The traditional path of e-commerce has largely failed during the dot-com crash in 2001, and organizations must learn to embrace the e-service paradigm approach to the electronic environment that can offer new forms of competitive advantage. Putting the firm in a position attending to the needs of the customer by providing software service in addition to selling products
Transformation of physical products to service products
The transformation of physical products to service products is enabled and hasten by electronic networks. For firms to garner long-term customer relationships they must take full advantage of the e-service opportunities that these electronic networks can offer. They predict that product-centered orientated firms that resists the call of the customers for control are not likely to survive in this electronic environment and give the example of record labels.
The e-commerce vs e-service path to increased profits
The traditional path is focused on automation and efficiency to reduce costs. While the e-service path is focused on enhancing service and building profitable customer relationships to increase revenues.
There is a shift form focusing on technology and systems towards focusing on understanding the customer. The electronic environment enables both this inward and outward-looking view of e-commerce. E-service is a customer-centric concept with emphasis on service and relationships to build customer equity instead of an emphasis on products and transactions.
The e-service paradigm takes advantage of the nature the online environment with it’s flows of information to learn about customers and communication to engage in long-term relationships.
Examples of the shift
“Dell Computers is a good example of how a firm selling products in an increasingly commodity market can follow an e-service orientation to build its customer equity” (Rust & Kannan, 2003). Organizations as IBM, HP and Sun are also undergoing this shift and increasingly focusing on their services as prime revenue source.
Source and based on: Roland T. Rust and P.K. Kannan, “E-service: a new paradigm for business in the electronic environment”, Communications of the ACM, June 2003/Vol. 46, No. 6
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#165 : July 12, 2009
Both paths can be used to make clear which strategy a company follows and could be used to inform the customer of what to expect. The demand for customization and tailored products are fulfilled by the e-service path. While the demand for low prices seems more logical with the traditional path. The question is if organizations can mix both. Is Dell a good example that does this? What do you think?