The Role of Knowledge and Capability Evaluation in E-Business Strategy: An Integrative Approach and Case Illustration

Article excerpt

Introduction

For most firms, ignoring e-business means losing an opportunity to gain competitive advantage in the digital age (Czerniawska and Potter, 1998). Yet, e-business initiatives are often perceived as risky and challenging, especially for bricks-and-mortar companies facing challenges such as a lack of e-business skills, resistance to process redesign, and the ambiguity associated with changing the information technology (IT) infrastructure of the company (Marshall and McKay, 2002).

Several studies have emphasized the role of e-business strategy and planning in reducing the uncertainty associated with moving business operations to the Internet (Mason, 2000). However, organizations are not all equally predisposed or prepared to successfully launch and maintain an e-business initiative. Therefore, a key to understanding the success and failure of e-business initiatives is to identify and assess the necessary preconditions. In this paper, these preconditions refer to the prior knowledge and capabilities that directly affect the organization's drive toward successful e-business strategy formulation. This paper postulates that formulating an e-business strategy should be based on knowledge of customer priorities, technological evolution, supply chain, environment, and competition, as well as on its current core capabilities.

Traditional top-down and bottom-up planning approaches have failed to provide the needed flexibility in e-business projects because they do not adequately account for such knowledge and capabilities factors. Thus, a "continuous planning with feedback" approach to the process of e-business strategic planning has been introduced, wherein the process of transformation to e-business is customized and systematized. In this approach, two major phases take place, namely e-business strategy formulation and implementation. The formulation phase has three major steps. First, knowledge building involves assessing and acquiring the knowledge levels necessary for e-business. Second, capability evaluation involves assessing and acquiring the capabilities required for a successful e-business initiative. And third, e-business design consists of choosing the appropriate e-business application and setup based on the existing knowledge and capability levels. The implementation phase entails developing an e-business blueprint followed by the development and deployment of the e-business applications (Kalakota and Robinson, 1999).

This study focuses on the first two steps of e-business strategy formulation by developing an integrative and a knowledge-based approach. This approach adapts auditing principles to knowledge building and capability evaluation. More specifically, this study attempts to address the following research questions:

1. How can knowledge-enabled customer relationship management (KCRM) auditing principles be used to identify and assess a broader range of knowledge areas in a company, in addition to customer knowledge? An how can it help arrive at an acceptable level of knowledge for moving into e-business?

2. How can current competencies be identified through a capability audit? And how can companies determine what additional capabilities are required before implementing the e-business strategy?

After a brief review of the literature on e-business strategy, the next section describes the integrative framework for the process of e-business strategy formulation. The application of the proposed framework is illustrated by a case study of a garment manufacturing company in the Middle East.

E-business Strategy

The primary value of e-business lies in enabling organizations to respond to business pressures with innovative rather than incremental actions, such as customization, direct marketing, and convenient and timely access to market information (Zhu, Kraemer and Xu, 2003). Moreover, e-business reduces the cost of information, direct advertising, and access to international markets while removing distance-related barriers. …