254
Innovation and B2B E-Commerce
the B2B enthusiasts over-emphasise the extent
to which corporate purchasing is about buying
commodities or highly standardised products for
which price is the only salient variable. We sought
data from supplier organisations about the nature
of their sales on two dimensions: First, the degree
to which their output was commoditised — in the
sense that the goods or services provided were
VWDQGDUG³RIIWKHVKHOI´LWHPVRUEHVSRNHIRUD
particular customer’s needs. Second, we asked
about the extent to which buyers play a role in the
VSHFL¿FDWLRQRIWKHLURZQUHTXLUHPHQWV,QVRPH
cases, buyers spell out exactly what they want; in
RWKHUVWKHVHOOHUVSHFL¿HVWKHVROXWLRQDFFRUGLQJ
to an assessment of the buyer’s needs; in many
cases, the exchange requires a process of dialogue
between the buyer and seller. Much of what has
been written about B2B e-commerce has assumed
a particular model of inter-company trade, em-
SKDVLVLQJVWDQGDUGL]HGSURGXFWVVSHFL¿HGE\WKH
customers (e.g., from an online catalogue). From
WKHVXSSO\LQJ¿UPVZKRUHVSRQGHGWRWKHHPDLO
questionnaire in this study, this amounted to less
WKDQRIVDOHV7KLVLVDVLJQL¿FDQW¿QGLQJDV
it indicates that (if the result were indicative of
the general case) more than 80% of B2B trade is
not amenable to the impersonal, price-oriented,
online catalogue mechanisms which have been
one of the key archetypal images of B2B. Firms

also differ from each other by supplying differ-
ent combinations of goods, services, and works.
7KH¿UPVLQWKHHPDLOVXUYH\SURYLGHGDJRRG
mix here, with 60% providing goods alone or in
some combination with works and services, and
the remainder selling some combination of works
DQGVHUYLFHV2IWKH¿UPVWKDWVROGJRRGVWKUHH
quarters sell them as part of a more complex pack-
age involving more intangible elements. Again,
much of the discussion about B2B has thought
RQ O\LQWHUPVRIVLPSOH³SURG XFWV´EXWWKHUH DO LW \
is far more complex.
Buying: Use of the Internet
We asked organisations about the use of the Inter-
net in the purchasing process and found extensive
use, especially in terms of seeking information
from suppliers’ Web pages (see Figure 5).
7HOHSKRQHLQWHUYLHZVFRQ¿UPHGWKDWUHVSRQ-
GHQWVLQWHUSUHWHGWKHWHUP³RQOLQHPDUNHWSODFHV´
very broadly — and organisations often view
distributors in these terms. Also, it seems that
a crucial role of suppliers’ Web pages is simply
providing further contact data — postal addresses
DQGWHOHSKRQHQXPEHUV7KH³RWKHULQIR´UHVSRQVH
LQFOXGHVXVLQJVWDQGDUGVHDUFKHQJLQHVWR¿QG
for example, press coverage on a supplier. This
mundane but valuable facility transpired to main
current impact of the Internet on the procurement
IXQFWLRQDQGLVDVLJQL¿FDQWREVHUYDWLRQRQO\LQ
as much as that it falls considerably short from

WKHLGHDRID³FORVHO\FRXSOHGVXSSO\FKDLQ´RUD
³YLUWXDOFRPPXQLW\´,QRXUFDVHVWXGLHVZHQRWHG
WKDWWKHRSSRUWXQLW\IRU³¿QGLQJQHZVXSSOLHUV´
did not seem to excite much enthusiasm amongst
the organisations; the Internet could make getting
information slightly faster, but was not perceived
by the case participants as being fundamentally
different from using the Yellow Pages. This is an
D S S D U H QWO\P X Q G D Q H EXWVL J Q L ¿ F D QW¿ QG L Q JPX F K 
of the early excitement about the role of the Internet
was based around a notion that it would reduce
search costs (see Bakos, 1991). This appears not
to be much of an issue — or, if it is, there is only
marginal advantage in a marketplace system over
a simple Google
™
search.
Buying: Inter-Organisational
Systems
Although the B2B hype emphasises the electronic
linking of organisations’ procurement systems to
their suppliers’ systems, we found that only half of
W K H V X SSO\ L Q J ¿ U P V K D G F R P SXWHU L VHGSXUFKDVL Q J 
255
Innovation and B2B E-Commerce
systems, with the same proportion having cen-
tralised purchasing systems (see Figure 6).
7KHVH¿QGLQJVDUHLQWHUHVWLQJLQWKDWLWVXJ-
gests that for smaller organisations at least, the
idea of inter-linked systems along the supply

chain is likely to remain something of a fantasy
without considerable innovation in both informa-
tion technology and business practice amongst
PDQ\¿UPV7KLVLVQRWWRVD\WKDWWKLVFDQQRWRU
ZLOO QRW KDSSHQ KRZHYHU ZHUH WKHVH ¿QGLQJV
to be representative, it would appear that there
is a major task of supplier development ahead
IRUWKRVH¿UPVZKLFKZLVKWRFDVFDGHLQWHJUDWHG
supply chain practices.
Figure 6. Purchasing organisation and methods
Figure 5. Purchasers’ use of the Internet
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Internet -
Supplier Web
Pages
Internet - Online
Directories
Internet - Other
Info
Online

Marketplaces
None of the
Above
(n = 167 for this question)
Percentage of Responding
Firms
0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Computerised
Purchasing System

Centralised Purchasing

Department

Formal Tendering

Procedures


(n = 165 for this question)

Percentage of Responding
Firms

256
Innovation and B2B E-Commerce
Buying: Purchasing Measurement
and Control
Much of the enthusiasm for e-procurement has
focused on the enormous scope for reducing the
costs of purchasing bureaucracy and transactions
processing. Rather than go through an internal
SXUFKDVLQJGHSDUWPHQW³XVHUV´FDQRUGHUZKDW
they need from their desktop, with automatic bud-
JHWFRQWUROVNHHSLQJVSHQGLQJZLWKLQSUHGH¿QHG
limits: Many B2B enthusiasts have predicted the
demise of purchasing departments as a result.
While not denying the great potential for
these types of savings, this study points to some
LPSRUWDQWTXDOL¿FDWLRQV7KLVLVEHFDXVHWKHUHLV
more to purchasing than transaction processing.
First, effective procurement requires higher-level,
strategic management in regard to external issues
— such as supplier development, collaboration on
business processes, and supply policy. In other
words, there is much more to good purchasing
WKDQVLPSO\¿QGLQJWKHORZHVWSULFH6HFRQG
there are more complex internal issues than

simple budgetary controls — a prime function of
procurement systems is the control of fraud, and,
in the public sector in particular, organisations’
procurement systems are constrained by a complex
regulatory framework. So while e-procurement
FDQ\LHOGVLJQL¿FDQWVDYLQJVRQHOHPHQWVRIWKH
procurement process, it does not do away with
the need for specialist procurement staff with
real purchasing expertise.
These considerations of organisation and
structure lead to the questions of measurement.
The participants in our study all struggled with
quantifying both the performance of purchasing
and in determining reliable costs for the purchas-
ing process itself. This issue has two important
consequences for the adoption of e-procurement
and B2B.
First, without effective metrics of how well a
purchasing process is performing, the appeal of
using Internet-based innovation to reduce costs is
rather blunted. Indeed, for managers in some of
the organisations in this study, the key motivation
was to ensure compliance with a system of bu-
reaucratic controls rather than a hunger to reduce
expenditure. This seems a particular issue if an
organisation’s culture rewards risk aversion; we
found organisations where purchasing managers’
principal goals seemed to be to stop things going
wrong and to maintain a steady equilibrium. In
such organisations, mechanisms of measurement

and reward work against dynamic innovation in
procurement systems.
Second, in other types of organisations, the
measurement of purchasing works to give a
misleading focus on short-term savings. In some
organisations, the dazzle of dramatic savings in
headline prices achieved by B2B innovation (for
example, online reverse auctions) has mesmerized
¿UPVLQWRIRUJHWWLQJ WKDW WKHLPSRUWDQW FRVWLV
the total cost of acquisition and ownership. The
SKHQRPHQRQRIVXSSOLHUV³ORZEDOOLQJ´WRZLQD
contract, then working hard to claw back their
margin by, for example, raising post-contract
complexities, is well known and understood by
procurement professionals. Equally, costs as-
sociated with delivery, quality, warranties, and
post-sale support can easily dominate the initial
purchase price. It appears, however, that in some
organisations it has become politically convenient
to brush aside these concerns and focus on im-
pressive sounding reductions in headline prices.
In such cases, there is a clear risk that such an
DSSURDFKPD\EDFN¿UHLQWKHORQJHUWHUP
Selling: Communication and
Customer Relationships
B2B has often been presented as though it is all
about purchasing. But is essential to understand
the other side of the coin — how it affects selling
organisations. We asked suppliers about various
aspects of their relationships with customers (see

Figure 7).
Although only roughly one-third used elec-
tronic links such as EDI, the use of e-mail was
257
Innovation and B2B E-Commerce
very widespread. E-mail is clearly a dominant
DVSHFWRI¿UPV¶XVHRIWKH,QWHUQHWEXWLWLVXVH-
ful at this point in the discussion to consider the
H D U O LHU¿ Q G L Q J U HJD UG L Q JW KHSRRU T X D O L W \ RIH PDLO
addresses. It seems fair to say that although the
¿UPVLQRXUVWXG\DUHODUJHO\UHOLDQWRQHOHFWURQLF
communications, there are many examples where
the process of managing these communications
LV UDWKHU DPDWHXULVK DQG VSHFL¿FDOO\ ZKHUH
the organisational infrastructure for managing
these systems are underdeveloped. (It is worth
noting that in the author’s own institution, there
are cases of administrators continuing to use
e-mail addresses to send and receive messages
from accounts labeled after long-departed col-
OHDJXHVSXEOLVKHG³FRQWDFW´HPDLODGGUHVVHV
are often personalised; and there are few mana-
gerial systems for systematically managing the
³¿OLQJ´RI HPDLOV(OHFWURQLFFRPPXQLFDWLRQ
²IRUDOOLWVEHQH¿WV²EULQJVZLWKLWDQHHGIRU
an administrative infrastructure, and associated
investment and training.
Selling: Use of Web Sites
7KHXVHRI,QWHUQHWSDJHVIRUVHOOLQJ¿UPVYDU-
LHG FRQVLGHUDEO\ ZLWK PDQ\ ¿UPV XVLQJ WKH

opportunity for both information and handling
queries. Far fewer organisations used the Web
sites for transactional purposes — and for many
the mechanism for handling orders was merely
the provision of an e-mail address for the sales
department (see Figure 8).
The study highlighted the various roles that
the Internet might play in the sales and market-
LQJ VWUDWHJLHVRI VXSSO\LQJ ¿UPV 0XFKRI WKH
B2B literature presents a very passive role for
suppliers — their role reduced to supplying com-
moditised goods and participating in price-driven
DXFWLRQV RU PHUHO\ SURYLGLQJ WKH IXO¿OPHQW
of orders placed through online catalogues. In
contrast, we found that organisations have vari-
ous proactive approaches to using the Internet.
Our case studies included a small manufacturer
of specialist architectural electrical equipment,
Figure 7. Customer relationships
0%
20%
40%
60%
80%
100%
EDI with any of
your Customers
Other
ELECTRONIC
LINKS with any

of your
Customers
"PARTNERING"
with any of your
Customers
E-
MARKETPLACE
Membership (for
sales)
REGULAR Email
contact with
Customers
Don't Know/N/A
CUSTOMERS
(n = 140 for this question)
Percentage of Responding Firms
258
Innovation and B2B E-Commerce
who made considerable use of the Internet as a
marketing intelligence tool — a member of the
marketing team systematically trawled the Web
for news relating to suitable building projects in
NH\RYHUVHDVPDUNHWV)RUWKLV¿UPWKHFUXFLDO
PDUNHWLQJDFWLYLW\ZDVZRUNLQJZLWKWKH³VSHFL-
¿HUV´UDWKHUWKDQWKHLPPHGLDWHFXVWRPHUVDQGWR
avoid any type of marketing which presented their
products as commodities, or easily comparable
to competitors’ products. In this case, the use of
online catalogues was not at all a priority, as this
would be entirely out of step with its relationship

marketing philosophy.
Impact on Buyer-Seller
Relationships
A key question for B2B e-commerce is its effect on
the power balance in supply relationships. Figures
9 and 10 indicate some interesting contradictions
LQSDUWLFLSDQWV¶SHUVSHFWLYHV³+LJK´DQG³/RZ
Impact” here refer to participants’ expectation
of the impact of the Internet on customer rela-
WLRQVKLSVLQWKHQH[W¿YH\HDUV³'RQ¶W.QRZV´
DQG³1RW$SSOLFDEOHV´DUHQRWLQFOXGHGRQWKHVH
graphs).
An interesting contrast here is that a large group
of respondents expect their suppliers’ prices to
decline while the prices they charge to customers
UHPDLQXQDIIHFWHG7KLVLPEDODQFHLVDOVRUHÀHFWHG
LQWKHZD\LQZKLFK¿UPVYLHZHGWKHOLNHO\VKLIWV
in power (see Figures 11 and 12).
One interpretation of these data is that there
is perhaps an unwarranted degree of optimism
— and maybe even complacency — in the re-
V S R QG L Q J ¿ U P V  7 K L V L QW U LJ X L Q JD QGFRQW U D G L F W RU \ 
¿QGLQJHFKRHVSUHYLRXV¿QGLQJVUHJDUGLQJ¿UPV¶
views regarding the power consequences of supply
chain integration and partnership relationships
(see Burnes & New, 1996; New, 1998).
Figure 8. Use of Web sites for selling
0%
10%
20%

30%
40%
50%
60%
70%
80%
DETAILED
information about
the company (e.g.
Financial data)
PRICE
information about
the
products/services
you supply
ON-LINE
CATALOGUE for
customers
TECHNICAL
information about
the
products/services
you supply
QUERIES by
customers
ORDERS by
Customers
NONE of the
ABOVE
NO Website

Don't Know/N/A
(n = 241 for this question)
Percentage
259
Innovation and B2B E-Commerce
Figure 9. Predicted effects on price changes to customers
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
UP DOWN NO CHANGE
Expectations
Percentage of Responding Firms
Total (N=184)
High Impact (N=83)
Low Impact (N=101)
Figure 10. Predicted effect on prices paid to suppliers

0%
10%
20%
30%
40%
50%

60%
70%
80%
UP DOWN NO CHANGE
Expectations
Percentage of Responding Firm
s
Total (N=136)
High Impact (N=67)
Low Impact (N=69)

260
Innovation and B2B E-Commerce
CONCLUSION
This chapter has presented some of the data from
a multi-method study into the reality of B2B e-
commerce. Its general conclusions are to point
toward a picture which is considerably at variance
to the extraordinary hyperbole generated by the
business media, consultants and some academics
about the potential impact of B2B.
Figure 12. Predicted effect on power position relative to suppliers
Figure 11. Predicted effect on power position relative to customers
0%
10%
20%
30%
40%
50%
60%

70%
MORE Powerful LESS Powerful No Change
Expectations
Percentage of Responding Firms
Total (N=158)
High Impact (N=75)
Low Impact (N=83)
0%
10%
20%
30%
40%
50%
60%
70%
MORE Powerful LESS Powerful No Change
Expectations
Percentage of Responding Firms
Total (N=184)
High Impact (N=86)
Low Impact (N=96)
261
Innovation and B2B E-Commerce
A key element of this picture is that much of
the theorising about the potential impact of B2B
has started from an inaccurate and deeply mislead-
ing image of a) what organisational buying and
selling is like, and b) the degree of sophistication
RIPXFKRIWKHVXSSO\EDVH+HUHZHIRXQG¿UPV
ZKRZHUHDFRQVLGHUDEOHGLVWDQFHIURP³VXSSO\

chain cybermastery” (Berger & Gattorna, 2001)
DQGDSSHDUHGQRWWREH³VXUJLQJIRUZDUGRQWKH
crest of the Internet wave” (Friedman & Blanshay,
2001, p. 2) and for whom the reality of B2B rela-
tionships are more complex and richly textured
than the rather Spartan and highly depersonalised
images of the electronic marketplace.
The boom and bust in B2B e-commerce could
be accounted for by a number of explanatory
stories. Day et al. (2003) focus on the idea of a
competitive opportunity attracting many players,
many of whom die in the rush. The fact that so
many of the e-marketplaces have failed simply
UHÀHFWVEUXWDOLW\RIWKH³ODQGJUDE´*RRGLGHDV
attract much interest, and there is not enough
gold to go around. An analogy could be that the
innovations at the turn of the 20
th
century that
initially encouraged the founding of hundreds
of car companies — but only a few can become
Ford and GM.
The story that emerges from the research de-
scribed here is different. It suggests that the B2B
hype was based on a fundamental misreading
of the nature of inter-organisational buying and
selling, and the rush was for fool’s gold. Many of
the presumptions of the B2B model were not true,
and, in consequence, innovators lost a great deal
of money. From this wreckage, one might salvage

a reminder of the idea that innovators have a duty
to understand in detail the nature of the markets
into which they wish to enter.
These observations are clearly contingent
on the degree to which the data gathered here is
representative of other populations. However, the
use of the triangulated approach in the broader
research project has indicated to us that this line
of inquiry is worth continuing.
ACKNOWLEDGMENTS
The author would like to acknowledge the sig-
QL¿FDQWFRQWULEXWLRQVRI7RQ\0HDNLQ5XWK
Southworth, and Mark Siddall, to this work, and
WR $FKLOOHV*URXS /WG IRU ¿QDQFLDO DVVLVWDQFH
Earlier versions of this work were presented at
the EurOMA conference, Lake Como, in June
2003.
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This work was previously published in Entrepreneurship and Innovations in E-Business: An Integrative Perspective, edited by
F. Zhao, pp. 41-61, copyright 2006 by IGI Publishing (an imprint of IGI Global).
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Chapter 1.18
The Business of Online
Education
Dirk Baldwin
University of Wisconsin-Parkside, USA
Bradley Piazza
University of Wisconsin-Parkside, USA
ABSTRACT
Many observers have predicted a revolution due
to online education. Opportunities exist to save
money due to the lack of brick and mortar, and
travel necessary to take classes in a traditional
setting. Besides costs savings, several studies
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including support for self-paced learning and bet-
ter discussion between learners and teachers. The
opportunities for online learning have spurred
growth in the business of online education. Entre-
preneurs see opportunities for increased market
share, while others perceive a threat. The design
of an online program is not easy, however. This

chapter summarizes pedagogical and business
dimensions that must be addressed in order to
develop an effective online educational program.
The chapter also discusses tactics that will help
organizations compete in the online education
industry.
THE BUSINESS OF ONLINE
EDUCATION
In a relatively early book regarding electronic com-
merce (e-commerce), Choi, Stahl, and Whinston
(1997) described e-commerce in terms of three
dimensions: product, process, and agent. Each of
these dimensions can take on a digital or physical
form. Pure e-commerce, according to Choi et al.,
takes place when all three dimensions are digital.
For example, purchasing downloadable music
through the Internet is pure e-commerce because
the search, purchase, delivery, and product are all
digital. Because educational materials, such as
lecture notes and exercises, can be found, stored,
and delivered in digital form, it is not surpris-
ing that several people predicted a revolution in
education. In 1997, the management expert, Peter
Drucker, stated (Gubernick & Ebeling, 1997, p.
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outside the traditional campus, outside the tra-