b2band Ict

Chapter 8

THE REAL VALUE OF B2B: FROMCOMMERCE TOWARDS INTERACTIONAND KNOWLEDGE SHARING

Mohanbir Sawhney

a

and Eleonora Di Maria

b

a

Kellogg Graduate School of Management, Northwestern University, Leverone Hall, 2001Sheridan Road, Evanston, IL 60208-2001;

b

TeDIS Center, Venice International University, Island of S. Servolo, 30100 Venice, Italy

Abstract

The paper analyzes the evolution of business-to-business e-commerce(B2B) and outlines the emerging framework for business networkswhere interactive relations between firms are empowered by ICT. Therise and decline of B2B have highlighted the weaknesses of its hypothe-ses, focused on the benefits for firms to gain in efficiency through elec-tronic transactions (Transaction cost theory). The economic and finan-cial problemsin which B2Bmarketplaces occurred have stressedthe dif-ficulties of their transaction-based business models, while the low valueof e-commerce over the years can be explained in terms of firms’ in-difference in using electronic networks as new commercial channels.Instead, such emphasis on emerging technology solutions, mainly basedon the Web, to connect firms with its customers, suppliers and partnersincreases firm’s opportunities of interaction within its value chain. Froma knowledge-based perspective, firms are discovering a completely dif-ferent scenario and new drivers for their competitiveness, based on arenovated use of ICT to manage distributed business processes. Oppo-site to the e-commerce value proposition focused on spot efficiency of electric transactions, firms refer to ICT to enhance their established net-works of business-to-business relationships.

1. INTRODUCTION

Certainly, e-commerce was put at the core of the new economy paradigm,as the ﬂag of the deep transformation driven by network technologies that wassupposed to open a completely new economic era. Speciﬁcally, opposite tobusiness-to-consumer, analysts stressed how the real opportunities in terms of value generation based on ICT should have risen from business-to-business

186 Chapter 8

e-commerce (B2B) (AMR Research, 2004, Lief, 1999a, 1999b). However, aswe all know, the rise and decline of B2B have highlighted the weaknesses of its hypotheses, focused on the benefits for firms to gain in efficiency throughelectronic transactions.The enhancement of connectivity between enterprises has led to tremen-dous business model innovation in business-to-business e-commerce. B2B e-commerce has gone through several generations of business models evolution,from Electronic Data Interchange (EDI) to e-commerce to e-marketplaces toincumbent-sponsored consortia (Kaplan and Sawhney, 2000; Phillips, Meekeret al., 2000; Kalakota, Oliva, and Donath, 1999). However, the economic andfinancial problems in which marketplaces occurred have stressed the diffi-culties of their transaction-based business models, while the low value of e-commerce over the years can be explained in terms of firms’ indifference inusing electronic networks as new commercial channels (Day, Fein, and Rup-persberger, 2003).On the contrary, the emphasis on technology solutions mainly based onthe Web to connect firms with its customers, suppliers and partners increasesfirm’s opportunities of interaction within its value chain (e.g. Sawhney andZabin, 2001). From a knowledge-based perspective, firms are discovering acompletely different scenario and new drivers for their competitiveness, basedon a renovated use of ICT to manage distributed business processes (e.g. Non-aka, 1994; Davenport and Prusak, 1998). Opposite to the e-commerce valueproposition focused on spot efficiency of electric transactions, firms refer toICT to enhance their established networks of business-to-business relation-ships. While on the one hand, firms stress the inadequacy of e-commercetechnology solutions to manage their business processes and products intoelectronic environment (i.e. fashion industry), on the other hand, firms findinteresting chances in using ICT for interactive marketing and supply chaincollaboration.The paper analyzes the evolution of business-to-business e-commerce(B2B) and outlines the emerging framework for business networks where in-teractive relations between firms are empowered by ICT. We draw on Trans-action Cost Theory, marketing channel theory, and the theory of networkedorganizations to delineate key evolutionary themes in B2B e-commerce. Wepropose that B2B e-commerce is evolving from transactions to collaboration,and from pure channel forms to hybrid channel forms. We propose that en-terprises will gradually evolve their connectivity with suppliers and tradingpartners into robust networks anchored by the enterprise as the hub, and con-nected to trading partners through shared business processes. We outline thestructure, the scope, and the governance issues that arise in the formation of such networks. We also offer perspectives on where value may migrate and thenew value extraction points that might emerge in the new scenario.

The Real Value of B2B 187

2. KNOWLEDGE ECONOMY, NETWORK OF FIRMSAND THE CRISIS OF THE

NEWECONOMY

As we know, the

new economy

has not maintained its promises of extraor-dinary economic growth and value generation that everybody expected to see just few years ago. Following the gains in business-to-business e-commerce,players at all levels—suppliers, manufacturers, customers, sales networks,etc.—should have been able to achieve interesting portions of the value cre-ated by the use of Information and Communication Technologies in economicprocesses (Merrill Lynch, 2000; Kelly, 1998; Schwartz, 1999).The paper intends to explore the reasons for such a huge failure in expec-tations through an analysis of the hypotheses at the basis of B2B. Speciﬁcally,the idea proposed in this paper regards the fact that most of the mistakes in thatvision were related to weak assumptions on the relationship between ICT andthe economic sphere in B2B. Shifting the focus from the transaction to a widerperspective of processes at the basis of value generation offers a better com-prehension of the real dynamics of the knowledge economy designed by ICT,where value lies in networks (e.g. Sawhney and Parikh, 2001; Gulati, Nohria,and Zaheer, 2000).

2.1. Transaction vs. Knowledge Focus?

Firms’competitive advantage can be enhanced dramatically by informationtechnology, by transforming business activities and potentialities remarkably(Venkatraman, 1994). In particular, we refer to the development of informa-tion and communication technology as worldwide network technologies ableto stock, elaborate, diffuse information (information functions) and to supportpeople communication and interaction at distance (communication functions)rapidly and economically. Speciﬁcally, the Internet as a global open network is changing social and economic relationships in a relevant way. From an elec-tronic network that enables social interaction as in the case of virtual commu-nities, these technology infrastructures are becoming more and more strategicsupports for business processes.In the

new economy

, the most common way to look at the impact of ICTon firms and economic process was suggested by the prevalent theoretical ap-proach of transaction costs (Williamson, 1985; Malone, Yates, and Benjamin,1989; Bakos, 1997). According to such perspective, in fact, studies focusedtheir attention on transactions and on the need for their cost reductions, andby this, many scholars emphasized the relevant advantages in the efficient al-location of resources brought to firms by electronic markets. Such new mech-anisms of transaction management based on electronic solutions should in-crease players’ benefits in managing exchanges with respect to more limited“old markets” in terms of time and space.

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