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A TCI Book Review

Opening Digital Markets - Battle Plans and Business Strategies for Internet Commerce

Walid Mougayar
McGraw-Hill, New York, 1998

"Internet commerce is clearly becoming an imperative for the internetworked enterprise. It can be characterized as an evolution of international trade. From a technology perspective, the Internet is the catalyst for yet another new computing paradigm: Internet computing (also referred to as network-centric computing or internetworked computing). The marriage of the Internet with electronic commerce represents the cutting edge in business today.

ŠEvery firm that wants to stay in business beyond the turn of the century should be reevaluating its strategy and operations [in light of the potential for Internet commerce], from customer service to marketing to product development to merchandising, logistics and distribution." (p.8)

Walid Mougayar is the Canadian representative of CommerceNet, an industry association devoted to "accelerating the transformation of the Internet into a viable open marketplace" (p. 102). His book is about how businesses should be thinking about Internet commerce (which Mougayar also refers to as electronic commerce) in order to stay competitive for the future. A key point that he makes in this regard is that organizations cannot simply regard the Internet as merely another medium through which to make financial transactions. Rather, they must see the Internet as a strategic vehicle for the manipulation of digital data that is associated with financial transactions, and that creates additional value for the customer. Viewed this way, the Internet fundamentally transforms the nature of the transaction - and puts us into an entirely new era in supplier-consumer relationships.

Mougayar identifies several issues as being important at this still relatively early stage in the emergence of electronic commerce. In the first four chapters of the book he gives a very comprehensive overview of the current state-of-the-art (as of spring, 1998) in the field of Internet commerce. He describes in detail the technologies, initiatives, and industry associations and strategies that are being mounted to prepare the world for Internet commerce. In summary, the major factors that he identifies are:

  • the convergence of technologies which is making new and more efficient capabilities possible in the transaction between buyer and seller
  • the emergence of new intermediaries and other businesses between providers of services and the seller: these are new businesses, not in existence a few years ago, that are replacing the old intermediaries - examples would include multimedia content delivery companies such as Build-a-Card which enable the user to create greeting cards in cyberspace and deliver them instantly
  • the developing legal and regulatory framework, which includes issues such as the lack of standards and consistent rules and policies, uncertainties regarding the treatment of custom duties and taxes across international boundaries, etc.
  • the behavioral response of consumers,,in terms of concerns about security, privacy, fraud, hype and exaggerated promises, and a host of other uncertainties regarding the safety of doing business electronically

the behavioral response of companies, which includes issues such as lack of awareness of what is now possible and what will be possible in the near term, lack of an understanding of the strategic advantages of electronic commerce, and lack of a coordinated approach to dealing with Internet commerce implementation

Some of these issues, such as the convergence of technologies, are pushers and drivers, impelling us sooner rather than later to embrace the world of electronic commerce. Some, on the other hand, are barriers, such as the level of suspicion and coolness towards Internet commerce that can be seen in many consumers, which mat inhibit to some extent the acceptance and adoption of Internet commerce.

Even though there are drivers and blockers at work at the present time, Mougayar leaves little doubt that there is no avoiding Internet commerce in the future, and that wise companies will begin planning immediately for a world where electronic commerce is routine. This brings us to the second part of the book (chapters five through eleven) where he presents a strategic approach for a company to become involved in electronic commerce.

First, he notes that it is important that a company have a complete perception of exactly what the Internet is, and the roles that it can play in electronic commerce. He outlines the multidimensional nature of the Internet as having five distinct aspects, which are:

  1. a network - with proper security, the Internet can function as a network of suppliers, customers, intermediaries, regulators - all of the parties that potentially need to get together to make a transaction (or develop a product or service)
  2. a medium - this view of the Internet sees it as another advertising and promotional medium, carrying messages to the marketplace
  3. a market - this view sees the Internet as the marketplace itself, a coming-together of hundreds of millions of potential consumers
  4. a transaction platform - this view sees the Internet as the vehicle through which financial transactions (and other exchanges) are made
  5. an applications development platform - finally, this perspective sees the Internet as a 'skunkworks', enabling products as services to be trialed and perfected
"The Internet has five multiple identities, and each one must be taken advantage of by developing and applying a different strategy. It is important to understand and accept the unique potential of each one, as a sign of Internet organizational maturity. The synergistic effect realized by addressing all five faces of this identity enables organizations to take maximum advantage of electronic commerce capabilities. Successful large organizations are addressing every one of the five identities." (p. 83) With this multidimensional perspective firmly in mind, Mougayar then proceeds to outline a 10-step strategy for firms to follow in pursuing Internet commerce (or, as he puts it, to reach 'cybermaturity'). These are:
  1. conduct necessary education
  2. review current distribution and supply chain models
  3. understand what your customers and partners expect from the Internet
  4. reevaluate the nature of your products and services
  5. give a new role to your human resources department (to establish the systems, procedures and protocols needed for electronic commerce)
  6. extend your current systems to the outside
  7. track new competitors and market shares in the new digital marketplace
  8. develop a web-centric marketing strategy
  9. participate in the creation and development of new virtual marketplaces and intermediaries
  10. instill a management style that understands the synergies and the differences in dealing with electronic markets in addition to traditional markets
Each of these steps is further detailed, with expected outcomes at the conclusion of each specified, in Chapter 7 of the book. Chapter 9 also discusses IT strategies to incorporate electronic commerce into the orgnization.

Chapter 8 of the book is particularly interesting from a marketing perspective. Entitled 'The Wired Consumer', this chapter discusses among other things the emerging needs that are being demonstrated by consumers, and to which electronic commerce will have to respond. There are nine consumer needs and demands that Mougayar identifies, which are:

  1. the need for customers to be able to serve themselves
  2. the need for efficient access to information and relevant data
  3. the need for Internet commerce to facilitate bidding (possibly using software agents representing the buyer, which are 'empowered' to make specific bids for products or services, up to a certain amount, on their behalf)
  4. the demand for 'information appliances' which will be plugged into the Internet (such as the PC wallet and the Web-telephone)
  5. the demand for virtual reality experiences
  6. the need for on-line customer detail and transaction history
  7. the need for universally available and accepted payment instruments
  8. the need for suppliers to be able to handle microtransactions (that is, transactions with a value of only a few cents' (or fraction thereof)
  9. the need for new casting capabilities (e.g. such as webcasting, which will combine the Web and television, or pointcasting, which will direct highly specific tailored content to an individual)
Appendix A of the book outlines the emerging digital payment options that are currently in use or are being developed: digital cash, smart cards, encrypted credit cards, electronic checks and Internet financial EDI (electronic data interchange). All of these are vehicles for possible commercial exchange that we will undoubtedly be seeing more of in future.

Opening Digital Markets is a very rich book, full of insights and examples, in a very fast-moving field.





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