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In this article we offer a view that e-business applications supports strategic management in multiple ways. We argue that e-business applications can have either of four focuses: (1) a attribute supporting a cost strategy, (2) a source to differentiation supporting a differentiation strategy, (3) enabling process adaptation and integration in business networks, and finally (4) as a value manager supporting a strategy focusing on core competences, relations and dynamic capabilities. Based on multiple case studies we discuss that the locus of the firms present operations and strategic management is always enhanced by the e-business incentive even if the value differs.

Introduction

The role of electronic communication and information systems in shaping tomorrow's business operations is a distinctive one. E-business has the potential to change business dealings, market offerings and value configurations among actors and customers. The role of information technology and e-business in strategy formulation and implementation is critical but also complex since the impact on strategic value of e-business can either be seen as small (Porter, 2001) or large (Tapscott, 2001).

During the turn of the century traditional industries cautiously tried small e-business applications with low levels of direct management involvement and small investments, and waited for customers and competitors responses before extending their technical, operational, purchasing and marketing competence. The e-business activities and investments were not a highly prioritized issue and were not related to traditional activities. Accordingly, the strategic impact of e-business was marginal. During 2002 and 2003 companies have extended their level of e-business presence to embrace a majority of the pre-transaction, transaction and post-transaction steps (Brehmer, 2002), as well as purchasing and customer services designed to develop relationships with the customer or supplier (Rehme, 2001). Multiple parallel channels are becoming the norm, with the Internet as one (Johansson, 2002). In this context it is important to understand how e-business and information technology contribute and shape corporate objectives, and the issues of integration and synergy of strategies and activities between e-business and traditional ones. The impact is significant in a majority of industries, with information intensive pieces of purchasing and sales affected the most.

This article explores the theme of how e-business and information technology contributes to and develops strategic values. After a discussion on the theme of value configurations with reference to e-business we explore different strategies to achieve competitive advantage. Following this we discuss four strategic value themes; attributes, differentiation, process adaptation and value manager. The article is interspersed with short case illustrations that elucidate some of the challenges for strategy. A list of the cases influencing this article is attached in appendix 1.

Value configurations

Understanding value has indeed a long history. In the context of e-business, processes and activities for value production are impacted and sometimes even radically changed by technologies employed to realise e-business. From providing customers with information during marketing/sales, to including them in order entry, to transparent real-time information flows about stocks in production, inventory and distribution/delivery, e-business is subtly and surely infiltrating most activities of value production. Of particular interest for e-business are the new ways in which such activities and processes are re-configured with the help of new information technology.

Long before e-business emerged, new forms of value configurations occurred between companies. For clarity and precision the term value configuration surmise productive activities, processes and interactions along a value transformation flow that ends (conceptually) with customers. The purpose of a value configuration is 'to produce value for all those involved.' Value configuration describes which actors do what in the production of value. For commercial value to be produced, a customer eventually has to be incorporated into value configuration logics and our assessment of them. Exchanges with customers must ultimately sustain all productive activity/processes/interactions up to and including interaction with customers or the value configuration will fail (Stabell and Fjelstad, 1998).

Failure of a given configuration of valued activities/process/interactions does not necessarily mean failure of 'the actors involved'. It simply means that the 'business idea' was not configured in a robust and value sustaining manner. Or it may mean that a new configuration is more effective in producing value for all partners than old configurations.[3] Put simply, the business idea and the configuration of participants involved was not productive, nor valuable enough for participants to stay involved. Naturally, the perspective and degree of participation of customers must be included in these value configuration logics. If customers opt out of participating, the entire value configuration fails 'by design.' For example, are there shared and focused inputs and consequences of productive partners involved? And how are inputs/consequences shared among them?

2.1 Value - perceived, experienced and relative

Value is a multifaceted concept. Another does not necessarily value what is valued for one. Value for the selling company is ultimately realised by its requirements and not the customers' requirements. For example, should a selling company desire immediate financial gain for a given transaction, it will likely focus on activities that generate cash (discounted prices, volume incentives, even new stock offerings, etc.,) over those that generate long-term productivity improvements (or even maximising customer perceived value).

Value for the customer is ultimately determined and realised by customer perception and not by the selling company. Value is rarely directly and solely related only to a cost. It is true that product value, service value or combinations of the two are often established by the lesser cost among alternatives at hand offering similar functionality. However, the concept of functionality for many can include many less apparent 'non-rational' evaluations associated with brand image, emotional identification/association, anticipated and consumption experience, goals, desires, consequences, etc.

The perception of value lies not entirely in the characteristics of the products or services, but in their delivery of consequences that the customers experience. Customer evaluations are closely related to their particular use situation. These judgements are subject to change across use situations, over time, and due to specific “trigger” situations. Woodruff and Gardial (1996) created a framework for determining and breaking-down customer value from the perspective of usage and consequences over that of product/service attributes. They present a 'customer value hierarchy' and it presents attributes, consequences, and desired end-states, (see Figure 1) as building blocks for understanding customer perceived value.

The levels become increasingly abstract with movement from the lower to higher levels (for the customer as well in theory), but as we move up the hierarchy, the levels become increasingly relevant to customers and not irrelevantly abstract. The lowest level, attributes, describes what the product/service is, its features, and its components, parts or activities. The second level, consequences, represents the customers’ more subjective considerations of the positive and negative effects that result from engaging in product or service use. The top of the hierarchy, desired end states, describe the user’s core values, purposes, and goals. This, the highest level, is constituted by the values that serve as fundamental motivators for the customer, such as security and achievement. Understanding these 'drivers' helps in guiding marketing actions at the other levels. By focusing on customer consequences, insights to innovations often arise. Off course the attributes are important, as they must embody the other levels.

The level of consequences (user product/service interface) is where value configuration activities/processes/interactions must synchronise with 'desired end states' and 'product/service attributes' (levels 3 and 1 respectively). What is actually 'added value', or what activities actually represent 'value creation' in a given value configuration, for example. are set into play for the customer by synchronising desired end states (level 3) with product/service attributes (level 2) in the configuration of 'consequences' for the customer.

In summary, the production of value involves activities, processes and interactions on both the selling actor's side and the customer actor's side. Stimulating and configuring these activities/processes and interactions 'to the value of both the producing and customer participants' are two of the main functions of the firm. Value configuration impacts mostly the consequences of product/service usage and thus perception of value of those involved. Value configuration is highly influenced by the context in which it is set

Strategy and e-business

Since the 1960s, scholars in the strategic field have been concerned with explaining differential firm performance and those what should be in focus for the strategic management. Three prominent views on sources of competitive advantage have emerged; industry structure, resource and relational-based (Dyer and Singh, 1998).

Industry structure competitive advantage was the dominant view in the 1980s and refers to an organisation's competitive advantage through membership of an industry with favourable characteristics. Associated with the work of Porter (1980), characteristics may include relative bargaining power, barriers to entry, lowering cost and tying in suppliers and customers. The strategic management make the choice of relative to their competitors either focusing on lowering costs, differentiating their offering or a combination of the two. An alternative - the resource based view (RBV) of the firm - argues that differentiatial firm performance is fundamentally due to firm heterogeneity rather than industry structure (Barney, 1991; Rumelt, 1991; Wernerfelt, 1984). Firms that are able to accumulate resources and capabilities that are rare, valuable, nonsubstitutable, and difficult to imitate will achieve a competitive advantage over competing firms. In RBV or the associated dynamic capabilities approach (Teece, Pisano & Shuen, 1997) the firm is the unit of analysis and focused initially on that competitive advantage to be obtained through technology but the focus has also been on information as competitive resource (Galliers, 1991).

In parallel with the development of the resource-based perspective emerged a third, the relational-based perspective (Dyer and Singh, 1998). Associated with the industrial network theory (Hakansson, 1993) the focus is on how idiosyncratic interfirm linkages refers to competitive advantage that cannot be generated by either firm in isolation and can only be created through joint contributions.

With the emergence of the Internet and electronic business the importance of how firms use their information as a strategic source grown. Information, technology, people, relations, and knowledge are all resources that a firm can use to maximise the effectiveness and efficiency of the corporation so it can achieve its objectives. It also has the potential to change industry roles and relations. As with the different competitive advantages the e-business focus can be on different resources that apply to the desired uniqueness. Studies have pointed at that not everything is up to the individual company. Instead, the future impact of IT is significantly shaped by its environment (Vitale, 1986). Different applications within a company play different roles as they support different business strategies. Ward and Peppard (2002) embraced this fact and proposed the matrix illustrated in Figure 2, referring to applications as "the use of IT to address a business activity or process" (p.4).

Strategic applications might help the company to gain competitive advantages and consists of applications which use fairly new technology. Hereby pushing forward and trying to enable new business initiatives. In this area we see e-business applications as value adaptor, developer and manager enabling a strategic development base on core competences and dynamic capabilities, representing high strategic value. High potential applications are not usually used in the business but can rather be seen as "insurance policies". Can turn into, or enhance existing strategies or enhance quality of key operational systems. We see this as e-business applications which enable a differentiation strategy, a multiple use of e-business to support different objectives. Key operational applications are vital for running the business, if they fail, parts of the business come to a standstill. Ward & Peppard give examples such as reservation systems or trading applications. For industrial companies we intrepid this as e-business applications enabling process integration in business networks. Support applications are important in order to run the business, but not critical for the success of the business. The applications are often developed to gain a competitive advantage based on lower costs (Ward & Peppard, 2002). This apply to there e-business is seen as a business attribute.

Cases

The cases referred here takes e-business from the acquisition of e-business competence as a platform for developments through a source to differentiation and optimisation of core competences in business networks to value based network.

4.1 Support applications: e-business as a business attribute

As common with any other business activity, e-business needs to be guided by a business strategy. An e-business strategy is the means by which an organisation seeks to achieve its e-business objectives. Typically, the organisation has a range of strategic options that support the achievement of its objectives. Some options will be related to increasing volume, while others will relate to improving profitability in existing markets segments. Typical options in the last category include reducing costs, increasing prices, streamlining operations and changing the product mix. The key feature of strategy is that it offers a clear statement of how to create competitiveness relative from competitors.

Gas cylinder management is a key issue for AGA customers in order to increase their productivity. In 1999 the information from AGA concerning cylinder management and gas consumption was stated in the monthly bill sent to the customer. This information seldom reached outside the customers finance and economic department. The ACQURA Internet application made this information available for production engineers which together with a renewed focus of AGA on their sales engineers provided value to the customers by their knowledge and skills leading to better vending quality and higher productivity. The customer value is related to a deeper understanding on how to run their production. For AGA the value is mainly in a increased interest in their sales engineers services but also that by the use of the ACQURA Internet application the yearly negotiations nowadays concerns prices as well as what impact the AGA knowledge has on the customers operations.

With a catalogue of 1500 pages as their operational base, distributing, correcting and managing the catalogue was highly costly for VWR and caused several quality failures due to customers use of outdated catalogue information. A typical customer was only regular ordering from 150-200 pages. By making the catalogue available through a Internet application and proving each customer with a login the distribution could be handled by the customers, the last updates was always available and the customer could easily distribute copies or login to all employees that needed the information. To also provide an additional means to order VWR developed a WebOrder application in which the customer could write in order instead of using fax or phone. Due to technical problems VWR decided not to make any connections between the catalogue and the WebOrder, it was more important to start using Internet than to have the best available solution in place.

Ericsson’s e-procurement programme was designed to develop the total effectiveness for the purchase of indirect material. The development was done to lower costs in the procurement process but also to reduce maverick buying. This system is used by a majority of the employees within the corporation and handled in 2002 around 120 000 orders to some 5000 dedicated suppliers. For the Nordic e-procurement initiative Ericsson cooperated with IBX (Integrated Business Exchange). IBX started in 1999 as joint effort between Ericsson, SEB (Skadinaviska Enskilda Banken, Swedish commercial bank) as well as B-business Partners (internet investment company). Their cooperation resulted in a web-based marketplace for indirect material. The IBX marketplace started their operations in 2001 and is intended to facilitate transactions between buyer and seller. The service that IBX provides include coordination of the buyers’ catalogues, statistical data etc.The technology is bought form Commerce One and SAP. IBX is part of “the Global Trading Web”, which is a network of regional marketplaces around the world. The network makes it possible to purchase from globally dispersed suppliers. Ericsson policy was to purchase only from those suppliers that they had agreements with. On behalf of Ericsson IBX handled catalogues and the integration of approved suppliers. IBX gathers information from suppliers, categorise them and publish the information and updates the catalogues. (www.ibx.se)

The cases of AGA, VWR and Ericsson/IBX demonstrate the range of different areas in which e-business can impact. All is applications that not changes the way business is conducted, but they reduce cost in transactions, information handling, and quality management and together they reduce uncertainties and risks. The best model will vary with the nature of the business. A guiding principle is that it’s important to acquire e-business competence as well as develop modest scale applications that encourage employees, suppliers, and customers to explore and encourage the use of Internet applications alongside or as a substitute for phone, fax and mail.

4.2 High potential applications: e-business to differentiate

Effective management of e-business alongside established business poses challenges for many businesses. Venkatraman (2000) propose that articulate a strategic vision for e-business in precise terms is doomed to failure, which poses an interesting dilemma for an integrated corporate strategy. Venkatraman (2000) suggest that strategic vision for e-business operations should be viewed as a continued cycle involving building on current business models, and creating future business models through selective experimentation. The aim is to balance refining the current business rules while creating new business rules for the e-business agenda.

With a mixture of off-the-self and customer-made products and a customer base including global corporations as well as small engineering workshops it was obvious what one e-business initiative was not enough. Through the ‘ShopOnline’ Internet application is it possible to place orders on off-the-self products. Drawing, descriptions, cutting data, stock availability, prices, delivery status, order history and order track facilities supports an easy customer use and reduces communication by other means to Sandvik. The ‘TailorMade’ application is a design tool that allows the customer to design a tool based on his own machinery, material choice, cutting profile and number of units to produce. Different solutions are presented and with the selection made the delivery day will be given and the product is planned in the Sandvik production. A third application is the ‘Customer Value File’ an extranet application in which Sandvik collects all information for a key account customer. With the aim of sharing knowledge between regions the aim is to have an application that both support the sales engineers work as well as makes the customer aware of the value Sandvik has provided over the time. A fourth type of application is directed towards customer that wants a smooth handling of not only Sandvik products but also other manufacturers products. To do so Sandvik cooperates with ENDORSIA an e-marketplace for MRO (manufacturing, repair, operations)-products. In all applications the present organisation with HQ, regional companies and a key account organisation is unchanged which mean that it is important that the applications supports current business.

With the catalogue and weborder as building blocks VWR developed their facilities towards the aims of increasing the everyday value of doing business with VWR. A step was to make the catalogue searchable and clickable so that information directly was transferred to the Weborder. Based on an analysis of their customers VWR identified that a large number of individuals placed order sent them to the purchasing department how entered the orders into the Weborder. A solution was to develop an individual catalogue for each individual limited to the products her or him was allowed to purchase. With personalized login-facilities the customer value of the application is in minimizing the customers purchasing activities. Other value is gained since the e-business application provides VWR with a direct contact link to the users of the products.

Electrical component providers, such as ABB Control, have historically delivered components to wholesalers. Electricians have been (and still are) supplied via wholesalers and the components that are mounted by electricians at the construction site. With the new solution ABB Control had a tool for electricians to design their solution via internet. ABB Control assembled the components to a system and supplied them either via the wholesaler or direct to the construction site (the commercial business remained at the wholesaler). The value-add of the application was for the customer to receive a ready mounted system instead of parts/components, and saved time. For ABB Control it was a way of ensuring customers’ demands was fulfilled more accurately than before. It was also a way for ABB to try to increase the customer retention.

The way forward through the differentiation strategy involves new initiatives in special areas: these allow the development of expertise and experience. By working with a series of separate initiatives or strategic experiments, the organisation creates a collection of building blocks, which can form the foundation for business transformation (Markides, 1999; Teece, et al, 1997). Differentiation also means that the question of cannibalisation must be seriously handled and a necessity to accept (Useem, 1999). What works well in evolutionary markets may challenge stable ones but can work for a specific customer segment. Cannibalisation may mean encouraging an Internet spin-off company, or e-marketplaces, to charge lower prices than the traditional channel since differentiation is better than leaving it to competitors.

4.3 Key operational applications: e-business enabling integration

The steps in the value chain, supply, production, marketing, delivery and support are the areas in which e-business has the potential to impact on business value. To gain a competitive advantage, a business needs to be able to perform some functions in its value chain better than its competitors. With an extensive dependence on business networks in delivering values due to a focus on core competences, outsourcing of functions and alliances with customers as well as competitor's information technology enables process integration across established business lines. The e-business value chain is concerned with the way in which information technology can be harnessed by businesses to generate competitive advantage. The use of information technology in order to enhance the relationship with the customer may be achieved within marketing and sales, or through customer support. E-business may not always be able to create sufficient value alone, but may instead prefer to engage in influencing the business network with a focus on configuration of joint value.

With a wide product range on a global market Electrolux Laundry Systems (ELS) business network comprises owned geographical sales companies, centralised product and spare parts operations, and independent service shops. A spare part order from a service shop is historically handled through the sales companies to the central spare parts warehouse, which meant long response time in countries with reverse working time in relation to GMT. Another consequence was that less time was spent on sales than on providing spare parts. In the developed Internet application the service shop has a login and has detailed drawings, spare parts catalogues, present spare parts stock, ordering facilities and delivery options available 24h each day. With choices on how the delivery should be handled the service shop can opt delivery to sites as well as their own facilities, an important facilities in congested large towns leading to shorter down time for customers. Since the service shops also repair competitors' laundry equipment additional customer services tend to be a strategic marketing move. For the spare parts operations have the use of the Internet application smoothen the workload since order are entered during all 24h instead of mainly during 3h. The bypassing of the sales companies has improved the ELS understand of end customer requirements but also that the role of sales companies has been focused on one core issue. Two core structures have emerged with clear roles for each one involved.

For its production of radio base stations Ericsson initiated a new way of doing business with their suppliers. Instead of placing orders Ericsson let suppliers fill their stock on a when-needed basis. This was done with the aid of the web-based application Pipe-Chain and was based on the concept of Vendor Managed Inventory (VMI), where the supplier had full responsibility in planning deliveries etc. The internet based system let suppliers see consumption of components at the Ericsson plant, and they could therefore make better judgment on when and how much to send to the Ericsson plant. This application solved the main information flow to suppliers. Ericsson personnel could focus on planning ahead instead of chasing late orders. With more ensured deliveries the solution served as a way to start building tighter relationships that could be of value for Ericsson as well as their suppliers. The resulting effect on tied-up capital for Ericsson, as well as the lowered costs was high. The effect on service was also beneficial, particularly for Ericsson.

Long-term competitive advantage is usually associated with customer value and customer satisfaction. Based on their relations several actors can use information technology to both support the understanding on what the business network is to provide and what the reasons behind business needs. Weaknesses in providing all necessary spare parts undermines brands and marketing opportunities for the entire value chain even if only one part is confronted with the end customer. Alliances allow partnering companies to pool expertise, enter new markets, share financial risk, and get products and services to markets faster. In fast growing and dynamic industries, co-opetition is a new term for competitive models in which businesses that are competitors in some areas co-operate in other non-competitive areas (Teece, 1992). The importance lays in the business networks ability to imagine and combine technology, organisations and knowledge from all network partners into what creates sustainable advantages.

4.4 Strategic applications: e-business as value manager

In innovation the advances in technology have moved the frontiers and in many areas are the competence in one area not sufficient to develop competitive products and services. And as the competitive landscape transform, industries restructure and technologies develops the potential for innovations is greater than ever (Brown and Eisenhardt, 1998). But at the same time the pressure on managers is to keep costs down, conduct development in time and as a result have customer appreciation from the products and service developed. Consequently the value is increasingly developed outside the product and/or service centric company with active, informed and connected customers and suppliers as essential parts in the business network (Prahalad and Ramaswamy, 2000). With a global network the importance of information technology and e-business applications is increasing beyond formulated issues especially in early development phases. An overemphasis on e-business as the only base of business competitiveness may lead to de-emphasizing important aspects and knowledge.

With its focus on military products SAAB Technologies works in the technological forefront and are depending on outside organisations competences in the development and production. Within the global military industry this means that rather few partners are available in the vicinity of their production facilities. In the development of equipment to the third generation combat aircraft Gripen Internet and e-business applications was initially used to mange the coordination and cooperation between SAAB Technologies and their development partners. In initial phases the use of a common application containing drawing, specifications, risk calculations and information about the projects progress increased the interaction and enabled communication between the 80 engineers involved (50 at the supplier and 30 at SAAB Technologies). The e-business application put pressure on the information technology infrastructure but the problem was solved. However in later phases the priorities among the engineers drifted which turned the development work into a standstill. With different traditions on how to handle for example performance/cost trade-offs and when to develop a prototype made the managers aware of the problem of handling the total knowledge in the development project through a e-business application. Routine issues are no problem but then it comes to complex trade-offs involving tacit knowledge of the organisation the e-business application structure hinders the innovation.

In development projects tacit knowledge is recognized as playing a key role in determining the extent to which companies are able to create sustainable competitive advantages (Johannessen et al, 2001). The consequences of not recognizing it can be devastating. It is a leadership issue to recognize the border of present e-business application; also emphasizing that e-business is developing additional capabilities that reinforce value not develops its own. With the development in areas such as artificial intelligence (AI) it can be possible to handle tacit knowledge and complex business objectives through e-business applications in the future.

Discussion

Discussion about value for industrial companies sooner or later is concern with which value it contributes with. As the field of strategic management has expanded it has been an interest in value despite views on how competitive advantages are gained.

5.1 The importance of value is not strained

Then, what does this imply for companies venturing into e-commerce solution? First and foremost, the functionality of e-commerce solutions should either be designed for value generation or productivity improvements and cost cutting. As we have found in the cases, the solutions have been focused on one of these aspects, or developed over time, see Figure 3. To establish an e-commerce solution that caters for both value generation and cost cutting will most probably lead to inferior functionality in both respects (cf. Porter 1980).

Second, the solution needs to be designed for the type of business that the company is in, i.e. if the company is selling products on a market with many actors/buyers/sellers or if it is focusing on personal selling (or buying) with strong relationships to a limited number of large buyers (sellers). A majority of the solutions that have been introduced from a selling company perspective have been designed for marketing and selling to a “market”. This is regardless if the original focus in the company has been to sell to large customers instead of to a market.

The VWR and AGA cases are good examples of solutions where the web based tools have been designed for a general market. Moreover, these solutions have been aimed at standardising and making operations more efficient in the selling process. The features include leveraging costs through logistics platforms and, in particular, using information to make e.g. R&D or manufacturing processes more efficient.

Although Sandvik Tooling and ABB Control have made solutions that are directed to a “market”, they have had a clear intention of adding-value, both through the internet solution in itself, but also adding value to the product and/or to the augmented product. The features of the solution are very much oriented towards differentiating themselves from competition and delivering well-defined customer value. The solutions demanded internal knowledge development from which they draw the value contribution.

When companies try to move from value-adding or cost-cutting solutions in a market environment, to a one-to-one relationship perspective it appears as though the buyer takes driver seat. For the buyer cost is second to none in importance, and whereas sellers can deliver value-adding solutions, cost is still what they have to focus on in a one-to-one relationship.

Erisson’s Pipe-Chain solution as well as Electrolux system for spare-parts were/are very much associated with trying to lower costs, in one-to one relationships. In line with these two examples is also a ABB-Tetra-Pak case that was designed to accommodate to Tetra Pak e-procurement initiative. These three cases have primarily been designed to make life easier for the buyer. Both for Ericsson and ABB-Tetra Pak the solutions have even been controlled by the buyer almost entirely. The solutions are, all in all, influenced by SCM-thinking and handles flow of products and information in the buyer/seller relationship. They result in tighter relationships, with higher asset specificity between the two parties. This also reinforces customer retention for the seller and ensures supplier dedication for the buyer.

The fourth and final case illustration is to develop strategic value-add in one-to-one relationships. In our cases this has proven to be very difficult, mainly caused by strategic considerations about company secrets that is at stake, and that e-systems still have not proven to be powerful and/or reliable enough. With the introduction of new and improved Expert Systems and Artificial Intelligence systems this may be a highly interesting avenue for development.

These descriptions leaves us with figure 3, above, that on the one hand divides the focus in terms of customer base, where a “mass market “ depict that the solution is designed for customers that are small and many in numbers, whereas “relationship” means solutions (often multiple) that cater for few customers that are large and have special needs (also see Table 1 below). Strategic focus divides the solutions into value configuration that is adding customer value, or cost configuration that makes solutions and processes more efficient. In terms of Ward and Peppard (2002) operational value configuration for 1) mass market focus means that the solutions are support applications for the business and 2) with a relationship focus the solutions are key operational applications. Likewise, for strategic value configuration for 1) mass market solutions they are high potential applications and 2) for relationship solutions they are strategic applications (see Figure 4).

5.2 The times they are a’ changing

Are there dynamics involved in the development of internet solutions? From our cases we can say that there are. In terms of strategic orientation many firms have tried to add-value to existing products by delivering dimensioning programmes and other types of value services. In terms of implementation and a raison d’être for system investments, however, process improvement and cost-cutting appear to be more important. Companies have made solutions that improve business processes to make them more efficient, which is easier to advocate than value-adding services that result in more intangible effects. It is therefore easier, from an investment perspective, to start and develop a Business Attribute solution and then try to move up to a solution that is providing a Business Differentiation.

Another important aspect is that operational value-add will only bring you so far. In order to make customers or, for that matter, buyers interested enough to use the system there has to be some icing on the cake. Value-add, however difficult and fuzzy it may be, is therefore something to develop in order to differentiate from competition and make users keener to tap into the system.

“Value-solutions” that have been developed, often eagerly and with great enthusiasm by employees in the selling companies, are more often than not, less than suited to be adapted for operational effectiveness. It is therefore more convenient to establish a new solution that caters for operational effectiveness, and then try to take advantage of the “value-solution” by adapting it to the new system. This often happens when suppliers approach larger customers that have requirements on the system to be a tool for effectiveness.

The market context in which the companies operate their internet solutions, is often not enough for biggest customers or suppliers. Instead the solutions need to be adapted to the individual in order to be beneficial for the larger actors. The most common strategic orientation of buyers is to use tools for cost-cutting and that they have to adapt them in order to fit in to the customer’s procurement process and/or e-procurement initiative. Therefore, the solutions need to be heavily adapted in order to support a relationship framework.

To move an e-business solution to a strategic orientation in a relationship context is probably the biggest challenge of all. There are high requirements on system operation, security and functionality: There are also needs for peer-to-peer communication between different levels and functions in the two firms.

In summary we advocate that companies that engage in e-business solutions should start with a cost focus in the functionality. When the ground has been set, and the solution aids in process effectiveness, it is time to develop value-add functionality further. The development of strategic value in the solution is not very easy to copy, and will leave the company with a temporary competitive advantage. Cost focus is either driven from an internal desire to be more efficient, or driven from customer demands on more efficient business processes. The more relationship oriented the solution, the more difficult it is for competition to copy. This is mainly caused by the asset specificities that are created in processes and information systems between the two parties. The customer base (if they address a market or individual companies) in the respective company is in our view a major determinant for the company’s future development of solutions. We believe that there are large benefits to be drawn from making highly efficient solutions that are adapted for individual customers benefits.

Most importantly, however, is that the solutions needs to be dynamic, that they are designed on a cost configuration platform first, then are developed to generate customer value, and that these solutions are adapted to cater for different types of customers in the customer base (large & small). This also means that solutions should develop to follow and anticipate customers’ tangible and intangible (tacit) requirements (cf. Woodruff and Gardial 1996).

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Appendix 1 List of cases influencing the paper

As the global leader in Process Automation Control Systems, ABB has and continues to supply the total needs to clients and their processes.

AGA is a division of Linde Gas Group AG the global leader in gas products and engineering services serving industries worldwide.

Alvis Hagglund is a division in the UK Group Alvis focusing on manufacturing of combat and all terrain vehicles.

Atlas Copco is a global provider of mining, drilling, construction, machines and power tools for household and professional use.

Bergman &Beving is a Nordic products and solution provider of mainly tools, consumables and medical equipment

Dynapac is a manufacturer of paving and compacting equipment with a product range covering the entire field with products in different sizes. Dynapac is a business area within Metso Minerals.

Electrolux is a global leader in household equipment in which Electrolux Laundry Systems is the division producing and selling professional laundry and cloth care equipment.

A world leading manufacturer, provider and developer of telephone infrastructure for voice and data communication.

Lyreco is a wholesale dealer of stationery and office supplies with a turnover of 140 M euro and approximately 6.000 employees in 18 countries throughout Europe, North America and Asia.

Metso Minerals is a division of the Finnish Metso group. Metso Minerals constructs, produce, and supports operations of mineral processing, crushing and screening, metal and waste recycling, drilling, and compaction and paving.

SAAB Technologies is a high tech equipment provider company in the range of aircrafts, robots, missiles, systems for military control, command and communication, and space.

Sandvik Tooling produces and sells tools for the metal cutting industry and is one of three divisions of the Sandvik group with 37.000 employees and a turnover of 5.5 billion euro.

The Tetra Pak group of 3.600 employees develops and produces equipment as well as material for containing fluid and refried food.

The Volvo Group is one of the global truck, bus, aerospace, and construction equipment providers with brands such as Volvo, Renault, RVI, Mack, White, Volvo Penta, VCE.

VWR International is a global leader in laboratory product distribution serving the industrial, pharmaceutical, educational and governmental markets. Operates in 18 countries, 6.000 employees, 350.000 products and services, and 250000 customers.

[1] Assistant Professor Logistics Management, perbr@eki.liu.se

[2] Assistant Professor Industrial Economics, jakre@eki.liu.se

[3] Dell computer offers a 'customer direct' value configuration that essentially forced all traditional computer production/distribution/sales/usage configurations to either rapidly improve or be replaced by the Dell way.

	Business Attribute	Business Differentiator	Business Integrator	Value Manager
Strategic focus	Operational	Value add	Operational	Value add
Customer Focus	Market	Relationship	Market	Relationship
Features	Leveraging costs through logistics platforms	Differentiation, internal knowledge, Competition landscape management	Flow management, the “extended enterprise”, system solutions, high asset specificity	Dialogue, open access, risk management, transparency, value networks, individuals
E-business solutions	Standardized solutions (e-business platforms)	Multiple e-business solutions: -market place (Endorsia) -customised solutions -own solutions	Extranet solutions – ERP-integrators	AI /expert systems
Ease of copy	Easy	Fairly difficult	Difficult	Very difficult

Abstract