The Theory and Development of a Relationship Matrix … · development. &Matrix-based Approach to Evaluating e-Marketplaces

A b s t r a c tThe process of joining an electronic marketplace

(e-marketplace), and the evaluation of which

particular ones offer the most suitable mix of

services for a particular business, is not a

straightforward undertaking. With a myriad of

variants on offer, and with the numerous mem-

bership models, features, services, functionality,

product types, and technology platforms in exist-

ence, it can prove to be a very confusing process

for any prospective company looking to join.

For that reason this paper take steps toward

developing an effective, intuitive, and user

friendly mechanism for assisting in e-market-

place selection, to be employed by practitioners

looking to either subscribe to existing e-market-

places or examining the prospect of developing a

bespoke e-marketplace of their own.

The investigation describes two case studies, one

depicting the development of an e-marketplace, by

an SME in the UK, and the other describing a set of

three new classification models derived after

analysis of the wider global e-marketplace domain.

These findings are then employed, and utilized as

inputs, in the development of a QFD-based matrix

approach for evaluating e-marketplace suitability.

Keywords: electronic marketplace, e-

marketplace, QFD, selection tool

A u t h o r s

John L. Hopkins([email protected]) is a research fellowbased at the Michael Smurfit Graduate Schoolof Business in University College Dublin. Hisresearch interests focus on newly-evolvinge-business and telecommunications modelsand how they effect supply chains, valuechains, and operations management.D. F. Kehoe([email protected]) is Saxby Professorand Royal Academy of Engineering ResearchProfessor of e-Business, Director of thee-Business Research Centre (e-BRC) andDirector of the Advanced Internet Methodsand Emergent Systems Centre (AiMeS)research and knowledge transfer centre (over£6m in ERDF/RDA funding). His researchfocuses on the role of information systems inimproving business performance. He hasspecific interest in the creation of new highgrowth high technology businesses emana-ting from the Liverpool e-BRC. Since 1988he has been principal research investigator onprojects valued at over £10m and he leadsthe DOMAIN project - the EPSRC’s largestfunded work on e-business. Professor Kehoeholds a number of non-executive director-ships in a range of high technology start-upbusinesses in the UK.

The Theory and Development of a

Relationship Matrix-based Approach to

Evaluating e-Marketplaces

JOHN L. HOPKINS AND D. F. KEHOE

INTRODUCTION

The need for research in this areawas driven by the lack of high qualityexisting academic material beingcurrently available on the importantfactors to consider when evaluatingan electronic marketplace (e-market-place). It was felt that such a crucialdecision, involving significant invest-ment in planning and resources,should be supported by more com-prehensive literature and study data,in order to assist in a better educatedbusiness decision.

Linder and Cantrell (2000) arguedthat existing frameworks are notsufficient to describe the rich arrayof new business model choices nowfacing managers in these electronicbusiness environments. In particulardecision makers have the difficult taskin assessing the range of proposedmodels in order to determine thosethat are most suitable. It was felt thatthere was a genuine business need forthe development of some kind offramework or system, for assisting inthe successful adoption of the mostsuitable e-marketplace, for companieswith specific requirements, at theright time, for realistic business ben-efit at the right cost.

This paper chronicles the back-ground work undertaken in the area

and discusses the development ofan interrelationship matrix-basedapproach for evaluating the suitabil-ity of an e-marketplace’s range ofservices to an established set ofcustomer requirements. A definitionand brief history of e-marketplacesare illustrated, utilizing literaturereview findings, followed by anaccount of the two areas of casestudy and the reasons supportingtheir selection. The application ofthe findings of this work, in additionto the background behind thetechnique of Quality FunctionDeployment (QFD), is thendescribed as the relationshipmatrix-based approach tool is devel-oped and subsequently tested.

A DEFINITION AND BRIEF HISTORYOF ELECTRONIC MARKETPLACES

The relative immaturity of e-market-places and the significant amount ofchange that has occurred in theirshort existence has resulted in therebeing no widely accepted definitionof what constitutes an e-marketplace(Daniel et al. 2004). Dependingupon the line of investigation fol-lowed e-marketplaces can be foundto be defined as many differententities. Definitions can vary from

Cop

yrig

ht�

2006

Elec

tron

icM

arke

tsVol

um

e16

(3):

245-2

60.w

ww

.ele

ctro

nic

mar

kets

.org

DO

I:10.1

080/1

0196780600842090

RESEARCH

Downloaded By: [Schmelich, Volker] At: 11:37 24 March 2010

Greiger (2003) defining an e-marketplace as being ‘thatwhich usually brings buyers and suppliers together (in a‘‘virtual’’ sense) in one central market space andimplicitly involves trade financing organizations, logis-tics companies, taxation authorities and regulators’, toBakos (1997) and his more buyer–seller orientated viewof an ‘interorganisational information system that allowsthe participating buyers and sellers in some market toexchange information about prices and product offer-ings’. Nairn (2000), on the other hand, describes an e-marketplace as ‘a Web site that allows businesses to buyand sell industrial products and services using a standardweb browser’.

The Federal Trade Commission (2000), however,delivers what would be a widely accepted notion of an e-marketplace, with their definition of: ‘a distinct systemof suppliers, distributors, commerce services providers,infrastructure providers and customers that use theInternet for communications and transactions’.

Since the late 1990s the information technologyworld has experienced what can only be described asan incredible period of revolution. The concept ofsharing information and knowledge electronically, with-out the need for expensive software at the user end,became a reality, and the boundaries of its possibilitywere limitless. Companies would come to adapt this newcapability to enable them to conduct business-to-consumer (B2C) transactions, creating brand newrevenue streams and a means for increasing marketshare, and there the world of electronic business, or e-business, was born. e-business itself can be defined asbeing the application of Internet technology toward theautomation of business transactions and workflows(Kalakota and Whinston 1997).

A natural progression of this capability was forcompanies to start interacting with other companies ina similar manner, making business-to-business (B2B)transactions, simultaneously improving the speed andaccuracy of communications, and providing the poten-tial for the kind of levels of collaboration not possiblebefore. B2B e-commerce can be defined as an enterpriseconducting business with another enterprise/enterprisesover the Internet. If this kind of interaction is done onan individual ‘one-to-one’ basis, then there is norequirement for an e-marketplace environment.However, if many enterprises go to one website to dobusiness with one another, on either a ‘one-to-many’,‘many-to-many’, or ‘many-to-one’ basis, then thewebsite is considered as acting as an online exchangeor e-marketplace.

To establish the origins of e-marketplaces best, it isnecessary to examine earlier attempts to automate thesupply chain. According to research from the PRIMEFaraday Technology Watch (May 2001) the first of thesewas electronic data interchange (EDI), where orders,invoices, material releases and delivery information,usually for core products and raw materials, could be

transmitted via predefined, inflexible and often expensivemessaging systems, tying the purchaser to traditionalclient/server technology. EDI technology quickly estab-lished itself as an effective way of conducting businesson a global scale, enabling much closer integrationthroughout the supply chain, between the successivestages of manufacture and distribution (Holland 2002),supported by the belief of Rayport and Sviokla (1995)that the extent of collaboration between the separatelyowned companies constituted a virtual supply chain thatbehaved as if it were owned by a single organization.EDI was later superseded, in many cases, by self-serviceelectronic procurement, which allowed authorized staffto buy non-core products via electronic catalogues, oftenaccessed through an internally managed intranet.

However, what really facilitated such a giant leap inthis area, from EDI to an environment of seamlessintegration between customers and suppliers, withoutthe need for extensive investment in hardware orsoftware, were the advances experienced in Internettechnology. The Internet brought into existence acommon medium, for the first time, capable of hostinga seamless web of information and transactions, betweena limitless number of users.

There grew considerable interest in the new Internet-based applications that were appearing by the late 1990s,such as early e-marketplaces, particularly as a means forinformation exchange between companies, and thenumber of these e-marketplaces emerging up grewdramatically between 1999 and 2000 (Schram andSexton 2000). In fact, according to a study by Laseteret al. (2001), there were already a total of 2,233 e-marketplaces in existence by 2001.

The evolution of these B2B e-marketplaces arrived inthree distinct phases:

1. In 1999 the first phase of e-marketplaces to appearwere those established by independent startups, withlow-cost connectivity to the Internet fuelling theboom, offering both standardized products andtechnologically advanced legacy procurement sys-tems. These were characterized by multi-industryB2Bs VerticalNet, and FreeMarkets, as well as thechemicals industry’s Chemdex.

2. The second wave, around 2000, involved indepen-dent exchanges offering equity stakes to large buyersand sellers as incentives to trade through them.At this point many of the first generation ofindependent electronic marketplaces, set up byentrepreneurs, would typically exclude the equityparticipation of industrial companies that formedtheir trading base, to preserve both their neutralityand ownership.

3. The third stage of the e-marketplace evolution storyinvolved large industrial companies either develop-ing their own private e-marketplaces or joining up

246 John L. Hopkins and D. F. Kehoe & Matrix-based Approach to Evaluating e-Marketplaces


with industry partners to create consortium e-marketplaces (Harting 2000).

The early e-marketplaces were propelled to the forefrontfor investors on the strength of hugely inflated stockvaluations for the dot-coms at the time so, after thecollapse of the stock market in 2001, growth in the areahalted dramatically and many were soon to fail.

Despite these failures other e-marketplaces have stillmanaged to flourish. Research has found that financialperformance is often considered to be the primaryperformance indicator of e-marketplaces but other, non-financial, measures such as improved processes, innova-tion, growth and improved customer satisfaction canalso be considered as important contributions toperformance (O’Reilly and Finnegan 2003, 2005).Covisint has been in operation for four years now andforecasts record annual revenues, of between $90 and$100 million for 2006 and 2007, as it expands itspresence in Europe and Asia (CrainsDetroit.com 2005).It has, however, experienced much change in this period,with the auction section of Covisint’s original businessbeing sold to FreeMarkets in January 2004, followedshortly by Compuware procuring their remainingproducts and technology in March of the same year(B2B News 2005).

Another success story of this era, Transora, a leadingconsumer products community for eCollaboration, withretailers in 22 countries, has also recently agreed inprinciple to unite their operations with The UniformCode Council (UCC), a US-based data pool that offersdata synchronization services that enable trading part-ners to exchange accurate, standards-compliant data(Barlas 2005), with the combined entity to be led byTransora and to operate as a subsidiary of the UniformCode Council, thus providing a further example of howbusiness models in this field can change.

Although the failure of some of these e-marketplaces,and the success of others, has led to a state of someconfusion, particularly for those companies looking atjoining such ventures, the e-marketplace concept stillremains valid for many businesses, particularly due to theway it relates to the supply chain, adding value to supplychains on a business-to-business basis rather thandirectly to consumers. Benefits can still be gained fromthe increased efficiencies in product availability, price,delivery and inventory management that e-marketplacesprovide. In B2B e-marketplaces, businesses, as opposedto consumers, are the customers.

A couple of approaches have been offered for assistingwith e-marketplace selection already, notably Stockdaleand Standing (2002) with their content-based approach,and the multi-criteria process presented by Buyukozkan(2004), including such methods as fuzzy AHP andcriteria weighting. These theories certainly have theirown level of value and impact in this field but are notcurrently in any such condition whereas they could be

taken and immediately applied by companies looking tojoin or develop an e-marketplace.

Hayes and Finnegan (2005) also offered a frameworkto assist decision makers assessing e-business models.The approach is very broad based, however, andconsiders everything from e-shops and e-malls right upto e-hubs and collaboration platforms. It proposes thatthe derived framework may increase an organization’schances of choosing the appropriate e-business modelsimply by helping towards identifying a shorter list ofmodels for full assessment, and not through matchingrequirements to service availability. However, no caseapplications or empirical testing has been included, tosupport this framework, at this time.

Material specifically covering the design of e-market-places was also found to be in short supply. Yu et al.(2002) offer a three-stage business strategy for evolvinge-marketplaces that considers factors such as thecompetitiveness of e-marketplace operators and thethree stages of service in an e-marketplace, and analysedthe competitiveness and strengths of e-marketplacesoperated by organizations from various market posi-tions. This, again, offered useful background into someof the considerations to make when undertaking an e-marketplace design, but no procedure or method wasoffered as to how to tackle it realistically.

This paper tackles the same issues but incorporates analternative approach, one that draws upon not only theknowledge gained from understanding the history andbackground of the subject, but also from the newknowledge and experience attained via a set of strategi-cally selected independent case studies. It then takesthese findings and designs a procedure that can befollowed in order to calculate the appropriateness of a setof e-marketplace features to a particular business ormarket. It was intended to be equally applicable to therealms of both the academic and industrial research, andproposes to present an approach that can be adapted anddeveloped fairly easily for an early realistic benefit.

CASE STUDY INVESTIGATION

This study includes the results of two separate investiga-tions into e-marketplaces. The studies were aimed atuncovering case research material to form the founda-tions for the development of a strategic framework, orselection tool, for identifying the appropriateness of e-marketplaces.

The first case study makes an empirical examination ofa small-to-medium (SME) sized enterprise, RJW, andanalyses how they approached the development of an e-marketplace, in terms of identifying customer require-ments, internal drivers and benchmarking the industry.The second case study considers current literature andexamines the condition of the wider e-marketplacedomain; specifically focusing on earlier attempts at

Electronic Markets Vol. 16 No 3 247


e-marketplace classification, then derives three newclassification models, based on the discovery of a seriesof fundamental characteristics, in order to determine therelative positioning of an industry, an e-marketplace or aproduct/service.

These two case studies were selected for their capacityin offering valuable insights into e-marketplaces, andtheir development, as viewed from a number of differentoperational levels. Case Study I concentrates solely onthe individual private e-marketplace provider, the busi-ness drivers behind RJW’s initiative for developing an e-marketplace, their approach to establishing an accurateset of customer requirements, and the ensuing process ofsatisfying the requirements effectively with a set ofspecifically targeted web-based services.

Case study II takes a sector level view of the range of e-marketplaces currently in operation. It explores thedifferent types of classification model in existence,investigating the criteria upon which they are based,and analyses the technologies involved, both forparticipating and hosting.

It was believed that by looking at e-marketplaces fromthese different perspectives; the individual and the sectorlevel, that an accurate picture could be fashioned as totheir ultimate definition, classification types, technolo-gies, requirements, functionality and business benefits,which can be used in juxtaposition with the findingsfrom the literature review, in order to establish a methodof supplying detailed answers to the research questions.

Case study I

Back in 2000, a collaborative project was initiatedbetween the University of Liverpool and an industrialmaintenance company, Rewinds and J Windsor and SonsEngineers Limited (RJW), based in the Northwest ofEngland. The objective of the project was to establishRJW as one of the UK’s first Maintenance, Repair andOperations (MRO) e-marketplaces, strategically posi-tioned between its customers and its supply base, by wayof developing their own online private e-marketplacenetwork, an Internet-based integrated supply distribu-tion business to satisfy customer MRO requirements forthe supply of products and services typically required bymaintenance and production departments, within avariety of industries located throughout the North ofthe UK, while simultaneously improving service levelsand reducing costs.

The company specialize in the repair of mechanical,electrical and electronic plant, and have a wide range ofcustomers, from various industries, including automo-tive, chemical, aerospace, and food manufacturers, inaddition to service industries such as airports, shoppingcentres and hotel chains. Although they do notmanufacture products of their own, they are approvedsuppliers for many of the leading names in electric

motors, bearings, transmission parts, and PLC controlsystems etc., and are registered to supply, install andmaintain such equipment on site at customers’ facilities.

In conjunction with the university, RJW engaged inan initiative to develop a public MRO e-marketplaceaimed at leveraging leading edge technologies in anattempt to improve customer service, streamline internalbusiness processes, and enable the organization to growand expand into new markets. The university examinedhow an SME approached the development of an e-marketplace in terms of analysing customer require-ments, capturing internal drivers, and utilizing bench-mark studies, and followed the two-year developmentlife cycle, from the early planning stages up toimplementation and operation, and described how itaffected the running and culture of their business.

Initial research was carried out via a series of tape-recorded interviews with 12 of RJW’s larger customers,specifically targeting purchasing and inventory manage-ment divisions, with over 800 email questionnaires alsodistributed to smaller customers, and through collabor-ating with one main strategic partner, a large globalfood-producing manufacturer. Over a period of twelvemonths, the inventory supplied to this collaborator wasmanaged, and monitored, in order to forecast theirtypical annual MRO usage. All the data collected, fromthese separate sources, were then utilized in establishinga ‘wish list’ of overall customer requirements, to be usedas design considerations for the new e-marketplacedevelopment.

From this investigation several important lessons onthe approach to building an e-marketplace were learned.The university research team discovered that there waslittle, if any, available literature at that time that offeredsupport or guidelines for the appropriate selection, ordesign steps, to take when evaluating electronic market-places.

RJW identified the importance of concentrating on e-enabling existing services, leveraging areas they werealready strong in and had built a good reputation on,rather than adopting ‘technology for technologies sake’,and of not entering new markets where they werecomparably inexperienced, without fully exploring thepossible consequences. The great significance of gainingan understanding of customer requirements was alsoappreciated, in the how, why and where of providingindispensable services for them, gaining a competitiveadvantage in the market, as well as rememberingpersonal objectives, benefits available from gainingknowledge of the market, in identifying the ‘best ofbreeds’, and highlighting ideas and key features theycontain that could be incorporated into their ownsystem development.

From the customer interviews, questionnaires andcollaborative partner data, a picture was built up of thetypical customer demands of an e-marketplace. Similarly,the internal assessment and benchmarking information,



supported by the findings of the literature review,enabled a set of typical functionalities to be established.

It is believed that this was an effective, structured,approach to e-marketplace development, establishingthe business case and only progressing with the projectupon defining both internal and external demands.However, if some sort of approach tool had beenavailable at the early stages of the project, this informa-tion could have been possibly utilized more effectively inestablishing a valuable set of interrelationships anddesign criteria, highlighting areas of best fit for thescope of functionality to customer requirements, andsubsequently more astute investments of resources mayhave been possible.

Case study II

The task of effectively classifying B2B e-marketplaces canbe a very complex process. The specific functionality andrequirements expected from any electronic marketplaceby its supply chain can be extremely varied even within asingle market. It can be product driven or functionalitydriven, as opposed to market driven. In other instancesthe requirements are driven exclusively by the potentialbusiness benefits, regardless of what products areinvolved.

Although a specific set of functions, includingcatalogue searching, information exchange and auction-ing lie at the forefront of many typical e-marketplaces,the combination of features and the purpose for whichthey are incorporated can vary significantly. Differentactivities at different stages along the supply chain alsolend themselves to becoming electronic interactions togreatly differing extents.

A standardization of e-marketplace characteristicscould be possible if the underlying objectives andpotential benefits for the inception of these marketplacesare examined. e-marketplaces, in broad terms, providean electronic means to simplify, automate and helpsynchronize the way in which supply chain partnersinteract with each other to reduce costs, improveproductivity and increase revenues. In addition to this,e-marketplaces aim to bring about a state of increasedtransparency between supply-chain partners, in terms ofdemand and availability, creating a reduction in lead-times, inventory and work in progress, all resulting instrategic benefits.

However, no two e-marketplaces operate in exactlythe same manner, and it would be impractical to create ablueprint to which all e-marketplaces should adhere to inorder to attain success. A reasonable first step, however,towards a classification would be to decide upon whichparticular characteristics of these e-marketplaces offersufficiently enough distinctive divisions as to justify aclassification category.

With little guidance available, many companies oftenexhaust considerable time and resources in assessing thevalue to them of participation in e-marketplaces. If it isdecided that they offer a viable opportunity there is alsolittle in the way of support as to how to develop an entrystrategy best suited to one’s particular business needs.While the importance of adopting the right approach isalready highlighted (Chopra and Mieghem 2000;Smeltzer and Carter 2001), the main focus of theresearch so far in this area has been around thetechnologies involved, and as a result few frameworksfor strategically guiding organizations through thisdecision-making process have been proposed.However, several categorizations or classifications of e-marketplace elements have already been suggested basedupon channels of e-marketplaces (Morgan Stanley DeanWitter 2000), tools for conducting electronic B2B trade(Kaplan and Sawhney 2000), and type of purchasing anditems (Hasen et al. 2001). Whitaker et al. (2001) andTemkin (2001) support a two dimensional classificationof B2B e-marketplaces including the connectivity modelconcerning the ownership of the marketplace, andapplication model concerning involved processes, theobjectives of the marketplace and used tools. Two maintypologies are also advocated by Bartezaghi and Ronchi(2003) which include Sourcing Service Providers whohost the e-marketplace operations for various customers,and Sourcing Process Outsourcers who additionallyprovide professional services such as analysis of themarket and contract and negotiation processes tocustomers.

The key dimensions to this classification approachwere agreed as being the nature of the products/servicesto be traded, the ownership/structure of the e-market-place, and the level of functionality/relationshipsrequired from the trading interaction. The productcategories were defined as being commodities, durables,and bespoke; the ownership of the exchange wasconsidered as being either independent, sector coalition,or private; and the relationships involved as either closeor anonymous (Hopkins et al. 2003).

Three classification models were then derived,Figures 1 to 3, and these dimensions were used foridentifying the optimal position for an industry, an e-marketplace or a product/market. The strategic role ofan e-marketplace was also identified as being dynamic innature over the product/market lifecycle and theongoing development of the information systems andtechnologies.

This analysis gives the researcher valuable insights into positioning of e-marketplace users in terms of theirownership status, product demand, and functionalityrequirements.

It was concluded that the more control a companyhas over its e-marketplace, in terms of ownership,the greater benefits they can reap from it. It wouldbe difficult to use e-marketplaces for the purpose



of procuring highly customized products withouthaving a close relationship with, or greater influenceover, the supplier. However, only a low level of controlover the e-marketplace, and anonymous relation-ship with the supplier, is necessary in the case ofcommodities.

APPROACH TOOL DEVELOPMENT

The findings of the case research were utilized indeveloping a QFD-style matrix that emphasized theinterrelationship between their customer requirementsand e-marketplace functionality.

Figure 1. Classification model 1, products vs ownership (Shaded areas indicate suitability)

Figure 2. Classification model 2, product type vs functionality



Quality function deployment (QFD)

Quality function deployment (QFD) ‘is a method fordeveloping a design quality, aimed at satisfying theconsumer, and then translating the consumer’s demandinto design targets and major quality assurance points tobe used throughout the production phase’ (Akao 1990).It is a customer-oriented design tool aimed at develop-ing new or improved products and services, to increasedcustomer satisfaction and quality assurance (Akao 1990;Mizuno and Akao 1994), by integrating marketing,design engineering, manufacturing and other relatedfunctions of an organization, that focuses on deliveringvalue by taking into account customer needs and thendeploying this information throughout the developmentprocess (Karsak 2004; Sullivan 1986). The basic threeprincipals of QFD are to:

1. Prioritize spoken and unspoken customer wows,wants, and needs;

2. Translate these needs into actions and designs suchas technical characteristics and specifications; and

3. Build and deliver a quality product or service byfocusing various business functions toward achievinga common goal of customer satisfaction. (QFDInstitute, www.qfdi.org)

The original concept of QFD was invented in 1966, atthe Bridgestone Tire Corporation, by Yoji Akao, for thepurpose of process assurance, and translates customerrequirements into designed product functionality, which

has helped such organizations as 3M, Ford Motor Co.and AT&T to improve customer satisfaction, reduceproduct development time, and reduce start-up pro-blems.

QFD is a requirements quality approach and consistsof statistical process control, design quality, and valueengineering. Its intention is to collect user requirementsthroughout the product development and productionstages (Macaulay 1996). Matrix diagrams, very useful inorganizing and illustrating any collected data, can beused to display this information and measure the extentto which customer requirements are being met withfunctionality, and highlight the potential resources thatexist that can be employed in fulfilling those require-ments further. The structure that QFD uses to organizesuch information is known as the ‘House of Quality’(HOQ).

Lowe and Ridgway (2000) describe the HOQstructure as a six-stage process (see Figure 4):

1. Customer requirements: Usually the first section ofthe matrix to be completed, and considered to bethe most important, this compiles a list of thecustomers requirements, described in their ownwords, and are referred to as the ‘voice of thecustomer’.

2. Planning matrix: Situated on the right hand side ofthe model this quantifies the level of priority of thecustomers’ requirements and establishes their eva-luation of current products/services.

Figure 3. Classification model 3, ownership vs functionality



3. Technical requirements: This describes the productin the customers’ words and is referred to as the‘voice of the company’. This input information isestablished by identifying all the measurable char-acteristics of the product that go some way tomeeting toward meeting the earlier specifiedcustomer requirements.

4. Inter-relationships: Positioned in the middle of themodel this two-dimensional matrix operates bytranslating the requirements specified by thecustomer into product technical requirements.Each cell, corresponding to a relationship betweena customer requirement and a technical require-ment, is assigned a value to describe the significanceof this relationship, based on it being either astrong, medium, or weak one.

5. Roof: The roof section of the matrix is used toestablish whether or not the technical requirements,specified earlier, have any kind of relationship thatmight support, or impede, one another. For eachcell it is asked, for the corresponding requirements,whether increasing or decreasing the strength ofone will have a positive or negative effect on theother.

6. Targets: The closing element of the HOQ matrixpulls together all the interactivity of the rest of thematrix and draws a set of conclusions to work from.These generally take the form of technical priorities,competitive benchmarks and targets.

The boundaries of fully describing the QFD process,and its many applications, lie well outside those of thispaper, and further reading is required for QFD to befully appreciated. However, what this work does is takeQFD and adapts a technique, primarily designed as acustomer-oriented design tool for the development ofnew or improved products, and employs part of itsmethodology in a new application environment, utiliz-ing its ability for quantifying relationships between setsof customer requirements and product features.

This structural approach was incorporated in thecurrent research in an attempt to develop a mechanismfor effectively organizing customer requirements into aconfiguration whereby they could be easily referencedagainst the functionality range of e-marketplaces. It wasnot envisaged that all the steps would be strictly adheredto for this particular work, Stage 5 for instance was notseen as valid for this application, but many of thetechniques highlighted herein were identified as usefulmethods for drawing important conclusions about thedata collected during the case research.

Despite the roots of the QFD technique originatingfrom a design environment, its application was found tobe just as appropriate a method for evaluating existing e-marketplaces, with a view to joining them, as foreffectively analysing customer requirements and productexpectations when designing a new e-marketplace. Theapproach was believed robust, and detailed, enough tobe able to quickly indicate whether or not the resultingproduct (e-marketplace) significantly addressed the keyrequirement issues of the customer in either instance.

Application of case study evidence

From RJW’s survey into their customers’ possiblerequirements of an e-marketplace, supported by theliterature review findings, the following capabilitiesfeatured prominently: procurement savings; reductionin administrative costs; order/status tracking; productsearch; vendor search; integration; and collaboration.

Their in-house considerations, gained via internalinvestigation, were that the e-marketplace developmentprovides levels of performance in the areas of: productcatalogue hosting; stock control; order processing; user-friendly backoffice; remote access; connectivity; security;and online asset management.

From these lists of findings a typical set of customerrequirements was compiled for inclusion in the relation-ship matrix as the ‘voice of the customer’ input, Stage 1in Lowe and Ridgway’s model (Figure 4).

Typical functionality common to most best-of-breede-marketplaces, and standard in most e-marketplacesoftware suites, according to the literature review andfindings of Case study II, included: electronic cata-loguing; order tracking and audit; online reverse

Figure 4. HOQ model by Lowe and Ridgway (2000)



auctioning; integration with back office systems; auto-mated payment systems; electronic requisitions; electro-nic purchase orders; electronic delivery notes; contractedpricing; automated approval systems; managementinformation and reporting; and user profiles withspending limits.

Therefore, a list of e-marketplace functionality couldnow also be derived as inputs for the top row of thematrix, at Stage 3. These e-marketplace features are theforecasted product control characteristics.

The inputs are cross-referenced against each other, inthe corresponding areas of the matrix, and any instancesof an existing relationship, between customer require-ments and the available services, are highlighted with thesymbols ‘N’, ‘&’, and ‘m’. These symbols indicateinterrelationships weighted, on a four-point scale, ashaving either a high, medium, or low effect on each other.Blank spaces indicate a situation where no interrelation-ship between the two parts can be identified.

Focusing on the top line of customer requirements inFigure 5, the e-marketplace feature of electronic catalo-guing, documenting in one place the specifications of awhole range of products and services, from multiplesources and suppliers, is adjudged as having a highcapacity for potentially generating procurement savings.The point on the grid corresponding to the relationshipbetween these two factors is, therefore, marked with acircle.

Similarly, electronic delivery notes are deemed asoffering only a low level of contribution towardsgenerating procurement savings, via their ability forslightly improving back-end processing, but are

adjudged as being a significant contributor towardsgenerating administration cost savings in the same area.These relationships on the matrix are therefore popu-lated with a triangle and a circle respectively.

The value that the capacity for integrating electronicdelivery notes with back office systems carries, such aswith linking directly to invoice and inventory systems, isconsidered as being between high and low, so it labelledmedium and marked with a square.

For any given organisation, a set of customerrequirements can also be ranked, by the customer, ona scale of 1 to 5, in order to establish their priority areas.Definitions of the level of importance, as defined by the5-point scale, are stated in Table 1.

If RJW’s customer base for this venture had beenasked to complete such a scorecard in this way arelationship matrix approach to the new e-marketplacecould have been incorporated into the design phase.

For this paper, a set of values were later collected fromRJW’s collaborative partner, in exactly the formatdescribed, and were retro-fitted into the new approach

Figure 5. The relationship matrix for the input values collected from the case research

Table 1. Ranking values of importance to customer

Ranking Business Importance

E Very high level of importance to customer

D High level of importance to customer

C Medium level of importance to customer

B Low level of importance to customer

A Very low level of importance to customer



model. The collaborator identified their main priorityareas as being that of making savings in procurement andreducing administrative costs, scored 5, with areas ofsecondary importance set as integrating with existingsystems, collaborative planning, and the ability to makesupplier price comparisons, scored 3).

Services such as product search, vendor search,integration and order tracking were also identified butnot deemed as being as critical (see Table 2).

These figures are now inserted into the developingmatrix under a column heading Ranked importance, asseen in Figure 6.

The relationships between e-marketplace features andcustomer requirements are weighted, by assigningnumerical values to the original interrelationships(N55, &53, m51), multiplying each of these valuesby the ranked importance score for that requirement,and then tallying the scores in each column to derive avalue for Technical Priority – that being the influencethat a particular feature has across the full range ofcustomer requirements (see Table 3 and Figure 7).

This process could then be applied across the entirematrix (see Figure 8).

On observing the generated results the top three areasof technical priority for an e-marketplace, under theseparticular conditions, are defined as:

1. Electronic cataloguing (99);2. Online reverse auctioning (79;) and3. Integration with Back Office Systems (77) (see

Figure 9).

These figures make an evaluation that considers thecomplete list of scored customer requirements.Referring back to the original ranked importancecolumn it can be seen that, for this particular customer,the services potentially providing the greatest businessbenefit are electronic cataloguing, online reverse auc-tioning, and the integration with back office systems.

Any customer, evaluating the possibility of joining ane-marketplace, could insert their own requirements andranked importance values into a similar matrix, alongwith the functionality offered by the e-marketplace theywish to evaluate, to highlight areas of potential benefit,

Table 2. A completed scorecard for collaborator’s level of

customer requirements

Customer Requirements Rating Score

Procurement Savings E 4 3 2 1

Reduced Administrative Costs E 4 3 2 1

Order Status/Tracking 5 4 3 2 A

Product Search 5 4 3 B 1

Vendor Search 5 4 3 B 1

Integration with Existing Systems 5 4 C 2 1

Integration to Other Exchanges 5 4 3 B 1

Collaborative Planning 5 4 C 2 1

Supplier Price Comparisons 5 4 C 2 1

55Strongest

15Weakest

Figure 6. Customer ranked importance rating added to matrix



and the extent of that benefit, for their particularbusiness needs.

If the matrix approach is now employed in a slightlydifferent application, one of evaluating the relationshipsbetween a set of customer requirements and theclassification criteria established in Case Study II, itserves as an exercise in testing out the matrix method onnot just a single particular e-marketplace but with a top-level evaluation of an entire e-marketplace sector.

To enable this, the inputs for the technical require-ments row, Stage 3 of the HOQ model, were substitutedfor the three different product types and ownership

models identified in Case Study II. The originalcustomer requirements remain unchanged, in Stage 1of the model, but a new set of interrelationships, withthe ownership model inputs, are devised. These aredisplayed in Figure 10.

It can be clearly seen, when utilizing the matrixmethod in this manner, that a privately owned e-marketplace, with its capacity for strong relationships,appears to offer potential significant reductions inprocurement and administrative costs, regardless ofproduct type, whereas within the independent andsector coalition sections this is limited to mainlycommodities due to restricted control.

Similar levels of order tracking, vendor search andsupplier price comparison capabilities are available, nomatter how much control is held over the e-marketplace,and there is a likelihood of achieving better integrationlevels with other exchanges via a sector coalition hostede-marketplace that with any other type.

These figures are based solely on the performance ofthe three different types of e-marketplace ownership,against customer requirements, and do not consider thecosts associated with the membership/development.These results are consistent with the findings from CaseStudy II where it was concluded that the more control acompany has over an e- marketplace the greater benefitsthey can reap from it. If, however, a company’s solemotivation for joining an e-marketplace purely to source

Table 3. The interrelationship weighting system utilized

Symbol Interrelationship weighting Value

N HIGH: A highly significant level of

interrelationship is present between

customer requirement and e-marketplace

functionality.

5

& MEDIUM: Exhibits a medium strength

interrelationship between customer

requirement and e-marketplace functionality.

3

m LOW: Indicates only a low level of

interrelationship between customer

requirement and e-marketplace functionality.

1

Figure 7. Deriving technical priority value for electronic requisitions



Figure 8. Complete matrix of interrelationships

Figure 9. Focus on areas of highest suitability



commodities cheaper, then its requirements of that e-marketplace are inevitably going to be less rigorous.

In Figure 11, a typical list of requirements for such acompany, one of RJW’s smaller customers, are plottedagainst the three e-marketplace ownership models. It canbe clearly seen that there is little, and none whatsoever in

some cases, difference between the performance of thethree different categories for these requirements. Itwould, therefore, be of little benefit for this company tojoin a sector coalition or develop their own private e-marketplace, with the high associated investmententailed, if their needs from such a platform are simply

Figure 10. Matrix applied to Case Study II classification models

Figure 11. Commodity procurement driven requirement



to search products and vendors, and compare prices,with the goal of reducing the cost of procuringcommodity items. They would be able to receive a morethan satisfactory level of service, to enable them to dothese particular activities, via joining a much cheaperindependent e-marketplace.

If, however, the customer requirement warrantedcertain functionality that necessitated a much closer levelof relationship, the difference in scoring between thethree ownership models would be expected to be farmore evident, as shown in Figure 12.

Here it can be seen, in the technical priority scoring,that typical independent e-marketplaces are unsuitablefor sourcing bespoke products, collaborative design, andintegration with existing systems, and that sectorcoalitions are only marginally successful in providingthem. The recommendation to a company in thissituation would be to look into developing a private e-marketplace, designed specifically to satisfy their own,more complex, demands.

CONCLUSIONS

This paper proposes a matrix-based approach for theevaluation of e-marketplace services. One that establishesinterrelationships between functionality and customerrequirements, designed for not only assisting in thedesign of a system that embeds, as effectively as possible,the correct functionality set for meeting specific custo-mer requirements when creating a new e-marketplace,but also in providing a tool to assist in identifying thepresence of the right kind of web services for use bycompanies planning entry into an existing e-market-place.

The literature review and case study research findingscombine to define the typical customer requirementsand inherent functionality necessary for a successful e-marketplace. The system adapts a technique primarilydesigned as a customer-oriented design tool (QFD), forthe development of new or improved products, andemploys part of its methodology as a means to collectuser requirement data, before utilizing its presentationstructure to display the collected information, establish-ing interrelationships for the purpose of visually, andstatistically, measuring the extent to which customerrequirements would be fulfilled by a set of web services,or vice versa.

This approach utilizes both qualitative and quantita-tive methods for establishing the entities incorporated inthe system, and in quantifying the relationships betweenthe sets of customer requirements and the inherentfunctionality, and has been designed to generateeffective results in a user-friendly, easy to deciphermanner, that requires that the operator simply decidesupon a range of requirements and functionality that isparticularly applicable to their position and to thenmakes a decision upon the level of importance that eachof the chosen attributes has for their business.

The inputs for the matrix can be changed at any time,to correspond with the features of a new e-marketplaceor the new/changing requirements of a customer, andso don’t require the assumption of any standardizationof e-marketplace characteristics and practice, making thesystem flexible enough to adapt to differences in theseareas when dealing with a different category of customeror e-marketplace.

It is believed that there was a need for developingsuch a methodology for e-marketplace selection, onethat not only supports the decision-making criteria for

Figure 12. A collaborative driven requirement



e-marketplace entry, suggesting a framework model forthe evaluation and validity of existing web services, butone that also suggests an approach to designing newsystems, based upon the functionality most demandedby the customer.

Other applications of the QFD technique are begin-ning to emerge in the e-business realm; such as with thedevelopment of a methodology for converting internaland external needs into a feasible e-business plan forSMEs (Tan et al. 2004), and in measuring customersatisfaction levels in e-banking (Gonzalez et al. 2004),but no such applications that evaluate the appropriate-ness of an e-marketplace service range have yetmaterialized.

This aspires to be an original, effective, and thoughtprovoking, way of tackling the subject, and is intendedto serve as the basis for further exploratory studies intothe subject. The next stage for this work is to test out theaccuracy, and relevance, of the approach method in aseries of realistic environments. Only then can itspotential be measured effectively.

ReferencesAkao, Y. (ed.) (1990) Quality Function Deployment,

Cambridge, MA: Productivity Press.

Bakos, J. Y. (1997) ‘Reducing Buyer Search Costs:

Implications for Electronic Marketplaces’, Management

Science 43(12): 1676–92.

Barlas, D. (2005) ‘UCCnet, Transora Merge: A Big Step

Towards Standardizing Data Synchronization, But Some

Important Decisions Remain to be Made’, Line56.com,

online at: ‘http://www.line56.com/articles/

default.asp?articleID56575&TopicID52’ (accessed 19

May 2005).

Bartezaghi, E. and Ronchi, S. (2003) ‘E-sourcing in a Buyer-

Operator-Seller Perspective: Benefits and Criticalities’,

Proceedings of the 2003 EUROMA-POMS Conference,

Como, Italy, 16–18 June.

Buyukozkan, G. (2004) ‘Multi-criteria Decision Making For

E-marketplace Selection’, Internet Research 14(2): 139–54.

B2B News (2005) ‘Covisint Targeting Other Industries’,

B2BNews.org, online at: http://www.b2bnews.org/b2b-

news-005/052505-0128-b2b-news.html.

Chopra, S. and Van Mieghem, J. A. (2000) ‘Which e-Business

is Right for Your Supply Chain?’, Supply Chain

Management Review, July-August, 32–40.

Crain’s Detroit Business Publication (May 2005) Online at:

http://www.crainsdetroit.com/cgi-bin/

article.pl?articleId527072.

Daniel, E. M., Hoxmeier, J., Smart, A. and White, A. (2004)

‘A Framework for the Sustainability of e-Marketplaces’,

BPMJ 10(3): 277–89.

Federal Trade Commission (2000) ‘Entering the 21st Century:

Competition Policy in the World of B2B Electronic

Marketplaces’, The Federal Trade Commission B2B Public

Workshop.

Gonzalez, M. E., Quesada, G., Picado, F. and Eckelman, C. A.

(2004) ‘Customer Satisfaction Using QFD: An E-Banking

Case’, Journal of Managing Service Quality 14(4): 317–30.

Grieger, M. (2003) ‘Electronic Marketplaces: A Literature

Review and a Call for Supply Chain Management Research’,

European Journal of Operational Research 144(2): 280–94.

Harting, M. C. (2000) ‘Business to Business e-marketplaces: A

Primer’, KPMG Consulting.

Hasen, M. A., Mathews, B. A., Mosconi, P. A. and Snakran, V.

(2001) ‘A Buyers’ Guide to B2B Markets’, McKinsey

Quarterly, 2.

Hayes, J. and Finnegan, P. (2005) ‘A Framework for Assessing

the Potential of e-Business Models’, European Journal of

Operational Research, Special Issue on Decision-making in

the Internet Age 60(2) January: 365–79.

Holland, C. P. (2002) ‘Competition and Strategy in Electronic

Marketplaces’, Proceedings from the 35th Hawaii

International Conference on System Sciences 8: 229.

Hopkins, J. L., Kehoe, D. F., Sharifi, H. and Boughton, N.

(2003) ‘Adopting e-Marketplace Models for Better Supply

Chain Management: What is the Appropriate Choice?’,

Proceedings of the 2003 EUROMA-POMS Conference,

Como, Italy, 16–18 June.

Kalakota, R. and Whinston, A. (1997) Electronic

Commerce: A Manager’s Guide, Reading, MA: Addison-

Wesley.

Kaplan, S. and Sawhney, M. (2000) ‘E-Hubs: The New B2B

Marketplace’, Harvard Business Review, May-June,

97–103.

Karsak, E. E. (2004) ‘Fuzzy Multiple Objective Decision

Making Approach to Prioritize Design Requirements in

Quality Function Deployment’, International Journal of

Production Research 42(18) September: 3957–74.

Laseter, T., Long, B. and Capers, C. (2001) B2B Benchmark:

The State of Electronic Exchanges, McLean, VA: Booz Allen

and Hamilton.

Linder, J. C. and Cantrell, S. (2000) Changing Business Models:

Surveying the Landscape, Institute for Strategic Change,

Accenture.

Lowe, A. J. and Ridgway, K. (2000) ‘Quality Function

Deployment’, online at: http://www.shef.ac.uk/

,ibberson/qfd.html.

Macaulay, L. A. (1996) Requirements Engineering, London:

Springer-Verlag, pp. 63–70, 94–102.

Mizuno, S. and Akao, Y. (1994) Quality Function Deployment:

The Customer-Driven Approach to Quality Planning and

Deployment (trans. Glenn Mazur), Tokyo: Asian

Productivity Organization, (ISBN 92-833-1122-1).

Morgan Stanley Dean Witter (2000) B2B Internet Report,

online at: http://www.morganstanley.com/institutional/

techresearch.

Nairn, G. (2000) ‘Winds of Change Sweep through the

Marketplace’, Connectis, 4, July.

O’Reilly, P. and Finnegan, P. (2003) ‘Assessing the

Performance of an Electronic Marketplace: A Conceptual



Model and Case Study’, Proceedings of the 11th Euro-

pean Conference on Information Systems, Naples, 16–21

June.

O’Reilly, P. and Finnegan, P. (2005) ‘Performance in

Electronic Marketplaces: Theory in Practice’, Electronic

Markets, The International Journal of Electronic Commerce

and Business Media 15(1): 23–37.

Rayport, J. R. and Sviokla, J. J. (1995) ‘Exploiting the Virtual

Value Chain’, Harvard Business Review, November/

December, 75–85.

Schram, P. and Sexton, J. (2000) The Future of B2B: A New

Genesis, New York: Deloitte Consulting.

Smeltzer, L. R. and Carter, J. R. (2001) ‘How to Build and e-

Procurement Strategy’, Supply Chain Management Review,

March-April.

Stockdale, R. and Standing, C. (2004) ‘Benefits and Barriers of

Electronic Marketplace Participation: An SME Perspective’,

Journal of Enterprise Information Management 17(4):

301–11.

Sullivan, L. P. (1986) ‘Quality Function Deployment’, Quality

Progress June: 39–50.

Tan, B. L., Tang, N. K. H. and Forrester, P. L. (2004)

‘Application of QFD for e-Business planning’, Production

Planning & Control 15(8) December: 802–18.

Temkin, B. (2001) ‘B2B Success: Going Beyond e-

Marketplaces’, Supply Chain Management Review, July-

August.

Whitaker, J. D., Murphy, M. D., Haltzel, A. H. and Dik, R. W.

(2001) ‘Private Exchange: The Smart Path to

Collaboration’, Supply Chain Management Review Global

Supplement, July-August.

Yu, H. C., Hsu, C.-S. and Hsi, K.-H. (2002) ‘Setting Up an e-

Marketplace: A Three-stage Approach’, Technology in Society

24(4) November: 473–82.



Documents

The Theory and Development of a Relationship Matrix … · development. &Matrix-based Approach to Evaluating e-Marketplaces