E-business applications: charging up local business to face growing globalization

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Hong Kong, with its open economy, free flow of currency, its status as a major hub of information and transportation and as a tourist centre for the region, has strong comparative advantages for the development of e-business, even in the current economic downturn. As a prelude to the 4th International Conference on Electronic Commerce (ICEC 2002), CityU hosted a panel discussion on how e-business applications can help local businesses in the face of growing global competition.

The panel members are (from right, photo below):

  • Dr Louis Ma (moderator), Associate Head, Department of Information Systems, CityU;
  • Mr Stephen Law, Managing Director, Strategic Systems Consultants Ltd;
  • Mr Peter Yan, CEO, Global e-Business Services Ltd;
  • Professor Douglas Vogel, Chair Professor, Department of Information Systems, CityU;
  • Mr Charles Chow, General Manager, e-Enterprise Solution Division, Hong Kong Productivity Council
  • Professor Robert Zmud, Michael F Price Chair in Management Information Systems, University of Oklahoma, US

Dr Ma kicked off the roundtable discussion with his presentation on the need for high-value added e-business applications in Hong Kong. "This is an important area for Hong Kong," Dr Ma said, "because our operating costs are so high we cannot compete with low-cost producer areas." There are four high-value added areas that are essential to Hong Kong's economic development, Dr Ma believes. First, are financial services, where Hong Kong should continue to maintain and enhance its position as a leading financial centre in the region. Over the past few years, e-banking and e-stockbroking have been growing-but the downside is that with more technology in use there are fewer employment opportunities for bankers and tellers.

Second is tourism, an important sector that brings revenue to Hong Kong as well as employment. Travel agents, hotels, restaurants and catering services can all capitalize on various areas of e-business and build better systems to attract more international visitors to Hong Kong, as well as improving our organizational effectiveness in various business sectors, Dr Ma said.

Logistics is the third area, where, with our container port and cargo terminal we have a history of success. "But in terms of local acceptance of e-business, we lag behind," Dr Ma said. Hong Kong still has the advantage of having a free flow of money and information, as well as good information management in general, and a good regulatory framework and legal system. "These are the criteria for Hong Kong to continue its efforts to maintain a high success area in logistics." Finally, Dr Ma looked at professional and business services, an area that is increasingly important because of China's entry to the World Trade Organization (WTO). China is likely to become the world's largest manufacturing centre but most cities in China are less advanced in the areas of business services, professional services and consulting, Dr Ma believes, and it is in these areas that e-business will be widely used.

Utilizing Hong Kong's e-government experience

Next up was Mr Peter Yan, who spoke about e-government, an area in which he believes Hong Kong companies can utilize their experience to provide professional services to local and overseas government sectors. Hong Kong started off with a strong footing in e-government, Mr Yan said, when the Chief Executive introduced the Digital 21 Hong Kong IT strategy in 1998. The legal infrastructure was set in place with the passing of the Electronic Transaction Ordinance in 1997-the first of its kind in the region. Subsequently, the Public Key Infrastructure, essential to the electronic security area of e-business, was implemented. The government also led by example in developing a number of major projects: the Government to Citizens Electronic Service Delivery (ESD), with more than 30 on-line applications for Hong Kong citizens to access government services; and the Government to Business Electronic Tendering System (ETS), which promotes transparency in the procurement process.

In 2002, Accenture, the management consultants and technical services organization, ranked Hong Kong as the third fastest growth area in the e-government sector, with over 91% of services now done online. The government also plans to have 80% of procurement done electronically by the end of the fiscal year 2003 and is already aiming to have phase three of the ETS implemented in early 2003.

One of the major development areas in China in the next five to 10 years will be e-government, partly because China has to comply with WTO regulations on government procurement. "If we look forward, the opportunities are there to gain an advantage from our experience in the e-government area to promote such services to nearby cities. Given our unique position in the Pearl River Delta, I believe we have a significant role to play," Mr Yan concluded.

SMEs and e-business

The impact and adoption of e-business by small and medium size enterprises (or SMEs in short), or in Hong Kong was the title of Mr Charles Chow's presentation. As is the case in other cities, the majority of the enterprises in Hong Kong are SMEs-around 300,000, which employ about 1.4 million people. In a half-yearly study on the progress of e-adoption in Hong Kong, which has been carried out since 1999, it is clear from the June 2002 survey that, although the uptake is increasing, the majority of SMEs still have no plans to do anything within the next six months. In the sectors that are doing more e-business, it is usually at the level of e-mail communications. In fact, only 0.2% of SMEs have internal and external integration and online transactions and payment. And although the majority of people believe that companies are not very successful in implementing e-business, over 60% of them think that such companies have a competitive advantage.

A separate study completed in September 2002 looked at the adoption of IT by 400 SMEs in six different sectors. In the areas of IT governance, IT infrastructure and resource, and IT application, results revealed that 60% of the companies did not have any packaged software to apply to their business. The other message that came across is that infrastructure in terms of hardware and broadband are now so cheap that it's easy to adopt them, but few companies are prepared to go one step further to make them work for business in terms of software application. The majority of businesses have good infrastructure but poor application. "They are under-leveraging their IT processes and we need to encourage them to develop their infrastructure in tandem with the business process," Mr Chow said. He believes that SMEs today are facing two pressure points: first, those organizations which are not IT-literate and innovative will lose out; and second, with their global trading partners moving towards the online e-market place, local companies will have to do business online to survive. These are the most serious challenges facing Hong Kong's SMEs today.

Managing knowledge

Knowledge and its management was the topic of Mr Stephen Law's presentation: Enhancing the services industry with knowledge management. It has been said that the one sure source of lasting competitive advantage is knowledge but how much do companies know about themselves, the business environment and the global business world? How much are they in control?

Knowledge, Mr Law said, is a collection of information which allows us to identify patterns and answer specific questions. "By a process of understanding, knowledge becomes wisdom and wisdom allows us to ask: what if?" With knowledge management comes increased competition and rate of innovation, and, said Mr Law, a look at the rate of innovation in the business world today makes it easy to see that if a business is not innovative, it will lose out.

Knowledge management encourages a culture where people can grow by learning from each other. It also encourages innovation and new ideas. In fact, "knowledge" is now being recognized as an asset like stock prices and balance sheets. "And knowledge management is important to the services industry in particular because it's about service, it's about people," Mr Law said. "The services industry relies on knowledge and information."

With the increasing complexity of such things as investment products and logistics comes the increasing importance of understanding how the business environment is changing. In the US, for instance, 90% of Fortune 500 companies have introduced knowledge management initiatives, Mr Law said. "As business managers, the most important questions we need to answer today are: Do we know what we know? And do we know what we don't know?"

Living locally, working globally

Next up was Professor Douglas Vogel, whose presentation covered e-learning and mobile commerce. In education, universities are going through a shift as they move from the traditional campus-centred environment that is instructor-centric to a more student-centric, network-centred environment that involves world-wide interaction. "And we're also dealing with experiential learning, lifelong learning that involves the working environment and bringing education into that in a Ojust-in-time' instead of a Ojust-in-case' approach," Professor Vogel said. The plethora of mobile devices now commonly available has led to the introduction of an "our time, our place, our pace" interface to working and learning, which helps us to make more effective use of niche time, he said. "They give us seamless interaction between a variety of different kinds of spaces, where we can be continuously connected in a much more personalized fashion."

By embracing these mobile devices as part of the learning environment, we engage in different kinds of interactions, between students, instructors, and institutions-a convergence of e-learning and m-commerce, Professor Vogel said. But there are several social and personal issues which still have to be addressed: Who has the control of the information, for instance. And can we selectively filter it out? In the area of IT, application and design is also a huge issue, with interface difficulties between people and devices and also between devices. "If we want to truly create an information and learning environment, we have to think about it in a global context because that's the environment in which our students work," he said. "They exist locally, they work globally."

Sharing across the value chain

Finally, it was the turn of Professor Robert Zmud, whose presentation was titled: Increasing visibility across the value chain. "A number of organizations in North America are talking about not looking only within the enterprise but across the enterprises at suppliers, customers and partners-looking across the extended value chain," Professor Zmud explained. The focus is on capturing on a real-time basis, over a wide area and over different types of technology moving into the m-commerce domain, when business events occur, and sharing those events across the value chain. The benefits of such business visibility include improved efficiency, cost, quality, speed, timeliness, and, as patterns are better analysed, improved decision making. "The key is not to look at one organization but to look across the organizations that are competing in a larger market place and that are trying to tie themselves together through e-business. The e-business concept here is as a business platform to take care of business."

There are, however, several barriers to achieving this desired visibility, Professor Zmud said. The four major barriers are: incompatibilities across companies with their business processes; dependence on slow serial communication technology; the lack of sharing of information across the value chains; and scale, because it costs a lot of time and effort to overcome the other barriers. "One of the exciting topics is the area of e-market places and how they can provide the scale to overcome one of the barriers for small organizations and provide the capability to increase visibility across value chains."

Defining success criteria

Reminding the participants of the theme of the ICEC conference, Dr Ma suggested the participants to identify a criterion of success in their particular areas. "In e-business, we have to be innovative in thinking of new ways to operate but we also have to consider the risk factor. We need experts in knowledge management and those who understand the technology to work together as a team to think of innovative and yet cost-effective applications." Finding a niche is crucial to the survival of Hong Kong companies, Mr Yan said. "In the IT industry, that will be a critical success factor. We have to be cost-effective and find ways that add unique value-for instance, in the financial industry and professional services, where we've had an international presence for some time. We also have an edge in the e-governance market, which we should exploit."

Mr Chow's suggestion was the creation of an environment in which SMEs have a similar leverage on the infrastructure as large organizations, while maintaining their entrepreneurial spirit. And that environment, he believes, is the e-market place, which provides "an SME cooperative, an IT or e-business adoption life-cycle portal, where all the service providers are in one place, so the SMEs know where to go."

"I think a success factor must be something that really makes a big difference, to enhance the business's competitive edge," said Mr Law. He believes Hong Kong has to become a knowledge-based society before it can be successful and this means we have to adopt a formal approach to the concept of knowledge management. Focussing on adoption diffusion was Professor Vogel's choice. "Whether we are working as academics with SMEs or at any different level within and between organizations, we have to encourage the diffusion of the kinds of things and examples that we've seen. If we can do that, then we'll begin to see the results on a larger scale."

Professor Zmud agreed: "We have to focus on why adoption diffusion isn't occurring and what can be done to make it occur at a more accelerated rate." People also need to understand what e-business is, he added. "It's not a business-to-commerce website, it's transforming the way you do business, overcoming the fear of whether or not it can be done, and overcoming the cost implications." And the only thing that will guarantee that SMEs will achieve this and get real value from it, is to act cooperatively.

In conclusion, Dr Ma said that e-business is an area with high potential that offers multiple benefits. But it must be examined from different perspectives, which is why we need experts from academia and industry to study the problem areas to find solutions that lead to the development of more cost-effective e-business.



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