A MEASURE FOR THE COMPETITIVE ADVANTAGE IN THE
INTERNET ERA
Guendalina Capece
Department of Business Engineering, University of Rome “Tor Vergata”, Via del Politecnico 1, 00133 Rome, Italy
Keywords: Distinctive competencies, e-business, metric, parameters, decision making, distinctivity.
Abstract: The drive to introduce this new parameter arose when we asked ourselves two crucial questions about
capabilities to obtain and maintain distinctivity in the Internet era. The first question is: “how can nowadays
an e-business idea be inimitable, non-substitutable, non-transferable and innovative and different from the
existing ones?”. While the second question is: “how this can be measured?”. In this paper we propose an
answer to these questions by defining a metrics and a parameter, called e-distinctivity, that quantitatively
measures the fundamental distinctivity aspects of an e-business idea. To evaluate the e-distinctivity of an e-
business idea we used a reference user panel. The assessments and results on the parameter have been
evaluated on a panel of eighteen e-business enterprises, taken as reference examples of successful
implementation of e-business ideas. At the end of the paper we finally discuss the results and underline the
advantages of this methodology.
1 INTRODUCTION
In this paper we propose a new metrics in order to
support the feasibility evaluation of an e-business
idea through a new parameter created “ad hoc”,
named “e-distinctivity”.
This original metrics aims to quantitatively
support the selection phase of a new e-business idea
in order to evaluate its distinctivity in the actual e-
business arena. In order to do that, we introduce the
new parameter, “e-distinctivity”, that aims to
evaluate how much a new e-business idea is difficult
to imitate, difficult to substitute, difficult to transfer
and how much is innovative&different with respect
to the existing competitors. This approach aims to
extend to the e-business the concepts of “distinctive
competencies” as key factors to gain a competitive
advantage that have been widely discussed in the
literature in the strategic management (Teece, 1998).
The e-distinctivity parameter extends the model
proposed in a previous paper for the evaluation of e-
business ideas where we identified two parameters
called “Conceptual Accessibility” and
“Technological Accessibility” (Capece, 2006). The
first parameter, the “Conceptual Accessibility”, aims
to evaluate how much the new e-business idea is
close to known and common e-business concepts
and ideas. The goal is to give a measure of how
much the new idea will be promptly understood and
accepted given the existing cultural background of
the expected users. The second parameter, the
“Technological Accessibility”, aims to evaluate how
much the new e-business idea implementation will
require the use of well-known and wide-spread
technological instruments.
In the e-business environment the assessment of
the soundness of a new idea not only requires the
traditional tools of business analysis, but also the
evaluation of the aspects specifically related to the
media that will be used to bring the idea to the final
users. In our analysis we will refer to an e-business
idea as a business idea which derives its
distinctiveness and competitiveness from two key
factors:
it is proposed to the target users through
internet;
its realization would not be possible without the
internet support.
It is necessary to clearly identify the motivations
behind the idea, the user target of the idea and the
aspects of innovation and differentiation that should
drive the idea towards success with respect to the
existing business scenario.
A widely accepted approach in evaluating a new
idea is based on a detailed analysis of the existing
293
Capece G. (2007).
A MEASURE FOR THE COMPETITIVE ADVANTAGE IN THE INTERNET ERA.
In Proceedings of the Second International Conference on e-Business, pages 293-300
DOI: 10.5220/0002108202930300
Copyright
c
SciTePress
environment i.e. it depends on the capability to
identify and anticipate the needs of defined users
targets and thus on the capability to offer solutions
that will satisfy these needs. In the e-business
specific scenario then we need to adapt those
categories to take into account the used media (i.e.
the Internet).
Following the classic marketing literature, to be
successful a business idea must be innovative,
attractive, competitive, pursuable and capable to
generate revenue (Kottler and Scott, 1991).
The most recognized methods for the evaluation
of new ventures are the feasibility analysis and the
cost/benefit analysis. In the literature the typical
phases of the development of venture projects are
defined as: ideation, selection, preparation,
evaluation and actuation (Kottler and Scott, 1991).
In this paper we will concentrate on the
feasibility analysis during the selection phase for e-
business ideas.
The feasibility analysis aims to define the
viability of the realization of the e-business idea and
to give to the decision makers the information
needed to confirm the start of the project realization
and therefore the needed investments. The feasibility
study for e-business is an important instrument to
ensure an effective use of the ICT tools and in the
economic effectiveness of the ventures. It also
increases the awareness of the investment decision
and therefore helps in evaluating the expected
benefits vs. the required costs. In this way it
contributes to decrease the projects risks and it
represents an instrument to manage the complexity
of the projects.
2 THE REFERENCE USER
PANEL
In order to tune the parameter and to execute all the
needed evaluations a user panel has been provided
by a database in which there was a list of 240 people
names and phone numbers. This list has been used in
order to perform the interviews. The database
containing the users’ information has been selected
in order to represent the expected target of a new e-
business idea being evaluated. Contact was made
with 188 customers; 52 were unreachable. Of the
188 customers contacted, 138 agreed to participate
in the questionnaire. The survey instrument included
questions on demographic information. All the panel
components of the database are European people,
that frequently access the Internet both for work and
for leisure. In particular the panel consists of 138
people aged between 20 and 50. Seventy percent of
the panel components have a bachelor degree or are
university students. Forty percent uses ICT and
internet specifically for work purposes and all the
components use it also for study and other personal
interests.
3 THE REFERENCE
ENTERPRISE GROUP
The assessments and results on the parameters have
been evaluated on a panel of eighteen e-business
enterprises, taken as reference examples with respect
to the e-business idea definition given in section 1.
All the components of the enterprise reference group
are examples of successful implementation of e-
business ideas, although they are very different from
each other for strategy and user proposition:
Abebookes, Amazon, AOL, Apple, Dell, eBay,
Expedia, Google, Internet Movie Database, iTunes,
Nike, Million dollar homepage, Motorola, Paypal,
Ryanair, Skype, SuperEva, and Yahoo.
The identified parameters have been evaluated
on the components of the enterprise reference group
to ensure their soundness with respect to existing
successful e-business ventures.
4 E-DISTINCTIVITY
PARAMETER
The necessity to create this new parameter arose
when we asked ourselves two crucial questions
about capabilities to obtain and maintain
distinctivity in the Internet era:
1. how can nowadays an e-business idea be
inimitable, non-substitutable, non-transferable
and innovative and different from the existing
ones?
2. how this can be measured?
We tried to find an answer to these questions by
defining a metrics and a parameter in order to
measure the fundamental aspects that describe the
distinctivity of an e-business idea. After that we
decided to apply the identified metric to a panel of
successful business idea to assess its soundness and
accuracy though the found results. As said the e-
distinctivity parameter aims to evaluate how much
the new e-business idea is difficult to imitate,
ICE-B 2007 - International Conference on e-Business
294
difficult to substitute, difficult to transfer and
innovative&different from existing competitors.
As first step four aspects have been identified to
give a quantitative evaluation to the e-distinctivity:
inimitability, non-substitutability, non-transferability
and innovation&differentiation with respect to the
existing competitors. For each of these four aspects
two characteristics have been pointed out in order to
better specify and evaluate the parameter and its
significance. They have to be defined carefully to
determine the importance and significance of the e-
distinctivity attribute. All these eight characteristics
interact and contribute to the final value of the
parameter.
For the first one, inimitability, the two
characteristics we wished to evaluate are:
1. how much the idea is protected by license,
patents or intellectual property;
2. how much the information about the idea are
exposed;
For the second one, non-transferability, the two
characteristics we wished to evaluate are:
1. how much the idea is influenced by the local,
regional or context forces;
2. how many information, and thus knowledge,
about the definition of the idea are tacit and non
codified when investigated by an external analysis.
For the third one, non-substitutability, two
characteristics we wished to evaluate are:
1. how much the use of the idea fosters customers’
loyalty;
2. how much the idea is customized or
customizable by the final users.
For the fourth one, innovation&differentiation with
respect to the existing competitors, the two
characteristics we wished to evaluate are:
1. how many complementary and successful ideas
exist;
2. how much the approach is different from the
existing ones.
Once the idea has been explained to the
reference user panel, the four aspects have been
evaluated by measuring each of the eight
characteristics. The measure of each characteristic is
realized by answering to a specific statement with a
value between 1 (low) and 5 (high). The results for
each e-business idea can then be visualized in a two
dimensional radar consisting of four principal zones
each representing one of the e-distinctivity aspects.
The radar graph allows to represent the results in
a form that will be simpler to understand. It is
immediate to recognize, through the radar graph,
which is (are) the aspect(s) of the e-distinctivity that
is (are) crucial for the success of the business idea.
Indeed, the zone(s) in which there is a larger graph
area is (are) the most meaningful one(s) and this
means that the two characteristics are the most
important and competitive ones. It is also easy to
point out the aspect(s) that must be improved in
order to enhance the e-distinctivity of the e-business
idea. Indeed, the zone(s) in which there is a smaller
graph area is (are) the ones in which the
characteristics must be strengthen to become a
strong point. The radar graph is also useful to
evaluate different e-business ideas in order to
understand the one that has a strategic position in
comparison with the others. Indeed, the idea that has
the larger radar graph in every zone, also has the
best characteristics and, as a consequence, the
greater e-distinctivity value as key factor to gain a
competitive advantage.
Once the idea has been explained to the
reference panel, the eight characteristics have to be
evaluated one by one by the reference panel
components that have to give to each characteristic a
value in the established range. To implement a
synthetic representation of the results on the radar all
the results from the same characteristic have been
averaged. The value assumed by a given e-business
idea on each characteristic is set as arithmetic mean
of the values obtained for that characteristic from all
the components of the reference user panel
The shape of the radar for an e-business idea is
then delineated by the mean values of its
characteristics.
At the end of the evaluation, we have a single
value for each characteristic for every e-business
idea considered for our study. Every quadrant
represents a selected aspect of the e-distinctivity
parameter. In each quadrant there are two axis that
indicate the characteristics to evaluate for the aspect.
See figure 1 presented next:
Figure 1: The radar graph area with the four crucial
aspects and the two characteristics for each quadrant
As explained before each respondent gave an
evaluation of each aspect by responding to a specific
question.
Difficult
to imitate
Difficult
to transfer
Innovation&
Differentation
Difficult
to substitute
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295
In order to make the evaluation needed for our
work, we asked to answer to each question with a
value from 1(low) to 5(high) and we gave to each
value a specified meaning.
For the first aspect, “inimitability”, regarding the
first characteristic, “how much the idea is protected
by license, patents or intellectual property”, we have
to identify how much licenses, patents or intellectual
property provide protection against the imitation of
an idea. These resources offer rights for exclusive
use by the owner and can keep imitators at bay. The
degree of their power is also in other external
factors, such as regulations, that can try to block or
al least limit the invent-around alternatives from the
competitors.
To evaluate this characteristic we decided to assign
the meanings to the different values as follows:
5: the idea is completely protected by license,
patents or intellectual property;
4: the idea has all the key aspects protected by
intellectual property;
3: the idea has some key aspects protected by
intellectual property;
2: the idea has some non-key aspects protected by
intellectual property;
1: the idea is completely unprotected.
For the first aspect, “inimitability”, regarding the
second characteristic, “how much the information
about the idea are exposed”, we have to explain the
concept of observability. The observability of the
technology or the organization is an important factor
for imitation and plays a crucial role.
To evaluate this characteristic we decided to assign
the meanings to the different values as follows:
5: in order to implement the idea it is not necessary
to expose any part of the idea itself to the final
user;
4: in order to implement the idea it is necessary to
expose only the non-key aspects of the idea itself
to the final user;
3: in order to implement the idea it is necessary to
expose some key aspects of the idea itself to the
final user;
2: in order to implement the idea it is necessary to
expose some key and non-key aspects of the idea
itself to the final user;
1: in order to make use of the idea it is necessary to
completely expose the idea itself to the final
user.
For the second aspect, “non-substitutability”,
regarding the first characteristic, “how much the
idea is influenced by the local, regional or context
forces”, we have to underline how some ideas can be
influenced by local, regional or context forces.
Firm’s capabilities are deeply shaped by these
factors. Porter (1990) in fact attests that differences
in local product market, local factor market and
institutions play an important and strategic role in
shaping competitive capabilities. This means that
replication and imitation in a different geographical
context may then be difficult and costly in terms of
time and money. Understanding the idea, the
processes, the production and even the management
is a key factor in order to improve because an
enterprise cannot develop what it does not deeply
and accurately understand and know.
To evaluate this characteristic we decided to assign
the meanings to the different values as follows:
5: the idea can be implemented only by leveraging
on local, regional or context forces;
4: some key aspects of the idea are implemented by
leveraging on local, regional or context forces;
3: some non-key aspects of the idea are
implemented by leveraging on local, regional or
context forces;
2: the idea is negligibly influenced by the local,
regional or context forces;
1: the idea is not influenced at all by the local,
regional or context forces.
For the second aspect, “non-substitutability”,
regarding the second characteristic, “how many
information, and thus knowledge, about the
definition of the idea are tacit and non codified when
investigated by an external analysis”, we have to
explain the concepts of tacit and codified
knowledge. Tacit knowledge (Teece, 1981) is
difficult to articulate in a way that is meaningful for
the others. This means that the more a given item of
knowledge has been codified, the more it can be
transferred. This is an important and crucial property
that depends on the ready availability of channels of
communication suitable for the transmission of well-
codified information. Uncodified or tacit knowledge
is slow and costly to transmit or reproduce.
Ambiguities and error of interpretation can occur in
the process. The first ones can be overcome only
when communications take place in a manner that is
the most similar to a face-to-face dialogue. The
second ones can be corrected only when there is a
meaningful and appropriate system of feedback.
This means that messages and therefore knowledge
can better be transferred if they are structured in a
codified form.
To evaluate this characteristic we decided to assign
the meanings to the different values as follows:
5: the greatest part of the information and
knowledge of the idea are tacit;
4: most of the key aspects of the information and
knowledge of the idea are tacit;
3: some key aspects of the information and
knowledge of the idea are tacit;
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2: the non-key aspects of the information and
knowledge of the idea are tacit;
1: the greatest part of the information and
knowledge of the idea is not tacit.
For the third aspect, “non-transferability”,
regarding the first characteristic, “how much the use
of the idea fosters customers’ loyalty”, we have to
investigate the reasons that allow a firm aim to gain
customers’ loyalty.
Factors that determine that consumers make
most of their transactions in the same place are very
important in order to avoid substitutability.
Retaining customers is a financial imperative for any
e-commerce or e-business enterprise, especially as
attracting new customers is considerably more
expensive than for comparable, traditional, brick-
and-mortar stores. Understanding how to determine
a sense of loyalty in the final user remains one of the
crucial management issues. The development,
maintenance, and enhancement of customer loyalty
represent a fundamental marketing strategy for
attaining competitive advantage (Gould, 1995;
Kotler, 1988; Reichheld, 1993). It is important that
the partners of an economic relationship are
prepared to work at preserving it because it must
continue indefinitely (Morgan and Hunt, 1994).
To evaluate this characteristic we decided to assign
the meanings to the different values as follows:
5: customers’ loyalty is always fostered by the use
of the idea;
4: customers’ loyalty is fostered in most of the
cases by the use of the idea;
3: customers’ loyalty is fostered only under certain
conditions or due to particular sales promotions;
2: customers’ loyalty is fostered only during the
first period of the utilization by the final user;
1: customers’ loyalty is not fostered at all by the
use of the idea.
For the third aspect, “non-transferability”,
regarding the second characteristic, “how much the
idea is customized or customizable by the final
users”, we have to better specify the concept of
“customization”. The term mass customization was
coined by Stan Davis (1997) who predicted that the
more a company was able to deliver customized
goods on a mass basis, relative to their competition,
the greater would be their competitive advantage, a
view supported by Pitt, Bertham and Watson (1999),
and Duray and Milligan (1999). Pine, Victor and
Boynton (1993) describe the synergy of mass
customization and continuous improvement as a
‘new’ competitive strategy to challenge ‘old’
strategies such as mass production. Hart and Taylor
(1996) offer an operational definition: ‘Mass
customization is the use of flexible processes and
organizational structures to produce varied and often
individually customized products and services at the
price of standardized, mass produced alternatives’.
The concepts of flexibility, timeliness and variety
are essential to the notion of mass customization. It
is determining what the customer really needs and
attempting to respond quickly with an offering
which costs to the customer relatively little more
than standardized, mass produced alternatives’
(Duray & Milligan, 1999). So mass customization is
a firm’s ability to meet specific customer
requirements en masse, yet at a low cost, which
rivals mass production capabilities.
To evaluate this characteristic we decided to assign
the meanings to the different values as follows:
5: the idea can be deeply customized by the final
user;
4: the idea can be customized in many key aspects
without restrictions by the final user;
3: the idea can be customized in a restricted and
fixed number of key aspects;
2: the idea can be customized only in a restricted
and fixed number of non-key aspects;
1: the idea is not customized not even customizable
by the final user.
For the fourth aspect, “innovation &
differentiation with respect to the existing
competitors”, regarding the first characteristic, “how
many complementary and successful ideas exist”,
we have to determine if an idea could have the
possibility to gain a competitive advantage. To do so
it has to be compared with the other ideas in the
same economic field. The greater the number of
competitor is, the most difficult could be to emerge
in a specified market. This is enhanced above all if
the complementary ideas are successful ones. It is
not simple to gain a slice of the market if many
similar and successful ideas exist.
To evaluate this characteristic we decided to assign
the meanings to the different values as follows:
5: it does not exist any similar idea;
4: a number between one and two of successful
similar ideas exist;
3: a number between three and six of successful
similar ideas exist;
2: a number between six and eight of successful
similar ideas exist;
1: many similar and successful ideas exist.
For the fourth aspect, “innovation&differentiation
with respect to the existing competitors”, regarding
the second characteristic, “how much the approach
is different from the existing ones”, we have to
observe the approach of the idea and to compare it
with the other approaches that characterize the other
A MEASURE FOR THE COMPETITIVE ADVANTAGE IN THE INTERNET ERA
297
existing ideas. To gain competitive advantage the
new idea has to be different form the others. If in the
market there are many successful and similar ideas,
the only way to survive is to present something
different in order to capture the attention and the
interest of the customers.
To evaluate this characteristic we decided to assign
the meanings to the different values as follows:
5: the idea is substantially different from the other
existing ones;
4: the idea is different in many key aspects;
3: the idea is different in a restricted number of key
aspects;
2: the idea differs only in a restricted number of
non-key aspects;
1: the idea does not considerably differ from the
other existing ones.
After the definition of the e-distinctivity parameter
and all its characteristics, the next step is to define
how to visualize the results of an e-business idea. To
implement the representation of the results we made
use of a radar graph and every e-business idea has
been considered separately. In this way, for each e-
business idea, we will obtain a value for each axis of
the radar, and this means that we will have eight
assessments. In the following we will show the final
radar for a chosen e-business idea taken into
consideration for our study, just as an example of its
final shape.
Figure 2: Final radar for a chosen e-business idea taken as
an example.
As explained this method has been firstly applied
to the enterprise reference group to see if the
obtained results are sound with the reality of some
well-known reference e-business ventures.
We have to underline the results of the test we
made: every e-business idea from the enterprise
reference group has obtained values quite high in
two or more quadrants of the radar and this result is
consistent with the fact that all the chosen
enterprises are well known and have a great success
in their business.
We analyzed the results and we compared them
in order to find significance for further applications.
This method can be used in order to comprehend if a
new e-business idea has the sufficient distinctivity to
be a successful one. This means that a new e-
business idea, on the one hand, can be compared
with a group of different and successful ideas to
understand which is its strategic position in
comparison with the others and, on the other hand,
can be compared with different new e-business ideas
in order to make easier for the enterprise the choice
of the idea to put on the market.
In order to give an additional interpretation of
the found results we calculated the total sum of the
values considering all the four quadrants of the
radar, the mean value and the variance. These three
numbers can give us additional insights to analyze
the e-distinctivity of the e-business ideas.
At first step of our work (Capece, 2006b), we
had a panel of one hundred people and we
considered ten e-business enterprises as reference
example for e-business ideas. The results have been
quite interesting even though the two reference
panels were too modest. In table 1 the results of our
first study are shown.
Table 1: The table results of our first study with ten
enterprises.
Results Value
Sum >20
Mean >2,5
Variance <1,6
We decided to improve the reference user panel
and the reference enterprise group to test the first
results and to achieve a more stable and defined
measurements. According to this goal, we made a
new study and we now show the latest results. These
can be considered the definitive ones, because in a
third phase of our study we considered twenty-six
enterprises and the results of the sum, mean and
variance didn’t change. The sum value changed
from 20 to 18. The mean value changed from 2,5 to
2,25. The variance value didn’t change. We can
therefore think that in table 2, showed below, the
definitive results of the sum, mean and variance are
shown.
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298
Table 2: The sum, mean and variance values for the
eighteen enterprises considered.
Enterprise Sum Mean Variance
Google 24 3
1,166667
Amazon 30 3,75
0,416667
Ebay 30 3,75
0,416667
iTunes 31 3,875
1,0625
Expedia 26 3,25
0,083333
Yahoo 22 2,75
1,583333
AOL 22 2,75
0,75
SuperEva 21 2,625
1,229167
Skype 28 3,5
0,166667
MDHP 24 3
5,333333
Dell 24 3
0,75
IMDB 23 2,875
0,615
Motorola 24 3
0,25
Paypal 25 3,125
0,61
Nike 25 3,125
0,186
Ryanair 18 2,25
0,69
Abebooks 21 2,625
0,48
Apple 25 3,125
0,41667
The results of the sum underline the position of
Ebay, Amazon and iTunes. They obtained the
highest values, 30 and 31, while the lowest value
belongs to Ryanair, 19, Supereva and Abebooks, 21.
All the chosen enterprises obtained a value that is
higher than the mean value of the sum (18) and this
lead us to a first consideration: in order to be
successful, a new e-business idea should have a sum
value of the e-distinctivity parameter higher than 18.
Through the observation of the mean values we
also observed that all the eighteen enterprises have a
value that is higher than the median. This leads us to
a second consideration: in order to be successful a
new e-business idea should have the median value
higher than 2,25, which is the lowest value and is
therefore taken as a reference rate for the mean
value.
The variance is the third value we considered for
our study and gave us another important
information: the variance in our study is a value
between 0 and 5,333. Anyway, excluding the
Million Dollar Home Page, the range is reduced to 0
and 1,6. Considering the peculiarities of the business
case for MDHP this leads us to a third consideration:
in order to be successful a new e-business idea
should have the variance value lower than 1,6. In
table 3 the results of our study are shown.
Table 3: The target values of our study.
Results Value
Sum >18
Mean >2,25
Variance <1,6
Considering the success records of the enterprise
reference group, these values can be considered as
targets when evaluating the e-distinctivity of a new
e-business idea.
5 CONCLUSIONS
In this paper we proposed a new metrics in order to
support the feasibility evaluation of an e-business
idea and quantitatively sustain the selection phase of
a new e-business idea The new approach is different
from the existing ones because we identified an
original parameter to be evaluated on a given e-
business idea in order to provide a quantitative
measure of its distinctivity. To be applied the
method requires only a detailed description of the
idea; therefore it is easy to compare many different
alternative ideas during the feasibility phase and
have quantitative data to evaluate them without
requiring huge investments.
Another advantage of this method is that the new
proposed idea can be easily compared with other e-
business ideas through the comparison of the
parameter value. A panel of eighteen successful e-
business ideas has been evaluated towards the
parameters and it can then be used to assess how a
new idea compares to them. Our results confirm the
soundness of this evaluation parameter. The study
provided three important properties that a new e-
business idea must have in order to be successful in
terms of distinctivity: the first one is that the new e-
business idea should have a sum value of the e-
distinctivity parameter higher than 18; the second
one is that a new e-business idea should have the
mean value higher than 2,25; the third one in that a
new e-business idea should have the variance value
lower than 1,6. However, this parameter is not
intended to be sufficient for an exhaustive
assessment of the feasibility of an e-business idea. It
is necessary to continue the investigation in order to
determine other parameters and evaluation tasks in
order to improve the accuracy of the model. Our aim
is to support the selection phase of new
A MEASURE FOR THE COMPETITIVE ADVANTAGE IN THE INTERNET ERA
299
e-business idea with the aid of new parameters that
integrate the traditional methods of business
analysis.
Further developments will be necessary for the
definition of an extended set of parameters
specifically designed for a complete assessment of
an e-business ideas.
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