American Society for Cybernetics
ASC 2001 Conference
May 27-29, Vancouver 
 

Whitaker, Randall, and Ulf Essler (2001). Interactivity in Electronic Commerce: Shifting the Focus of Business Modeling.
Online Proceedings of the American Society for Cybernetics 2001 Conference, Vancouver, May 2001.
http://www.asc-cybernetics.org/2001/WhitEssl.htm

Table 1: A Three-Phase Schema for Commercial Exchange Transactions

(Adapted from Essler and Whitaker, 2001)
 

PHASE:	POREMPTIVE	EMPTIVE	ABEMPTIVE
	"Toward the transaction"	"Pertaining to the transaction itself"	"Away /deriving from transaction"
Vendor Activities	Establish business Generate product Market product	Take order Deliver product Receive payment	Support user Support product
Buyer Activities	Recognize need Identify product Seek product	Enact order Make payment Receive product	Deploy product Use product

 

This three-phase schema views exchange transactions with respect to the dyadic interactions between vendor and buyer, as opposed to addressing the exchange from the perspective of one or the other. In the poremptive phase, the opportunities for exchange are opened up and explored by both parties. The emptive phase (the actual exchange) is the focus of most conventional business models. In the abemptive phase lingering obligations of the buyer and vendor, if any, are realized.

Using this Schema to Categorize and Describe eCommerce Features

The three-phase emptive schema allows us to draw distinctions in comparing conventional business activity with eCommerce, of which we will briefly discuss one. To date, the most apparent impact of eCommerce concerns the poremptive phase, which is overwhelmingly informational or conversational by comparison with the emptive phase most often addressed in conventional business modeling. In the traditional venue of real space, the outcome of an exchange transaction is (e.g.) the transfer of a tangible product from one to another geographic location. In this setting, poremptive and emptive interactions are accomplished through channels selected and/or maintained by the sellers (e.g., brick and mortar retail stores). In the new cyberspace venue, the end result of commerce may well be the same as before (i.e., transfer of a physical product). However, customer poremptive activity is no longer constrained to vendor-selected channels of access (e.g., storefronts). As a result, control over customer poremptive activity is surrendered to the customers themselves or to intermediaries brokering customers' access to vendor products and/or information about those products. This explains the incremental addition of shopping channels to general Web portals and the proliferation of specialized portals dedicated to shopping search and access functions. This also sets the stage for us to refine through reformulation two of the conventional constructs most commonly invoked in the eCommerce literature -- 'aggregation' and 'intermediation'.

Revised Views of Aggregation and Intermediation

Aggregation denotes the provision of unified access to a variety of products or services. Labels for enterprises effecting aggregation include "aggregators" (Buckley, 1999), "e-malls" (Timmers, 1998), and "hubs" (Kaplan and Sawhney, 2000). The conventional, structural, business modeling perspective treats such aggregation as an intersection in a supply or value chain. From a customer-focused agitectural perspective, this same aggregation is treated in terms of channels and/or interactions. The set of distinct poremptive / emptive interactions entailed in completing a given transaction is the object of aggregation. Customer sophistication constraints are less problematical when these interactions are fewer in number and/or conducted through only one channel. The number and diversity of affordances that must be employed is reduced, as are the potentials for making errors, getting lost, becoming overwhelmed, and giving up from frustration. This, we believe, is the most important sense in which eBay, Amazon, and Advanced Book Exchange (ABE) "aggregate". "Aggregation" as supply chain consolidation applies only figuratively to eBay and ABE, because buyers negotiate and enact final transfer of the purchased product outside the scope of these enterprises' services. The agitectural perspective better explains these firms' success by characterizing their success in terms of "aggregating" poremptive interactivity within one venue.

The type of intermediationsuch portals afford is distinct from the sense in which that term has been employed in management studies. The conventional usage frames intermediation as sequential involvement along a linear path of 'product's progress' from origin through sale to purchaser receipt. Portals need not be, and often aren't, actually involved with the course of 'product's progress' at all. Such auxiliary players in the web of commercial interactivity are external to both the vendor enterprise and the 'value chain' in which that enterprise may anachronistically presume itself to participate. From the customer's vantage, such players are not linearly arranged single-file toward him or her, as the value chain construct would suggest. Instead, they are seen by him or her as a set of entities with whom interaction may occur non-sequentially or in parallel. This observation led us to replace the old construct 'intermediation' with paramediation to connote co-effectuation of a transaction by means which appear more parallel than serial from the vantage of the customer (Essler and Whitaker, 2001).

Payment facilitation services such as PayPal, Billpoint, and BidPay are good examples of paramediaries. Although these firms serve as "intermediaries" in getting a buyer's money to a seller, they cannot be construed as an intermediary in the conventional "product's progress" sense. To the consumer, a payment facilitator is analogous to a courier -- another actor in the "constellation" of contacts made to complete the transaction. The selection of Billpoint as eBay's official payment facilitation partner further illustrates how paramediaries can become de facto components of an "aggregator". Even more interesting is ABE's recently-introduced paramediary function in accepting credit card payments on behalf of participating booksellers who themselves do not accept credit cards. This illustrates an "aggregator" which has itself adopted a paramediary role.

We believe this increase in customers' and external intermediaries' control over the poremptive phase is the key to understanding the novelty of eCommerce as it has evolved so far. With diminished control over the poremptive phase, enterprises will have to redirect sales and marketing strategies to allow for more proactive customers. Enterprises wanting customers who will trade will need to foster increased customer affordances for locating and engaging them. The objective of marketing strategy shifts away from how best to target potential buyers toward how best to be targeted by them.

Interactional Quality: Sophistication and Locution

The customer's increased poremptive control derives from opportunities for more proactive involvement via a more interactive medium. There are costs involved in exploiting these opportunities. Costs in terms of time and effort are typically less than would be the case in physically going out to shop. The summary cost of access (equipment and connections), though still substantial, is dropping steadily. The most interesting requisite costs involve self investment. Ironically, the most ubiquitous Internet services (email and WWW) rely on the same basic literacy and writing skills devalued and eroded since the rise of broadcast media. Effective poremptive reconnaissance requires cognitive skills for identifying, collating, comparing, and selecting options. The high-tech aura surrounding computers has fostered the notion that exploiting the Internet is a matter of technical proficiency. From our vantage, the enabling quality is seen as something more akin to 'sophistication'.

This resurgent emphasis on interactional skills applies to the enterprises as well. A successful firm must be sufficiently cognizant of customers' value-creating activities to invite and motivate contact, collaboration and transaction (Normann and Ramirez, 1994). As such, businesses can exploit cyberspace to the extent their sophistication (with respect to providing accessibility and transactional capabilities) is sufficient to lure and serve customers in the new venue. This prioritizes 'expressiveness' or 'eloquence' in portraying the business and its products. The time-honored cliché for success in real space was "location, location, location" -- a testament to that venue's capacity for territorialization. Once the focus is shifted to de-territorialized interactivity, the analogous maxim for eCommerce becomes "locution, locution, locution".

Beyond Exchange Transactions: Innovation through Conversation

The foregoing discussion has concentrated on interactions and conversations in the relatively limited and pro forma context of exchange transactions. We have already seen preliminary signs that enterprises are exploring even more interesting ways of engaging customers in dialogical interactions. Two recent case studies illustrate how companies are actively establishing mediated conversational channels with customers for discussing not just what the company offers now, but what the company could or should offer, and hence what the company could or should be. Such initiatives clearly demonstrate the prospect of guiding architectural transformation on the basis of agitectural outcomes (i.e., results of the dialogical interactions). Moreover, they lend credence to our claim that agitecture is the most illuminating referential context for analyzing eCommerce.

The first case involves a Scandinavian firm that produces metal cutting tools and systems for small manufacturing enterprises. Beginning in 1998, the firm undertook a series of conversations with its customers on their needs, the changes they would like to see in dealings with the firm, and the manner in which IT could be employed to realize these changes. The result was an online sales system through which regular or certified customers could more easily and efficiently place orders. This system was deployed not as a publicly accessible service, but as a privileged channel available only to known customers. The firm has consistently treated the new online sales channel as a means through which these regular customers can themselves operate more efficiently. The outcome can be construed as an innovation beneficial to the customer, motivated by customer input, and deployed so as to aid those customers participating in the innovation process. This case illustrates an extension of interactional scope from specific exchange transactions to longstanding external partnerships or affiliations. Although the new online sales system is an innovation in the firm's architecture, its justification can only be assessed in terms of its agitecture (e.g., with respect to nurturing partnerships).

The second case involves the financial services component of a well-known multinational corporation. This enterprise had already pursued eCommerce in the mainstream manner -- as an adjunct to their existing marketing. In 1995, the company had undertaken a major quality improvement campaign. By 1999, this campaign had established metrics-based criteria and instruments throughout the enterprise. Beginning in 1999, eCommerce efforts were redirected away from external marketing toward internal quality improvements informed by customer inputs. By 2001, some 80% of the enterprise's eCommerce efforts were committed to this new orientation. Information technologies were employed not to facilitate sales to customers, but to facilitate dialogues in which the customers could propose, test, and critique innovations in the enterprise's existing operations. This case is different from the first in that it involved a shift from external exchange transactions to the internal configuration of the enterprise itself. Changes resulting from this customer-driven quality program are innovations in the enterprise architecture guided through its agitecture (network of customer interactions).

Directions for Current and Future Research

The preceding sections have summarized the most important results of our approach to date. Our exploratory research continues, and it is already branching out to address additional topics. In closing, we would like to illustrate our ongoing research by briefly discussing two such topics upon which our current efforts focus.

Relationship Marketing / Management as Abemptive Interactivity

As mentioned earlier, the most dramatic interactional impacts of eCommerce to date have concerned buyer empowerment in the poremptive phase of an exchange transaction. The next emerging context for significant innovation concerns recurrent interactions constituting persistent relationships between enterprises and their customers, partners, suppliers, investors, etc. The term 'relationship' is invoked without strict definition in the business and management literature. For our purposes here, we shall follow this generic usage by taking the term to connote an ascribed state of affairs describing or explaining the form or course of interactivity among two or more parties.

Because online buyers have both more alternative sources to choose from and less costs for switching from one exchange transaction to the next, sellers will have to deal with the problem of holding on to any customers they get. As a result, some relationships will involve interactivity temporally downstream from (i.e., postdating) initial vendor / buyer contacts and exchanges -- i.e., during the abemptive phase of a particular exchange transaction and beyond. No longer able to rely on spatially circumscribed captive audiences, vendors run greater risks in introducing new products in the online marketplace. This makes it all the more important to get the product right and get it to the right marketing channels, both of which can be facilitated with better knowledge of the customers' needs and preferences. As a result other relationships might involve interactivity prior to any exchange transaction (e.g., when customer participation in new product development is sought). Such relationships might be linked to particular exchange transactions in the earliest (poremptive) phase, or they may be realized outside the context of any exchange transaction.

Relationship marketing (RM) is the label for a marketing orientation attuned to generating long-term relationships among the enterprise, its business process partners, and/or its customers (Snehota and Söderlund, 1998). Most typically, relationship marketing is treated as conventional enterprise-centric management strategy which in the best case treats customer contact as another product or service line and in the worse case considers repeated exchange transactions as the extent of the relationship to be sought. The term relationship management (also RM), though sometimes invoked as a synonym for relationship marketing, typically connotes the fostering and maintenance of such relationships. For the sake of this brief discussion, we'll use their common acronym to denote both. To date the main context for RM research and applications has been retailing. Within this context RM is typically pursued through (e.g.) soliciting customer inputs, customizing market communications, providing "customer care" services, customizing products, and rewarding customers for loyalty.

Multiple taxonomies and typologies have been suggested to categorize relationships. Unfortunately, these are commonly no more than a classification of customer types (e.g., by needs or motivational factors) with whom an enterprise might enter into a relationship, and hence do not really categorize the relationships in and of themselves. An illustrative example of the rare exception comes from the area of new product development, where Athaide and Stump (1999) delineate three types of relationships: customer education about products, customer feedback about prospective products, and full-blown development collaboration involving customers along with enterprise personnel. However, even this example treats the enterprise as the primary and the empowered party. Only in the role of collaborator is the customer regarded as being active (i.e., empowered to initiate and guide information flows). The two companies' efforts cited in the last section are concrete examples of such collaborative conversations.

The relevance of our approach is obvious, given RM proponents' universal allusions to two shifts: the first from exchange transactions to relational transactions as the phenomena of interest, and the second from competition and conflict to dialogue and cooperation. The first shift is all about interactivity, and the second can only be addressed in terms of such interactivity. Initial attempts to model the course of relationship development are appearing in the RM literature. We are currently examining the prospects for developing a temporal or processual model for relationships analogous to our three-phase schema for exchange transactions.

Another Analytical Tool: A Taxonomy of Interactional Stance

Our initial three-phase schema for exchange transactions is only one tool for analyzing agitecture, and its applicability is limited to one relatively pro forma type of transaction. We are actively researching the prospects for developing more general and more powerful analysis tools, drawing on a variety of sources including second-order cybernetics, linguistics, and semiotics. One line of such research concerns the utility of categorizing interactional 'stance' for each of the participants in eCommerce conversations. By 'stance' we mean an orientation of relevance to the conduct or content of the interaction itself. The specific type of 'stance' currently being examined is the orientation of an interactor to the other (or to a third) in terms of three main dimensions: interactional directness (e.g., 'second person' versus 'third person'), granularity of reference (e.g., the specific / singular versus the collective / plural) and referential sophistication (i.e., degree of specific knowledge and inferential nuance regarding another interactor).

Our interest in 'stance' is that we see it as a fundamental descriptive aspect of interactive behavior which could, if usefully codified, provide a basis for analyzing specific roles and conducts in conversational interactions. Our experiences and case studies suggest that enterprises adopt distinct 'stances' in particular roles or situations, and that a progression of such 'stances' can be traced over time. Consider the example of an enterprise following a course leading from designing a new service, through marketing it, to fostering long term relationships with its users. While traversing this course, a stereotypical enterprise can be seen to shift its interactional 'stance' regarding the customer from third-person / collective / highly abstracted knowledge (e.g., market research) through second-person / plural / situational knowledge (e.g., sales contacts), to second-person / singular / personal knowledge (e.g., a personalized partnership).

Our current theory development on this issue revolves around highly relevant work specifically invoking second-order cybernetics. Krippendorff (1996) examines the role of 'otherness' in communication with specific regard to observers observing each other in the course of their interactions. One result of this examination is his taxonomy of five basic categories of I-Other relations, which we list with minor terminological modifications as follows:

• I-Thou. Human beings in conversation.
  

• I-You. Persons in communication.
  

• I-It / Nontrivial . Interaction with objects whose behavior is determined by their internal states as well as by externally observable inputs (nontrivial machines ).
  

• I-It / Trivial. Interaction with objects whose behavior is determined by observable inputs alone (trivial machines ).
  

• I-They. Addressing a set or collective as a statistical aggregate.

With varying degrees of unanimity, Krippendorff's categories touch upon each of the three dimensions listed above. Interactional directness is addressed (at least partially) by the I / You / They allusions within the taxonomy. Some distinction among referential granularities is provided by the singular I / You versus the collective They. Finally, two levels of referential / inferential sophistication are entailed in the distinctions of You / Thou (for persons) and Trivial / Nontrivial (for machines generally). We find it intriguing that Krippendorff's work thus touches on precisely the dimensions we've identified as relevant to agitectural analysis. At the time of this writing, we are developing a taxonomy which is largely inspired by Krippendorff's, but considerably expanded so as to provide a set of categories accounting for all 'persons' (first, second and third), both singular and collective cases, and differential knowledge for all combinations of these factors.

Closing Comments

These and other points arising from our work to date are not, and could not have been, derivable from the objectivistic viewpoint exemplified by conventional business models. Such a viewpoint presumes the 'system-as-it-is' to be isomorphic with the 'system observed'. Any such perceived isomorphism must be discernible in a referential context within which the two entities of interest are identically apparent, and the degree of isomorphism will be contingent upon the extent to which their appearances or projections in that context are identical. The structural or architectural emphasis of conventional business models is not surprising, insofar as a system's essential character is presumed to be identical with its (presumably unambiguous) appearance as a structurally delineated composite unity.

The basic fact that the Internet is a communications medium led us to our emphasis on interactivity. This in turn obligated us to address enterprises and their customers as entities observing and observed by each other. As a result, our invocation of second-order cybernetics is entirely congruent with our longstanding commitment to its principles and the work of its exponents. We believed such an approach is the one most appropriate to the subject matter, and so far this belief has been consistently validated by the improved referential and analytical acuity it has afforded our research.

AUTHORS:

Randall Whitaker, Ph.D., (EnolaGaia@aol.com) is an adjunct researcher with the Institutionen för Informatik, Umeå University, and Senior Scientist with Logicon Technical Services, Inc.. He currently conducts research, analysis, and design in collaborative IT, cognitive engineering, and work-centered interface design. His private scholarship has focused upon the work of Maturana and Varela. He is the creator and steward of 'The Observer Web' -- the largest Internet nexus on autopoiesis and enaction -- and the current editor of the second-order cybernetics category within the Open Directory Project.

Ulf Essler, Ph.D., (Ulf.Essler@hhs.se) is Program Director of eCommerce/eBusiness with the Center for Information and Communications Research (CIC) at the Stockholm School of Economics. He conducts research on adoption, assimilation, and effects of information technologies within firms. His background is in systems theory and cybernetics, particularly second-order cybernetics and the work of Maturana and Varela.

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HTML transcription: Randy Whitaker, March 2002