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The Commerce Model for Electronic Redesign

By Dr. Mark E. Nissen
Naval Postgraduate School
Email: MNissen@nps.navy.mil
URL: http://dubhe.cc.nps.navy.mil/~menissen/

Mark Nissen is a professor of systems management at the Naval Postgraduate School (NPS) where he teaches courses on the acquisition of software and information technology and conducts research on the application of artificial intelligence to innovate procurement and acquisition processes. He currently leads the NPS acquisition research program and coordinates the School's research activities through the Defense Acquisition University consortium, where he continues his interests in procurement process reengineering and Internet-based intelligent agents. Before beginning his academic career, Dr. Nissen acquired a dozen years' aerospace management experience in the Contracts & Pricing area and served as a Supply Officer in the U.S. Naval Reserve.

Reengineering and E-Commerce

Business process reengineering (BPR) represents a pervasive and powerful approach to effecting innovation and quantum performance improvement in the enterprise, and many electronic commerce (e-commerce) technologies are now being employed to redesign inter-organizational processes (e.g., procurement and marketing) (1). Common examples include ubiquitous company Web pages, electronic storefronts and malls, online ordering, electronic catalogs and even the familiar electronic data interchange (EDI). The questions are: how do such e-commerce technologies integrate into process redesign? And how do we avoid the trap of simply inserting information technology (IT) into a (potentially broken) process? The first question concerns the focused use of technology in process redesign and mirrors the manner in which reengineering has been accomplished to date, but with its emphasis no longer on internal operations. The second question concerns the inductive approach (i.e., use the technology first, worry about the process later) taken by many "re-engineers," which has been colorfully referred to as "paving the cowpaths" (2). The Commerce Model provides an analytical framework for addressing these and other e-commerce/reengineering questions.

The Commerce Model

Procurement, purchasing, marketing, sales, customer support and other key elements of the commerce process are all intimately interrelated and can be analyzed deductively as an integrated whole, as opposed to being assessed individually without the benefit of examining important factors such as logical synergy between redesign alternatives, complementary technologies, buyer-seller interactions and others. The Commerce Model represents one tool that can be used to represent and understand these relationships, and it can serve as a guide to focus the redesign activities on those process activities that offer the greatest potential to leverage the technologies at hand (e.g., those associated with e-commerce). This model is illustrated in Figure 1.

Figure 1 - Commerce Model

The Commerce Model was originally developed for one of the prototypical courses on electronic commerce (3) at the Haas School of Business and pertains to commerce in general; the idea is that one must understand commerce in general before attempting to take advantage of the technologies employed for electronic commerce. The diagram depicts the process flow (from left to right) associated with a commercial relationship or transaction--a transaction generally occurs over a relatively-short period of time, whereas a relationship is more enduring; yet whether ephemeral or enduring, a transaction or relationship can be seen to progress through each step along the process flow depicted in the model. Clearly these steps represent commerce at a very high level (i.e., "double-clicking"on any high-level process activity would reveal the subprocess activity at the next-lower level).

From the buyer's perspective, the process begins with the identification of some need and proceeds through sourcing and purchasing to the use, maintenance and ultimate disposal of whatever product, service or information is purchased. The seller's process begins with some arrangement to provide a product, service or information (e.g., research and development, service process design, information acquisition, etc.) and proceeds through marketing and sales to customer support. The arrows connecting these high-level process steps are used to represent key items of exchange between buyer and seller, items which constitute the commercial activity proper. For example, information is exchanged at several points along the process flow, as are money and goods (or services, information, etc.) and even "influence," as delineated at the negotiation stage. By examining the process stages at which information is exchanged, one can acquire insight into those process activities that offer good potential for support through digital and network technologies.

Related Research

For example, the model is being used for research and development at the Naval Postgraduate School, where the use of intelligent agents to automate and support procurement, contracting and related "seller" activities such as product development, program management and logistical support is currently being investigated. This work is part of a more general stream of research oriented toward the application of artificial intelligence to innovate processes in the acquisition domain (i.e.,commerce processes), some of which has been ongoing for many years (4, 5). The commerce model has proven to be very useful for directing this research to promising application areas, including automatic contract composition, supplier evaluation, just-in-time training, procurement metrics, knowledge protection and growth, and others.

Admittedly very simple and straightforward at this high and general level of presentation, the Commerce Model was developed to be extensible and to be tailored to represent the specifics of each separate industry and commercial context. As such, it represents a starting point for the focused, deductive analysis of e-commerce opportunities and applications and serves to integrate key elements of process redesign with emerging Internet-based technologies. The author is interested in variations on its usage and application in the redesign and practice of procurement and e-commerce.

  1. Nissen, M.E. "A Focused Review of the Reengineering Literature: Expert Frequently Asked Questions," Quality Management Journal 3:3 (1996), pp. 52-66; republished with permission in the Electronic College of Process Innovation (1997).
  2. Hammer, M. "Reengineering Work: Don't Automate, Obliterate," Harvard Business Review (July/August1990).
  3. BA248D - Telecommunications and Distributed Processing, Prof. Mark Nissen (1995).
  4. Nissen, M.E. "Valuing IT through Virtual Process Measurement," Proceedings of ICIS '94 Vancouver, Canada (1994).
  5. Nissen, M.E. Knowledge-Based Organizational Process Redesign: Using Process Flow Measures to Transform Procurement. Doctoral dissertation, University of Southern California (1996).