The Yin and Yang of Electronic Commerce

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The Yin and Yang of Electronic Commerce
D. Geller - June 8, 2002

Problem: The barrage of new products and technologies on one hand, complex - and frequently unrelated - business requirements on the other.

Solution: Develop a consistent language and model for E-Commerce and its effects on the company.

Value: A model provides a framework for categorizing requirements, seeing commonalities, and predicting organizational impact of any specific project.

This Note: Identifies the major corporate functions that engage in E-Commerce activities and the kinds of information flows that result from E-Commerce activities.

What is E-Commerce? Today, it's almost better to ask, What isn't E-Commerce? Pervasive and problematic, E-Commerce penetrates into every corner of the modern business - with good reason. It promises reduced costs, higher margins, more efficient operations and higher profits. Who could fail to embrace it?

But embracing it doesn't mean we always know what it is. Remember the fable of the blind scholars encountering an elephant? One grasps the tail; he says, "This is very like a rope." Another, feeling the leg, opines "This is very like a tree." The third, by the trunk, thinks she's found a snake. What the story doesn't tell is that the third scholar has always wanted a pet snake, and takes the elephant home. "I never knew a snake could eat so much, or make such a big mess," she told her friends.

Bringing E-Commerce into an organization is a bigger step than it usually appears. All the complexities of selecting a new technology apply, but by the way it slashes through departments and communication channels E-Commerce tends to take on a life of its own. Even with well-understood applications, where the vendor products are stable and the alternatives are easy to evaluate, E-Commerce may have unexpected side effects because of what it promises. "Our company home page (or product catalog, or procurement application) is just great, but wouldn't it be better if we could pass the data to Corporate Communications (or Market Analysis or Resource Planning) as soon as we get it?" It's not the tie-ins to other divisions and applications that make E-Commerce like the pachyderm in the story - it's the expectation that everything can be brought to a browser now!

There's no simple answer to the "What is" question. Something along the lines of

E-commerce is the collection of tools and practices involving Internet technologies that allow a company to create, maintain and optimize business relations with consumers and other businesses

will do well enough. But we have to drill deeper to understand both the promise and the pitfalls.

Figure 1 is a picture of E-Commerce that captures many of the issues and complexities. It shows the information flow between a business and a customer. The model is not limited to consumer commerce, however. Here's where the Yin and Yang come in. In Daoist philosophy, the Yin and Yang symbol represents the two different forces within the life force, which pervades everything in the universe. Neither can exist without the other. The parallel for E-Commerce isn't that customers and providers are complementary. Rather, it's that in E-Commerce each party can be either, and is sometimes both at the same time. The web is a marketplace in which, largely because of advertising and the tracking of behavior and identity, each party has something to sell. The model in Figure 1 reflects this by showing the view at two different levels. To see both partners at the same level, place a two-sided mirror going from top to bottom at the middle of the figure. The left gives a surface-level view of the transactions, while the right exposes the anatomy.

There are two useful ways to use Figure 1 as a guide to E-Commerce: Focus on the components or focus on the data flows. We'll do each, briefly. The components are the functional pieces of the business. Of course, each business is different, and any business is more complex that Figure 1 indicates. We've simply identified some basic functions at a high level, to indicate the ways that E-Commerce and its information flows affect the divisions of a business.

Web Management: This grouping is responsible for creating the web pages. It typically has artistic, editorial and software responsibilities. To put up the very first web page, one as simple as a blurb about the company's product offerings, will require artists to do the design, editorial people to convert the text produced by Marketing into web format, and software people to create a web infrastructure. Even if they don't form a single administrative unit, these people will function as a team. Note that we've left out the operational component. While obviously critical to the success of any E-Commerce initiative, and often working closely with this team, we prefer to place the Web Operations function with the "Back Office" component.

Strategic Customer Relationship: Sales and Marketing here represent not so much the specific divisions of the company as the complementary functions of creating relationships and creating transactions. For example, Corporate Communications may have a direct hand in creating material that describes the company, but to the extent that the purpose of such material is to help build and cement a relationship we consider it here as a marketing function.

Note that we've identified Advertisers as a separate function. Despite the continual predictions of the collapse of Internet, advertising as a revenue source, continues to be an important source of revenue, and the relationship with advertisers is one that typically exists only because of E-Commerce. (A significant exception coming with some media operations, typically magazine publishers). Advertisers are placed behind the Strategic Customer Relationship function because their interactions with the web site are typically mediated through this group. In some cases all of a site's revenues are derived from advertising, which may then be the tail that wags the dog.

Customer Service: Like Web Management, the departmental location of this function is less important than its unique nature. Its uniqueness reflects its dual role as a technical help desk and the first line of customer relation management. It has strong ties to Web Management, Strategic Customer Relationship and Operations, but its function is separate from each.

Back Office: Certainly not a single function, but grouped together in this chart to reflect that its functions are typically the furthest from the web boundary. We mean this in the sense that, for example, the data representing web sales will be in a concise form by the time it gets to the Back Office Finance function; actual transactions are handled automatically, and Finance will be dealing with summary reports from the website and from the external payments processor. However, some Back Office functions may have more direct relationship to the web; HR, as an example, may receive rsums via E-mail or a web form.

It's tempting to ask about the many ways in which the real "Back Office" participates in E-Commerce. Should we have placed an information flow going rightward from the Back Office to represent MRO or other procurement activities, now becoming important areas of web commerce? We think not, because when the company is seeking vendors or making purchases over the web it belongs on the left side of Figure 1. In that scenario, the Purchasing Department is just some other company's web customer.

For the purposes of Figure 1, and for E-Commerce in general, the salient feature of any function is the way it generates, transforms, and absorbs information. Figure 1 calls out more than three dozen-information flows, and we can't examine each one in detail here. We will present a glossary of the types of information shown in Figure 1. (Note that Table 1 presents the information flows in a different format, which makes it easier to see how far each travels and what kinds of information touch each function. We'll look at these information types from the point of view of the customer, because this makes for a more concise definition.

Figure 1.

Inputs (to the Customer)

  • Ads: Ads placed on the site by advertisers or departments of the company. They are typically in fixed positions and separated visually from the "actual content" of the page.

  • Blurb: General material about the company. This will be frequently found in sections with names like "About Us," "Press Releases," and "Contact Us."

  • Branded Content: Information that is part of the company's stock in trade. The clearest example is intellectual property (like this report).

  • Catalog Information: Any information devoted specifically to the sales function, such as an "Our Products" or "Where to Buy" section or full product listings.

  • Messaging: Start with E-mail, but add Fax and Voice over IP, although at present the most significant is E-mail.. E-mail can serve a number of purposes, from a personalized newsletter with company information to a response from Customer Service. While quite drab compared to the glitz of E-Commerce, E-Commerce without E-mail would be as handicapped as a surgeon without her operating room nurse. Many kinds of information can be delivered by E-mail or through the browser, but the experience and technology are significantly different in the two cases.

  • Service: Information from Customer Service, such as technical tips, Frequently Asked Question lists, or individual responses.

  • Software: Software as an information flow may represent a product, a data file, a plug-in or even a Blurb. Its unique mode of delivery (over the web) and production (by Web Development) make it worth treating as a special class.

  • Transaction Data: This represents any formal feedback to the customer about commercial interactions with the company. It ranges from order acknowledgement to a consumer after a purchase to a detailed accounting report displayed on-screen to a business-to-business partner.

Outputs (From the Customer)

  • Behavior: This represents information about how people travel through the website. It includes such typical traffic analysis data as what pages are visited and how many clickthroughs an ad may have received, as well as more detailed path traces.

  • Messaging: As above, internet messages sent by the customer may carry almost any of the information types.

  • Payments: This represents financial transactions, such as the name, credit card number and expiration date that are required for a credit card purchase.

  • Personal Data: Any kind of personal data not directly related to payments. The most common consumer example is registration data required before the customer can use some features of a site. In a business-to-business case one example is contact information.

  • Selections: The product selections made by the customer.

  • Solicited Data: Non-personal information that is provided explicitly by the customer. Two examples are requests for information or service that might be entered through a form on the site, or responses to a survey form.

Given the size and impact of E-commerce, you know that a scheme like this won't be the last word. Despite its inevitable imperfections, it is a useful tool for gauging your plans for E-commerce and their likely effects on the organization.

Table 1: Data Flows in e-commerce
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  Ads Blurb Branded Content Messaging Catalog Info Service Software Transaction Data
Web Management                
Strategic Customer Relations                
Customer Service                
Back Office                

  Behavior Messaging Payments Personal Data Selections Solicited Data
Web Management            
Strategic Custome Relations            
Customer Service            
Back Office            
Inputs and Outputs are from the point of view of the customer
Darker cells indicate that the E-commerce business function engages in the indicated information transfer with the customer.

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