254 Innovation and B2B E-Commerce the B2B enthusiasts over-emphasise the extent to which corporate purchasing is about buying commodities or highly standardised products for which price is the only salient variable. We sought data from supplier organisations about the nature of their sales on two dimensions: First, the degree to which their output was commoditised — in the sense that the goods or services provided were VWDQGDUG³RIIWKHVKHOI´LWHPVRUEHVSRNHIRUD particular customer’s needs. Second, we asked about the extent to which buyers play a role in the VSHFL¿FDWLRQRIWKHLURZQUHTXLUHPHQWV,QVRPH cases, buyers spell out exactly what they want; in RWKHUVWKHVHOOHUVSHFL¿HVWKHVROXWLRQDFFRUGLQJ to an assessment of the buyer’s needs; in many cases, the exchange requires a process of dialogue between the buyer and seller. Much of what has been written about B2B e-commerce has assumed a particular model of inter-company trade, em- SKDVLVLQJVWDQGDUGL]HGSURGXFWVVSHFL¿HGE\WKH customers (e.g., from an online catalogue). From WKHVXSSO\LQJ¿UPVZKRUHVSRQGHGWRWKHHPDLO questionnaire in this study, this amounted to less WKDQRIVDOHV7KLVLVDVLJQL¿FDQW¿QGLQJDV it indicates that (if the result were indicative of the general case) more than 80% of B2B trade is not amenable to the impersonal, price-oriented, online catalogue mechanisms which have been one of the key archetypal images of B2B. Firms also differ from each other by supplying differ- ent combinations of goods, services, and works. 7KH¿UPVLQWKHHPDLOVXUYH\SURYLGHGDJRRG mix here, with 60% providing goods alone or in some combination with works and services, and the remainder selling some combination of works DQGVHUYLFHV2IWKH¿UPVWKDWVROGJRRGVWKUHH quarters sell them as part of a more complex pack- age involving more intangible elements. Again, much of the discussion about B2B has thought RQ O\LQWHUPVRIVLPSOH³SURG XFWV´EXWWKHUH DO LW \ is far more complex. Buying: Use of the Internet We asked organisations about the use of the Inter- net in the purchasing process and found extensive use, especially in terms of seeking information from suppliers’ Web pages (see Figure 5). 7HOHSKRQHLQWHUYLHZVFRQ¿UPHGWKDWUHVSRQ- GHQWVLQWHUSUHWHGWKHWHUP³RQOLQHPDUNHWSODFHV´ very broadly — and organisations often view distributors in these terms. Also, it seems that a crucial role of suppliers’ Web pages is simply providing further contact data — postal addresses DQGWHOHSKRQHQXPEHUV7KH³RWKHULQIR´UHVSRQVH LQFOXGHVXVLQJVWDQGDUGVHDUFKHQJLQHVWR¿QG for example, press coverage on a supplier. This mundane but valuable facility transpired to main current impact of the Internet on the procurement IXQFWLRQDQGLVDVLJQL¿FDQWREVHUYDWLRQRQO\LQ as much as that it falls considerably short from WKHLGHDRID³FORVHO\FRXSOHGVXSSO\FKDLQ´RUD ³YLUWXDOFRPPXQLW\´,QRXUFDVHVWXGLHVZHQRWHG WKDWWKHRSSRUWXQLW\IRU³¿QGLQJQHZVXSSOLHUV´ did not seem to excite much enthusiasm amongst the organisations; the Internet could make getting information slightly faster, but was not perceived by the case participants as being fundamentally different from using the Yellow Pages. This is an D S S D U H QWO\P X Q G D Q H EXWVL J Q L ¿ F D QW¿ QG L Q JPX F K of the early excitement about the role of the Internet was based around a notion that it would reduce search costs (see Bakos, 1991). This appears not to be much of an issue — or, if it is, there is only marginal advantage in a marketplace system over a simple Google ™ search. Buying: Inter-Organisational Systems Although the B2B hype emphasises the electronic linking of organisations’ procurement systems to their suppliers’ systems, we found that only half of W K H V X SSO\ L Q J ¿ U P V K D G F R P SXWHU L VHGSXUFKDVL Q J 255 Innovation and B2B E-Commerce systems, with the same proportion having cen- tralised purchasing systems (see Figure 6). 7KHVH¿QGLQJVDUHLQWHUHVWLQJLQWKDWLWVXJ- gests that for smaller organisations at least, the idea of inter-linked systems along the supply chain is likely to remain something of a fantasy without considerable innovation in both informa- tion technology and business practice amongst PDQ\¿UPV7KLVLVQRWWRVD\WKDWWKLVFDQQRWRU ZLOO QRW KDSSHQ KRZHYHU ZHUH WKHVH ¿QGLQJV to be representative, it would appear that there is a major task of supplier development ahead IRUWKRVH¿UPVZKLFKZLVKWRFDVFDGHLQWHJUDWHG supply chain practices. Figure 6. Purchasing organisation and methods Figure 5. Purchasers’ use of the Internet 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Internet - Supplier Web Pages Internet - Online Directories Internet - Other Info Online Marketplaces None of the Above (n = 167 for this question) Percentage of Responding Firms 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Computerised Purchasing System Centralised Purchasing Department Formal Tendering Procedures (n = 165 for this question) Percentage of Responding Firms 256 Innovation and B2B E-Commerce Buying: Purchasing Measurement and Control Much of the enthusiasm for e-procurement has focused on the enormous scope for reducing the costs of purchasing bureaucracy and transactions processing. Rather than go through an internal SXUFKDVLQJGHSDUWPHQW³XVHUV´FDQRUGHUZKDW they need from their desktop, with automatic bud- JHWFRQWUROVNHHSLQJVSHQGLQJZLWKLQSUHGH¿QHG limits: Many B2B enthusiasts have predicted the demise of purchasing departments as a result. While not denying the great potential for these types of savings, this study points to some LPSRUWDQWTXDOL¿FDWLRQV7KLVLVEHFDXVHWKHUHLV more to purchasing than transaction processing. First, effective procurement requires higher-level, strategic management in regard to external issues — such as supplier development, collaboration on business processes, and supply policy. In other words, there is much more to good purchasing WKDQVLPSO\¿QGLQJWKHORZHVWSULFH6HFRQG there are more complex internal issues than simple budgetary controls — a prime function of procurement systems is the control of fraud, and, in the public sector in particular, organisations’ procurement systems are constrained by a complex regulatory framework. So while e-procurement FDQ\LHOGVLJQL¿FDQWVDYLQJVRQHOHPHQWVRIWKH procurement process, it does not do away with the need for specialist procurement staff with real purchasing expertise. These considerations of organisation and structure lead to the questions of measurement. The participants in our study all struggled with quantifying both the performance of purchasing and in determining reliable costs for the purchas- ing process itself. This issue has two important consequences for the adoption of e-procurement and B2B. First, without effective metrics of how well a purchasing process is performing, the appeal of using Internet-based innovation to reduce costs is rather blunted. Indeed, for managers in some of the organisations in this study, the key motivation was to ensure compliance with a system of bu- reaucratic controls rather than a hunger to reduce expenditure. This seems a particular issue if an organisation’s culture rewards risk aversion; we found organisations where purchasing managers’ principal goals seemed to be to stop things going wrong and to maintain a steady equilibrium. In such organisations, mechanisms of measurement and reward work against dynamic innovation in procurement systems. Second, in other types of organisations, the measurement of purchasing works to give a misleading focus on short-term savings. In some organisations, the dazzle of dramatic savings in headline prices achieved by B2B innovation (for example, online reverse auctions) has mesmerized ¿UPVLQWRIRUJHWWLQJ WKDW WKHLPSRUWDQW FRVWLV the total cost of acquisition and ownership. The SKHQRPHQRQRIVXSSOLHUV³ORZEDOOLQJ´WRZLQD contract, then working hard to claw back their margin by, for example, raising post-contract complexities, is well known and understood by procurement professionals. Equally, costs as- sociated with delivery, quality, warranties, and post-sale support can easily dominate the initial purchase price. It appears, however, that in some organisations it has become politically convenient to brush aside these concerns and focus on im- pressive sounding reductions in headline prices. In such cases, there is a clear risk that such an DSSURDFKPD\EDFN¿UHLQWKHORQJHUWHUP Selling: Communication and Customer Relationships B2B has often been presented as though it is all about purchasing. But is essential to understand the other side of the coin — how it affects selling organisations. We asked suppliers about various aspects of their relationships with customers (see Figure 7). Although only roughly one-third used elec- tronic links such as EDI, the use of e-mail was 257 Innovation and B2B E-Commerce very widespread. E-mail is clearly a dominant DVSHFWRI¿UPV¶XVHRIWKH,QWHUQHWEXWLWLVXVH- ful at this point in the discussion to consider the H D U O LHU¿ Q G L Q J U HJD UG L Q JW KHSRRU T X D O L W \ RIH PDLO addresses. It seems fair to say that although the ¿UPVLQRXUVWXG\DUHODUJHO\UHOLDQWRQHOHFWURQLF communications, there are many examples where the process of managing these communications LV UDWKHU DPDWHXULVK DQG VSHFL¿FDOO\ ZKHUH the organisational infrastructure for managing these systems are underdeveloped. (It is worth noting that in the author’s own institution, there are cases of administrators continuing to use e-mail addresses to send and receive messages from accounts labeled after long-departed col- OHDJXHVSXEOLVKHG³FRQWDFW´HPDLODGGUHVVHV are often personalised; and there are few mana- gerial systems for systematically managing the ³¿OLQJ´RI HPDLOV(OHFWURQLFFRPPXQLFDWLRQ ²IRUDOOLWVEHQH¿WV²EULQJVZLWKLWDQHHGIRU an administrative infrastructure, and associated investment and training. Selling: Use of Web Sites 7KHXVHRI,QWHUQHWSDJHVIRUVHOOLQJ¿UPVYDU- LHG FRQVLGHUDEO\ ZLWK PDQ\ ¿UPV XVLQJ WKH opportunity for both information and handling queries. Far fewer organisations used the Web sites for transactional purposes — and for many the mechanism for handling orders was merely the provision of an e-mail address for the sales department (see Figure 8). The study highlighted the various roles that the Internet might play in the sales and market- LQJ VWUDWHJLHVRI VXSSO\LQJ ¿UPV 0XFKRI WKH B2B literature presents a very passive role for suppliers — their role reduced to supplying com- moditised goods and participating in price-driven DXFWLRQV RU PHUHO\ SURYLGLQJ WKH IXO¿OPHQW of orders placed through online catalogues. In contrast, we found that organisations have vari- ous proactive approaches to using the Internet. Our case studies included a small manufacturer of specialist architectural electrical equipment, Figure 7. Customer relationships 0% 20% 40% 60% 80% 100% EDI with any of your Customers Other ELECTRONIC LINKS with any of your Customers "PARTNERING" with any of your Customers E- MARKETPLACE Membership (for sales) REGULAR Email contact with Customers Don't Know/N/A CUSTOMERS (n = 140 for this question) Percentage of Responding Firms 258 Innovation and B2B E-Commerce who made considerable use of the Internet as a marketing intelligence tool — a member of the marketing team systematically trawled the Web for news relating to suitable building projects in NH\RYHUVHDVPDUNHWV)RUWKLV¿UPWKHFUXFLDO PDUNHWLQJDFWLYLW\ZDVZRUNLQJZLWKWKH³VSHFL- ¿HUV´UDWKHUWKDQWKHLPPHGLDWHFXVWRPHUVDQGWR avoid any type of marketing which presented their products as commodities, or easily comparable to competitors’ products. In this case, the use of online catalogues was not at all a priority, as this would be entirely out of step with its relationship marketing philosophy. Impact on Buyer-Seller Relationships A key question for B2B e-commerce is its effect on the power balance in supply relationships. Figures 9 and 10 indicate some interesting contradictions LQSDUWLFLSDQWV¶SHUVSHFWLYHV³+LJK´DQG³/RZ Impact” here refer to participants’ expectation of the impact of the Internet on customer rela- WLRQVKLSVLQWKHQH[W¿YH\HDUV³'RQ¶W.QRZV´ DQG³1RW$SSOLFDEOHV´DUHQRWLQFOXGHGRQWKHVH graphs). An interesting contrast here is that a large group of respondents expect their suppliers’ prices to decline while the prices they charge to customers UHPDLQXQDIIHFWHG7KLVLPEDODQFHLVDOVRUHÀHFWHG LQWKHZD\LQZKLFK¿UPVYLHZHGWKHOLNHO\VKLIWV in power (see Figures 11 and 12). One interpretation of these data is that there is perhaps an unwarranted degree of optimism — and maybe even complacency — in the re- V S R QG L Q J ¿ U P V 7 K L V L QW U LJ X L Q JD QGFRQW U D G L F W RU \ ¿QGLQJHFKRHVSUHYLRXV¿QGLQJVUHJDUGLQJ¿UPV¶ views regarding the power consequences of supply chain integration and partnership relationships (see Burnes & New, 1996; New, 1998). Figure 8. Use of Web sites for selling 0% 10% 20% 30% 40% 50% 60% 70% 80% DETAILED information about the company (e.g. Financial data) PRICE information about the products/services you supply ON-LINE CATALOGUE for customers TECHNICAL information about the products/services you supply QUERIES by customers ORDERS by Customers NONE of the ABOVE NO Website Don't Know/N/A (n = 241 for this question) Percentage 259 Innovation and B2B E-Commerce Figure 9. Predicted effects on price changes to customers 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% UP DOWN NO CHANGE Expectations Percentage of Responding Firms Total (N=184) High Impact (N=83) Low Impact (N=101) Figure 10. Predicted effect on prices paid to suppliers 0% 10% 20% 30% 40% 50% 60% 70% 80% UP DOWN NO CHANGE Expectations Percentage of Responding Firm s Total (N=136) High Impact (N=67) Low Impact (N=69) 260 Innovation and B2B E-Commerce CONCLUSION This chapter has presented some of the data from a multi-method study into the reality of B2B e- commerce. Its general conclusions are to point toward a picture which is considerably at variance to the extraordinary hyperbole generated by the business media, consultants and some academics about the potential impact of B2B. Figure 12. Predicted effect on power position relative to suppliers Figure 11. Predicted effect on power position relative to customers 0% 10% 20% 30% 40% 50% 60% 70% MORE Powerful LESS Powerful No Change Expectations Percentage of Responding Firms Total (N=158) High Impact (N=75) Low Impact (N=83) 0% 10% 20% 30% 40% 50% 60% 70% MORE Powerful LESS Powerful No Change Expectations Percentage of Responding Firms Total (N=184) High Impact (N=86) Low Impact (N=96) 261 Innovation and B2B E-Commerce A key element of this picture is that much of the theorising about the potential impact of B2B has started from an inaccurate and deeply mislead- ing image of a) what organisational buying and selling is like, and b) the degree of sophistication RIPXFKRIWKHVXSSO\EDVH+HUHZHIRXQG¿UPV ZKRZHUHDFRQVLGHUDEOHGLVWDQFHIURP³VXSSO\ chain cybermastery” (Berger & Gattorna, 2001) DQGDSSHDUHGQRWWREH³VXUJLQJIRUZDUGRQWKH crest of the Internet wave” (Friedman & Blanshay, 2001, p. 2) and for whom the reality of B2B rela- tionships are more complex and richly textured than the rather Spartan and highly depersonalised images of the electronic marketplace. The boom and bust in B2B e-commerce could be accounted for by a number of explanatory stories. Day et al. (2003) focus on the idea of a competitive opportunity attracting many players, many of whom die in the rush. The fact that so many of the e-marketplaces have failed simply UHÀHFWVEUXWDOLW\RIWKH³ODQGJUDE´*RRGLGHDV attract much interest, and there is not enough gold to go around. An analogy could be that the innovations at the turn of the 20 th century that initially encouraged the founding of hundreds of car companies — but only a few can become Ford and GM. The story that emerges from the research de- scribed here is different. It suggests that the B2B hype was based on a fundamental misreading of the nature of inter-organisational buying and selling, and the rush was for fool’s gold. Many of the presumptions of the B2B model were not true, and, in consequence, innovators lost a great deal of money. From this wreckage, one might salvage a reminder of the idea that innovators have a duty to understand in detail the nature of the markets into which they wish to enter. These observations are clearly contingent on the degree to which the data gathered here is representative of other populations. However, the use of the triangulated approach in the broader research project has indicated to us that this line of inquiry is worth continuing. ACKNOWLEDGMENTS The author would like to acknowledge the sig- QL¿FDQWFRQWULEXWLRQVRI7RQ\0HDNLQ5XWK Southworth, and Mark Siddall, to this work, and WR $FKLOOHV*URXS /WG IRU ¿QDQFLDO DVVLVWDQFH Earlier versions of this work were presented at the EurOMA conference, Lake Como, in June 2003. REFERENCES AT Kearney (2001). Creating differentiated value networks: How companies can get real value out of e-markets. Chicago: AT Kearney. Bakos, J.Y. (1991). A strategic analysis of electronic marketplaces. MIS Quarterly, 15(1), 295-310. Bakos, J.Y. (1998). 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Dale (Eds.), Working in partnership: Best practice in cus- tomer-supplier relationships (pp. 9-20). Alder- shot: Gower. New, S.J. (2002). Understanding the e-mar- ketspace: Making sense of B2B. Saïd Business School, Oxford. Prigg, M. (2000, December 3). How sharing can change the way business works. Sunday Times Special Supplement, B2B: Collaborating with Partners in the Digital Economy, pp. 2-3. Raisch, W.R. (2001). The eMarketplace: Strate- gies for success in B2B eCommerce. New York: McGraw-Hill. Ramsdell, G. (2000). The real business of B2B. McKinsey Quarterly, 3, 174-185. Sculley, A.B., & Woods, W.W.A. (1999). B2B exchanges: The killer application in the busi- ness-to-business Internet revolution. Hamilton, Bermuda: ISI Books. Timmers, P. (2000). Electronic commerce: Strate- gies and models for business-to-business trading. Chichester, UK: Wiley. This work was previously published in Entrepreneurship and Innovations in E-Business: An Integrative Perspective, edited by F. Zhao, pp. 41-61, copyright 2006 by IGI Publishing (an imprint of IGI Global). 263 Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited. Chapter 1.18 The Business of Online Education Dirk Baldwin University of Wisconsin-Parkside, USA Bradley Piazza University of Wisconsin-Parkside, USA ABSTRACT Many observers have predicted a revolution due to online education. Opportunities exist to save money due to the lack of brick and mortar, and travel necessary to take classes in a traditional setting. Besides costs savings, several studies V KRZ W K D W R Q O L Q H H G X F DW LRQK D V VLJ Q L ¿ F D QWEHQH¿W V including support for self-paced learning and bet- ter discussion between learners and teachers. The opportunities for online learning have spurred growth in the business of online education. Entre- preneurs see opportunities for increased market share, while others perceive a threat. The design of an online program is not easy, however. This chapter summarizes pedagogical and business dimensions that must be addressed in order to develop an effective online educational program. The chapter also discusses tactics that will help organizations compete in the online education industry. THE BUSINESS OF ONLINE EDUCATION In a relatively early book regarding electronic com- merce (e-commerce), Choi, Stahl, and Whinston (1997) described e-commerce in terms of three dimensions: product, process, and agent. Each of these dimensions can take on a digital or physical form. Pure e-commerce, according to Choi et al., takes place when all three dimensions are digital. For example, purchasing downloadable music through the Internet is pure e-commerce because the search, purchase, delivery, and product are all digital. Because educational materials, such as lecture notes and exercises, can be found, stored, and delivered in digital form, it is not surpris- ing that several people predicted a revolution in education. In 1997, the management expert, Peter Drucker, stated (Gubernick & Ebeling, 1997, p. ³8QLYHUVLWLHVZRQ¶WVXUYLYH7KHIXWXUHLV outside the traditional campus, outside the tra- . 2) and for whom the reality of B2B rela- tionships are more complex and richly textured than the rather Spartan and highly depersonalised images of the electronic marketplace. The boom and. WKH opportunity for both information and handling queries. Far fewer organisations used the Web sites for transactional purposes — and for many the mechanism for handling orders was merely the. (2000). Electronic commerce: Strate- gies and models for business-to-business trading. Chichester, UK: Wiley. This work was previously published in Entrepreneurship and Innovations in E-Business: