with variable quality from fluid to slow. The difference between the two modes lies in the fact that, respectively, they enable the creation of one’s own 22

Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

The advertising market on the Internet

discussion forum or entering an existing forum, as well as a discussion between only two persons. To conclude the direct competition analysis, two main aspects should be raised. First, the competition regarding video chatting is rapidly growing and the current commercialisation project should be marketed shortly. Second, even if competition is tough, innovation leading to new and better quality products is still possible. Moreover, the presence of a firm commercialising a similar version of our service could facilitate market penetration. With regard to substitutes, two types of substitutes were identified: (1) those linked to the communication function; and (2) those linked to the ‘‘meeting’’ function.

The current section exposes the advertising market on the Internet with one possibility being to replace the original background with a background integrating advertisements. This new type of advertising might be appealing to certain market actors and could be a nonnegligible source of revenue. In order to verify this a market study was conducted. However, before doing so, it is necessary to identify the actors in the market structure and their role in the elaboration of an advertising campaign; the numbers below refer to Figure 1: (1) The mandates, an Internet site, for example, contact a ‘‘re´gie’’ in order to hand them the task of commercialising their advertising space. This means that these re´gies have a better knowledge of the market and its actors. (2) The re´gies then contact the media centres, which play a centralisation role in the market. In the current research, the product to commercialise is the advertising space present in the new video chatting background. (3) The media centres contact the advertising agencies and present them with the available products. (4) The agencies advise the announcers on how to conduct their advertising campaigns.

The first type of substitutes covers the telephone, post, e-mail and traditional chat, but none of these substitutes enables video imaging. The second type of substitute regroups ways of meeting people, for example meeting in clubs. There exists, thus, a certain number of substitute products, but none is superior to the others and, basically, they aim at different types of potential customers. Analysing the barriers to entry enables the evaluation of the potential entry of new companies offering the same service. These entry barriers are highly present in the case of video chat services: patents, as well as the importance of technical capacities, the recruiting of computer technicians and the importance of brand image, are all impediments to the development of new activities competing with the current service. The identification of the clients’ and suppliers’ negotiating power depends highly on the commercialisation mode. These matters will be developed further. To conclude, the video chat market structure is one that is competitive due to the increased offer and constant improvement of product quality. The entry barriers are quite high, and the strategy implemented to penetrate the market is of great consequence. Finally, one must be aware that video chatting might be a ‘‘fashion phenomenon’’, which could disappear as quickly as it appeared.

Figure 1 The advertising market: structure and functioning

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Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

(5)

(6)

(7) (8)

(9)

centres and agencies were randomly picked; however, regarding the re´gies we were advised by the administrator of a future spin-off of the Telecommunication and Teledetection Laboratory of the Catholic University of Louvain to contact RMB and 24/7 and randomly pick two others. All the companies contacted are based in Belgium; however, the majority are present abroad as well, enabling us to discuss the differences between countries. An interview protocol was then written in order to approach the relevant themes earlier identified. This has been depicted in Figure 3. Following that, a search on the Internet was conducted for contact information of the different pre-selected actors. Unfortunately, though none of the agencies agreed to invite us in for an interview, two media centres and three re´gies did agree. Table II summarises the data collected from these in-depth interviews. In order to compare the collected data we consulted different studies, the main and most relevant one being the IAB’s annual report (IAB/PricewaterhouseCoopers, 2000). With regard to market history, it seems that the second semester results have not affected the advertising revenues and that many announcers have become more dynamic in using the Internet. International differences were found to be important between, on the one hand, Germany and France, which are the most active European countries in advertising on the Internet, and, on the other hand, the USA. In 76.7 per cent of cases, banners are the advertising medium. In the last step, it was decided that the information gathered from the interviews and previous market study seemed correct, enabling us to consider our findings as being representative of reality. It appears that there exists a real interest in the new video chat communication service. In order to identify and better understand the potential clients and/or users, the following section consists of a macroand micro-segmentation of the video chat market. Respectively, they identify the productmarket and their different segments (Lambin, 2000).

Most of the time (some 80 per cent) steps 5 to 7 will be followed. However, if not, step 8 exposes the alternative step. The announcers communicate their budget to the agency and also give them a few directives. The agency then proposes the media support and creates the banners and advertisements. The agencies communicate the information regarding the budget and the Web sites where the announcer wants to be present to the media centres, leaving them regularly to elaborate the planning aspects, media strategy and tactical announcers’ plans. The media centres contact the re´gies. The announcers contact directly the re´gies, informing them of the budget in order to accomplish the advertising campaign. The re´gies insert the advertisements into the sites with which they have an agreement.

This brief description of the market structure and interaction processes between the actors provides us with key information for the following market study. The methodology has been outlined in Figure 2. In the first step, the subjacent themes have been identified in order to reply to our interrogation regarding whether or not it is of interest to include advertising in the new video chat background. These themes refer to the history of advertising on the Internet, the future trends, the international differences, the technical requirements, the financial aspects and the applicability of advertising. Moreover, we asked the interviewees to voice their opinion on our concept. Previously identified in the advertising market structure, there exist three main categories of actors: (1) the agencies; (2) the media centres; and (3) the re´gies. In Belgium, there are roughly a dozen agencies, nine media centres and 18 re´gies[6]. In order to have a complete overview of the market, members of all three categories were contacted, selected from an exhaustive list available on Web sites such as the ‘‘Centre d’Information sur les Me´dias’’ (CIM)[7] and the ‘‘Interactive Advertising Bureau’’ (IAB)[8]. Three media

The macro-segmentation of the video chat market The aim of macro-segmenting is to define the company’s reference markets narrowly enough in 24

Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

Figure 2 Advertising market analysis

strive to increase site visits and profits through email, chat and video chat, with or without the cutting technique. According to the interviews conducted with the different actors in the market, it was decided to focus on the following groups: . the Internet surfers who want to communicate and meet new people; . the companies that want to improve brand image; and . the Internet sites, which long for increased site visits.

order to implement a strategy, and widely enough to stimulate, discover and diversify imagination and strategies (Lambin, 2000). In order to do so, we implemented a set of ‘‘who?’’, ‘‘what?’’ and ‘‘how?’’ questions (Abell, 1999). For the ‘‘who?’’ question we identified Internet surfers, companies and Internet sites. The Internet surfers may want to communicate with friends, meet new people, ‘‘have fun’’ or discover new cultures. They may do so using the telephone, post, e-mail, chat and video chat, and with or without the cutting technique. The companies may want to increase brand image and profits. They are capable of doing so by using the same communication medium as the Internet surfers. Finally, the Internet sites may

Naturally, these three actors’ intentions are all being fulfilled by using video chat. The next objective was to analyse the diversity of needs within the product-markets. The Internet surfers have already been 25

Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

Figure 3 The themes for the interviews with the advertising market actors

(4) the national or international dimension of the Internet site; (5) the size of the client market in terms of revenues; and (6) the type of functioning of Internet sites with a video chat core activity.

discussed in the video chat market analysis. Concerning the Internet sites three different sources of information were exploited: (1) the knowledge gained from the direct competition study of the video chat market; (2) Internet sites frequency visit analyses published by CIM[9]; and (3) a study conducted by LemonAd, an advertising monitoring company[10], over a one-week period.

Three micro-segments have been distinguished: (1) video chat sites; (2) portals; and (3) editorial sites.

The micro-segmentation of the video chat market In the current approach, and based on the collected information, the micro-segmentation of the video chat market is based on six relevant factors: (1) the presence of a commercial aim; (2) the core business; (3) the type of advantage looked for by introducing the video chat;

Video chat sites, such as IsPQ or Cuseeme, naturally make video chat their core business. Connection can be made either via an Internet site or through direct connection. As for portals, the aim is to complete their product range in order to increase the number of visitors. They are either national (e.g. Yucom and Ad valvas) or international (e.g. Yahoo!, Wanadoo and 26

Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

Table II Results of the advertising market study 24/7

RMB

High media

Carat

Optimedia

Banner advertisement Continuously growing Advertising on the from 1998 to 2000 but hard times end of Internet increases but is still relatively low 2000 compared with other media

Large market growth in 2000 Mini-market crisis in the second semester 2000

The sector should develop but not extensively Several announcers have doubts on the Internet’s effectiveness International USA ahead compared No information USA ahead compared In Europe, France and differences with EU with EU Germany are ahead Belgium is a slow mover and more engaged The application must Being able to do Need to measure Ensure the nonTechnical be perfect in order to requirements profiling effectiveness violation of private be launched life Applications No information Offering a free service No information Create our own video to Internet users chat site No information Advertising must be a Financial Between e0.15 and Maximum e3,720 complementary source aspects e0.45 per impression Maximum 20 to 30 of revenue but not per cent of revenue the main source generated by advertising Interesting but the Interesting because Our concept Interesting because Interesting but we market must become answers a market answers a market need must be aware of more dynamic need and is an hoping to generate international concept too much revenue from advertising

Entry of new announcers Some announcers dare use new products (innovation)

Market history

Large market growth in 2000 Mini-market crisis in the second semester 2000 Banner advertisements = 90 per cent of the advertising campaigns Tendencies and New advertising previsions products appearing Profiling is becoming essential

Profiling is becoming essential

Banner advertisement use should decrease from 83 to 50 per cent of advertising market due to new applications

Tiscali). Editorial sites want to spread the community of visitors and offer them a service around a specific theme. They are either informational (e.g. Le Monde), interest-driven (e.g. Walt Disney), professional (e.g. Ibazar) or regrouped in the category ‘‘others’’ (e.g. Sport4fun). The video chat market segmentation enabled the identification of a number of client categories. However, it is not possible to satisfy all the clients, especially for a start-up with limited resources. These consequences led to the questioning of the different options available with regard to the commercialisation mode. Based on market segmentation, Porter’s five-forces analysis of the video chat market,

USA ahead of EU Belgium is a slow mover The application must be perfect in order to be launched Create our own video chat site The large campaigns generate revenues between e495,000 to e990,000 Interesting project but too early to evaluate its viability

and ideas collected from in-depth interviews, five commercialisation options were identified (Figure 4). The first option for the start-up would be to create its own video chat Web site targeting Internet surfers who video chat, and those who do not as yet. The advantages and drawbacks of this commercialisation technique are presented in Table III. This commercialisation mode seems interesting, but drawbacks are multiple. Even if one can expect advertising revenues, 70 per cent of the total revenue must be generated by the software sales. However, a large majority of the Internet surfers are searching for free downloads. Second, if this commercialisation mode is implemented, the 27

Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

Figure 4 The five commercialisation modes

requirements. In terms of advertising revenue losses, they could most probably be partly recouped by alliances or contracts with the clients. Finally, competition not being as tough, more time would enable the start-up to develop a more complete version of the software. Developing a service with the cutting technique for Internet chatters is the third type of commercialisation that the start-up could consider. In this case, the start-up would have to develop software that masters the cutting technique and the image re-composition. When chatters connect to the Internet site to video chat, they will be able to download the software. The chances of success in this case are low; indeed, even if development costs are low, other cost centres will not be so: for example, promotional costs will be significant in order to rapidly reach the Internet users. Moreover, the only substantial revenue would be generated by the software sales, which would most probably be low, as an increasing number of Internet users are not ready to pay for downloadable software. Finally, there already exists one company, which commercialises such type of software, which means that competition could thus be quite tough.

distribution would be a key – and especially expensive – factor. Third, and due to tough competition, the software must be differentiated and complete. As a consequence, development costs would increase. The second commercialisation mode, developing a complete service for other sites, addresses the demand from Internet sites. Table IV presents the advantages and drawbacks of this commercialisation mode. By selling to Internet sites, the start-up can save on maintenance and distribution costs. However, this commercialisation mode would engender extra costs in terms of software adaptation in order to reply to the different Internet sites’

Table III Advantges and restrictors of creating one’s own Web site Advantages

Restrictors

Possibility of creating a better quality video chat by proposing a more complete service with better performance The cutting technology would enable the start-up to differentiate itself from existing video chat sites, which do not propose the insertion in a new background Two types of services would be offered: a free software including advertising and a paying one with no advertising Revenue would be generated by the advertising on the free version and the software price on the paying one

The software development requires investment in terms of human resources mobilisation (expensive) The cutting technique is only a small part of the service; will it be enough to differentiate us from competitors? Both options would require two different softwares. However, programming differences would not be too important A good business plan should count on 30 per cent of revenue as the maximum generated by advertising. The rest should be generated by the paying version (continued)

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Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

Table IV Advantages and restrictors of developing a complete service for other sites Advantages

Restrictors

Possibility of creating a video chat service of higher quality; the service would be complete and powerful

The software development requires heavy investments in human resources; different clients might want slightly different versions Is the cutting technique sufficient in order to differentiate the service? In order to limit time and financial costs, the product would need to be standardised to a minimum extent

The cutting technique enables the start-up to differentiate their product from others The start-up could offer different services according to the different clients’ expectations and their desire to differentiate themselves Revenues would be generated by the software sales and maintenance charges

The start-up could lose all prospects of generating advertising revenues, as the clients will probably want to manage the advertising on their Web site In working with companies, expectations are higher and constraints tougher; penetrating the market would not be easy Less competition than in the first commercialisation mode, because fewer organisations propose such a service to Internet sites (continued)

The clients would be Internet sites; it would then be business-to-business and profit expectations are higher As presented in the micro-segmentation, the potential number of clients is quite important

At the current stage, it is impossible to decide which of the above options would be the most appropriate; however, the first and third solutions have been rejected, because it seems that aiming at Internet surfers would jeopardise the start-up’s profitability. In the next paragraphs, our understanding of the start-up’s potential is deepened and finalised, evaluating profitability and the required conditions by conducting a market study in the Internet site segment (Figure 5). The subjacent questions refer to advertising, commercialisation modes, technical requirements and program options, exclusivity and financial aspects. The reasons for enquiring lie, respectively, in the fact that advertising can be a selling argument and one wants to assess its impact, the interest we have in companies assessing the proposed commercialisation modes, the fact that clients’ expectations influence programming and costs, and the generation of a few financial figures. In the second step, we followed such a path in order to select the cases. We chose not to sample the Internet surfers and the companies, because they were less important financially, and also difficult to study in detail. The companies were not contacted, because the segment is too large, considering our small possibilities, and the needs differ significantly

The fourth option available to the start-up is the development of the software enabling the cutting technique, but for Internet sites instead of Internet surfers. This commercialisation mode seems interesting; indeed, the investment would be significantly lower than the option requiring the development of the start-up’s own Internet site. Moreover, addressing the Internet sites should bring substantially higher revenue than addressing the Internet surfers. The major drawback of this commercialisation option lies in the entry barriers: if this activity is profitable, the only known competitor, as of today, might, and most probably will, enter the market to compete with the start-up. The fifth option would be to develop a service for companies with the objective of creating an event on video chat on company demands. Basic software would be developed and would need to be adapted according to companies’ demands. Table V regroups the advantages and drawbacks linked to this commercialisation mode. This commercialisation mode probably requires more programming work because each contract is different. Prospecting expenses will also be high, which will significantly raise costs. However, the price charged could be higher, so the market size is an important factor in order to estimate profitability. 29

Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

Table V Advantages and restrictors of developing a service for other companies Advantages

Restrictors

The offered service would be new and companies could benefit from an innovative image The revenues would be generated by the selling of a number of services enabling an event creation The clients are companies, their budgets are large and an increasing part of them is devoted to the Internet Brand image for the grand public is not relevant; the start-up must be known by the companies and the reputation would be built according to service quality

The software development and the needed applications will require investment in time and human resources The service quality must be absolutely perfect The prospecting effort will have to be intense and it is essential to develop an adequate strategy in order to focus on the right customers There is a risk that video chatting is a fashion phenomenon, the service length will be determined by the contract length. In the long run, getting new contracts could become more complicated

Figure 5 Methodology for the market study

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Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

approached; and their identification and availability are relatively simple. The fact that they are based in Belgium makes it convenient for the interviewing process. The following portals were contacted: Ad valvas, Infonie, Msn, Planet Internet, Skynet, Yucom, Wanadoo, Tiscali Belgium and Free Web. Our objective was to find answers to the interrogation presented in the first phase. Figure 6 illustrates the methodology. Three portals accepted to meet us, five were interested, but lacked time, and one was not interested in our video chat service. Table VI contains the results gathered from our three interviews with Ad valvas, Tiscali Belgium, and Wanadoo Belgium. First, the video chat market seems as though it will indeed continue to develop, as most interviewees seem to believe this. Second, the researchers’ idea of integrating

from one company to another, which makes our enquiry very complicated. As for the Internet sites, we decided to contact them because the financial gains are relatively important and the segment size seems reasonable, in the sense that it is not too large, which facilitates the enquiry, and not too small, which enables the researchers to have a goodsized sample. In the Internet site segment, three micro-segments were identified: (1) video chat sites; (2) editorial sites; and (3) portals. The researchers chose to focus on the portal sites based in Belgium for diverse reasons. These sites are large holders of financial resources; the market size is larger than that of video chat sites and smaller than that of editorial sites; all the identified themes can be

Figure 6 The themes discussed with the interviewees of portal sites

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Bla-bla-bla: video chat service on the Internet – a market feasibility study

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . 20-33

Adam Lindgreen, Michael Antioco and Martin Wetzels

Table VI Results of in-depth interviews with portal managers

Concept

Communication mode

Competitive advantage

Software options

Exclusivity

Technical requirements Advertising Development Financials

Ad valvas

Tiscali Belgium

Wanadoo Belgium

Fun aspect Doubts regarding video chat’s development Only develop the cutting technique software Do not develop a complete service and sell it to Internet sites Core business: cutting technique software With the complete service, diminishing of the cutting technique No information

Interested by video chat Has just integrated a video chat service Open to new proposal if brings extra value No particular preferences

Interested in video chat Has just integrated a video chat service Like the cutting technique in the current project No particular preferences Interested in both the cutting-enabling software and the complete service

Whatever our choice, we should be able to differentiate The service should also enable Tiscali to differentiate itself

No information

Quick messages could be a good idea Be careful in using client profile information

Place lists of all connected surfers but possibility of placing filters Be careful in using client profile information Place an indicator on connection quality Modify character policy Be able to create public and private chat rooms No because differentiation based No information Exclusivity of six months to a year in a trial on background country Then spreading of the system in other countries Adaptation often realised Adaptation by the collaboration between the Adaptation by the collaboration between the two internally two companies companies How is this technology different Interesting but sceptical regarding market Many possible advertising adaptations from what can be done today? reaction Leave space for banner advertisements Make it a ‘‘fun’’ service Interested in everything that could help them Discussion services with stars while seeing film differentiate themselves abstracts Very difficult to estimate Very difficult to estimate Very difficult to estimate For the Belgian market between e250 and e5,000 More than e12,000 for each per month for the complete software cutting technology software

advertising in the new background has also been taken positively. Based on the gathered data, the researchers believe that the market study has reached its objective in providing a reply to our interrogations.

chat market, where competition is also tough, there is still room for new entrants that need to differentiate themselves. Indeed, the potential video chatters represent approximately 25 per cent of the Internet users – that is a potential market of 100 million people. Our service can provide these potential clients with what they are searching for, that is communication and ‘‘fun’’ over the Internet. As for the advertising market, advertising expenditures are rising and market actors are constantly searching for new products, better targeted and more interactive. Encountering the encouraging results from the three market studies, it was decided to further deepen knowledge and understanding of the eventual possibilities by undertaking a macro- and micro-analysis of the market. The micro-analysis enabled the refinement of the

Conclusions In conclusion, we will expose the striking and most relevant findings of this paper. The market studies conducted on the Web cam, video chat and advertising market provide us with very encouraging results. The Web cam market is growing and competition is becoming tougher, leading to increasing quality and decreasing prices; these conditions can lead us to think that the market will evolve favourably. On the video 32

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subscribers it is possible to know who announces, on which support, with which frequency, and at what dates. The software tracks, 24/7, 2,500 Internet sites in Europe.

segmentation, therefore helping the study of various commercialisation options. Two of the options that seemed unprofitable were eliminated and further analyses led to the consideration of a commercialisation mode that would be adequate for answering the needs of Internet portals. Indeed, the market study carried out on Internet portals highlighted the real interest of the potential clients for the current video chat service. This research enabled the gathering of pertinent information on the potential clients’ needs and the amounts of money they are ready to pay for the service. It is now for technicians and professionals to decide whether or not they are ready to create a start-up selling this software or the complete version of a video chat service using the cutting technique, enabling the chatter to be integrated to a new background, which will hold advertising agreements with the concerned portals.

References Abell, D.F. (1999), Defining the Business: The Starting-Point of Strategic Planning, Prentice-Hall, Englewood Cliffs, NJ. Cyberstudy (1999), p. 76, available at: www.corp.aol.com/ press/study/cyberstudy.pdf Distributique (n.d.), ‘‘Web cams: dans l’œil des constructeurs", Distributique, No. 266, p. 40. IAB/PricewaterhouseCoopers (2000), Advertising Revenues Study, London. InfoTrends Research Group (2001), ‘‘PC video camera market expected to reach 38 million units by 2003’’ , March, available at: www.infotrends-rgi.com International Data Company (2001), ‘‘PC cameras popularity shoots to new heights, but work remains to reach its full potential’’, April, available at: www.idc.com/Hardware/press/PR/CP/CP112700pr.stm Lambin, J.J. (2000), Market-driven Management: Strategic and Operational Marketing, Macmillan, Basingstoke. Logitech (2000), January, available at: www.logitech.com McKinsey-DAD (2001), ‘‘Comprendre l’e-consommateur belge’’, February 8, p. 12. PC Data (2000), ‘‘PC video cameras sales explode in November’’, PC Data, January, available at: pcdata. com/ Porter, M. (1980), Competitive Advantage, The Free Press, New York, NY.

Notes 1 Available at: www.viewontv.com/richmedia.htm 2 Inside Internet, SVM, Web Magazine and Internet & Enterprise. 3 IBS, Excel and Microstar. 4 Available at: http://gartner.com/Webletter/3comrisi/ summer99/article1/article1html 5 Available at: www.etforecasts.com 6 This information was collected from a product manager online department at RMB Belgium. 7 Available at: www.cim.be/base/fr/c/default.html (accessed April 2001). 8 Available at: www.iab-belgium.be/noframes/ fr_000008.htm (accessed May 2001). 9 Available at: www.cim.be/metriweb/fr/d/dc/ default.html 10 LemonAd enables one to follow the online campaign evolution in most European countries. For the

Further reading Miles, B. and Huberman, A.M. (1994), Qualitative Data Analysis: An Expanded Sourcebook, 2nd ed., Sage Publications, Thousand Oaks, CA.

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Background to the research

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A nation’s prosperity and that of its regions now depend to a very considerable extent on its success in developing competitive tradable service industries (Anyadike-Danes, 2001, p. 2).

This exemplifies the growing realisation in both the academic and the commercial worlds that the tradable services sector is a high value, knowledge-based sector – a vital and active ingredient in shaping economic (and social) change, where the growth and dominance of services are apparent in most advanced economies (Zeithaml and Bitner, 1996; Wymbs, 2000). The implications are that they (services) have (among other things) long-term growth prospects, employment potential and ability to cluster where the rewards from technology transfer and spill-over effects are highest. Looking specifically at the backbone of most advanced economies, namely small and medium-sized enterprises (SMEs); for the tradable services sector e-business (EB) and in particular the Internet are built on information and exhibit many of the same properties common to all tradable services. The intangibility, inseparability, heterogeneity, durability, perishability, customisation versus standardisation debates would suggest they are well equipped to take advantage of Internet-based technologies in service delivery (Lovelock et al., 1999). The implications are that top-performing service organisations make greater use of the Internet and the World Wide Web (Gray et al., 1999). Therefore, it is increasingly difficult to discuss SMEs in the tradable service industries without identifying the effect EB and the Internet have on them, (Watson et al., 2000).

Elaine Ramsey, Patrick Ibbotson, Jim Bell and Brendan Gray The authors Elaine Ramsey is a PhD Student at the University of Ulster, Coleraine, Londonderry, Northern Ireland, UK. Patrick Ibbotson is a Lecturer in E-commerce at the University of Ulster and Visiting Professor of Electronic Commerce at Western Carolina University, Cullowhee, North Carolina, USA. Jim Bell is Professor of International Business Entrepreneurship at the University of Ulster, Londonderry, Coleraine, Northern Ireland, UK. Brendan Gray is Associate Professor in Marketing at the University of Otago, Dunedin, New Zealand. Keywords Small to medium-sized enterprises, Innovation, Electronic commerce, Internet, Research Abstract Given the growth of services and their importance in the economy, e-business and the Internet have the potential to increase the competitiveness and growth of small firms. However, the general pattern is that the smaller the enterprise, the less likely they are to be prepared to adapt their business processes to accommodate this ‘‘new’’ technology. To illustrate the inherent issues this qualitative research utilised various projective techniques: construction, completion, and associative ‘‘tests’’ that have challenged the pseudo-scientific age of business as a great human ‘‘subjective’’ exercise. A methodology that in the less traditional academic sense is ‘‘unusual, intriguing, fun and engaging’’ is innovatively employed in this small tradable service firm study to facilitate self-expression among the respondents about particular e-business scenarios in a less structured, indirect and more imaginative way. Consequently, the depth of the analysis and interpretation generated from the study has provided the researcher with a rich source of new leads and ideas about potential e-business inhibitors and facilitators among SMEs not previously considered.

Tradable services defined

Electronic access

There are still many debates about what services, in particular tradable services, are or are not. Consequently, after much academic discussion and investigation to refine ‘‘our’’ definition of tradable services and for the purpose of ‘‘targeting’’ SMEs from the tradable services sector it was deemed appropriate to use the definition suggested by Miles et al. (1994) to enable an appropriate sample selection, that

The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . pp. 34-47 # Emerald Group Publishing Limited . ISSN 1352-2752 DOI 10.1108/13522750410512868

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face obstacles unique to their size as opposed to the sector in which they operate, where it is generally difficult to reach SMEs with new knowledge and new techniques (Magnusson, 2001). It is well recognised that for SMEs to get the full benefit of the Internet and EB, company and market structures may have to be reinvented. This may prove a strategic but risky approach, where the fundamental reality is that many SMEs may feel helpless and even overwhelmed by the events taking shape around them. Thus there is the leading edge ‘‘early adopter’’. At the other end of the spectrum lie groups of technophobes who feel uneasy about embracing anything new. In between there exists the owner-manager who will keep a ‘‘watching brief’’ (Culkin and Smith, 2000), a form of paralysis that causes inertia until they have a better idea of what is happening, being ‘‘conservative, habitual in their processes and largely technophobic’’ (Parker, 2002).

is tradable services that have been identified as being knowledge-intensive business services (KIBS) and/or technology knowledge-intensive business services (t-KIBS) (see Appendix). Pertinent to this research KIBS and t-KIBS are recognised as probably the most intensive adopters, chief orchestrators and leading users of information technology (IT) innovations (Miles et al., 1994), specifically the Internet. However, this may be over-generalised and optimistic, considering that differences begin to emerge due to firms being heterogeneous in their capabilities, resources and past experiences (Wernerfelt, 1984; Barney, 1991), with substantial and intelligible differences in innovation propensity and style across different classes of service firm and sectors. These differences become more apparent when SMEs are factored into the innovative equation. Past experience demonstrates that in each industry some firms failed to adopt a radical technology, while other firms leaped from one generation of technology to the next and adapted their business models based on such technologies. As suggested by Upachalanan (2000), there may be quite different patterns of radical and incremental service (product) innovation and processes; innovation over time, in different cases, sees quite different strategic actions by different firms within the services industry, with no ‘‘all-purpose’’ model to facilitate the process.

The research problem The ability of small firms to sense and respond to new technologies merits more academic research (for example, Srinivasan et al., 2002; Martin and Matlay, 2001; Raymond, 2001). A perspective that motivated this research is where there has been considerable debate among academics and business circles about the fundamental implications of Internet-based technologies for SMEs; where the reasons behind the adoption or otherwise of the Internet and EB remain obscure. Some studies have argued that organisational size has been a poor indicator with inconclusive and/or inconsistent findings relating to the adoption of ‘‘new’’ technologies (Brynjolfsson et al., 1994; Grover and Teng, 1992). However, it is argued that, since large firms have resources to spare and risk investing in the Internet; size is positively related to innovativeness (Weigelt, 2001), where SMEs have (among other things) fewer human financial and technological resources in terms of their capacity to innovate (Raymond, 2001; Julien and Raymond, 1994). The postulate is that we may have a naı¨ve, over-simplistic understanding of the complexity of the small firm market, where smaller

SMEs and EB: the innovation challenge Innovation factors refer to how costly, complex and compatible the innovation is perceived to be. Another important attribute is how the relative advantage of the innovation compared with existing or competing systems is perceived (Magnusson, 2001). Complications may be manifest if there is a need to transfer immature technology, as many SME owner-managers may perceive e-commerce to be. Consequently, they (SMEs) may not understand the ways in which such an information infrastructure could enable them to operate their businesses more efficiently or effectively. Therefore, it may be expedient to hedge their (SMEs) positions in alternative new technologies (Schilling, 2000). Thus their rates of adoption and ‘‘stage’’ tenure vary across firms (Weigelt, 2001), where SMEs 35

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qualitative research methodology that in the less traditional academic sense is ‘‘unusual, intriguing, fun and engaging’’ (Catterall and Ibbotson, 2000), and innovatively employed in this small firm study. A review of the rather diverse literature exhumes negative views on the qualitative legitimacy of projective techniques, with critiques viewing them as naı¨ve and inappropriate (Westen et al., 1990; Yoell, 1974). Management and academics may find the ‘‘results’’ insightful but may be nervous of basing decisions on them (Nancarrow et al., 1996), perhaps for reasons of ignorance of their unique elicitation capabilities. In comparison the historical legitimacy of their methodological heterogeneity across diverse disciplines is well documented (for example, clinical/ psychological, marketing/consumer, educational research). As suggested by Will et al. (1996), projectives are extremely useful in debating issues where subjects may lack knowledge of issues being questioned. Subsequently, projective ‘‘tests’’ may alleviate the complex and perhaps demanding issues that have emerged for SMEs as a result of the radical innovation ‘‘we’’ call the Internet. The implications are that the research instrument will capture deep thoughts from owner/ managers about particular EB scenarios in a less structured, indirect and more imaginative way, tapping into the deep layers of the psyche that are inaccessible to ‘‘direct’’ questioning. It is not for the ‘‘how many?’’ questions but, endorsing the qualitative school of thought, it is believed that ‘‘highly valued responses are the ‘difficult’, authentic and emotional kind’’ (Valentine and Evans, 1993). That being said, the distinction is not between deep and surface responses, but between different and equal versions of self, perceived in the imagination, shaped by different linguistic modes of expression and driven by the cultural rules of language (Valentine and Evans, 1993). Whether one sees this as a limitation or an advantage may well be coloured by on what side of the research fence one sits. The postulate is that, as opposed to trying to fit the responses of these heterogeneous and economically active units into neat quantifiable boxes, for this research team the methodology was a great human subjective exercise, instrumental in encouraging

businesses with smaller structures often exhibit highly complex attitudes and behaviours (Culkin and Smith, 2000), borne out by the fact that government (national and international) small firm EB initiatives are in their present form blunt instruments and have largely failed by attempting to make a ‘‘best EB practice’’ approach fit all firms, whatever the size or sector (Martin and Matlay, 2001; Bryson and Millward, 1998). This is recognised in the European Commission’s Europe Go Digital Report (2002) that all SMEs are different in terms of their culture, value of the transaction, regional environment, stage of ‘‘e’’ development, etc., where future research should address these differences and seek to understand their effects. Therefore, due to the limited impact of EB research thus far on the organisational business processes of SMEs, it was deemed appropriate to take a discriminant approach to investigate the innovative propensity of SMEs that fell under the KIBS definition. Specifically the research sought to elicit information from owner-managers associated with adopting, adapting and assimilating Internet-based technologies for business/EB purposes, thus forming the basis of sector-specific EB analysis among SMEs.

Research methodology: why projectives? The infant nature of small firm and EB research is apparent and attempting to undertake empirical research in an emerging area of ‘‘theory’’ is always challenging. This new ‘‘paradigm’’ that is encompassed in Internet-based technologies requires a greater knowledge and appreciation of how different research disciplines can bring different perspectives and ultimately greater insight (Barker et al., 2001) into EB issues among SMEs. Consequently, the research team recognised ‘‘. . . an urgency to inject new ‘vision’ ’’, (Catterall and Ibbotson, 2000; Smith and Dexter, 2001), in relation to how ‘‘we’’ conduct research, particularly when researching the highly fragmented nature of SMEs. Thus by taking a discriminant approach to illustrate the inherent issues of EB for tradable service SMEs this research utilised various projective ‘‘tests’’; construction, completion, and associative, a 36

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a state of freedom and spontaneity of expression where high degrees of freedom were apparent and welcome, putting into the public domain the ‘‘findings’’ of research that reflect the variety of feelings, opinions, beliefs, perceptions that exist within a heterogeneous and complex mix of economically active units in a way that the research team is confident will inform, excite and engage the audience.

respondents (50 owner-managers) were targeted. The response rate was 36 per cent (18 owner-managers). Consequently, various EB scenarios were constructed from the previous academic literature (e.g. Martin and Matlay, 2001; Magnusson, 2001; Daniel and Myers, 2001; Poon and Swatman, 1999), government reports (e.g. European Commission’s Go-Digital Progress Report, 2002; Department of Trade & Industry’s report, ‘‘Moving into the information age: an international benchmarking study’’(2002); and commercial reports (e.g. Pricewaterhouse Coopers (1999)); where in general, EB issues among SMEs had already been established, thus reinforcing the integrity of the scenarios applied specifically to KIBS in this study, chosen on the basis that they would match the themes that had emerged from the self-administered questionnaire, that is issues relating to the reasons behind the adoption or otherwise of EB by SMEs. Consequently, the most significant factors that were inhibiting their adoption/level of adoption of Internet-based technologies for business purposes were, lack of: . financial resources; . skills to use the technology, . understanding of the potential benefits; . support from government in providing practical help and information.

Method of distribution ‘‘Subjects’’ may rarely be called on to articulate their feelings outside their own environment (office); therefore a conscious decision was made not to take them (SME owner-managers) out of their familiar comfort blanket-type surroundings. Subsequently, the least personal, non-intrusive method of distribution was decided on (postal distribution) to maximise the depth and quality of potential responses, thus encouraging through projectives a more non-threatening, light-hearted and refreshing approach to the research to alleviate respondent ‘‘fatigue and anxiety’’ in the area being researched.

Types of tests utilised: ‘‘directed’’ projectives

The difference between perceived and actual Web site functionality emerged as a major issue. The reader will appreciate that it is outside the parameters of this paper to give an in-depth account of each ‘‘test’’ undertaken. However, be assured that the illustrations are a ‘‘fair’’ representation of the complete study. As aforementioned, the ‘‘type’’ of projective techniques used in the study were construction, completion and associative. There was a conscious aim to provide a ‘‘laddering’’ element to alleviate some of the ‘‘shock’’ at being presented with such an unusual tool to elicit information from them.

As suggested by Donaghue (2000); Churchill, (1991); Gordon and Langmaid (1988), the stimuli should offer enough direction to evoke some association with the ‘‘concept of interest’’, just to reassure the conventional sceptics that the concept of interest had already been established via a traditional self-administered questionnaire, where SMEs (KIBS) had already demonstrated their interests and/or concerns about the concept of EB (perceived and real). The ‘‘quantitative scope’’ of the first stage of the research generated dominant themes, forming the basis for the scenarios applied via projective techniques that contained a substantial component of ‘‘situational uniqueness’’ (Epstein, 1979), thus making them highly fallible indicators of the latent construct they were intended to ‘‘assess’’ (Lilienfeld et al., 2000). A 40 per cent subset of the survey

Word association test 1 Most closely associated with the conventional self-administered questionnaire, word 37

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Conscious of the Freudian concept of ‘‘agnosia’’ (the dysfunction in recognition and perception may affect the subject’s way of ‘‘seeing), when is an interactive, dynamic, informational Web site not an interactive, dynamic, informational Web site? When it is a ‘‘pathetic’’, slow, brochureware site, ‘‘superficial’’ in terms of the ‘‘added value’’ for the business and/or the potential customer. Herein lay the ambiguities, where the notion of ‘‘agnosia’’ may have come into play. Using the projective test as a template, the research team’s ‘‘interpretation’’ of the functionality and sophistication of the majority of Web sites was more associated with the negative words: pathetic, superficial, slow, dull, brochureware. In fact the scenario that was put to the subjects is well justified. However, it is the perception of the respondent that matters and it may be worthy to note that perhaps the downfall of this particular technique is the inability to project the perception to a third person. Therefore, human instinct would suggest that it is only natural to dissociate oneself from the negative aspects. From a positive perspective it may also be fair to suggest that ‘‘we’’ have the capability to make ‘‘future projections’’; consequently, perhaps the more positive associations represent ‘‘forward thinking’’ in terms of their aspirations for how sophisticated and functional their Web site will be in the future.

association would work on the selection procedures of language, giving the research team a snapshot of the cultural frame that is structuring meanings, based on the literal connections that people make when they are building up a narrative, illustrating the polarised position of enthusiasm and animosity towards the concept of EB, using the scenario as a particular frame of reference. A simple word count was made to identify particular words that recurred, thus building ‘‘meaning’’ into the responses. Word association test 1: SME Web site: functional or dysfunctional? As an example, word association was used in the context of the following scenario, stating that: Often SMEs equate having a Web site with electronic commerce. They set up a Web site and they don’t know what to do with it. It sits there as a reminder of their failure (PricewaterhouseCoopers, 1999).

Subjects were then asked to circle five words from a list that best described their perception of this statement in relation to their Web site: words such as simplistic, dynamic, informational, transactional, unsuccessful. An option was also given to add more appropriate words. Word association test 1: interpretation The outcome of this particular projective test was that positive ‘‘perceptions’’ dominated, with few of the respondents’ associating negative words with their Web sites. ‘‘Interactive’’, ‘‘dynamic’’ and ‘‘informational’’ had the highest frequency among the responses; ‘‘pathetic’’, ‘‘slow’’, the least frequent among the choices given. The option to add additional words was taken up by one particular respondent, where the individual added ‘‘superficial’’ and ‘‘brochureware’’. Based on the scenario that is a fair representation of the academic literature and being proactive in ‘‘our’’ approach to research, it was felt that the ‘‘significant differences’’ in responses were perhaps an indication of detaching ‘‘perception’’ from reality. Therefore, having prior knowledge of the respondents’ company Web site addresses, it was not a difficult exercise to ‘‘validate’’ the perceptions made.

Word association test 2: government’s role: facilitator or inhibitor? In another situation word association was applied to the following scenario: EB is often described as the ‘‘SMEs’ gateway to global business and markets’’. However, often owner/managers of small businesses feel that the public sector does not fully understand their specific problems, risks and needs and that information provided is often irrelevant, ignoring the fact that SMEs are a heterogeneous mix of economically active units (Martin and Matlay, 2001; Liikanen, 2000).

Subjects were then asked to consider this statement in the context of the government’s role in providing them with information and practical help about how to get, and/or maintain, their business online. Words such as 38

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provided (e.g. ‘‘non-existent’’ and ‘‘crap’’) may create a huge stumbling-block in the achievement of ‘‘their’’ aims and objectives.

generalised, irrelevant, useful, complicated, patronising, brilliant were included in the list, with, as before, the option to add more appropriate words. For variety and to accommodate the more skeptical ‘‘quantities’’, here is one statistic on which to crunch; 82 per cent of the respondents associated negative words with the level of help and support provided by government. The most used associations were ‘‘generalised’’, ‘‘simplistic’’, and ‘‘patronising’’. Subjects availed themselves of the option to add more appropriate words with two recurrent associations being made, that is the perception that the level of government help and support was/is ‘‘non-existent’’ and ‘‘crap’’ – with crap being colloquial but explicit enough to leave no need for interpretation.

Completion test 1: financial resources – facilitator or inhibitor? The ‘‘completion technique’’ depends on creating a context and bubble cartoons are viewed as a simple way to make the context visible requiring more complex and controlled intellectual activity on the part of the subject, penetrating e-business issues to a ‘‘deeper’’ level than word association, with careful consideration given to the scenario built around the cartoon. Figure 1 illustrates the bubble cartoon that was constructed to address the impeding issue of financial resources in SME e-business ventures. The aim of this ‘‘test’’ was to try and establish that, if the necessary financial resources were available, it would be enough to act as an incentive/accelerator in adoption, adaption and assimilation of Internet-based technologies for business purposes. For this purpose a scenario was given to set the scene and then a positive suggestion was made via a third ‘‘person’’ in the cartoon. The following scenario was given:

Word association 2: the interpretation In this projective test the negative associations dominated. One may think the particular scenario given was too explicit and may have ‘‘directed’’ the thoughts of the subjects. However, it (the scenario) like the latter was founded on previous academic research and, as this was a particular theme that arose from the survey as an impeding force in SME uses of Internet-based technologies, then the notion of directing thoughts is perhaps an inappropriate suggestion. Rather for reasons of thick interpretation the scenario is well justified. The question now is how detached from reality are the ‘‘projections’’ made? That is the difference between how the government (e.g. UK, EU) perceives and has situated SMEs within the wider political and economical e-business context and where SMEs perceive themselves to be situated within this context, for example, the e-Europe Action Plan, 2002 – an enterprise policy for SMEs to help spearhead the digital economy in Europe to achieve urgently a true, Europe-wide market in e-commerce, viewed as a chance for Europe, a chance for SMEs (Liikanen, 2000). Does chance cancel out for SMEs all the feelings of animosity that are reflected in the responses towards the level of help and support given by governments to create this ‘‘true, Europe-wide market in e-commerce?’’ In view of the interpretation of this projective test, the difference between government perception and SME perception of the help and support being

It is well documented that one of the main barriers for SMEs in their e-business activities is a lack of financial resources (Poon and Swatman, 1999; Daniel and Myers, 2001)

The ‘‘subjects’’ were then asked to consider the illustration and fill in what they thought the person was saying in response to the offer of financial resources. Completion test 1: interpretation The responses led the research team to put the respondents into distinctive categories. The sceptical owner-manager was in the minority Figure 1 Completion cartoon 1

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with comments like ‘‘Pigs might fly before my very eyes, I am getting money for an e-business venture’’; or ‘‘In today’s market I need more than this because the risk premium has risen’’. Although sceptical, there was a willingness to take on the e-business challenge. Then there was the ‘‘fire-fighting’’ owner-manager, the robbing Peter to pay Paul scenario, saying ‘‘I am sure I can find a better use for that money elsewhere in the business’’. At the other end of the spectrum lay the ‘‘entrepreneurial risktaker, saying, ‘‘I most certainly will; it was just money that was holding me back’’; or ‘‘sure thing, I hope there is enough’’. Then there was the more risk-averse, strategic thinking ownermanager who thinks he had ‘‘better work out the best solution for my business – I could spend this dough and end up with the wrong thing’’. In contrast this respondent comments: ‘‘yes, it will help us improve our existing ebusiness solutions’’. Or could it be money for old rope? On the basis of the responses the interpretation is that even within this small sample the heterogeneity of the responses reinforces the heterogeneity of the ‘‘types’’ of owner-managers that exist within this particular sector, each bringing their own cultural frame of reference to bear. Encouragingly, the majority of the respondents were receptive to the notion of being offered financial resources to help them take on the challenge of e-business. In reality who would turn down such an offer? Perhaps one of ‘‘our’’ basic human instinctive owner-managers personifies the situation and dilemma of many small firms and the issue of sourcing finances for their e-business ventures: ‘‘What is the catch. You get nothing for nothing in this world.’’

sales was used as the basis for the projective test using the following scenario: Given the growth of services and their importance in the economy, e-business and the Internet have the potential to increase the competitiveness and growth of small firms (DTI, 2002; Liikanen, 2000; Martin and Matlay, 2001; Tetteh and Burn, 2001). However, the general pattern is that the smaller the enterprise, the less likely they are prepared to adapt their business processes to accommodate this ‘‘new’’ technology (Poon and Swatman, 1999; Magnusson, 2001).

The subjects were asked to consider the illustration where it was explained that the cartoon depicted a business owner facing a huge downturn in sales and an employee who is enthusing about the potential of the Internet for the business. They were then asked to fill in the bubbles to project what the individuals are saying and thinking. The speech bubble of the lady was also completed to initiate the conversation/thought process. Completion test 2: interpretation The competing views that have emerged show the extremities of, on the one hand, an enthusiastic realisation of the potential benefits of Internet-based technologies for the business and, on the other hand, owner-managers who have a diverse range of issues with which to contend. Using Figure 2 as an illustration for interpretation, it appears that the respondent thinks favourably about the concept of EB and views it as a necessity in today’s business climate. However, perhaps the suggestion of a report on the concept is representative of the well justified recognition that there may be a huge gap between theory and the practical implications of adopting, adapting and assimilating Internet-based technologies for business purposes. In another example:

Completion test 2: E-business propensity of SMEs In this next projective test the aim was to address one of the familiar situations a small business faces at some stage in the business cycle, that is a downturn in sales that can be potentially ‘‘life-threatening’’ in terms of competitiveness and growth as well as survival. Subsequently the well documented benefits of the Internet that has the potential to increase customer base and correspondingly increase

Boss says: Cannot afford it. Boss thinks: Do not understand all this new technology. Employee thinks: He will never move with the times, he’s too stuck in his ways.

From the given response the interpretation is straightforward in that Internet-based business is perceived as the way forward. However, impeding forces are preventing this from 40

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Figure 2 Completion cartoon 2

happening. That is a lack of resources to fund an EB, a lack of understand ing of how to make use of the technology for business purposes. Importantly, the employee projection may have been strategically placed by the respondent as the highest form of dissociation in that it is representative of his/her innermost thoughts about lack of motivation to change existing business processes. The main theme that has emerged from this test is that many of the respondents do not deny the potential of the Internet for business purposes. Although many of them (the respondents) may be facing a real downturn in their business, the general interpretation of responses is that for many of these owner-managers there are many conflicting issues at work, a personification of the ‘‘typical’’ small firm owner-manager, more content to keep a ‘‘watching brief’’ than address the prospect of extinction. The ‘‘picture’’ that emerges may be a reflection of the mood of the situation portrayed in the cartoon drawing. The argument here is that reality is socially constructed and the issue of trying to capture sales, to be able to compete, grow and survive is real among small firms. The responses illustrated the competing forces in the subconscious, that ‘‘emotional tug of war’’ that ultimately dictates how high up their ‘‘to do’’ list owner-managers prioritise EB. It becomes clear that, as the intensity of the projective tests progresses (laddering) in terms of their content and the deep issues they seek to address, so too

do the quality and richness of the responses generated. Construction test 1: SME EB perceptions The ‘‘construction’’ technique describes the process of ‘‘ways of seeing’’ where the personification of words and pictures enabled the researchers to make ‘‘interpretative guesses’’ about cliche´s, truisms and ‘‘obvious’’ comments, tapped from the deep layers of the respondents’ psyche. This ‘‘test’’ was at the top end of the research ‘‘ladder’’ in terms of demands made on the depth of ‘‘imagination’’ that was required from the respondent to complete the projective test used. In the design of the picture sorting every effort was made to give a good range of pictures depicting a wider variation of ‘‘user’’ behaviour and facial expressions. Subjects were in this first test presented with a series of picture cartoons and were asked to write a caption to represent what they thought these customers/potential customers were doing and/or thinking as a result of visiting the company Web site. The following scenario was constructed to set the scene: Potential customers are browsing the Internet, seeking to purchase the service/product you provide. The pictures below (which are in no specific order) depict the customers visiting your Web site.

Figure 3 illustrates the extremities of responses through the captions the respondents attached to the pictures. 41

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Figure 3 The picture series

Respondent 1 interpretation

Thus the choice of carefully chosen words aimed at the service provider.

In the case of respondent 1, the interpretation made by the research team is of a person who appears to have a considerable level of knowledge about the Internet, sees the advantages for the business and the need to be price-competitive. They (the respondent) perceive the Web site as crap and ‘‘we’’ have no reason to believe that imagination has taken the place of reality. It is fortunate that the provider is addressing bandwidth issues, because this is one unhappy customer whose own situational uniqueness has been brought to bear. The suggestion is that insufficient bandwidth may be impeding the functioning of the company Web site and the frustrations may be well justified.

Respondent 2 interpretation By way of comparison to demonstrate how an individual’s own frame of reference will affect their way of ‘‘seeing’’, respondent 2 has a clear, less emotional view in their projections, basically interpreted as a case of efficient use of the technology, networking with other businesses, spreading the risk, reducing overheads where two or more EB heads are perceived as better than one. One could also interpret the ‘‘results’’ of the projections as being as far removed from reality as the 42

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systems, processes and procedures are fully aligned with the firms’ core business activities. Thus, it is suggested that, due to various driving and impeding forces borne out in the subjects’ own interpretations of the projective tests, many seem perplexed by the events taking shape around them. The implications are that at organisational level it is the socio-cultural barriers that will dictate the business decision-makers’ attitudes and perceptions of the usefulness of Internet-based technologies for business purposes. These barriers are traditionally hard to break down. The main cultural barriers identified in this research were relative to organisational factors (i.e. size, resources, maintaining stability); innovation factors (i.e. cost, complexity, compatibility, appropriate infrastructure) and environmental factors (i.e. competitive pressure and lack of government support). Thus, it is suggested that among this sample population existing organisation cultures may not be dynamic or innovative enough to allow EB to develop and thrive. Specifically, for enterprise level innovations such as Internet-based technologies it is the perception of the key decision-makers that matter (Raymond, 2001), where the driving force behind the adoption of Web technology is the owner-manager (Standing et al., 1998), while individual factors (i.e. education, age, and personal traits of the owner-managers) may impact on the propensity to adapt, adopt and assimilate Internet-based technologies for business purposes. In this study there is no evidence to suggest that individual factors are a major impediment. Collectively, the majority of the respondents were able to anticipate but still unable to adapt and implement ‘‘full-blown’’ EB. Consider the implicit assumption that the Internet and EB will be of benefit to ‘‘all’’ SMEs, where adapting existing business processes necessitates a coherent articulation of strategic objectives that involves efficient use of Internet-based technologies. Consequently, these small firms that are offering KIBS have not taken full advantage of Internet-based technologies for business purposes. This dispels the myth that product/service characteristics alone will

perception they have conjured up in their imagination.

Discussion Figure 4 is adapted from Lawson et al.’s (2003) model of Internet adoption in small firms and is illustrative of the picture that has emerged in terms of the barriers (perceived and real) that may be impeding the use of Internet-based technologies for business purposes. In general, at this stage of technological (Internet) development the soft (technical) barrier is viewed as ‘‘easy’’ to cross and, as demonstrated in this research, the majority of the sample have managed to establish a Web presence. However, as borne out in the projective tests, there are distinct differences between the ‘‘level’’ of technical sophistication and consequent functionality these owner-managers perceive of their Web sites and the actual functional attributes that were found by the research team. Specifically, the majority of the sample are engaging in ‘‘peripheral’’ Internet commerce (IC) where most Web sites are being used as informational/promotional tools to advertise the organisations’ name and intent, statistically relevant from the perspective that they have taken the initial steps to cross this soft barrier to IC and can thus be viewed (particularly by government bodies) as a ‘‘virtual statistic’’ (whether skewed or not) participating in ‘‘EB’’ activities. However, there was no evidence of advancement through the barriers to enable the implementation of transactional electronic commerce and ultimately to full-blown strategic EB, where both back- and front-end Figure 4 SME model of e-business adoption

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innovation equation. The implications are that projective tests have been successful in demonstrating on a ‘‘deeper’’ level the heterogeneity that exists among ownermanagers in terms of revealing some of the driving and impeding forces (perceived and real) associated with adopting, adapting and assimilating Internet-based technologies for business purposes. The overwhelming evidence (theoretical) supports the notion that, because of the intangibilty and information intensity of KIBS, then they (KIBS) are/will be leaders as opposed to laggards in embracing Internet-based technologies for business purposes. However, this research would confirm the need to view such assumptions as a more or less unique organisational process, where the evidence suggests that many of these small firms do not seem able to convert this potential into practice. Except perhaps in their imagination! In reality the Internet is one of the very few ‘‘business’’ tools that small firms, specifically KIBS, can/could use effectively to compete with the bigger rivals on the same grounds. However, in this research there is a lack of evidence to support that contention. For both small and large firms alike, ignoring EB is an unsustainable strategy in the long term. Consequently, small firms need to apply the same rigour to the Internet as a contribution to business success as they would any other opportunity. Paradoxically, business (EB) success may be contingent upon the ability to ‘‘sense’’ and ‘‘respond’’ to the associated EB opportunities and risks; factors that will rely on the business strengths of innovative small firms. If perception equals reality, then the EB future of these small firms is optimistic from a projectives perspective, where:

determine IC success, where the digitisability of the service is not the main factor influencing EB decisions in these particular small firms. As aforementioned, various government bodies exhume positive speculation to leverage all small firms to new EB heights, on which an ideal majority of the ‘‘subjects’’ looked with contempt, creating a cultural clash in relation to how receptive these particular SMEs are towards the level of help and support the government can and really does provide. Consequently, the interpretations are viewed as synonymous with quite different deep strategic ‘‘thinking’’ and ‘‘actions’’ by different KIBS firms, where there may be quite different patterns of radical and incremental service innovation and processes over time. Although these owner/managers may have read the technological and commercial signals emanating from this ‘‘new’’ business environment, the general interpretation is that the innovation propensity will be relative to how ‘‘costly’’, complex and compatible they (owner-managers of small firms), not the government, perceive the innovation to be. Adopting, adapting and assimilating Internet-based technologies with existing business processes will be an evolutionary and cumulative process, eventually re-shaping firm behaviour and evolving as a result of organisational capabilities development and learning (Dosi, 1988; Nelson and Winter, 1982; Abernathy and Clark, 1985). Thus an EB strategy must be aligned with and impact upon the existing business strategy of the firm. Such a complex integration has been something most of these small companies have avoided.

Conclusion

Companies fail to create the future, not because they fail to predict it but because they fail to imagine it (Hamel, 2000).

From the outset of this research the premise made was that tradable services belong to a high value knowledge-based sector, assumed to be the most intensive adopters, chief orchestrators and leading users of IT innovations, specifically the Internet. That assumption was neither refuted nor accepted until ‘‘our’’ SMEs could be factored into the

The implications are that, although the majority of the ‘‘subjects’’ have ‘‘sensed’’ the importance of EB both now and in the future, it appears that their ability to ‘‘respond’’ is weak. That being said, their EB ‘‘paths’’ may continue to change and develop. 44

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Grover, V. and Teng, J.T.C. (1992), ‘‘An examination of DBMS adoption and success in American organisations’’, Information and Management, Vol. 23, pp. 239-48. Hamel, G. (2000), Leading the Revolution, Harvard Business School Publishing, Boston, MA. Julien, P.A. and Raymond, L. (1994), ‘‘Factors of new technology adoption in the retail sector’’, Entrepreneurship, Theory and Practice, Vol. 18 No. 4, pp. 79-90. Lawson, R., Alcock, C., Cooper, J. and Burgess, L. (2003), ‘‘Factors affecting adoption of electronic commerce technologies by SMEs: an Australian study’’, Journal of Small Business and Enterprise Development, Vol. 10 No 3, pp. 265-76. Liikanen E. (2000), ‘‘e-Europe Action Plan 2002’’ speech, available at: http://europa.eu.int/comm/enterprise/ speeches/bdi29052000.htm Lilienfeld, S.O., Wood, J.M. and Garb, H.N. (2000), ‘‘The scientific status of projective techniques’’, Psychological Science in the Public Interest, Vol. 1 No. 2, pp. 27-66. Lovelock, C., Vandermerwe, S. and Lewis, B. (1999), Services Marketing: A European Perspective, Prentice-Hall Europe, London. Magnusson, M. (2001), ‘‘E-Commerce in small businesses – focusing on adoption and implementation’’, available at: www.hh.se/ide/nwec/pdf/Magnusson.PDF (accessed 12 September 2002). Martin, L.M. and Matlay, H. (2001), ‘‘‘Blanket’ approaches to promoting ICT in small firms: some lessons from the DTI ladder adoption model in the UK’’, Internet Research: Electronic Networking Applications and Policy, Vol. 11 No. 5, pp. 399-410. Miles, I., Kastrinos, N., Flanaghan, K., Bildebeek, R., Den Hertog, P., Huntink, W. and Bouman, M. (1994), Knowledge-Intensive Business Services: Their Roles as Users, Carriers and Sources of Innovation, Prest Publications, Manchester. Nancarrow, C., Moskvin, A. and Shankar, A. (1996), ‘‘Bridging the great divide – the transfer of techniques’’, Marketing Intelligence & Planning, Vol. 14 No. 6, pp. 27-37. Nelson, R.R. and Winter, S.G. (1982), ‘‘Innovation: mapping the winds of creative destruction’’, Research Policy, Vol. 14, pp. 3-22. Parker, R. (2002), ‘‘SME technophobia blamed for Barclay’s B2B’s collapse’’, Supply Management, Vol. 7 No. 1. Poon, S. and Swatman, P.M.C. (1999), ‘‘An exploratory study of small business Internet commerce’’, Information and Management, Vol. 35 No. 1, pp. 9-18. PricewaterhouseCoopers (1999), ‘‘SME electronic commerce study’’, final report, available at: http://e-business. pwcglobal.com Raymond, L. (2001), ‘‘Determinants of Web site implementation in small business’’, Internet Research: Electronic Networking Applications and Policy, Vol. 11 No. 5. Schilling, M.A. (2000), ‘‘Technology success and failure in winner-take-all markets: the impact of learning orientation, timing and network externalities’’,

References Abernathy, W.J. and Clark, K.B. (1985), ‘‘Innovation: mapping the winds of creative destruction’’, Research Policy, Vol. 14, pp. 3-22. Anyadike-Danes, M. (2001), Curriculum Vitae, pp. 1-5, available at: www.qub.ac.uk/nierc/documents/ madanes.pdf Barker, A., Nancarrow, C. and Spackman, N. (2001), ‘‘Informed eclecticism: a research paradigm for the twenty-first century’’, International Journal of Marketing Research, Vol. 43 No. 1, pp. 3-27. Barney, J. (1991), ‘‘Firm resources and sustained competitive advantage’’, Journal of Management, Vol. 17, pp. 99-120. Brynjolfsson, E., Malone, T.W., Gurbaxani, V. and Kambil, A. (1994), ‘‘Does information technology lead to smaller firms?’’, Management Science, Vol. 40 No. 12, pp. 1628-44. Bryson, A. and Millward, N. (1998), The Impact of Employee Development on Small Firm Economic Performance, Policy Studies Institute, London. Catterall, M. and Ibbotson, P. (2000), ‘‘Using projective techniques in education research’’, British Educational Research Journal, Vol. 26 No. 2, pp. 245-56. Churchill, G.A. (1991), Marketing Research Methodological Foundations (5th ed.), Dryden Press, Chicago, IL. Commission of European Communities (2002), Go-Digital Progress Report 2001-2002, available at: http:// europa.eu.int/comm/enterprise/ict/policy/doc/ sec_2002_566.pdf (accessed 12 August). Culkin, N. and Smith, D. (2000), ‘‘An emotional business: a guide to understanding the motivations of small business decision takers’’, Qualitative Market Research: An International Journal, Vol. 3 No. 3, pp. 145-57. Daniel, E. and Myers, A. (2001), ‘‘Levelling the playing-field: electronic commerce in small and medium enterprises’’, available at: www.som.cranfield.ac.uk Department of Trade & Industry (DTI) (2002), ‘‘Moving into the information age: an international benchmarking study, 2002’’, Information Society Initiative, available at: www.ukonline.gov.org Donaghue, S. (2000), ‘‘Projective techniques in consumer research’’, available at: www.up.ac.za/academic/ acadorgs/saafecs/vol28/donaghue.pdf (accessed 12 September 2002). Dosi, G. (1998), ‘‘Sources, procedures and microeconomic effects of innovation’’, Journal of Economic Literature, Vol. 26, pp. 1120-71. Epstein, S. (1979), ‘‘The stability of behaviour: on predicting more of the people most of the time’’, Journal of Personality & Social Psychology, Vol. 37, pp. 1097-126. Gordon, W. and Langmaid, R. (1998), Qualitative Market Research, Gower, Aldershot. Gray, B., Matear, S., Deans, K., Matheson, P., Bell, J., Garrett, T. and Cowley, G. (1999), ‘‘Profiling top service firms’’, paper presented at the Anzmac99 Conference, University of New South Wales, Sydney.

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available at: www.aom.pace.edu/amj/unassigned/ schilling.pdf (accessed 3 September 2003). Smith, D. and Dexter, A. (2001), ‘‘Whenever I hear the word ‘paradigm’ I reach for my gun: how to stop talking and start walking’’, paper presented at the MRS Conference 2001, available at: www.mr-in-context.com (accessed 28 August). Srinivasan, R., Lilien, G.L. and Rangaswamy, A. (2002), ‘‘Technological opportunism and radical technology adoption: an application to e-business’’, available at: www.msce.external.xerox.com/isbm/ dscgi/ds.py/GET/FILE-194/1-2002.pdf (accessed 8 August). Standing, C., Vasudavan, T. and Borberly, S. (1998), ‘‘Re-engineering travel agencies with the World Wide Web’’, Electronic Markets, Vol. 8 No. 4, pp. 40-3. Tetteh, E. and Burn, J. (2001), ‘‘Global strategies for SMe-business: applying the SMALL framework’’, Logistics Information Management, Vol. 14 No. 1/2, pp. 171-80. Upachalanan, K. (2000), ‘‘Competition and IT-based innovation in banking services’’, International Journal of Innovation Management, Vol. 14 No. 4, pp. 455-90. Valentine, V. and Evans, M. (1993), ‘‘The dark side of the onion: rethinking the meanings of ‘rational’ and ‘emotional’ responses’’, paper presented at the MRS Conference 1993, available at: www. semioticsolutions.com/media/onion.doc (accessed 19 September 2002). Watson, R., Berton, P., Pitt, L. and Zinklan, G. (2000), Electronic Commerce: The Strategic Perspective, Dryden Press, New Haven, CT. Weigelt, C. (2001), ‘‘Incumbents’ adoption and capability building on the Internet: differentiation through innovativeness’’, available at: http:// faculty.fuqua.duke.edu/CCC/Abstracts/weigelt.pdf (accessed 7 August 2002). Wernerfelt, B. (1984), ‘‘A resource-based view of the firm’’, Strategic Management Journal, Vol. 15, pp. 171-80. Westen, D., Lohr, K.R., Silk, L. and Gold Kerber, K. (1990), ‘‘Object relations and social construction in borderlines, major depressives and normals: athematic apperception test analysis’’, Psychological Assessment, Vol. 2, pp. 355-64. Will, V., Eadie, D. and MacAskill, S. (1996), ‘‘Projective and enabling techniques explored’’, Marketing Intelligence & Planning, Vol. 14, pp. 38-44. Wymbs, C. (2000), ‘‘How e-commerce is transforming and internationalising service industries’’, Journal of Services Marketing, Vol. 14 No. 6, pp. 463-77. Yoell, W.A. (1974), ‘‘The fallacy of projective techniques’’, Journal of Advertising, Winter, pp. 33-5. Zeithaml, V.A. and Bitner, J. (1996), Services Marketing, McGraw-Hill, New York, NY.

Further reading Brown, S. (1997), ‘‘New paradigm, new research’’, available at: www.sfx.brown.com (accessed 30 August 2002). Gordon, W. (1999), Good Thinking: A Guide to Qualitative Research, Admap, London. Gordon, W, and Ford-Hutchinson, S. (2002), ‘‘Brains and brands: rethinking the consumer in the light of scientific fact’’, cited in Valentine, V. (2002), Repositioning Research: A New MR Language Model, available at: www.semioticsolutions.com/ media/newlang.doc (accessed 19 September). Haire, M. (1950), ‘‘Projective techniques in marketing research’’, Journal of Marketing Research, Vol. 14 No. 5, pp. 649-56. Hoskin, F. (2002), ‘‘How do we ask questions and how do we know what it all means?’’, available at: www.nop.co.uk/news/PDE/BIG_Conference.PDF (accessed 9 September). Lovelock, P. and Ure, J. (2001), ‘‘The new economy: Internet, telecommunications and electronic commerce?’’, available at: www.trp.hku.hk/publications/ new_economy.pdf (accessed 3 July 2002). MacFarlane, J.W., and Tuddenham, R.R. (1951), ‘‘Problems in the validation of projective techniques’’, in Anderson, H.H. and Anderson, G.L. (Eds), An Introduction to Projectives, Prentice-Hall, Englewood Cliffs, NJ. Miles, I. (2001), ‘‘Services innovation: a reconfiguration of innovation studies’’, available at: http://les.man.ac.uk/ PREST/Publications/DP_PDFs/PRESTDPOI-05.pdf (accessed 7 August 2002). Mostyn, B. (1978), Handbook of Motivational and Attitude Research, MCB University Press (now Emerald Group Publishing), Bradford. Porter, M. (2001), ‘‘Strategy and the Internet’’, Harvard Business Review, Vol. 79 No. 3, pp. 63-78. Sampson, P. (1987), ‘‘Qualitative research in Europe: the state-of-the-art and the art of the state’’, in Sampson, P. (Ed.), Qualitative Research: The Old, the New and a Question Mark, ESOMAR Marketing Research Monograph, Vol. 2, ESOMAR, Amsterdam. Schaetti, B.F. and Ramsey, S.J. (1999), ‘‘The global nomad experience, living in liminality’’, Mobility Magazine, September. Schlackman, B. (1989), ‘‘Projective tests and enabling techniques for use in market research’’, in Robson. S. and Foster, A. (Eds), Qualitative Research in Action, Edward Arnold, London, pp. 58-75. Valentine, V. (2002), Repositioning Research: A New MR Language Model, available at: www. semioticsolutions.com/media/newlang.doc (accessed 19 September).

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Appendix. Traditional and new-technology-based professional services (KIBS and t-KIBS)

.

. .

. . .

. . . .

.

Accounting and bookkeeping. Management consultancy. Building services (e.g. architecture, surveying, construction engineering). Facility management services. Technical engineering services. Design. Environmental services (e.g. environmental law). Research and development consultancy services.

. . .

.

. .

Computer and information-technology related services (including software). Legal services. Marketing and advertising. Real estate. Training. Telecommunications (especially new business services). Specific financial services (e.g. insurance, stock market-related activities). Publishing/printing. Labour recruitment services.

Source: Miles et al. (1994).

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Introduction

A consideration of the roles of business intelligence and e-business in management and marketing decision making in knowledgebased and high-tech start-ups

Marketing is becoming more of a battle based on information than based on sales power (Kotler, 2000, p. 99).

There can be no doubt whatsoever that today the ways in which companies gather, manage and use information have changed to reflect new and dynamic technologies. Afuah and Tucci (2001, p. 3) reassert the obvious, in that: Most firms are in business to win, to outperform their competitors. They are in business to make money. They adopt new technologies to fend off new competitors, reinforce an existing competitive advantage, leap-frog competitors, or just to make money in new markets.

Jimmy Hill and Terri Scott

To do all or any of this it is crucial that they have access to up-to-date market intelligence. Inextricably linked to market intelligence is the emergence of e-commerce and e-business systems. Such systems have developed as a consequence of developments in technology and have arguably begun to reshape the way in which business transactions are conducted, expand access to markets hitherto inaccessible, and the way in which information is gathered, managed and disseminated. Established companies, however, particularly small firms and family businesses, tend to have established and somewhat old-fashioned networks into which they dip, either regularly or on an as-and-when basis, to obtain necessary information to improve the quality of their marketing decisions (Hill, 2001). These are often based simply on the informal and formal personal contacts of the key decision-makers and are undoubtedly largely intuitive. Old-fashioned information systems, therefore, were just as likely to be stored and processed in the marketing decision-makers’ heads as anywhere. Even in circumstances where there has been a reasonably conscious level of data information gathering, the resultant marketing information systems (MIS) often tended to be cumbersome, poorly managed, and scarcely interrogated for a variety of reasons. These included employee inability to use the MIS, disinterest, and indifference to cumbersome systems overloaded with intimidating and usually overwhelming amounts of data. What then about new age knowledge-based and high-technology start-up companies/

The authors Jimmy Hill is Professor of Entrepreneurship, University of Liverpool Management School, Liverpool, UK. Terri Scott is Managing Director for Enterprise and Entrepreneurship, Invest Northern Ireland, Belfast, UK. Keywords Business analysis, Electronic commerce, Research methods, Entrepreneurialism, Network synthesis, Northern Ireland Abstract This paper considers the roles of business intelligence (BI) and e-business systems in enhancing the quality of decision making in knowledge-based and high-tech start-ups. A qualitative study, using in-depth discussions with 11 companies based in Northern Ireland, was conducted. The study examined the extent of BI usage and evaluated the extent of implementation of effective e-business systems in the sample companies. The study concludes that, whilst the sample firms recognized the value of both BI and e-business models, the modus operandi of the entrepreneurial high tech start-up is very much rooted in the traditional small firm paradigm of personal contact networking. Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm

Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . pp. 48-57 # Emerald Group Publishing Limited . ISSN 1352-2752 DOI 10.1108/13522750410512877

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(2001) notes, however, that BI and the development of an intelligent learning organization represent a popular trend in many public and private sector organizations. He suggests that effective BI means that any manager or knowledge worker should be able to compose information requests without programmer assistance and achieve answers at the speed of thought. He argues that effective BI means that follow-up questions should be immediately asked and answered in order to maintain continuity of thought on a particular topic of importance. Brackett (2001, p. 1) states that intelligence:

entrepreneurial small firms? What, if anything, marks out new companies as more efficient in how they manage market information and manage business intelligence (BI)? In what ways have such companies sought to use e-commerce and e-business models? Other implicit questions, particularly with respect to e-business, that arise concern the profile of individuals who are ardent users of the Internet (Koukova and Ratchford, 2001) and other technologies, as media of BI. Has the advent of new technologies meant that oldfashioned business information is being replaced in this high-tech age by something now regarded in the lexicon of the modern market researcher as BI or e-business? The primary objectives of this paper, therefore, are to profile knowledge-based and high technology start-up companies, and to examine both the information management activity and extent of usage of BI systems. A secondary objective is to consider the extent of the e-commerce and e-business activities within these firms. It is anticipated at the outset that, given the level of technological expertise that characterizes such companies, and the industries in which they tend to operate, there would be solid evidence of BI systems being used and a natural gravitation towards e-business models. From the outset it was decided that this study would be conducted under the auspices of the qualitative paradigm as the authors’ previous experiences with small firm entrepreneurs indicated that qualitative approaches allowed for the generation of richer data streams and deeper insights. It is perhaps apposite, given the focus of this paper, however, to begin with a consideration of the nature of BI.

. . . is the ability to learn, to understand or to deal with new or trying situations; the skilled use of reason; the ability to apply knowledge to manipulate one’s environment or to think abstractly.

He adds that BI is a set of concepts, methods and processes to improve business decisions, using information from multiple sources and applying experience and adding assumptions to develop an accurate understanding of business dynamics. Therefore, it is the gathering, management and analysis of data to produce information that is distributed to people throughout the organization to improve strategic and tactical decisions. In essence, BI involves the integration of core information with relevant contextual information to detect significant events and illuminate cloudy issues for management decision-makers. It includes the ability to monitor business trends, to evolve and adapt quickly as situations change and to make intelligent business decisions on uncertain judgments and contradictory information. Brackett (2001) adds that BI relies on exploration and analysis of unrelated information to provide relevant insights, identify trends and discover opportunities. It is reasonable, therefore, to infer from Brackett’s observations that BI, if it is to be effective, is dependent on high quality information. This, understandably, can only be derived from a high-quality data resource. In any given industry naturally there are going to be disparate sources of data that are relevant to effective BI. This in turn raises the issue of how such data might be cleaned up, linked together and accessed in a meaningful way. Of particular

Business intelligence Cooper (1996) suggests that effective business decisions depend on the acquisition, processing and utilization of relevant knowledge. Some information or knowledge is simply more valuable and more sensitive than other information. Cooper (1996) views the area of BI as a complex one and really explodes the often held view that it is some kind of update of a contemporary business database. Brackett 49

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Given the manifold uses and clear potential of BI, it would be natural to assume that firms of all hues and shades would be clamouring to adopt and implement appropriate systems. There can be no argument that better and higher quality information should mean a higher confidence in decision making in all functional areas but with respect to this paper having a particular relevance to marketing decisions (see Reedy (2001)). Similarly, it would be a reasonable assumption that companies in industries that are knowledgebased and distinctly high-technology would be naturally inclined to adopt and use such systems as a the standard modus operandi.

relevance to this paper is Brackett’s observation that there is little doubt that the technology to support BI exists widely. The problem is in how the relevant information is harvested and collated at the appropriate times. A recent article in Microsoft Business (2001) notes that the more relevant, useful intelligence you have at your fingertips about your business, your customers, your partners, and your operations – the more your organization can make better decisions and increase competitive advantage. Essentially this means that the more you know about your customers, the better you can satisfy and anticipate their needs. Particularly popular uses of BI are to help organizations understand their customers’ buying patterns, to identify sales and profit growth opportunities, and to improve overall decision making. The argument for BI is that with accurate, real-time data you can spot and fix situations before they become problems and potentially spin out of control. More significantly, proponents of BI argue that real-time data are also vital for companies that wish to seize new opportunities quickly or adapt when customer response to a promotion exceeds expectations. In essence, BI solutions provide the ability to extract, cleanse, and aggregate data from multiple operational systems into a separate data mart or warehouse. Davis (2001a, b, c) extols the value of BI to gain competitive advantage. He notes, for example, that the Japanese are masters of BI, and that some US companies were founded on the eyes and ears culture. He insists that BI as an innovation is a legitimate business function and that it is especially valuable in gaining information about competitors. He cites that it was noted in 1996 that it is particularly useful for predicting the future environment in which a company will operate. The Montague Institute Review (2001) also advocates BI as an effective tool for coping with and understanding competition. Weiss (1999) is also particularly enthusiastic about the value of BI systems for the entire strategic planning process. Indeed, Smith (2001) predicts a substantial increase in the usage of BI systems so that companies might reflect on their experiences to date before taking some new course of action (see also Inmon (2001)).

The e-commerce and e-business dimensions Given the secondary focus of this study, it is also important to briefly consider the key issues pertaining to e-commerce and e-business within the small firm sector. McDonald and Burton (2002) note, for example, that the application of information and communications technologies (ICT) to business generally has been revolutionized by the ability of firms to use the Internet and the World Wide Web to gather, exchange and disseminate information. More particularly, they note that e-commerce systems, for instance, do not require substantial investment for technology-literate small firms because e-commerce systems can be placed into the existing network of the Internet. That said, much confusion abounds as to the actual difference between e-commerce and e-business. According to the OECD (1997, p. 20), e-commerce is the application of ICT to the production and distribution of goods and services on a global scale. E-business, on the other hand, is described as using electronic information to improve performance, create value and enable new technologies between business and customers[1]. E-business is the area of most relevance in this study and it is worth noting that the most common forms in which it is manifested are business to business (B2B), business to consumer (B2C), consumer to consumer (C2C), peer to peer (P2P) and a range of information exchange systems. 50

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limitation of small firms. They intimate that small firms lack the necessary staff and time to engage in strategic planning or marketing, and instead focus on operational aspects geared primarily to survival on a day-to-day basis. This theme of resource limitations permeates much of the small firm literature and in particular the small firms marketing literature. It is probably best summarized by Carson and Cromie (1989), who suggest that the small firm is actually characterized by three types of limitation, namely: (1) their impact (on markets); (2) finance; and (3) physical resources.

The key issue of relevance here is a recognition that an understanding of e-business potentially provides small firms with opportunities for radical change to their businesses. Indeed McDonald and Burton (2002) note the ability of effective e-business systems to reduce the number of channel intermediaries with which a small firm deals, to reduce search and transaction costs for such firms, and to increase the benefits of network externalities. This latter point is, of course, entirely apposite in the small firm sector, where the network dimension is paramount. Significantly, though, there is a feeling that perhaps the benefits of e-business have been overstated. McDonald and Burton (2002), for example, add that the problems experienced by dot.com companies that sought to become ‘‘virtual companies’’, for example, and the evolution of ‘‘clicks and mortar’’ firms suggest that the main effect of e-business systems is to generate traditional business models rather than to create completely new systems of doing business that are radically different from traditional systems. This intimates that perhaps such systems offer limited potential for the sample firms in this study. This study decided, therefore, to examine the extent of BI usage and linked e-business dimensions within start-up firms in the knowledge-based, high technology sector. A particular focus was the use of BI in improving marketing decisions. Since it is well established that small firms are simply not ‘‘small large firms’’, it is appropriate to briefly consider the key characteristics of such firms and the relevant aspects of the entrepreneurial individuals who founded them.

It would seem reasonable to infer from these studies that such limitations could be a two-edged sword in that they point to the need for good BI and e-business systems in small firms, on the one hand, and suggest difficulties in funding and management of such systems, on the other.

Traditional information gathering in small firms Small firm and entrepreneurial informationgathering techniques have been traditionally characterized by the use of personal contact networks (PCNs). A PCN is defined as the relationships and alliances that individuals develop or, indeed, may seek to develop between themselves and others in society (Aldrich and Zimmer, 1986; Johannisson, 1986). PCNs are fundamental to the way SMEs, and in particular entrepreneurial SMEs, do business. Management in start-up firms is characterized as being largely independent, highly centralized and highly personalized. The start-up or small firm entrepreneur’s use of personal contacts lends itself to this typically entrepreneurial way of doing business that is largely unstructured, unplanned, intuitive and chaotic. Contact networks expand the span of action of the small firm decision-maker. The small firm entrepreneur is portrayed, on the one hand, as one who thrives in circumstances of chaos, discontinuities and with limited quality information and, on the other, as an individual

Small firm characteristics Small firms, however they are defined, constitute the bulk of enterprises in all economies in the world. The increasing role of small firms and entrepreneurship in the economy cannot be underestimated (Bygrave, 1994; Timmons, 1994). The literature explores many aspects of small and entrepreneurial firms but several aspects clearly characterize these enterprises. Robinson and Pearce (1984), for example, focus on the issue of resource 51

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The sample

who is capable of making highly informed and competent decisions. Essentially, the literature on small firms points to the widespread use of PCNs as means of gathering relevant market information. Entrepreneurs and small-firm marketing decision-makers dip into their networks of contacts in particular to sound out markets for new ideas, aspects of competitor analysis, customer research, funding advice and to source the entire range of necessary resources required to successfully manage and run the enterprise. The issue here is whether or not in the start-up firms in the study there was evidence of the setting aside or diminution of personal contact usage and a shift to usage of BI and e-business systems to obtain, manage and analyse information heretofore gathered in a traditional manner.

Two key issues largely dictated the selection of the start-up firms for this study, namely: (1) prior research experience; and (2) access. Prior research suggested that it was useful to work with companies with strong commonality, in this case a strong knowledge base and a clear high-technology focus. Second, access to suitable companies can be difficult and beset with all sorts of problems (Hill and Wright, 2000). A sample of 11 knowledge-based, high-tech companies was identified in Northern Ireland. The authors were based in the Northern Ireland Centre for Entrepreneurship and part of that Centre’s remit is to support and counsel knowledge-based and high-tech start-up companies. Hence, access to the sample companies was gained with relative ease (see Table I for a profile of the companies). Each company was profiled and the founder, or in some cases founders, asked to participate in in-depth discussions. They all agreed to assist with the research. The discussions focused on a range of issues related to start-up companies, but largely concentrated on how marketing information was gathered and utilized.

The methodology Before outlining the methodological approach it is necessary to make several key points: . This research approach needs to recognize the impact of the small firm characteristics on any research approach and, in particular, those aspects that characterize the information-gathering and networking techniques. . Experience from the literature, research and practice suggests that existing approaches for researching in small firms are inappropriate (Davis et al., 1985; Hill and McGowan, 1999). . To research small firms, to research the key entrepreneurial personnel in SMEs, suggest an epistemological approach that dictates a minimization of distance between the researcher and the entrepreneur.

Instrumentation Given the qualitative approach adopted, it was decided to minimize prior instrumentation. It was felt that this would allow for issues of relevance to emerge in an inductive manner and respect the underlying belief that qualitative research lives and breathes through context. Table I The sample companies A B C D E F G H I J K

It was felt that a research approach was required that reflected the entrepreneurial personality and the unique characteristics of start-up firms (Hofer and Bygrave, 1992). It was decided, therefore, to embark on an in-depth research agenda that was distinctly qualitative in character. 52

Electronic procurement systems for the Internet Data-mining software Internet-enabled viewing systems Biotechnology Biotechnology Biotechnology High-tech sensor kits Web-streaming software and services Software for database maintenance Statistical process control software Educational software

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The simple axiom that the peculiarities produce the generalities and not the reverse must not be forgotten. This means that all that is needed at the start are some orienting questions, some headings, or guiding topics. These topics are listed as follows: . Talk to me about the ways in which you gather information in your business. . Tell me about the actual systems that you have in place. . Talk to me about how relevant information is stored. . Tell about the ways in which you might use any information that you gather or store. . Talk about the most effective way to gather and analyze information, if, for example, an urgent decision was to be made with respect to marketing. . Talk to me about your personal contact network and tell me who are the main constituents of this network. . With regard to information that is gathered, analyzed and stored, tell for what purposes it is primarily used. . Looking ahead, in what ways do you see your management and use of information systems impacting on your business? . Can you tell me what BI is? . What do you understand by the term e-business? . In what types of e-business do you engage? . Talk to me about what you see as the advantages and disadvantages of detailed information-gathering, management, analysis and retrieval systems.

The data were analysed by using the discussion topics as frameworks for analysis.

Findings With respect to how the companies gathered information, several issues emerged. These are summarized in Table II. A consensus across all companies was that up-to-date information was essential and that, it was certainly important to store this information in a useful way. Companies A, B, H and J were particularly strong proponents of the need for systems for information management. When pushed, however, about the systems that were in place the reality did not support the ideal. The companies all kept databases of customers and these reflected varying degrees of customer profile. Similarly, sales information was stored, the use of spread sheets was evident, computerized invoicing was extensive, supply chain issues were computerized but there was no really effective connecting of disparate data sources, and certainly scant evidence of the meaningful interrogation of same. Most marked was a detectable absence of detailed, stored information on competition. Companies A, G and C were strongest in this area. The most significant issue to emerge, though, was the unanimous commitment of all the respondents to the use and value of personal contacts. The owner of company C stated: ‘‘What is the use in all the high-tech information systems, if you lose the personal touch? Information systems are advanced, intelligent and seriously important but you cannot set aside the need for face-to face interaction.’’ A clear dependence on PCNs emerged in all the discussions. These PCNs comprised friends, family, customers, company accountants and financial backers. The contacts were without doubt personal in character as opposed to being informal and impersonal. There was a huge reliance on the PCN as a means of augmenting decision-making quality. This was especially notable with regard to the key marketing activities of customers and market information and the creation of competitive advantage. While BI-type systems

These topic areas constituted a tentative framework only. In line with the inductive aspect to the research, the topics would be addressed in all sorts of order. New topics emerged during the discussions.

Data analysis The discussions generated substantial amounts of usable information and actionable data. The discussions were audio-recorded but in all cases copious notes were made. All of the discussions were transcribed and coded for purposes of analysis using a coding framework based on the key topic areas (Miles and Huberman, 1994). 53

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Table II The key findings Key findings 1 2 3 4 5 6 7

Quality decision making in the sample firms is heavily dependent on up-to-date information gathered from a range of generally disconnected sources within the firm’s domain The sample firms exhibited a strong recognition of the need for an effective marketing and management information system Within the sample firms there were many useful data sources but these were neither effectively managed nor effectively connected The sample firms placed a very high value on their personal contact networks Those databases that did exist within the sample firms were standard and simplistic The sample firms recognized and articulated the value of BI and e-business models In spite of their recognition of the value of BI and e-business models the sample firms did not show positive signs of embracing or exploiting such technologies for business advantage

With respect to future trends, all of the participants stated that they saw BI systems as becoming increasingly important. A consensus emerged that would suggest that, as the companies got up on their feet and began to develop, they would have a greater reliance on such systems. There was a clear issue of scale emerging with respect to the tendency to use BI or other information management systems. Importantly, the companies were keen to point out that this did not mean that PCNs would lessen in importance, although they predicted that their PCNs would change to reflect the dynamic nature of their businesses. Finally, given the strong knowledge base of the companies and the high-tech aspect, there was a surprising hesitancy when participants were asked to define BI. Only company K gave a detailed and convincing response. The others had some loose ideas but generally described traditional MISs. There was clearly a problem of lack of understanding. The discussants could articulate and extol the values of the ideal BI system but the evidence to date was that they were less willing to sign up to practice.

played a role, they were superseded by personal contacts. The managing director of company K stated that he has a close network of highly-informed and trusted contacts. He maintained that these were the first people whom he consulted when crucial decisions were being made, even down to getting the inside line on the current activities of competitors. The types of business information systems that were in place were largely standard databases and spread sheet programs that allowed contact information to be stored along with a brief customer profile. Only company H had a meaningful competitor database profiled. All of the companies had computerized accounting systems and these mainly detailed sales information, trends and profiled customers’ spending patterns. In the main they were used to view history or to estimate short-term orders and production requirements, as opposed to detailing and predicting long-term trends and fundamental shifts in the nature of the business. A popular usage of stored information was the profiling of particular customers prior to review meetings or sales presentations. There was extensive usage of the Internet as a means of BI. All the companies used the Internet to obtain a range of information from technical to market, to customer, to emerging trends. While the Internet was extensively used and seen as vital, it was, in the main, used in an unplanned, unstructured and ad hoc way. There was no significant evidence of Internet usage being linked or married into more sophisticated networks of information portals.

Conclusions The key findings of this study were that, while the sample firms were populated with high-tech individuals, and while technology was core to their service/product, the use of BI in a planned and structured way was limited. Information was extensively gathered but not always processed. Sales data, customer profiles, invoicing, accounts, various reports and 54

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given a total package, a lot of which is not relevant to their needs (see also Griffin (2001)). The problems that affect BI in a wider sense also plague e-business. They are rooted in the personal contact network paradigm that is the hallmark of how entrepreneurial firms do business. The Internet is regarded as the central driver of e-business. The development of the Internet, however, has also created new problems such as the need for institutional systems that can effectively govern domestic and global e-business systems. It has also served to exacerbate the small firms’ problems with inadequate physical, human and financial resources. Furthermore, it has proven necessary to devise new systems and to acquire specialist experience to enable effective transformation of gathered information into effective knowledge that can actually enhance decision-making quality. Entrepreneurial small firms also have trouble in seeing how such an investment will generate benefits, given the financial and psychic commitment. It is reasonable to conclude, therefore, that, given the obstacles to the development of e-business systems in entrepreneurial small firms, the pace and development of such systems may be in fact impeded until such obstacles are significantly reduced. That said, though, this study has demonstrated that small firms do recognize that e-business systems have radically altered the domestic and international business arena, particularly in the e-tailing sector, and in supply chain management systems. Small firms see potential access to new channels of distribution, value in the emergence of Internet-based intermediaries, the benefits of lower information search costs, lower transaction costs and the ability to substantially improve the ways they gather, process and disseminate information. The paper, therefore, provides a set of recommendations with respect to the successful implementation of BI and e-business systems in a start-up, knowledge-based, high-technology firm.

supplier tracing were particularly in evidence. They were never really examined, though, in a structured or meaningful way. The findings suggested that the reasons for the lack of BI usage, however, are rooted in the same problems that have perennially affected traditional start-ups. The entrepreneurial personality tends to focus on selling for most of the time and this means a desire for better relational communication skills. Essentially, the decision-makers are too busy managing to take time for the effective use of BI in a meaningful way. It might well be that this is merely related to stage of business growth or a later stage of the business lifecycle and, as these companies become more established and formalized, then they will become more proactive in their usage of BI. The key individuals in the sample all had a high level of technological expertise and skills and were dependent on technologies for certain, in some cases many, aspects of their jobs. The core ability was there but there was undoubtedly a BI gap. The paper concludes, therefore, that the entrepreneurial personality seriously impacts on use of BI in start-up companies. It would be reasonable to conclude that the differences between the core activities of traditional start-ups and these new-age knowledge-based and high technology start-ups are actually much less than anticipated or widely believed. The paper also concludes that BI and effective BI management are conducive to better company management, and will likely lead to higher levels of efficiency, higher and better quality outputs, better marketing decisions and therefore, arguably, lessened risk of business failure. The challenge for business advisers, government agencies and other stakeholders in the BI industry is to seek ways of embedding a BI culture from the point of business inception. This challenge should be less daunting in the knowledge-based, high technology sector. It points towards the need for a better BI infrastructure platform with representation from BI systems developers and suppliers and the many types of support agencies that advise start-up companies. The study also concludes that expectations of BI systems should be realistic (Wu, 2001) and that they should be tailored to suit the nuances of particular firms, as opposed to start-ups being

Recommendations The study allows for the development of a set of recommendations that might go some way to 55

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Aldrich, H. and Zimmer, C. (1986), ‘‘Entrepreneurship through social networks’’, in Sexton, D. and Sinclair, F. (Eds), The Art and Science of Entrepreneurship, Ballinger, New York, NY. Brackett, M.H. (2001), ‘‘Business intelligence value chain’’, DM Review, pp. 1-6, available at: www.dmreview.com/portal_ros.cfm?NavID=91& EdID=115&PortalID=17 Bygrave, W.D. (1994), The Portable MBA in Entrepreneurship, John Wiley & Sons, New York, NY. Carson, D.J. and Cromie, S. (1989), ‘‘Marketing planning in small enterprises: a model and some empirical evidence’’, Journal of Marketing Management, Vol. 5 No. 1, pp. 33-50. Cooper, H.H.A. (1996), Business Intelligence: A Primer, Executive Protection Inst., Berryville, VA. Davis, C.D., Hills, G.E. and LaForge, R.W. (1985), ‘‘The marketing/small enterprise paradox: a research agenda’’, International Small Business Journal, Vol. 3 No. 3, pp. 31-42. Davis, M. (2001a), ‘‘Using business intelligence for competitive advantage’’, Knowledgepoint, pp. 1-2, available at: www.knowledgepoint.com.au/ business_intelligence/Articles/BI_MD001b.htm Davis, M. (2001b), ‘‘Using business intelligence for competitive advantage’’, Knowledgepoint, pp. 1-2, available at: www.knowledgepoint.com.au/ business_intelligence/Articles/BI_MD001c.htm Davis, M. (2001c), ‘‘Using business intelligence for competitive advantage’’, Knowledgepoint, pp. 1-2, available at: www.knowledgepoint.com.au/ business_intelligence/Articles/BI_MD001d.htm Griffin, J. (2001), ‘‘Business intelligence value proposition’’, DM Direct, pp. 1-6, available at: www.dmreview.com/ editorial/dmdirect/dmdirect_article.cfm?EdID= 3910&issue=08 (accessed December 3). Hill, J. (2001), ‘‘A multidimensional study of the key determinants of effective SME marketing activity’’, Monograph Part 1, International Journal of Entrepreneurial Behaviour & Research, Vol. 7 No. 5, pp. 171-204. Hill, J. and McGowan, P. (1999), ‘‘Small business and enterprise development: questions about research methodology’’, International Journal of Entrepreneurial Behaviour & Research, Vol. 5 No. 1, pp. 5-18. Hill, J. and Wright, L.T. (2000), ‘‘Defining the scope of entrepreneurial marketing: a qualitative approach’’, Journal of Enterprising Culture, Vol. 8 No. 1, March, pp. 23-46. Hofer, C.W. and Bygrave, W.D. (1992), ‘‘Researching entrepreneurship’’, Entrepreneurship Theory and Practice, Vol. 16 No. 3, Spring, pp. 91-100. Inmon, B. (2001), ‘‘Get business advantage of corporate data’’, e-Business Advisor Magazine, December 3, pp. 1-2, available at: www.advisor.com/Articles.nsf/ aid/INMOB01 Johannisson, B. (1986), ‘‘Network strategies: management technology for entrepreneurship and change’’, International Small Business Journal, Vol. 5, pp. 19-30. Kotler, P. (2000), Marketing Management, Millennium ed., Prentice-Hall International, Englewood Cliffs, NJ.

aiding the successful implementation of BI or adoption of the e-business model in knowledge-based, high technology firms: . Ensure that the technical expertise exists within the company. In addition to the technical skills some core management competencies are essential, particularly relational communication skills. Relational communication skills have over and over again been regarded as the most important aspect of business development in small firms. . Engender realistic expectations as to what BI and e-business can achieve. Ensure that the firms are not being over-reliant or abdicating responsibilities to a perceived BI/e-business panacea. . It is important that all personnel with the start-up company know what effective BI and e-business models can and cannot achieve. That will ensure that their expectations are measured. . Create a list, customized for each start-up company, as to what BI should do and what e-business systems would be most appropriate in their circumstances. Concentrate on a cluster of relevant tasks only. . Formalize interactions between the manager of the BI project and other staff in the firm. This may just mean a weekly update at management meetings but should go a long way to managing expectations and encouraging proper and effective use. . Recognition that the effective development of e-business systems need not be a substantial cost investment, yet the potential rewards and benefits are immense.

Note 1 PricewaterhouseCoopers (2001), available at: www.PricewaterhouseCoopers.com

References Afuah, A. and Tucci, C.L. (2001), Internet Business Models and Strategies, McGraw-Hill Irwin, New York, NY.

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Koukova, N.T. and Ratchford, B.T. (2001), ‘‘Something old, something new: a comparison of users and non-users of the Internet as an information source’’, in Marshall, G.W. and Grove, S.J. (Eds), ‘‘Enhancing knowledge development in marketing’’, Proceedings of the American Marketing Association Summer Educators’ Conference, pp. 11-12. McDonald, F. and Burton, F. (2002), International Business, Thomson, London. Microsoft Business (2001), ‘‘Overview of business intelligence’’, January, pp. 1-2, available at: www. microsoft.com/business/articles/bi/bioverview.asp Miles, M.B. and Huberman, A.M. (1994), Qualitative Data Analysis, Sage Publications, Thousand Oaks, CA. Montague Institute Review (2001), ‘‘Using the Internet for competitive intelligence’’, available at: www. montague.com/le/cio.html OECD (1997), ‘‘Electronic commerce: opportunities and challenges for government – the Sacher Report’’, DSTI/STI/IT (97), OECD, Paris.

Reedy, M. (2001), ‘‘Making better decisions with business intelligence software’’, Intellisolve, pp. 1-2, available at: www.intellisolve.com/bjart1.htm Robinson, R. and Pearce, J. (1984), ‘‘Research thrusts in small firm strategic planning’’, Academy of Management Review, Vol. 9, pp. 128-37. Smith, M. (2001), ‘‘Companies using BI tools to look within’’, Business Intelligence, June 25, p. 1, available at: www.advisor.com/Articles.nsf/aid/SMITT286 Timmons, J. (1994), New Venture Creation, 4th ed., Irwin, New York, NY. Weiss, A. (1999), ‘‘Competitive intelligence: tactical information or strategic wisdom?’’, Proceedings of the Online Information Conference, available at: www.competitive-intelligence.co.uk/articles/pp-9912.htm Wu, J. (2001), ‘‘Business intelligence: fostering success through managing expectations’’, DM Review, pp. 1-4, available at: www.dmreview.com/master.cfm? NavID=225&EdID=4151 (accessed December 3).

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1. Introduction

The importance of a strong business-IT relationship for the realisation of benefits in e-business projects: the experiences of Egg

There are few areas of organisational life that are no longer directly supported by information and communications technologies (ICTs). Such technologies now typically facilitate effective operational control within all organisational functions, support the organisation’s strategic planning and decision making, as well as increasingly managing the organisation’s interface with its customers, suppliers and financial partners. The increased importance of ICTs means that investments in this area are accounting for a very significant proportion of organisational resources (Renemka, 2000, p. 5). However, there is much evidence to cast doubt as to whether such investments always deliver the returns that were originally envisaged. For example, an extensive review of systems development practices by Clegg et al. (1997) found that:

Sue Clarke and Neil Doherty The authors Sue Clarke is a Program Manager at the Internet bank, Egg, in Derby, UK. Neil Doherty is a Senior Lecturer in Information Systems in the Business School at Loughborough University, Leicestershire, UK. Keywords

Up to 90 per cent of all IT projects fail to meet their goals; 80 per cent are late and over-budget and 40 per cent are abandoned.

Electronic commerce, Information strategy, Benefits management, Project systems

One area in which the value of IT investments is being strongly questioned is e-commerce. The scale of investments in e-commerce have been staggering; recent figures from the Boston Consulting Group (2001) suggest that, by the end of the year, the B2C economy will have grown to $65 billion, in the USA alone. However, as Phan (2003) notes, while many e-business ventures can be classed as ‘‘spectacular successes’’, the electronic marketplace has also witnessed ‘‘many failures’’. Indeed, the scale of problems witnessed within the electronic marketplace encouraged much debate as to whether the ‘‘dotcom bubble’’ had burst. There is, therefore, a pressing need for research to explore how organisations can gain far better returns on their information systems investments, in general, and their Web-based initiatives, in particular. A potentially rewarding, yet relatively under-researched, area for further study is how the development of a strong IT-business relationship can contribute to the successful outcome of systems development projects (Earl, 1996; Feeney and Willcocks, 1997; Peppard and Ward, 1999). The primary aim, therefore, of this paper is to explore how strong IT-business relationships have been fostered, to support the development

Abstract There is a pressing need for research into the successful application of technology within organisations, given the high incidence of failure, with respect to information systems projects, in general, and e-commerce applications, in particular. A case study was conducted into system development approaches at Egg, one of the UK’s leading online banks. Presents a qualitative study in this important area of research which should be of interest both to information systems researchers and to all IT professionals with responsibility for, or involvement in, e-business development projects. The key finding of the research is that, while the balance between IT and business input does change over the course of a project, its successful outcome is highly dependent on the evolution of a strong IT-business relationship that endures for the duration of the project. Shows that the maintenance of this strong relationship is undoubtedly aided by having shared and high priority activities, such as benefits realisation, that also last for the duration of the project. Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . pp. 58-66 # Emerald Group Publishing Limited . ISSN 1352-2752 DOI 10.1108/13522750410512886

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of e-business solutions, at one of the UK’s most successful online banks: Egg. One Internet company that seems to be bucking the trend and succeeding in the e-marketplace is Egg, which is a subsidiary of the UK-based financial services organisation, the Prudential. The company was launched in October 1998 and now has a staff of more than 2,000, working from offices in London, Dudley and Derby. Although it has only been around for a short time, it has already gained nearly two million customers and, in June 2000, Egg was listed on the London Stock Exchange. The company, which operates 24 hours a day, every day of the year, currently offers products and services from four main areas: (1) banking; (2) investments; (3) insurance; and (4) online shopping.

2.1 Levels of, and reasons for, systems failure Large numbers of information systems projects are excessively over budget, months or years behind schedule, of poor quality, or simply fail to adequately satisfy users’ requirements. Statistics on the success and failure of information systems are plentiful, and generally depressing. For example, Lyytinen and Hirschheim (1987) estimate that about 50 per cent of all IS projects fail; Kearney (1990) has found that only 11 per cent of IT projects successfully deliver their planned benefits; and Hochstrasser and Griffiths (1991) suggest that up to 70 per cent of IS projects fail. These statistics represent huge numbers of individual cases of abandoned or under-performing systems, which are reducing the operational and financial performance of many organisations. Owing to such high levels of reported systems failure, the past 20 years have witnessed the generation of much interest in the identification of factors that can improve the chances of a successful outcome to systems development projects. A range of empirical and in-depth studies has been conducted, which examine success factors in the development and implementation of information systems (for example, Sauer, 1993; Whyte and Bytheway, 1996; Li, 1997; Flowers, 1997). These and other studies have helped to focus IT professionals’ attention on the importance of adopting ‘‘best practice’’ with respect to the process of developing systems. For example, user involvement (Whyte and Bytheway, 1996), senior management commitment (Sauer, 1993), appropriate user training (Miller and Doyle, 1987) and rigorous systems testing (Flowers, 1997) have all been regularly cited in the literature. As noted in the introduction, and discussed more fully below, one potentially interesting strategy for improving the chances of success is through the development of strong IT-business relationships (Earl, 1996; Peppard and Ward, 1999).

However, the range is rapidly expanding. In recognition of the quality of its site and online services, Egg won the Yell.com award for the Best Finance Site in 2001 and, more recently, Computing Magazine gave Egg the 2002 award for ‘‘Best private sector project’’ for the EggPay facility, which allows customers to move money by e-mail. In order to effectively chronicle the experiences of Egg, the paper is organised into a number of distinct sections. The following section of this paper reviews the literature, prior to establishing the research objectives for this project. The research methods employed are then fully reviewed in the third section. The research results are presented and discussed in the fourth section, before their importance is assessed in the final section.

2. Literature review and research context The aim of this section is to review the literature with respect to the success and failure in systems development, before considering the influence of a close business-IT relationship on the successful outcome of information systems projects. In so doing, the justification for, and objectives of, this study are articulated.

2.2 The critical business-IT relationship It has been argued that ‘‘achieving high performance from IT is not just about the IT department’s ability to build, maintain and deliver systems, but is an organisation-wide 59

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a study was initiated with the specific aim ‘‘to explore the nature and importance of IT-business relationships within the context of e-business projects’’. More specifically, the following research questions were asked with respect to each of the key phases of an e-commerce development project: . Which members of the IT department are typically involved and what are the key actions for which they have the primary responsibility? . Which members of the wider business community are typically involved and what are the key actions for which they have the primary responsibility? . What are the critical areas for collaboration between the business and IT stakeholders? . What are the primary determinants of success?

activity requiring a strong business/IT partnership’’ (Peppard and Ward, 1999, p. 29). This view is supported by Keen (1991, p. 214), who notes that ‘‘IT successes generally reflect an effective relationship between business managers and IS managers’’. In particular, Peppard and Ward (1999, p. 32) suggest that, while the creation of new systems is primarily the concern of the IT department, the principal responsibility for realising benefits, and delivering value, from IT investments, must lie with business managers. The rationale for a strong business input to the systems development projects is that business benefits are generally derived from the organisational change that accompanies the introduction of IT rather than from the IT itself (Ward et al., 1996; Doherty and King, 1998). This view is supported by Strassman (1990, p. 519), who notes that:

It was envisaged that this research would be important from a practitioner perspective, as it aims to provide practical insights into how e-commerce development projects can best be organised and undertaken. From an academic perspective the research is also important, as it is one of the very first in-depth case studies to explicitly focus upon the IT-business relationship in the context of e-commerce projects.

Computers add value only if surrounded by appropriate policy, strategy, methods for monitoring results, talented and committed people, sound relationships and well designed information systems.

Consequently, business stakeholders must be actively involved to manage the organisational change, but they must work in close harmony with the IT professionals to ensure that the organisational change is well aligned with the system’s operational capabilities and characteristics. While the importance of a strong business-IT relationship is well documented, it has been suggested (Peppard, 2001) that too often, in practice, the relationship is poor because there is a significant ‘‘gap’’ between the IT department and the rest of the organisation. Moreover, it has been argued that this ‘‘gap’’ has a serious and detrimental impact on the outcome of systems development projects.

3. Research method The aim of this section is to review the overall research design, describe the design and execution of the case studies and then review the data analysis strategy. 3.1 Research design A case study approach was adopted to facilitate the detailed exploration of the research questions highlighted in section 2.3. This has been defined as ‘‘an empirical enquiry that investigates a contemporary phenomenon within its real life context’’, which ‘‘relies on multiple sources of evidence’’ (Yin, 1994, p. 13). Such an approach was considered ideal for studying the approaches by which e-business solutions are developed, in situ, within a large and highly sophisticated commercial organisation.

2.3 Summary of the literature and research objectives While there has been a substantial amount of research focusing on the incidence and significance of systems failures and strategies by which they can be avoided, to date, there has been little research explicitly targeting the importance of strong IT-business relationships (Peppard, 2001), particularly in the context of e-business. To help fill this gap in the literature, 60

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The detailed design of the research strategy was very strongly influenced by the fact that one member of the research team was employed, within Egg, in the role of a ‘‘project manager’’. In this position she had unrestricted access to a wide variety of relevant information and key personnel, within a variety of systems development projects, each of which is of relevance to the exploration of this study’s research questions. Consequently, she was able to gain unique insights into this increasingly important phenomenon. However, the broad research approach adopted was more akin to ‘‘participant observation’’ than to ‘‘action research’’ (Nandhakumar and Jones, 1997), as the aim of the study was to objectively assess, rather than to proactively influence, the nature and importance of the IT-business relationship. 3.2 Case study execution Over the past six months the ‘‘project manager’’ has, while working on a variety of systems projects, had the opportunity to interact with key personnel and had access to project documents; this gave her ample opportunity to collect relevant evidence. When conducting a qualitative case study, Darke et al. (1998) suggests that data should be collected in a variety of ways, including ‘‘formal interviews, questionnaires, observation, and document analysis’’, so that the findings can be triangulated. As with other ‘‘interpretive’’ case studies (for example, Prasad, 1993; Walsham and Sahay, 1999) this study sought to use a variety of data collection methods, but avoided the use of formal surveys. More specifically, when working on each case study site, the following data collection techniques were employed: . Document reviews. The principal researcher had access to a wide variety of documents, including IT, marketing and corporate strategy reports, staff communication documents and detailed design documents. However, of particular interest to this research study were the postimplementation reviews (PIR), that provided an in-depth analysis of the conduct and outcomes of a range of e-business projects. . Interviews. Formal interviews were conducted with a variety of managers, each of whom had a significant responsibility for the design, implementation and operation of

.

effective systems within Egg. More specifically, the roles of the key interviewees were as follows: project manager, product manager, benefits realisation manager and IT operations project manager. The primary aim of the interviews was to explore, for each of the key phases of a system’s development project, who would typically be involved from both the business and IT sides, and what would be the key actions that are primarily the responsibility of each of these groups. Additionally, the interviewees were invited to identify the critical areas for collaboration between the business and IT stakeholders and to comment on the determinants of success, at each of the key phases. For the purposes of this project, the project’s key phases were defined as: strategy formulation, project evaluation, system development, system implementation, PIR and ultimately the system’s operation. Observation. Being an active participant in each project, the principal researcher was able to observe their day-to-day execution at very close quarters, including participation in the many important project meetings and the involvement in a wide variety of project discussions and activities.

A series of notebooks was compiled to ensure that a complete, coherent and contemporaneous set of evidence was captured. Furthermore, the advice of Nandhakumar and Jones (1997, p. 118) was followed and time was set aside to periodically ‘‘step back from the research context’’, to write up key findings and objectively review them with the other researchers.

4. Research findings The aim of this section is to present an overview of the findings, before investigating the nature and importance of the business-IT relationship at each of a project’s key phases, namely: . strategy formulation; . project evaluation; . system development; . system implementation; . PIR; and ultimately . the system’s operation. 61

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financial services organisation. For example, a product manager noted, ‘‘the biggest difference between e-commerce and bricks and mortar projects is speed to market/speed to launch’’. However, as an operations manager noted, ‘‘it is important to remember that we are a bank, and therefore constrained by various regulations, so adhering to procedures and processes is essential’’. For an online bank, therefore, the development of new applications always causes tension between the need for speed and the requirement for robust and high quality systems. This situation was well summarised by an operations manager, who commented: ‘‘For e-business there is a need to get to market quickly and adherence to procedures can be seen as an unnecessary overhead, but lack of them is a key contributor to failure’’.

4.1 Overview of findings The material, presented in Figure 1, summarises some of the key findings of this research study, in terms of the participants in an e-commerce project, and the key roles that they undertook, at each of the key phases of a project. The centre arrow, in the Figure, contrasts the relative degree of involvement of IT and business stakeholders over the course of a project. More specifically, it can be seen that, while the business stakeholders have the higher level of involvement in, and responsibility for, the project at its outset and conclusion, it is the IT stakeholders whose proportionate involvement is greater during the middle of the project, particularly the development phase. The Figure was derived as a result of the interviews and document reviews, but particularly of the observations of the participating researcher. Before reviewing in detail the nature of the IT-relationship at each of a project’s key phases it is insightful to report some of the more general comments about the nature of e-business projects, in the context of a large

4.2 The strategy phase It is well recognised that all e-commerce initiatives should be proceeded by the formulation of a thorough and formal strategic plan. Moreover, it has been suggested that successful IS planning is dependent upon

Figure 1 An overview of the project findings

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involvement of all areas ensured that comments and concerns were addressed’’ (post-implementation review 1). The key activities are the production of a feasibility report, including a detailed analysis of costs and benefits, the identification and allocation of resources and the assessment of organisational impacts. The effective completion of all these activities requires, to a greater or lesser extent, the close collaboration of IT and business stakeholders. One of the most interesting aspects of investment evaluation at Egg is the role of their ‘‘outcome prioritisation group (OPG)’’. As a benefits realisation manager noted, the OPG is a collaboration between ‘‘outcome managers, business change managers and the UK programme office’’ tasked with ‘‘prioritising time-critical and business-critical projects’’. It was noted that a close working relationship was needed between IT and business stakeholders when prioritising outcomes, as there are always many projects ongoing and there is a high degree of interdependency between them (researcher’s notebook). A document noted that during this stage at the project’s outset: ‘‘business involvement was constant and supportive’’, and that ‘‘the requirements and technical documentation were written as a close IT-business collaboration, which worked very well and ensured a tight project focus on business needs’’ (post-implementation review document 2).

effective teamwork between business and IS representatives (Earl, 1996). The findings of the research confirm the importance of developing a strong IT-business relationship during the strategic planning phase. As can be seen from Figure 1, there are some very senior managers actively involved at the strategy phase. The IS/IT professionals have a crucial role to play at this stage. As an operations manager noted: ‘‘Egg is an IT company, so strategy decisions are heavily based around IT capability’’. The IS/IT professionals are also required to bring ‘‘an awareness of the benefits of technology, to point out opportunities’’ (benefits realisation manager) to the planning process. By contrast, the business stakeholders are primarily focused on ‘‘generating the business ideas and articulating the high level aims’’ (operations manager). Moreover, a product manager noted that business stakeholders should be especially focused on ‘‘the acquisition and retention of customers and the overall financial perspective’’. In terms of the critical areas for business-IT collaboration, a project manager noted that the two groups of stakeholders must work closely together, with ‘‘business setting the overall strategic intention and generating propositions, while IT specialists assess the overall feasibility’’. The overall importance of a strong business-IT relationship was well summarised by a benefits realisation manager, who noted: ‘‘Egg is a technology-led business, which needs to gear around business outcomes’’. It was, however, observed, that it is sometimes difficult for the technological development to keep pace with the speed of strategic thinking (researcher’s notebook).

4.4 The development phase The development phase is the period in which the paper-based plans are transformed into a working suite of software programs. It is the most technically sophisticated stage of the projects and therefore typically requires a heavy input from IS/IT professionals, such as system analysts, programmers and hardware/software specialists. A recent innovation at Egg has been the introduction of a new development approach known as ‘‘AgileEgg’’. The ‘‘AgileEgg’’ approach is a form of protoyping, in which the system is developed in ‘‘small iterative steps, with significant user involvement throughout’’ (operations manager). The use of ‘‘AgileEgg’’ ensures that the close relationship between the IS/IT professional and the business stakeholders is maintained throughout the

4.3 The evaluation phase IT evaluation has been defined as: ‘‘the process of establishing by quantitative and/or qualitative techniques the worth of IS/IT projects to the organisation’’ (Willcocks, 1992). It is, therefore, a critical stage in the development of e-business solutions as it should act as a filtering mechanism to ensure that an organisation does not invest in potentially high risk or low reward projects. As can be seen from Figure 1, evaluation tends to be a more inclusive exercise with a wider range of individuals participating. It was noted in a document that ‘‘early 63

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This is ‘‘vital in the e-business environment; as people (customers) always give surprises, very fast reactions are needed as it is a real-time, online environment’’ (product manager). Once more, there has to be very close co-operation between the IT and business stakeholders, as it is the business community that identifies the problems and the technical specialists that must effect any required fixes. To this end, a technical support team is always maintained throughout the implementation process (researcher’s notebook).

development phase and has ‘‘greatly reduced project time-scales’’ (benefits realisation manager). It was noted in a document that ‘‘a customer experience walkthrough of screen designs or a prototype would have identified more issues at an earlier stage’’ (postimplementation review 1). The critical role of business users was highlighted by a project manager, who noted: ‘‘the business lead is the key stakeholder and plays a critical role on the team as they co-ordinate everything on the business side’’. Another critical area for high levels of collaboration between the IT professional and business users is during systems testing. As a project manager noted: ‘‘usability testing is key in e-business’’. However, it was noted that testing should be applied to the paper-based designs, as well as the completed software, as the ‘‘sign-off and comments on functional specifications are a critical area for IT-business collaboration’’ (product manager). Moreover, project managers have a particularly important role to play during the development phase, as they must ensure that appropriate channels of communication are kept open between the business and IT communities (researcher’s notebook). It was also noted that e-commerce systems tend to be more complex than ‘‘bricks and mortar’’ applications, as they are being used by a wide variety of customers, rather than business users who have had explicit training. Consequently, the business stakeholders have an important role to play in representing the customer, by using their knowledge to help predict customer behaviour (researcher’s notebook).

4.6 The PIR It is important that a system, once implemented and operational, is the subject of a formal and thorough PIR, to ensure that it is effective. In addition to making an objective assessment of the system’s performance, the PIR also provides an ideal opportunity for effecting changes either to the system, or to the design of the organisation, in order to enhance the system’s contribution (Doherty and McAulay, 2002). The PIR requires significant business involvement and focuses on ‘‘learning experience, project closure, benefits realisation’’ (project manager). However, the benefits realisation manager commented that, while ‘‘PIR is always done, historically there has been little centralisation of the information gathered’’. However, he also noted that the new approach to PIR will necessitate ‘‘centralisation of findings, follow-up actions and reference learning’’. This new emphasis on learning from, and sharing of, experience will necessitate even closer IT-business relationships during the PIR, but should result in enhanced development approaches and outcomes for future projects.

4.5 The implementation phase Implementation is the crux of the project life-cycle, as it is the stage at which the system goes live, and ownership of the system formally passes from the technical development team to the business users. Because the ownership of the system passes to the business users, ‘‘the business drives post-live monitoring’’ (product manager). More specifically, this involves checking the system’s scope: ‘‘Has everything been released? Does anything else need working on?’’ (product manager). A live pilot test involving a small sub-set of customers who have volunteered to participate is always conducted.

4.7 The operational phase It is important that a strong relationship between technical specialists and the user community continues throughout the operational life of the system, as there are always requirements for upgrades, revisions and enhancements to be applied to ensure that the system continues to add value to the organisation. Key actions that continue over the system’s operational life include: ‘‘the monitoring and maintenance of service levels to customers, and the monitoring and realisation of benefits’’ (project manager). Moreover, it 64

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particularly in the context of e-business projects, further research is required to study the wider incidence and implications of these relationships. For example, follow-up surveys would be useful to explore the prevalence of such close relationships, while detailed, longitudinal case studies, across a variety of organisations, would allow their implications to be far more thoroughly evaluated. It is important to conclude this paper with a note of caution. When considering the wider significance of this study it must be remembered that the success of an e-commerce initiative is dependent on a wide range of managerial issues, such as strategic positioning, branding, good cost control and the provision of good products and services, in addition to the effective management of technology (Phan, 2003). Consequently, while the establishment of an effective business-IT relationship has been shown to play an important role in the successful deployment and operation of Web technologies, such a relationship cannot, alone, guarantee the successful outcome of e-business initiatives, as it will have limited impact on other critical areas such as strategic positioning, marketing and order fulfilment.

was acknowledged, once more, that these could only be achieved if the IT and business stakeholders continued to work closely and adopted a ‘‘proactive, rather than a reactive, approach’’ (product manager). However, it was noted that the relationship will be further strengthened once the newly appointed customer relationship managers have become established, as they will be responsible for driving a more proactive approach (researcher’s notebook).

5. Conclusions This paper presents a qualitative study in an important area of research, which should be of interest both to information systems researchers, and all IT professionals with responsibility for, or involvement in, e-business development projects. The key finding of the research is that, while the balance between IT and business input does change over the course of a project, its successful outcome is highly dependent on the evolution of a strong IT-business relationship that endures for the duration of the project. The maintenance of this strong relationship, throughout the system’s development and operation, is undoubtedly aided by having shared and high priority activities, such as benefits realisation, that also last for the duration of the project. The strong relationship is particularly important in the context of an e-business project, as the pace of change is rapid, yet the need for high quality and extremely robust systems is critical. Peppard and Ward (1999) suggest that close working relationships between the IT organisation and the rest of the business can be facilitated through the creation of appropriate ‘‘structures and process’’ and the fostering of well aligned ‘‘values and beliefs’’. The evidence from this case study indicates that the strong business-IT relationship, detected at Egg, has arisen as a result of the adoption of an appropriate development process, such as ‘‘AgileEgg’’, and the fostering of shared beliefs, such as the absolute importance of customer service. While the results of this preliminary study have provided important insights into the nature and importance of strong IT-business relationships,

References Boston Consulting Group (2001), ‘‘Online retail market in North America to reach $65 billion in 2001’’, available at: www.bcg.comm Clegg, C., Axtell, C., Damadoran, L., Farbey, B., Hull, R., Lloyd-Jones, R., Nicholls, J., Sell, R. and Tomlinson, C. (1997), ‘‘Information technology: a study of performance and the role of human and organisational factors’’, Ergonomics, Vol. 40 No. 9, pp. 851-71. Darke, P., Shanks, G. and Broadbent, M. (1998), ‘‘Successfully completing case study research: combining rigour, relevance and pragmatism’’, Information Systems Journal, Vol. 7 No. 2, pp. 273-90. Doherty, N.F. and King, M. (1998), ‘‘The consideration of organizational issues during the systems development process: an empirical analysis’’, Behaviour & Information Technology, Vol. 17 No. 1, pp. 41-51. Doherty, N.F. and McAulay, L. (2002), ‘‘The relationship between the ex-ante and ex-post information systems evaluation: reflections from the literature and the practice of evaluating e-commerce investments’’, paper presented at the ECITE Conference, Paris. Earl, M.J. (1996), ‘‘Integrating IS and organisation’’, in Earl, M. J. (Ed.), Information Management: The

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Organisational Dimension, Oxford University Press, Oxford. Feeney, D.F. and Willcocks, L. (1997), ‘‘The IT function: changing capabilities and skills’’, in Willcocks, L., Feeney, D. and Islei, G. (Eds), Managing IT as a Strategic Resource, McGraw-Hill, Maidenhead. Flowers, S. (1997), ‘‘Towards predicting information systems failure’’, in Avison, D. (Ed.), Key Issues in Information Systems, McGraw-Hill, Maidenhead, pp. 215-28. Hochstrasser, B. and Griffiths, C. (1991), Controlling IT Investment, Chapman & Hall, London. Kearney, A.T. (1990), Barriers to the Successful Application of Information Technology, DTI and CIMA, London. Keen, P. (1991), Shaping the Future: Business Design through IT, Harvard Business School Press, Cambridge, MA. Li, E.Y. (1997), ‘‘Perceived importance of information systems success factors: a meta analysis of group differences’’, Information & Management, Vol. 32 No. 1, pp. 15-28. Lyytinen, K. and Hirschheim, R. (1987), ‘‘Information systems failures: a survey and classification of the empirical literature’’, Oxford Surveys in Information Technology, Vol. 4, pp. 257-309. Miller, J. and Doyle, B. (1987), ‘‘Measuring the effectiveness of computer-based information systems in the financial services sector’’, MIS Quarterly, Vol. 11 No. 1, pp. 107-24. Nandhakumar, J. and Jones, M. (1997), ‘‘Too close for comfort? Distance and engagement in interpretive information systems research’’, Information Systems Journal, Vol. 7 No. 2, pp. 109-33. Peppard, J. (2001), ‘‘Bridging the gap between the IS organisation and the rest of the business’’, Information Systems Journal, Vol. 11 No. 3, pp. 249-70.

Peppard, J. and Ward, J. (1999), ‘‘Mind the gap: diagnosing the relationship between the IT organisation and the rest of the business’’, Journal of Strategic Information Systems, Vol. 8 No. 1, pp. 29-60. Phan, D.D. (2003), ‘‘E-business development for competitive advantages: a case study’’, Information & Management, Vol. 40, pp. 581-90. Prasad, P. (1993), ‘‘Symbolic processes in the implementation of technological change: a symbolic interactionist study of work computerisation’’, Academy of Management Journal, Vol. 36 No. 6, pp. 1400-29. Renemka, T. (2000), The IT Value Quest, John Wiley & Sons, New York, NY. Sauer, C. (1993), Why Information Systems Fail: A Case Study Approach, Alfred Waller, Henley. Strassman, P. (1990), The Business Value of Computers, The Information Economics Press, New Caanan, CT. Walsham, G. and Sahay, S. (1999), ‘‘GIS for district-level administration in India: problems and opportunities’’, MIS Quarterly, Vol. 23 No. 1, pp. 39-66. Ward, J., Taylor, P. and Bond, P. (1996), ‘‘Evaluation and the realisation of IS/IT benefits’’, European Journal of Information Systems, Vol. 4, pp. 214-25. Whyte, G. and Bytheway, A. (1996), ‘‘Factors affecting information systems success’’, International Journal of Service Industry Management, Vol. 7 No. 1, pp. 74-93. Willcocks, L. (1992), ‘‘Evaluating information technology investments: research findings and reappraisal’’, Journal of Information Systems, Vol. 2 No. 3, pp. 243-68. Yin, R.K. (1994), Case Study Research, Sage Publications, Thousand Oaks, CA.

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Introduction

Online banking information: what we want and what we get

According to the Office for National Statistics (2001a), information search is the primary reason for Internet use in the UK: 73 per cent of adults surveyed who had used the Internet reported the main purpose as ‘‘finding information about goods or services’’. Developments in Internet technology have transformed an originally limited medium to one that has the potential to provide consumers with information quantity and quality in an easily accessible form (Wind and Mahajan, 2001). A growing number of companies have invested in a corporate Web site to communicate their marketing messages: 63 per cent of UK businesses have their own or third-party Web sites (Williams, 2001). Consequently, there has been increased competition among companies to attract and retain Web site customers. Understanding the needs of consumers in terms of information requirements is paramount to assessing Web site effectiveness. Retail bank Web sites were selected as the subject of inquiry for several reasons. First, Internet use is the highest among the finance and insurance sectors: more than 70 per cent of businesses have their own or third-party Web sites (Williams, 2001). Second, the financial services sector is interesting as a result of broader trends that are occurring with respect to distribution and delivery: traditional channels, such as branches, are being displaced by the Internet and other remote forms of contact. Third, financial services purchases often present difficulties for consumers, not only because the products themselves are often difficult to understand and assess but also because information is frequently only available via an intermediary or presented in ways that make comparisons between products hard to achieve (Ennew et al., 1995; Harrison, 2000). Breitenbach and Van Doren (1998) outline the process by which a Web site becomes accepted by users, based on work by Walker and Walker (1996) and Rogers’ (1995) ‘‘Diffusion of innovation’’ theory, consisting of the five stages of: (1) awareness; (2) interest; (3) evaluation;

Kathryn Waite and Tina Harrison

The authors Kathryn Waite is a Doctoral Candidate and Tina Harrison is Senior Lecturer in Marketing, both at the University of Edinburgh School of Management, Edinburgh, UK. Keywords Information searches, Consumer behaviour, Banking, Internet Abstract This paper reports on young adults’ expectations and perceptions of online retail banking information. A combination of qualitative and quantitative research was used. Focus groups proved valuable in eliciting criteria grounded in the experience of users of bank Web sites. The subsequent questionnaire survey allowed the measurement of gaps between perceptions and expectations. The results indicate that respondents expect bank Web sites to be easy to use and to provide them with basic account/product details. These features are valued more than the technological aspects. Yet, perceptions of actual information provision differ. While basic account and price information is perceived to be provided, certain features are perceived to be less prevalent, rendering bank Web sites ineffective at aiding consumer decision making. The research questions the role of the Internet in information provision and suggests how banks can improve their Web sites to assist consumer decision making. Electronic access The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-2752.htm Qualitative Market Research: An International Journal Volume 7 . Number 1 . 2004 . pp. 67-79 # Emerald Group Publishing Limited . ISSN 1352-2752 DOI 10.1108/13522750410512895

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(4) trial; and (5) adoption.

because they are relevant to the consumer engaged in decision making (Evans et al., 2001). The rationale for information search behaviour is that consumers view purchase transactions as risky. This perceived risk has been defined as a two-dimensional construct comprising the uncertainty involved in the purchase decision and the consequences of taking unfavourable action (Cunningham, 1967). The utility of information relates to its usefulness in reducing the amount of perceived risk and uncertainty involved in conducting the transaction under consideration. The greater the level of perceived risk, the more information will be required until perceptions reach levels acceptable for the consumer (Newman and Lockman, 1975). Yet, it is acknowledged that there is a cost to acquiring information. Bakos (1997) defines this as the opportunity cost or time spent searching by the buyer as well as associated expenditures on telephone calls, visits, literature costs, etc. Processing information may also present an additional cost. Simon (1955) refers to this as the ‘‘cost of thinking’’, which depends on the similarity and complexity of product alternatives available. As a consequence of these costs, Stigler (1961) argues that the consumer will continue to search for information until its value becomes smaller than the cost involved in obtaining it. The extent of information search will be affected by a number of factors particular to the market environment, situational variables, product importance, knowledge and experience of the buyer as well as a whole host of individual differences. Research into these determinants has often revealed inconclusive and contradictory findings. For example, Staelin and Payne (1979) contend that high numbers of alternatives and high levels of product complexity will, in fact, lead to limited search activity because the ‘‘cost of thinking’’ increases. Furthermore, Brucks (1985) shows that high levels of product familiarity and knowledge actually increased informationseeking behaviour. The extent of search activity is also related to product type. For example, services, including financial services, are commonly viewed as being high in experience and credence factors,

Prior to visiting a Web site, individuals mentally consider what they expect from the Web site and how the known features will add value; if perceptions are less than expectations, then the Web site will not be tested or adopted. If, after trial, the reality of using the Web site does not match expectations, the user will decide that the Web site does not contain features of value and will not continue to use it. Therefore, there is a link between customer satisfaction and relationship continuance (Rowley, 2001). In addition, Rogers (1995) notes that consumers trial an innovation through low-risk elements that are divisible from the whole. Information is one such element and information search is recognised as an important first stage in the process of full-service adoption. Therefore it is important to ensure that consumers evaluate online information provision positively. To this end, the research reported in this paper explores the gaps between users’ expectations and perceptions of retail bank Web sites as a source of information. The results provide an indication of areas of dissatisfaction and highlight where bank Web sites need to be improved in order to be perceived as an excellent information source. The paper is presented in three main sections. The first section outlines the importance of information to consumer decision making, including a discussion of the Internet as an information source. The second section outlines the research methods utilised and reports on the findings of both the qualitative and quantitative phases of the research. The third section discusses the implications of the findings and draws conclusions for academics and practitioners.

Importance of information to consumer decision making Information search is an influential stage in the consumer decision-making process: consumers use information to decide whether to purchase or re-purchase a product or service. Information is defined as relevant data about choice alternatives. Data become information 68

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owing to their characteristics of intangibility and degree of customisation (Harrison, 2000; Gabbott and Hogg, 1994). Consequently, consumer decision making in a services context is believed to be complex and carries a higher perception of risk. This has been argued to lead to extended search behaviour (Murray, 1991). Yet, Venkatraman and Dholakia (1997) contend that experience qualities increase the search costs, since, in order to acquire information on experience qualities, purchase and consumption must take place. Hence, they conclude that, for services, the amount of pre-purchase search would be limited. Financial services are an important product which all economically active individuals are obliged to use (Davies, 1996). Financial ‘‘know-how’’ is a critical factor in the purchase of financial products (Harrison, 1997); where customers do not have and do not wish to develop this ‘‘know-how’’, they seek advice. Banks (2001, p. 122) notes that ‘‘consumer financial decision making relies on a core of information . . . and they [consumers] must have access to this information on a timely and regular basis’’. Asymmetry of information places the consumer in a vulnerable position: the mis-selling of pensions is one example. In addition, consumer ignorance prevails as a result of financial services being complex and, in many cases, non-comparable (Ennew et al. 1995). This has led to the active role of marketing (or ‘‘sales’’) in helping to construct consumer ‘‘needs’’, contrasting sharply with the notion of an active and sovereign consumer. As a result of these tensions between the patterns of information and advice provision and consumption within the financial services sector, the aim of recent government legislation has been to enhance financial literacy and improve generic advice (Harrison, 2000). Information provision and consumer education are the subjects of recent public policy: the Financial Services and Markets Act (2001) has a statutory objective of consumer education through ‘‘promoting public understanding’’. In addition, the Government’s White Paper, Modern Markets: Confident Consumers, emphasises the need for good, reliable information to be widely available (Department of Trade and Industry, 1999).

The Internet as a source of financial services information The Internet has several advantages as an information source. First, it provides accessibility to information: search engines simplify and reduce the time and effort related to search activity. Also, ‘‘search agents’’ increase the consumer control and automation of search activity, encouraging extended search behaviour (Van Raaij, 1998; Russo and Leclerc, 1991). Second, the Internet provides complete availability: it is a virtual medium, without physical form. Third, it is conducive to interactivity, enabling two-way communication and providing greater consumer control over the speed and sequence of information. Research by Ariely (2000) shows that these characteristics improve the quality of decision making over time. Fourth, the Internet is dynamic, offering the potential of limitless information that can be updated and amended easily and speedily. Finally, the Internet offers multimedia friendliness through the provision of graphics, text, sound and video, making information attractive as well as useful to the user. Financial services Web sites can perform a variety of functions ranging from basic information provision to full transactional capability. Knight et al. (1999) identify four separate levels of information provision: (1) At the most basic level, an Internet presence merely provides information about the financial institution, with no interaction between the institution and customer other than a possible e-mail link. (2) The next level allows the institution to receive information, such as an electronic loan application. (3) The third level offers the customer the opportunity to share information, such as account balances or transaction details. (4) The highest level identified allows the customer to process information. For example, the customer can process transfers of funds between accounts or can make bill payments. There are a number of claims that the Internet will become a vital source of consumer information (for example, Van Raaij, 1998; Ainscough and Luckett, 1996; Evans and 69

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Fontana, 1993). Rogers (1995) proposes that the adoption process is heavily influenced by word-of-mouth; therefore, it was appropriate to utilise group discussion to explore the extremes of views expressed, the interaction between these views and the consensus achieved. In this way focus groups add more depth and provide more breadth of information than an individual interview (Morgan, 1997). Two focus groups, each comprising six young adults, were conducted. Group 1 comprised five females/two males, and group 2 comprised two females/five males. Participants were recruited from the population of Business Studies students at the University of Edinburgh. The questionnaire survey in the quantitative phase (outlined below) was also administered to a convenience sample of students from the same population. An advantage of recruiting from the population of Business Studies students is the degree of group homogeneity. According to Knodel (1993), it is preferable that participants share key characteristics and identify with one another’s experiences. While the focus on students does not make this study representative of all Internet users, students are nevertheless a population of research interest. Students form part of the 16-24-year-old age group that comprises the largest group of Internet users in the UK (Office for National Statistics, 2001b). Moen and Walker (1999) note that young adult online information-seeking behaviour is an overlooked area of research. They argue that, as young adults gravitate towards the Internet as a primary source of information, research is needed to explore and identify informationseeking behaviours. The importance of the student segment to financial services has also been noted (Lewis and Bingham, 1991). The focus group discussions were transcribed and analysed according to grounded theory. The analysis followed eight key stages: (1) The data were searched for themes relating to the basic research issue. (2) Codes were developed for categories and sub-categories of the research issue and themes. (3) Using Nudist*4, the data cases were indexed according to the codes developed.

Wurster, 1997; Rust et al., 1996), because it has the potential to reduce the inefficiencies caused by buyer search costs. It has also been argued that the Internet has the potential to ‘‘redress the knowledge balance’’ by delivering a more educated consumer (Mackintosh, 1997). The assumption is that consumers find the Internet a convenient and effective source of information. A review of empirical research into consumer attitudes and experiences of online information provision has revealed that there is a need for research into this area. As a result of the relative novelty of the Internet only a few empirical studies thus far have examined its use for marketing purposes (Mathur et al., 1999). Ratchford et al. (2001) note the absence of research into the choice of the Internet as an information source and state that only three papers are closely related to this topic (Alba et al., 1997; Bakos, 1997; Lynch and Ariely, 2000). Limitations of current studies on the effectiveness of financial services Web sites are that they focus on transaction capabilities rather than information provision (for example, Joseph et al., 1999; Jun and Cai, 2001; Sathye, 1999) or employ evaluative criteria that have not been generated by users (for example, Polatoglu and Ekin, 2001; Mols, 1998; Jayawardhena and Foley, 2000). The research contained in this paper explores how consumers evaluate financial services Web sites, investigating in particular consumer expectations and perceptions of retail bank Web sites as an information source.

Research methods Data were collected in two stages: (1) qualitative; and (2) quantitative. Qualitative phase The purpose of the qualitative phase was to gain insight into how consumers value and evaluate the Internet as a source of information. The qualitative data collection instrument chosen was the focus group. This technique provides ‘‘data on group interaction, on realities defined in a group context, and on interpretations of events that reflect group input’’ (Frey and 70

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(4) The data were examined for consistency and accuracy with regard to the coding schema. (5) Coding refinements were made where necessary. (6) Interpretations were made. (7) Explanations were formulated of the phenomena involved. (8) Finally, the whole process was reflected upon to ensure validity and reliability.

Table I Summarised evaluative criteria derived from the focus groups Characteristic Evaluative criteria Accessibility

Quick to download Is available in branches via a special terminal Site has a site map Site has a search engine Availability Site has details of security arrangements for banking online Site has details of how many bank branches there are Site has details of locations of branches Site has details of current interest rates being offered Site has details of competitors’ interest rates Site has details of special packages available for students Site has details of overdraft facilities Site has details of bank charges Site has details of when bank charges apply Site has details of how to pay money in Site has details of how to transfer money between accounts Site has details of foreign exchange rates Site has details of commission charged for foreign exchange Interactivity Site has a frequently asked questions page Site has the facility to send in questions by e-mail Site has contact details for complaints Site has the facility to order brochures and more detailed information online Dynamism Site has daily updates Site has all banking needs included in menu options Site has sufficient information to decide to purchase a service without getting more information from elsewhere Multimedia Site has an online tutor to explain how to use the Web site friendliness Site has flashy graphics Site has a requirement to register before supplying information Site links to other Web sites such as Which? and other consumer organisations Site is easy to use Site has pop-up windows

The data analysis resulted in a set of evaluative criteria, grounded in the experience of users of bank Web sites, that could be explored further in a quantitative study. The criteria derived from the focus groups can be summarised according to Ainscough and Luckett’s (1996) five categories: accessibility, availability, interactivity, dynamism, and multimedia friendliness (shown in Table I). While it would have been desirable to conduct more focus groups, presentation of the findings in this way shows that the responses elicited from the two groups conducted noted the key issues previously identified in the literature. It is not possible to comment on the extra information that might have been obtained from additional groups, although it would appear that that there has been no loss of information compared with previous research. Quantitative phase For the quantitative phase, a questionnaire was developed containing the 30 statements derived from the evaluative criteria outlined in Table I. The aim of the quantitative survey was to measure the relative importance of the evaluative criteria and identify the extent to which gaps exist in terms of the kind of information people expect bank Web sites to offer and what they perceive is actually offered. Respondents were asked to indicate on a five-point Likert scale the extent to which they agreed or disagreed that they would expect these features to be present on a bank Web site that was excellent in terms of information provision. They were then asked to indicate their perceptions of current bank Web sites as a source of general information, again using the same 30 statements and five-point Likert scale, thus allowing the gaps between perceptions and expectations to be measured.

Source: adapted from Ainscough and Luckett (1996)

The research instrument was informed by the SERVQUAL method, which is based on the ‘‘expectancy-disconfirmation’’ model. The ‘‘expectancy-disconfirmation’’ model was chosen, as it uses the consumer perspective to evaluate performance. The model posits that consumers form beliefs based on prior experience with the product or service and/or communications about the product or service that imply a certain level of quality (Van Raaij, 1991). Consumer satisfaction (or 71

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information (in terms of both customers and products). The least important attributes are the bottom three items shown in Table II, and relate to the requirement to register before being supplied information, flashy graphics, and pop-up windows. These attributes contribute to the technological entertainment value of the Web site, and generally attracted criticism in the focus groups for being timewasting and intrusive. This suggests that decision-making convenience is more important than the technological capabilities of the site and is consistent with the findings of Raman and Leckenby (1998), which concluded that utilitarian aspects of Web site design are valued more highly by users than hedonic features. The requirement of consumers to register their details before being supplied information may be perceived as a barrier inhibiting easy access to information. However, responses to this variable were fairly evenly divided with 45.5 per cent either agreeing or strongly agreeing and 40.4 per cent either disagreeing or strongly disagreeing. While some individuals may find the provision of personal details an invasion of privacy, findings from the focus groups indicated that some participants felt that supplying personal information was a form of payment for free information online. This is consistent with research by Gordon and De Lima-Turner (1997) which found that consumers perceive the supplying of personal information as a fair trade-off for being shown targeted advertisements. The findings could suggest some interesting segmentation issues worthy of further investigation. None of the variables was consistently valued below 3, indicating that respondents did not wish to reject any feature. This finding is consistent with the suggestion made by Bruce (1999) that the hype characterising the Internet as a ‘‘superhighway’’ increases expectations of information quality: in this instance there is perhaps an expectation that an excellent bank Web site should not exclude any listed feature, although some features clearly are valued more than others.

dissatisfaction) is influenced by these prior expectations such that, when a product or service fails to meet these expectations dissatisfaction occurs and, when it exceeds expectations, satisfaction occurs. SERVQUAL is a well-established method of measuring the difference between expectations and perceptions and reflects the methodology used by Bruce (1999) within the information science discipline. SERVQUAL is also appropriate, since information provision is increasingly viewed as a core component of a product or service offering (Freiden et al., 1998). It has been argued that information provision is a fundamental component of financial services (Knight et al., 1999; Ennew et al., 1995). The questionnaires were distributed to a convenience sample of 297 students, comprising both users and non-users of retail bank Web sites. A total of 253 usable questionnaires were returned, giving a response rate of 85 per cent. The number of respondents who had previously visited a bank Web site totalled 100. The results presented in this paper are based on the sub-sample of 100 respondents who had prior experience of a bank Web site and whose perceptions were based on actual experience.

Analysis and findings Web site visitor expectations The data were examined in terms of the modal class, the median and the mean. Since ‘‘strongly agree’’ had the highest numerical value (5), ranking the data by mean scores clearly identifies the attributes respondents most expected to be a feature of an excellent bank Web site. Table II shows that the top two attributes expected to be present are ease of use and the provision of security details for online banking. Details of special packages for students and details of bank charges were ranked equally in third place, and the two attributes jointly occupying the fourth place are the ability to be quick to download and the provision of current interest rates. Thus, it would appear that respondents expect an excellent bank Web site to offer both accessible and targeted 72

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Table II Expectations ranked by mean score Expectation Be easy to use Have details of security arrangements for banking online Have details of special packages available for students Have details of bank charges Be quick to download Have details of current interest rates being offered Have details of how to transfer money between accounts Have details of when bank charges apply Have the facility to send in questions by e-mail Have details of overdraft facilities Have contact details for complaints Have details of how to pay money in Have all banking needs included in menu options Have a search engine Have a search map Have daily updates Have details of competitors’ interest rates Have the facility to order brochures and more detailed information online Have details of commission charged for foreign exchange Have details of foreign exchange rates Have sufficient information to decide to purchase a service without getting more information from elsewhere Have details of branch locations Have a frequently asked questions page Be available in branches via a special terminal Have links to other Web sites such as Which? and other consumer organisations Have an online tutor to explain how to use the Web site Have details of how many bank branches there are Have a requirement to register before supplying information Have flashy graphics Have pop-up windows

Mean

Median

Mode

Standard deviation

4.77 4.63 4.57 4.57 4.53 4.53 4.51 4.48 4.48 4.42 4.39 4.32 4.27 4.22 4.18 4.17 4.15 4.12 4.09 4.07

5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00

5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 5.00 5.00 4.00 4.00 4.00

0.59 0.63 0.63 0.63 0.65 0.58 0.66 0.71 0.68 0.66 0.84 0.83 0.83 0.96 0.78 0.95 0.97 0.75 0.86 0.89

4.06 3.97 3.76 3.49

4.00 4.00 4.00 4.00

4.00 4.00 4.00 4.00

0.83 0.91 1.15 0.99

3.38 3.35 3.25 3.15 3.05 2.99

3.00 3.00 3.00 3.00 3.00 3.00

3.00 3.00 3.00 5.00 3.00 3.00

1.07 1.06 1.12 1.50 0.86 1.15

In terms of the items at the bottom of the list, respondents generally perceived the following attributes to be less prevalent: . links to other useful sites; . the ability to make a decision based solely on the information provided by the Web site; . details of competitor rates; . links to branches; and . an online tutor to help use the Web site.

Web site visitor perceptions Compared with expectations, consumers’ perceptions of retail bank Web sites as a source of information show some interesting differences (see Table III). For example, the top five attributes respondents perceived were available consisted of: details of security arrangements, current interest rates, the requirement to register before being supplied information, ease of use, and the ability to send in e-mails to the bank. These can be classed as features that are provider-driven. Thus, respondents generally perceived that basic account and price information was provided and that the Web site was easy to use.

These can be classed as features that are consumer-driven. Hence, there seemed to be the perception that bank Web sites are generally less effective at providing consumers with 73

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Table III Perceptions ranked by mean score Perception Have details of security arrangements for banking online Have details of current interest rates being offered Have a requirement to register before supplying information Are easy to use Have the facility to send in questions by e-mail Have details of how to pay money in Have a site map Have details of overdraft facilities Have a search engine Have details of how to transfer money between accounts Have contact details for complaints Have a frequently asked questions page Have details of bank charges Have details of special packages available for students Have the facility to order brochures and more detailed information online Have pop-up windows Have all banking needs included in menu options Have details of when bank charges apply Have details of foreign exchange rates Have details of how many bank branches there are Have details of branch locations Have daily updates Are quick to download Have flashy graphics Have details of commission charged for foreign exchange Have links to other Web sites such as Which? and other consumer organisations Have sufficient information to decide to purchase a service without getting more information from elsewhere Have details of competitors’ interest rates Are available in branches via a special terminal Have an online tutor to explain how to use the Web site

Mean

Median

Mode

Standard deviation

3.90 3.73 3.67 3.67 3.60 3.58 3.57 3.50 3.45 3.43 3.41 3.41 3.39 3.33 3.31 3.29 3.27 3.23 3.22 3.21 3.20 3.19 3.18 3.12 3.06

4.00 4.00 4.00 4.00 4.00 4.00 4.00 3.50 4.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

4.00 4.00 5.00 4.00 3.00 4.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 4.00 3.00

0.97 1.00 1.15 0.97 1.10 0.99 0.90 0.94 1.18 1.03 1.02 1.08 1.07 1.05 0.99 0.93 0.97 1.05 0.98 1.04 0.97 1.01 1.02 1.12 0.89

2.94

3.00

3.00

0.91

2.93 2.85 2.83 2.48

3.00 3.00 3.00 3.00

3.00 3.00 3.00 3.00

0.93 1.08 1.00 0.96

scores were similar or correlated and the significance of the difference between the means at 95 per cent confidence (Bryman and Cramer, 2001). The results of this analysis are presented in Table IV. Variables are ranked in order of the extent to which expectations exceed perceptions; this means that those items at the top of the list are potential sources of dissatisfaction according to the SERVQUAL model (Parasuraman et al., 1988). Variables with a gap greater than 1 generally relate to usability, utility and sufficiency of the Web site as an information source. Usability functions include speed of download and ease

broader information (outside that which is specific to the company and its products perhaps) that might enable consumers to make informed purchase decisions. Gaps between Web site visitor perceptions and expectations The final stage of the analysis explored the gaps between expectations and perceptions. The intention was to identify the areas where expectations exceeded perceptions. The perception mean score was subtracted from the expectation mean score. Following this, a paired sample t-test was performed for each variable to determine the extent to which the 74

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Table IV Comparison of mean scores for expectation and perception ranked by mean gap

Expectations-perceptions Be quick to download Have details of competitors’ interest rates Have details of when bank charges apply Have details of special packages available for students Have details of bank charges Have sufficient information to decide to purchase a service without getting more information from elsewhere Be easy to use Have details of how to transfer money between accounts Have details of commission charged for foreign exchange Have all banking needs included in menu options Have daily updates Have contact details for complaints Have details of overdraft facilities Have details of foreign exchange rates Have the facility to send in questions by e-mail Have an online tutor to explain how to use the Web site Have the facility to order brochures and more detailed information online Have details of current interest rates being offered Have details of branch locations Have details of how to pay money in Have a search engine Have details of security arrangements for banking online Be available in branches via a special terminal Have a site map Have links to other Web sites such as Which? and other consumer organisations Have a frequently asked questions page Have details of how many bank branches there are Have flashy graphics Have pop-up windows Have a requirement to register before supplying information

Paired differences Standard Gap deviation

Expectation mean

Perception mean

4.53 4.15 4.48 4.57 4.57

3.18 2.85 3.23 3.33 3.39

1.35 1.30 1.25 1.24 1.18

4.06 4.77 4.51 4.09 4.27 4.17 4.39 4.42 4.07 4.48 3.35

2.93 3.67 3.43 3.06 3.27 3.19 3.41 3.50 3.22 3.60 2.48

4.12 4.53 3.97 4.32 4.22 4.63 3.52 4.20 3.38 3.76 3.25 3.03 2.99 3.15

of use. In a study among online banking customers, Jun and Cai (2001) note that speed and ease of navigation are critical to the success of online banks and, in a more general context, Hoffman and Novak (1996) show that there is a significant correlation between download speed and user satisfaction. However, Jun and Cai (2001) argue there is an important distinction to be made between online systems quality and online service quality. Speed is dependent not only on the nature of the site content being downloaded but also on the computing hardware and method of connection being used

t

DF

Significance (two-tailed)

1.16 1.41 1.28 1.22 1.19

11.36 8.80 9.54 9.74 9.63

94 94 94 94 94

0.00 0.00 0.00 0.00 0.00

1.13 1.10 1.08 1.03 1.00 0.98 0.98 0.92 0.85 0.88 0.87

1.28 1.09 1.04 1.22 1.12 1.23 1.20 1.21 1.24 1.20 1.10

8.74 9.92 10.08 8.38 8.88 7.93 7.93 7.28 6.95 7.03 7.52

94 94 93 94 94 94 94 94 92 93 93

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

3.31 3.73 3.20 3.58 3.45 3.90 2.83 3.59

0.81 0.80 0.77 0.74 0.77 0.73 0.69 0.61

1.26 1.11 1.17 1.17 1.23 1.09 1.27 0.95

6.15 6.93 6.26 6.24 5.72 6.41 5.28 6.29

93 94 93 94 90 94 93 93

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2.94 3.41 3.21 3.12 3.29 3.67

0.44 0.35 0.04 –0.09 –0.30 –0.52

1.17 1.43 1.27 1.26 1.33 1.46

3.45 2.23 0.00 –0.66 –2.31 –3.78

92 94 93 93 94 92

0.00 0.03 1.00 0.51 0.02 0.00

to download information (Jayawardhena and Foley, 2000). Therefore, although these are areas where there are critical gaps between expectation and perception of provision, it is unclear to what extent responsibility for improvement rests with the financial institution or with the Internet user. Utility functions include details of interest rates, bank charges, student packages, transfer facilities and foreign exchange. This is information that consumers might use as both evaluative criteria for bank selection and for ongoing evaluation and education about the 75

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and targeted information, which is easy to use and quick to download. In addition, there appears to be an expectation that the online environment should seek to simplify financial decision making by facilitating the comparison of price information. Attributes that are not perceived as making a significant contribution towards excellence are the technical capabilities of the Web site, namely pop-up windows and flashy graphics. Overall, the perceptions of Web site users are that the usability, utility and sufficiency of bank Web sites for providing information generally do not match expectations. Significant gaps between expectation and perception were identified in terms of consumer decision-making convenience and usability. These findings are consistent with content analysis undertaken by Jayawardhena and Foley (2000), which found that bank Web sites are slow to download and that the quality of information provision is mixed. This study also found that perceptions matched or exceeded expectations for attributes that were not valued highly by respondents. It is suggested that these features are providing organisational benefits in the form of marketing information rather than adding value for the site visitor and the extensive utilisation of these interactive features appears to contribute to user dissatisfaction. Based on these findings, the following recommendations are made. In order to improve Web site usability, banks may wish to examine the navigational functions and compatibility of Web site software and hardware. Jun and Cai (2001) note that improvements in these areas will enable banks to increase the speed of online systems responses to customers’ input. However, measures to improve Web site usability may have limited success, since speed of download is also dependent on user software and method of connection. In order to manage expectations in these areas it may be necessary to inform users of the most desirable technical specifications. Alternatively, Sathye (1999) suggests that the problem could be handled by appropriate customer education. Understanding the impact of familiarity with the technology and user experience and competence would be of value in this context.

services being consumed. Research by Raman and Leckenby (1998) found that perceived usefulness has a strong and positive relationship with the duration of Web site visits and hence satisfaction. Sufficiency functions include having sufficient information to decide to purchase without going elsewhere and having all banking needs included in menu options. Pedersen and Nysveen (2001) note that it is a common belief that the Internet gives consumers access to more information and this is reflected in the metaphor of the Internet as an ‘‘Information superhighway’’, coined by Koelsch (1995). However, contrary to this popular conception it would appear that consumers perceive the information provided on bank Web sites to be limited. Muylle et al. (1999), in a study of online search behaviour, note that a major weakness of commercial Web sites is that they do not satisfy the search needs of the visiting user, since the information being sought is not available, not satisfying or not able to be located by the user. These observations appear to be borne out by the findings of this study.

Discussion and implications This paper has focused on consumer expectations and perceptions of bank Web sites as a source of information. At a time when many financial institutions are investing heavily in the Internet as a channel of distribution and communication, the research findings raise some important questions about the role of the Internet as an information source for financial services and a consumer decision-making aid. Black et al. (2001) note that it is the perceived attributes of an innovation that affect the rate at which it is adopted within a social system. However, despite the importance of consumer perception, Thornton and White (1999) argue that the introduction of new technologies is usually guided by management concerns for cost-effectiveness and economies of scale, while too often little is known about consumer concerns, motives and reactions. This study has found that consumers of online financial information expect accessible 76

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Utility and sufficiency functions could be improved by the inclusion of broader content that provides contextual information for consumers making decisions in an easy to access format. For example, research indicates that decision making is enhanced when information on alternative product attributes is presented in a matrix format to enable ease of comparison (Bettman and Zins, 1979). The provision of decision-making environments that reduce temporal and cognitive search costs through facilitating comparison could be an opportunity for service differentiation. To conclude, a focus group participant summarised his expectations about online information provision as follows: ‘‘Most importantly, bank Web sites should be functional, simple and easy to use’’.

References Ainscough, T.L. and Luckett, M.G. (1996), ‘‘The Internet for the rest of us: marketing on the World Wide Web’’, Journal of Consumer Marketing, Vol. 13 No. 2, pp. 36-47. Alba, J., Lynch, J., Weitz, B., Janiszewski, C., Lutz, R., Sawyer, A. and Wood, S. (1997), ‘‘Interactive home shopping: consumer, retailer and manufacturer incentives to participate in electronic marketplaces’’, Journal of Marketing, Vol. 61 No. 3, July, pp. 38-53. Ariely, D. (2000), ‘‘Controlling the information flow: effects on consumers’ decision making and preferences’’, Journal of Consumer Research, Vol. 27 No. 2, September, pp. 233-48. Bakos, J.Y. (1997), ‘‘Reducing buyer search costs: implications for electronic marketplaces’’, Management Science, Vol. 43 No. 12, pp. 1676-92. Banks, E. (2001), E-Finance: The Electronic Revolution in Financial Services, John Wiley & Sons, Chichester. Bettman, J.R. and Zins, M.A. (1979), ‘‘Information format and choice task effects in decision making’’, Journal of Consumer Research, Vol. 6 No. 2, pp. 141-53. Black, N.J., Lockett, A., Winklhofer, H. and Ennew, C. (2001), ‘‘The adoption of Internet financial services: a qualitative study’’, International Journal of Retail & Distribution Management, Vol. 29 No. 8, pp. 390-8. Breitenbach, C.S. and Van Doren, D.C. (1998), ‘‘Value-added marketing in the digital domain: enhancing the utility of the Internet’’, Journal of Consumer Marketing, Vol. 15 No. 6, pp. 558-75. Bruce, H. (1999), ‘‘Perceptions of the Internet: what people think when they search the Internet for information’’, Internet Research: Electronic Networking Applications and Policy, Vol. 9 No. 5, pp. 187-99. Brucks, M. (1985), ‘‘The effects of product class knowledge on information search behaviour’’, Journal of Consumer Research, Vol. 12 No. 1, June, pp. 1-16. Bryman, A. and Cramer, D. (2001), Quantitative Data Analysis, Routledge, Hove. Cunningham, S.M. (1967), ‘‘The major dimensions of perceived risk,’’ in Cox, D.F. (Ed.), Risk Taking and Information Handling in Consumer Behavior, Boston University Press, Boston, MA, pp. 102-8. Davies, M. (1996), ‘‘Image problems with financial services: some considerations for improvement’’, Management Decision, Vol. 34 No. 2, pp. 64-71. Department of Trade and Industry (1999), Modern Markets: Confident Consumers, The Stationery Office, London. Ennew, C., Watkins, T. and Wright, M. (1995), Marketing Financial Services, 2nd ed., Butterworth-Heinemann, Oxford. Evans, M.J., Moutinho, L. and Van Raaij, W.F. (2001), Applied Consumer Behaviour, Addison-Wesley, Harlow, pp. 86-107. Evans, P.B. and Wurster, T.S. (1997), ‘‘Strategy and the new economics of information’’, Harvard Business Review, Vol. 75, September-October, pp. 71-82. Freiden, J., Goldsmith, R., Takacs, S. and Hofacker, C. (1998), ‘‘Information as product: not goods, not

Suggestions for further research The findings from both the qualitative and quantitative phases of this study have raised as many questions as they have provided answers. Thus, there are opportunities for further research in this area. Two interesting avenues for further study are segmentation and participant observation. The focus on a narrowly defined segment of the population did not permit a segmentation analysis to be performed. Further research, taking into account a wider demographic sample, might investigate differences in both expectations and perceptions among sub-groups. Regarding the second issue, this study has relied predominantly on individuals’ recall of their experiences of using bank Web sites to access information and remote recounting of experiences (via either a focus group or self-completion questionnaire). It would be interesting and appropriate in this context to investigate the same issues using participant observation. Such a study would allow the behaviour of individuals to be observed in the setting as well as allow their attitudes and perceptions to be recorded. Furthermore, it would provide an insight into the processual view, contrasting with the ‘‘snapshot’’ view provided by questionnaires. 77

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Note from the publisher

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Emerald papers go through a further post-publication ‘‘review’’, which assesses them on readability, originality, implications for further research and practice. We publish this information, and it can be used as a search criterion, on the Emerald database. . In 2002 we were judged as providing best customer support by the scholarly library publication The Charleston Advisor. . We provide high levels of dissemination of our authors’ work – nearly 1 million papers per month are downloaded and read by subscribers to the Emerald online portfolio. . In 2004 we will be introducing an online submission and peer review system which will speed up the publication process. (3) Internationality. We operate in a transnational world of scholarly ideas and we believe that this should be reflected within our publications. Working with our authors, we set targets for international representation of authors and editorial team members, and measure against them: . In the past six months we have published more than 50 themed issues with a specific international focus. . In the first half of 2003, papers from 60 different countries were published. (4) An interdisciplinary approach. We set targets and ask for papers and special issues on interdisciplinary approaches, and new/ emergent themes. This gives us better, stronger, and more vibrant journals, and a clear leadership position in our industry: . In the first half of 2003 we published more than 20 themed issues dealing with interdisciplinary approaches to a subject or industry. . We encourage themed issues on leading edge and innovative research topics, and in the past six months published 35 such issues. (5) Supporting scholarly research: The Literati Club. We help remove the barriers to publication. We conduct workshops for researchers on publishing issues. We provide help and advice to new researchers. .

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During 2003 Emerald developed its corporate publishing philosophy. We did this through discussion with readers, contributors and editors and we would like to share it with you. We believe that our approach to quality makes us different and unique amongst scholarly publishers. It is based on six core principles, which together form our distinctive philosophy: (1) We put quality at the centre of our approach to scholarly publishing. All papers published by Emerald go through a quality-assured peer review system; in many cases this takes the form of double-blind peer review. All papers published by Emerald are expected to make, in some way, an explicit original contribution to the existing body of knowledge. All papers published by Emerald are accessible to a wide range of students, scholars and practitioners in the fields in which we publish. All papers published by Emerald are beneficial in some way; to researchers; practitioners, or both: . In 2001 we were audited and certified as ‘‘Committed to excellence’’, following a European Foundation for Quality Management self-assessment exercise. . We retained our status as an ISO 9000certified organisation, and our Investors in People certification. . More than 30 Emerald journals are listed in the ISI Citation Index. (2) Continuous improvement of reader, author and customer experience. We continue to invest in enabling technology to increase efficiency and effectiveness in content provision, customer service and management. We benchmark against others and against our own standards. We are as clear as possible in our policies, measures, targets and achievements and we do not hide shortfalls, but confront and learn from them: 80

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papers accepted at nine academic and other conferences, and supported six academic conferences world-wide. (6) Integration of theory and practice. We ask editors and review board members to focus where applicable on application, and beneficial implication for practice. We do so because this gives a clear message to our core supplier and consumer markets – the applied researcher, the reflective practitioner, the students of business and their teachers, the business and management school: . All of our journals will publish a majority of papers that have a direct application to the world of work. . More than 1,000 university libraries world-wide subscribe to the Emerald portfolio, including 97 per cent of the Financial Times Top 100 Business Schools. John Peters Director of Author Relations, Emerald

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