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Chapter 5 E-business strategy 275

Market Driving Market Driven
Capability/Incentives and motivation Keep pace with
Strategy:
Strategy:
High
Customer
education
market threats/
opportunities
Capability
Building:
Internal Low Status Quo: Build for transition
Don’t Bother
to Electronic
Commerce

Low High
External Forces/Incentives

Matrix for evaluation of external capability against internal capability
Figure 5.9
Source: Perrott (2005)

Evaluation of internal resources should be balanced against external resources. Perrott
(2005) provides a simple framework for this analysis (Figure 5.9). He suggests that adoption
of e-business will be determined by the balance between internal capability and incentives
and external forces and capabilities. Figure 5.9 defines a matrix where there are four quad-
rants which businesses within a market may occupy according to the development of their
e-business strategy:
Market driving strategy (high internal capabilities/incentives and low external forces/
incentives). This is often the situation for the early adopters. Perrott gives the examples of
Amazon, Dell, Cisco and Wells Fargo Bank in this category.
Capability building (low internal capabilities/incentives and high external forces/incen-
tives). A later adopter.
Market driven strategy. Internal capabilities/incentives and external forces/incentives are
both high. Perrott gives the examples of Dun and Bradstreet, First Direct, Quicken and
Reuters in this category.
Status quo. This is the situation where there isn’t an imperative to change within the market-
place since both internal capabilities/incentives and external forces/incentives are low.
An organization’s position in the matrix will be governed by benchmarking of external fac-
tors suggested by Perrott (2005) which include the proportion of competitors’ products or
services delivered electronically, proportion of competitors’ communications to customers
done electronically, proportion of different customer segments (and suppliers or partners
on the supply side) attracted to electronic activity. Internal factors to be evaluated include
technical capabilities to deliver through internal or external IT providers, desire or ability to
move from legacy systems and the staff capability (knowledge, skills and attitudes necessary
to conduct electronic business). The cost differential of savings made against implemen-
tation costs is also included here.
Stage models can also be used to assess internal capabilities and structures. For example,
Atos Consulting (2008, Table 5.4) have defined a capability maturity framework. This is based
on the well-known capability maturity models devised by Carnegie Mellon Software Engineer-
ing Institute (www.sei.cmu.edu/cmmi/) to help organizations improve their software
development practices. In Chapter 10 there is more detail on how to achieve management of
change between these stages.