Lecture 28

Electronic Business (MGT-485)

Recap – Lecture 27

• E-Business Strategy: Evaluation– The Evaluation Process– Organizational Control and Evaluation– Financial Evaluation

Contents to Cover Today

• E-Business Strategy: Evaluation– Technology Evaluation– Human Resource Evaluation– Website Evaluation – Business Model Evaluation – E-Business Strategy Evaluation

Technology evaluation

• Technology is one of the key drivers of e-business so it is important for organizations to understand their current position regarding the stage of technology adoption and what can be achieved from it.

• There are various different levels of e-business applications and organizations will adopt those that help achieve their objectives within the constraints of finance and skills.

• Most organizations start with general information on a website then progress to having an internet presence.

• The next stage is the development of distinct value-adding services for customers followed by the integration of systems for supporting communications and transactions with customers, suppliers and partners.

Technology evaluation

• The final, most technologically demanding, stage is the development and use of technology for collaboration with suppliers and partners.

• The key to a successful IT strategy is for managers to understand exactly what technology is required for helping the organization achieve its objectives.

• Other technological factors will also feature in the evaluation process including connectivity rates among customers, suppliers and partners, access to broadband and compatibility of systems used by organizations and customers in different parts of the globe.

Technology evaluation

• The evaluation of technology includes the assessment of the quality and capabilities of technology prior to investment, and an evaluation of the performance of the technology once it has been implemented.

• The main factors comprising an evaluation process for computer hardware include:– Capability – Cost – Reliability – Obsolescence – Scalability – Risk

Technology evaluation: Capability

• The capability of computer hardware will determine the scope of use that it is put to.

• Capability includes speed, capacity and throughput.

• An e-business has to evaluate what speed and capacity is required for the volume of business and the types of business it expects to handle over a given period of time.

Technology evaluation: Cost

• The cost of acquiring and installing the technology influences the decision about what type of technology is appropriate within the set IT budget.

• The cost of installation also includes the likely disruption during the changeover from the old to the new system.

• The cost of putting into operation and maintaining the hardware forms part of the evaluation of its performance.

• A set standard of performance relative to cost projections will determine the cost effectiveness of the chosen hardware.

• This informs future decisions on choice of hardware.

Technology evaluation:Reliability

• The performance of the hardware is constantly monitored and any malfunctions noted.

• The information relayed to managers will include the number of malfunctions, the type of malfunctions and the time factor relating to resolving the problem.

• Managers will set a minimum threshold for reliability and take action to replace the hardware should it fall below the threshold.

• Managers need to be satisfied that the problem lies with the hardware and not with the people who operate it.

Technology evaluation: Obsolescence

• The rate of technological advance in computing hardware could represent a cost to organizations if the suite of current computers becomes obsolete or outdated relative to those used by competitors.

• When evaluating the performance of the technological infrastructure managers have to account for the longevity of current stock and the rate of obsolescence over given periods of time.

• This will be closely linked to the types of activities carried out within the organization and the reliance on technology to carry out those activities.

Technology evaluation: Scalability

• As firms experience growth so the demands on technology increase.

• Vendors of IT systems will normally guarantee scalability to set levels as part of the sales agreement.

• Scalability and reliability are linked and form important measures of technological performance in organizations that seek to achieve growth and competitive advantage.

Technology evaluation:Risk

• Technology is the cornerstone of e-business and plays a pivotal role in determining how successful organisations will be.

• The greater the benefits of installing a new technology infrastructure the greater will be the associated risks.

• An e-business may seek competitive advantage by investing and installing the very latest technology nfrastructure.

• Managers need to weigh the benefits of being first to roll out a more efficient system against the risks of malfunction, installation or usability.

Technology evaluation

• Organizations can reduce risk by installing new technology incrementally.

• Increasingly, organizations are taking advantage of the convergence of technology and the integration of systems to cut costs and improve efficiency.

• The convergence of technology links voice, data, mobile and video, and Internet Protocol (IP) sets an industry standard for facilitating communications across different media.

• The investment in new systems to take advantage of convergence and integration would constitute a high risk for many organizations but the risk of losing out may be even higher.

• Evaluating software uses similar criteria to evaluating hardware.• Capability, cost, reliability and compatibility are as relevant to

software evaluation as they are to evaluating hardware.

Technology evaluation:• Factors that have to form part of the evaluation process both

before and after investment in software include:– Quality: The software has to be free of viruses, have security

mechanisms built in to prevent improper use and be free of errors in the program code

– Efficiency: The software should be a well-developed system of program codes and it should not take up excessive memory, capacity or disc space

– Flexibility: The software should be able to process all e-business demands placed on it without requiring major modification

– Connectivity: The software should be Web-enabled for access to internets, intranets and extranets;

– Language: The software must be written in a language that is familiar to IT developers in-house;

– Documentation: The software must be well documented and include items such as help screens, reports, forms and data entry screens.

Technology evaluation:

• The evaluation of technology, both before and after the investment decision, is an important element in determining an e-business strategy.

• Since many of the activities that take place in an e-business are reliant on technology, the choice and implementation of specific systems play key roles in determining the success of the organization.

• Consequently, evaluation of the performance of technology is a continuous process, as is the testing of new technologies before committing to investment.

• Before deciding on such an important investment, organizations have to ensure that costs and risks are controlled and that training of staff, or the recruitment of new staff, is in place to ensure immediate usability of the new technology.

Human Resource Evaluation

• One of the most commonly cited reasons managers put forward for adopting e-business are the cost savings that can be derived from reducing the number of people employed.

• E-business applications can process many jobs that were previously undertaken by humans.

• Many firms who have engaged in e-business seek to employ fewer, but more specialized, workers.

• The development of network organizations and virtual organizations means that firms can cast their net much wider to attract and recruit suitably skilled staff.

Human Resource Evaluation

• The evaluation of human resources in e-business is undertaken at four different levels. That are:– The evaluation of human resources policy;– The evaluation of the recruitment process in

attracting and retaining key skills;– The evaluation of human resource performance

against set targets;– The evaluation of feedback from human resources.

Human Resource Evaluation: Evaluating human resources policy and planning

• Every organization has to develop and implement a human resources policy.

• The policy will incorporate the overriding criteria that determine the type of skills and experience the organization needs to attract, the reward system, the training and staff development process and the system for monitoring, assessing and appraising staff performance.

• There are wide differences in approach to determining the types of skills and experience required.

• Much depends on the objectives of the organization, the products or services produced and the strategy that is put in place to achieve organizational objectives.

Human Resource Evaluation: Evaluating human resources policy and planning

• The type of skills and experience sought by firms in e-business may cover specialist activities including:– Web design: design web structure, graphics and navigation– Web developer: initiates web-based projects, programming– Webmaster: managing and developing the website using web

technology– Computer technician: solves computer problems and ensures hardware

and software reliability– Online marketer: manage online marketing and promotional campaigns– Network manager: controls and co-ordinates staff across the network

organization– Project manager: develops, controls and manages the delegation of

projects to teams of workers– Logistics manager: manages the electronic control of inbound and

outbound logistics.

Human Resource Evaluation: Evaluating human resources policy and planning

• In modern e-business working environments the reward system is likely to go well beyond simple financial reward for time spent in the office.

• Rewards will reflect innovation, creativity and contributions to developing new products and services and ways of improving internal efficiency.

• This may include promotion, peer acceptance, greater autonomy in work scheduling or greater decision-making powers.

• The evaluation of human resources also entails reflecting on how closely matched the actual human resources performance is to the forecasts for human resource needs.

• Human resource needs form part of human resource planning.

Human Resource Evaluation: Evaluating the recruitment process

• An e-business has to be able to attract and retain skilled staff who possess the correct qualifications and experience to add value to the organization and help achieve the stated objectives.

• The aim of the recruitment process is to find the right people for the right job. – First, the process begins with a job analysis where all relevant

information on the tasks, duties and responsibilities is gathered and interpreted.

– This is followed by the compilation of a job description that summarizes the specific tasks, duties and responsibilities.

– Lastly, the job description details the knowledge, skills, qualifications and experience required to perform the tasks, duties and responsibilities to a satisfactory standard.

Human Resource Evaluation: Evaluating human resource performance• All staff should add value to the organization and be

prepared to use their skills, experience and expertise to contribute to the organization achieving stated objectives.

• The rigor to which performance appraisal is undertaken varies between different types of organizations

• It is important to put in place a formal appraisal system so that set standards are widely known, employees understand the benchmark performance expected and managers can observe when performance falls below standard and take action.

• Information systems have opened up the possibility of constant monitoring of performance in many work tasks.

Website Evaluation• In e-business it is the website that generates interest from

customers and drives the business model. • The design and application of the website is of vital

importance to organisations engaged in e-business and e-commerce. – The first step in developing an effective website is to ensure the

design is attractive to browsers. The design has to capture the attention of users.

– Secondly, the website has to be easily navigated. Internet users will quickly move on if they are unable to work their way around the website quickly and efficiently.

– Thirdly, the website has to offer fast access to information required by internet users.

– Finally, the website needs to offer 24-hour access and security.

Website Evaluation• Website Performance Indicators

– The number of ‘hits’ on the website by potential customers– The length of time the potential customer stayed with the website– Which types of products or services were viewed by potential

customers– The navigation of the website, whether one-stop or multiple browsing– The number of ‘hits’ transformed into actual sales– The value of sales made– The types of products and services sold– The number of repeat customers– The characteristics of customers – age, gender, employment, location,

etc.– Comparisons between website performance indicators in one time

period set against another similar time period.

Business Model Evaluation• The performance of the business model will be continuously

monitored and evaluated.• One of the purposes of creating a business model is to

generate revenue so that the e-business can survive and grow. • An e-business will set targets for income generation over a set

period of time and compare it with actual income received.• Even though the business model may not generate much

income in the short term, managers in e-business must remain true to their convictions and not abandon the business model too early.

• Unless an e-business has first-mover or other market advantages it can take some time for e-business models to generate income.

E-Business Strategy Evaluation• The final part of evaluation should focus on the longer-term aspirations of

the e-business. • An evaluation of e-business strategy should determine whether or not the

organization is heading in the right direction to achieve stated objectives. • However, there are a number of factors that make evaluating an e-business

strategy distinct from evaluating the strategy of traditional firms that includes:– The need for a full understanding of the capabilities and attributes of the internet

when applied to business functions;– The need to change the internet architecture in order to measure relevant criteria– The need to clearly define business processes as a distinct e-business activity– The need to recognize that workgroups do not operate in isolation, but have to

recognize their impact on other groups within a network organization– The need to recognize that the impact of the internet extends beyond the internal

environment.

E-Business Strategy Evaluation• If the e-business is nearing, or is at the final phase of

a strategy cycle then analysis will focus on where the organization is positioned relative to where they intended to be.

• The analysis should reveal:– Where the organization is currently positioned– Where the organization can be positioned given current

resources and capabilities– The benefits of adopting different levels of e-business– The position that the organization should aspire to– The practical steps for implementing a new strategy to

achieve competitive advantage.

E-Business Strategy Evaluation• The evaluation of the performance of an e-business strategy

will focus on the extent to which it achieves stated long-term objectives.

• Some examples of strategic objectives include:– Targets for increasing market share (either overall or in a market

segment)– Becoming the technological leader in the industry sector (e.g.

Apple’s strategy for technological leadership in browser applications)– Acquiring the best skills (Microsoft maintain their competitive

advantage partly through their ability to attract key workers with key skills)

– Setting profit targets (the phase of existing on investor goodwill has passed and now more and more e-businesses set specific annual profit targets)

E-Business Strategy Evaluation• Managers have to address a number of key issues relating to

the evaluation of strategy that include:– The extent to which existing strategies achieve desired outcomes– The effectiveness to which the strategies were executed– The effectiveness to which the strategies were communicated to all

parties– The accuracy of the internal and external analysis– The extent of managerial commitment to the chosen strategy– The depth to which alternative strategies were analyzed– The extent to which results were monitored, recorded and analyzed– The level of proper diagnosis of trends– The level of consistency between strategic choice and its

implementation– The extent to which the strategy was properly resourced.

Summary

• E-Business Strategy: Evaluation– Technology Evaluation– Human Resource Evaluation– Website Evaluation – Business Model Evaluation – E-Business Strategy Evaluation