Knowledge Management in EC

Abstract

In the present E-Commerce (EC) era Knowledge Management (KM) is fundamental to a company’s
success. Not only has the topic of KM attracted much research attention but the management of
customer knowledge is becoming increasingly important. Nevertheless, little research has been carried
out to see how KM is gained through EC and what a suitable framework is. Companies with EC
operations have the advantage of acquiring more detailed information about their customers; for that
reason they can gain valuable knowledge about their market. This paper will look at an analysis of how
KM is employed in EC sites through analysing the interactions between the Business and Consumer, and
between one consumer to another consumer. Hence customer knowledge management practices
utilised by many e-commerce sites will be investigated. The findings of the analysis can be used as best
practice by EC companies that are aspiring to complement their KM practices.

Introduction

Presently, many organisations have become conscious of the fact that in order to have a competitive
advantage, they primarily need to effectively manage and employ organisational knowledge that can be
exchanged or transferred on the Internet or Intranet without physical contact Pan et al (2001) and
Kocharekar (2002). In competitive environments such as EC, the way in which businesses learn from
past performances and manage knowledge makes an impact on future decisions. In addition to web-
based companies many traditional companies are also moving into the world of the Internet, but are not
performing well due to inflexibility and the inability to manage their customer and business processes as
stressed by Sugumaran (2002). The changes that are reshaping many businesses in the EC era requires
for a new effective and efficient method of discovering, capturing and sharing knowledge. Regardless of
the substantial increase in EC companies, not much research has been undertaken that investigates the
KM techniques functioning in EC which was mentioned by Nah et al (2002). EC sites currently are slow
to adopt KM practices and tools. Some web sites have implemented KM principles in their EC activities,
but they have applied KM principles unconsciously and implicitly hence are not benefiting fully from KM
research (Chen and Liou,2002). This brings about the question on how EC companies acquire, manage,
make use of and distribute knowledge over the Internet.

This research distinguishes KM mechanisms used by business-to-consumer (B2C) and consumer-to-

consumer (C2C) EC websites; furthermore suggestions to improve these mechanisms are discussed.
Consequently, the purpose of this paper is to investigate how we can bring consumer KM principles and
tools to enhance an EC environment.

Literature Review
This research draws from established theories from the areas of KM and EC. These areas are briefly
described in the following sections.

Knowledge Management

KM is the explicit and systematic management of vital knowledge and its associated processes of
creating, gathering, organising, diffusion, use and exploitation. It requires turning personal knowledge
into corporate knowledge that can be widely shared throughout an organisation and appropriately
applied as stressed by Johnson et al (2005, pg 133-136).

Allard and Holsapple (2002) state that KM is getting the right information to the right processors,
(whether computer or human) at the right time, and helping people create knowledge, share and act
upon information in ways that will benefit the performance of the organisation. To achieve this, a
systematic approach to identify and capture information and knowledge about a company’s processes is
required (Johnson et al, 2005, pg 133).

E-Commerce

E-Commerce is the buying and selling of goods and services on the internet, especially the World Wide
Web (Johnson et al, 2005, pg 29-30). However, definitions of EC in the literature are copious. It is clear
from the literature that there is a vital relationship between knowledge and EC. An analysis of these
definitions reveals that, while all the definitions are similar and not dominant over each other, five
apparent themes on the characteristics of EC do come forward as proposed by Allard and Holsapple
(2002).

▪ Firstly, EC sites focus on market-based activities, for example buying and selling through the use of
computer based technology, which is probably the most common outlook of what EC is.

▪ Information on the transaction is exchanged and traded almost as if it was the product itself.

▪ EC has an activity outlook that comprehends a range of business activities outside trading that are
fulfilled using technologies, for example, marketing activities, production activities, decision support,
research activities, trading activities etc.

▪ The goals, reasons and effects of EC are explored from the perspective of business strategy, planning,
evaluation etc.

▪ Finally EC is used as a technology to add value to the value chain model described by Porter (2004, pg
33-63).

E-Commerce Relationships
Nah et al (2002) state that EC activities include the formation and maintenance of online relationships
between an organisation and its customers, suppliers, partners, dealers and other agents related to (or
in the support of) traditional delivery channels , in ways that could not be supported in traditional retail
channels. These activities may be business-to-consumer (B2C), consumer-to-business (C2B), business-
to-business (B2B) or within a business, such as between employees through an Employee Intranet.
These activities can enhance the communication of knowledge through the organisation suing internal
technologies and between the organisation and members of its external elements using external
technologies.

B2C Interaction

Companies need to manage the knowledge that consumers have of the company and its brands through
channels of communication, getting the right information to the right people at the right time, in the
right format. The company should leverage consumer’s tacit knowledge of the company and also offer
additional knowledge to consumers e.g. lifestyle knowledge, through portals or partner sites.

C2B Interaction

What do consumers want or need? This is interacted possibly using FAQs databases, feedback forums
etc, which is then accessed by the business

C2C Interaction

This is an Interaction between individual customers through Communities of practice, discussion forums
etc.

Models on Knowledge Management

Schwartz et al (2000, pg 10-19) elaborated the Acquisition, Organisation and Distribution (AOD) Model
for the knowledge management. The AOD model views web-based knowledge management as dealing
with three distinct views: Acquire, Organise and finally distribute. The three elements of the model are
defined as follows:

Acquisition: how to collect knowledge from members of the organisation or other resources, and store
that knowledge in an organisational memory.

Organisational: Structuring, indexing and formatting the acquired knowledge.

Distribution: to get the relevant knowledge to the person who needs it at the right time.
When we deal with knowledge management in e-commerce, we must include both knowledge
acquisition and dissemination between companies and customers. In other words, the knowledge
crosses organisational boundaries.

A model that takes into consideration customer knowledge is the knowledge management research
model proposed by Nah et al (2002, pg 122) in Figure 1. This model comprises of three procedures:
knowledge acquisition, knowledge dissemination and knowledge sharing. This model is appropriate as
this paper focuses on knowledge management mechanisms on e-commerce sites. To be more specific,
knowledge dissemination can be directly observed from e-commerce sites, for example through ‘Search
Functions’, ‘Product Comparisons’ etc.

Sugumaran (2002, p68), stated that Knowledge Acquisition consisted of either identifying new
knowledge that needs to be gathered or creating knowledge that could be used by others within the
organisation. Any knowledge that is generated needs to be represented or stored in such a manner that
is readily accessible and usable by others.

In the perspective of this paper, knowledge dissemination refers to distributing knowledge to potential
customers, whereas knowledge acquisition refers to the acquirement of customer knowledge.
Knowledge Sharing enables the knowledge management participants (whether an employee or a
customer) to provide online knowledge to other peer participants. Nah et al (2002, pg 122) stressed
that knowledge sharing activities not only occur between the company and its customers, but also
amongst the customers themselves.

According to Chen and Liou (2002, pg 96), in an EC environment, the opportunities for capturing and
acquiring knowledge from customers are abundant and customers play a dominant role as an important
source of knowledge.

Knowledge Dissemination Mechanisms in E-Commerce

Successful e-commerce companies know how to distribute information in an effective way. They have
the ability to turn the available information into knowledge for existing and potential customers. A
study by Chen and Liou (2002) indicates that most websites have search functions, links to other
websites and e-mail reminders/alerts. Other methods of disseminating knowledge through e-commerce
include having, personalised product recommendations and educational information about products on
their websites, a product comparison function, listing of best-seller products and consumer
reviews/ratings of products. All of these functions mechanisms allow C2B or B2C interaction but now
C2C interaction is also equally important. McLean and Blackie (2004) stated that consumers value the
potential to communicate with each other. Customers use online communities based around shared
interests to exchange knowledge of products and services provided by companies. For customers
“consumer knowledge” is knowledge possessed by consumers. According to McLean and Blackie (2004),
on the Internet consumers are creating a knowledge sharing culture where stories are told, opinions
shared and advice given. This is why taking all this into consideration, the function of allowing a
consumer to e-mail the description of products to friends is equally important. This mechanism
encourages customers to recommend products and services to friends, which facilitates knowledge
dissemination to other potential customers. According to Nah et al (2002, pg 124) such referral
mechanisms are also a fairly effective way to acquire new customers.

Knowledge Acquisition Mechanisms in E-Commerce

Allard and Holsapple (2002, pg 21) state that Knowledge Acquisition necessitates the identification of
knowledge in the external environment and transforming it so that it can be utilized within the
organisation and Sugumaran (2002, pg 66) mentions that this process also includes the creation of new
knowledge. Also according to Sugumaran (2002), the knowledge acquisition process focuses on
determining the relevant product, process and knowledge needed to effectively carry out e-commerce
activities. The acquisition of this information is through monitoring the activities and information
exchanges between stakeholders. For example,, in the B2C market, the past history of customer
purchases from e-commerce sites can be analysed to create a profile of the customer, which may
include his or her buying habits, attributes of products purchased, general areas of interest etc. This
knowledge can subsequently be used to recommend similar products as well as cross-sell related
products.

Customer knowledge is actively acquired by e-commerce companies (Nah et al, 2002) and is
fundamental for effectively marketing their products. The study by Nah et al (2002) proves that almost
all e-commerce companies realise the importance of customer knowledge and attempt to classify and
implement mechanisms to acquire it.

Nah et al (2002) stated that the most direct approach to customer knowledge acquisition is through
membership/account sign-up. In this process the customer is asked to provide demographic or
psychographic information through structured forms and subsequently, the customer has the
opportunity to buy products, use restricted functions, like bulletin boards and online chatting etc. The
sign-up and customer account mechanisms present a subtle way of tracking online customer activities
and according to Nah et al (2002), is the most convenient and effective method of acquiring customer
knowledge. Other mechanisms on acquiring knowledge are wish lists, a ‘write to us’ function that allow
customers to submit feedback, a survey form, and consumer review/rating of product function which
simply allows customers to provide their opinions on products and services.

Knowledge Sharing Mechanisms in E-Commerce

Chen and Liou (2002, pg 96) mention that if people are accumulating knowledge or information then the
organisations will suffer. An organisation encouraging a culture of sharing this knowledge is critical upon
the success of knowledge management initiatives and the Knowledge management systems should be
designed to provide easy access to knowledge whilst security issues are still addressed.

Knowledge sharing mechanisms are fundamental as Wah (1999) stressed that, knowledge sharing is the
key issue concerning knowledge management initiatives and that it allows competitive advantage. This
is due to knowledge being difficult to replicate as emphasised by Johnson et al ( 2005, pg133-136).

Many e-commerce companies provide these advanced mechanisms to facilitate knowledge sharing,
which proposed by Nah et al (2002) include consumer message posting, expert message posting, online
chat amongst customers, online chat with experts, email postings and bulletin boards. These
knowledge sharing activities are not only amongst the company as an expert and the customer but also
between the customers themselves. These activities intend to enhance the presentation of the
company’s products and services, gather customer feedback and improve the customer service in an
interactive way. However, Nah et al (2002) proposed that the most significant function of knowledge
sharing is to create a virtual customer community, in which customers will be encouraged to come back
in the future. As there needs to be a substitute method of the social interactions you would usually find
in a face to face environment. A virtual environment provides customers a sense of belonging to people
hardly known by them and enriches their shopping experience.

How does this research Build Upon and Enhance Existing Literature?

Largely the existing literature on KM concentrates on how to manage, develop the collaboration and
disseminate organisational knowledge. Some researchers have looked at the basic framework to
enhance an EC environment whilst other researchers have explained why and how the convergence of
knowledge management and e-commerce has taken place. Principally, most of the existing KM research
focuses on how KM in EC provides competitive advantage to the organisation.

This research looks at KM mechanisms provided on EC websites and in this context, the type of
knowledge that exists is in electronic format, which is easier to control and manage than explicit
knowledge. Therefore, unlike a lot of previous research and investigations, this research does not
centre on how to make easier the progress of KM within an organisation but focuses on investigating the
principal methods of E-Commerce KM and the customer KM practices used by e-commerce sites.
I believe this is important as with e-commerce, there is no physical interaction between the business
and consumer. This is for the reason that in the EC context, there is a lack of social cues and interaction
between individuals in the world of the Internet, therefore there needs to be a means of acquiring
customer knowledge, which can be seen as the most important type of knowledge for any organisation.

Conclusions & Future Research

Managing knowledge is a challenging task facing organisations in today’s e-commerce area. The
knowledge management principles and tools in e-commerce environments have been identified in this
paper and Knowledge management is a principal driver of e-commerce. In order to provide a successful
online retailing experience, it is essential to necessitate the knowledge management mechanisms
highlighted, which fall under the three categories: Knowledge Dissemination, Knowledge Acquisition and
Knowledge Sharing. Not only will these mechanisms enrich the virtual environment but they will also
contribute significantly to the competitive advantage of the organisation.

Through these three knowledge management activities, customer and expert knowledge is recognized,
obtained, administered and managed (processed), which then allows the knowledge to be comprised
significantly in market research which subsequently will allow new products and services. This newly
created knowledge is then disseminated to current and potential customers. In addition to the
knowledge being acquired and disseminated, it is also shared between companies and their customers
and amongst customers themselves.

Even though this paper is limited to B2C, C2B and C2C companies, the mechanisms identified will
provide organisations to be advanced in their approach to customer knowledge management. Future
research can include B2B e-commerce and examine the differences between knowledge management
mechanisms for B2C, C2B and C2C against B2B e-commerce. This paper has looked at how knowledge
has crossed organisational boundaries, so with future research the knowledge management
mechanisms within organisations can be explored further.

Also this paper has not attended to in any great detail how e-commerce companies make use of
customer knowledge. For example, the specific processes involved with transforming the information
and knowledge acquired into higher-level knowledge. This research would be difficult for me to
undertake as these processes are internal within an organisation and cannot be observed accurately
from websites alone, which is why I have excluded this research in this paper. However, the way
knowledge is utilised is an imperative portion of knowledge management and so this is another
potential future research topic on knowledge management in e-commerce.

References
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Figure 1.

Knowledge Sharing

Knowledge Dissemination

Knowledge Acquisition

Knowledge Management