Quantifying trust in EU e-commerce: B2B and B2C models

Promoting Trust in e-Commerce: AN EU Perspective on Quantifying Trust

The intent of this thesis proposal is to define a model for evaluating online trust initiatives as they relate to the growth of both B2C and B2B e-commerce transactions in the EU. The fact that EU-based B2B and B2C e-commerce has immediate global implications further brings the urgency of the definition of a model of trust to the forefront of research and validation efforts. The quantification of trust has many facets including Digital Rights Management (DRM), digital signatures, and the pervasive and urgent need for identity and transaction security online globally all further underscore the need for a thorough research effort that can look at approaches and models to quantify trust in transactions. The need for the quantification of trust and the use of technologies to align both B2B and B2C e-commerce initiatives with the legal precedents and requirements in the EU further make this thesis timely and focused on the broader global implications of the EU-based companies being able to successfully compete globally. The globalization of e-commerce poses significant challenges for EU-based corporations looking to grow their online selling through B2C-oriented websites on the one hand, and the ability to quantify and validate trust with their suppliers through extensive B2B-based supplier relationships on the other. From this perspective, regardless of the customer sold and served, every company has a component of their online strategies that revolve around B2B-based commerce; namely in their supply chain management processes and systems, coordination and synchronization with suppliers multiple layers into their supply chains, and most critically, synchronizing the fulfillment of orders through both their own and through partners' production systems. The essence of the quantification of trust is in being able to transform this potential liability for any company selling online into a competitive advantage. This thesis will examine the implications of how both B2B and B2C-based companies can transform their relative levels of competitive disadvantage in terms of quantification of trust into a competitive advantage globally, and in turn create more validation in conjunction with the legal precedents defined within the nation of the EU they reside in, and the collective legislation of the EU and its impact on the company's growth as a global competitor. The essence of the quantification of trust in e-commerce as it relates to adherence to EU legal precedents then begins with the creation of models or constructs by which companies can transform their weaknesses in these areas into strengths. For the many EU-based companies that rely on B2B and B2C transactions as part of their core business models the ability to turn trust into a competitive advantage, and with it, validation of DRM, digital signature, and online security as it relates to online browsing, purchasing, and service is already turning into the most valuable of differentiators relative to competitors. A cornerstone of this thesis is the definition of an e-commerce trust maturity model that encompasses both B2B and B2C online selling models and their respective integrations and dependencies throughout global supply chains, further underscoring how critical trust is as a differentiator of both B2B and B2C-based businesses.

Differentiating and Segmenting on Trust Globally

Trust is a primary differentiator for any successful company. Over and above the ability of a manufacturer to deliver the lowest-priced product, or the services company to deliver the most exceptional customer experience, the fact is that trust is the most precious commodity of all. This is supported by research completed both on competitive advantage, in addition to the evolution of values-based segmentation.

Competitive advantage is sustained when other firms are unable to easily duplicate the benefits of this strategy. This is one of the major reasons why trust is becoming the prime differentiator of value for many EU-based companies. Sustaining the trust level once attained is very difficult and takes a constant focus; and this will be covered in the context of a trust maturity model within this thesis.

Sustainability of the competitive advantage varies between EU-based services and manufacturing companies, yet the constant of trust in the company itself, its claims, product and service quality together act to significantly reduce the erosion by competitor behavior or environmental shifts. One company cannot "out trust" another; each competes on their own track record with its customers, prospects, partners, suppliers and buyers. Customers are using trust as their cornerstone in the development of their own specific models of value-based segmentation and experiential modeling of company's performance. For EU-based companies and the unique legal precedents and requirements they have, the need for an e-commerce maturity model is just exacerbated, as legislators and governments need guidance into how to align the evolving areas of digital laws to the present and potential litigation and future legislation. What is needed is a framework, an information architecture that is permeable and flexible enough to illustrate the continued evolution of online customers (both from a B2B and B2C perspective) on the one hand, and structurally sound enough to allow for the applying of EU-based laws pertaining to e-commerce transactions, supporting the quantification and legislating of online trust on the other. This model or framework is best seen as an e-commerce maturity model that can compensate for shifts in both customer unmet needs and the responses of EU-based laws and potential future rulings on cases on the other. A key part of the thesis is the definition of this EU e-commerce maturity model, which is defined in the following section.

Towards an EU e-Commerce Maturity Model

Clearly to define the evolution of demands from both B2B and B2C e-commerce customers of EU-based companies on the one hand and the continual evolution of EU-based legislation, legal precedents and the growth of Commons law on the other, an EU e-Commerce Maturity Model is necessary to keeping both dynamics synchronized together. The basics of the model assume a higher level of integration between the strategies companies use in attracting, selling and servicing both B2B and B2C companies and the EU-based legislation that seeks to enforce trust in e-commerce transactions while protecting the rights and privacy of consumers. Figure 1 shows the EU e-Commerce Maturity Model.

Figure 1: European Union e-Commerce Maturity Model

This model defines the relative level of synchronization or integration of companies relative to security and DRM initiatives specifically developed to fuel greater levels of trust in their online initiatives. What becomes apparent from the analysis of preliminary results is the fact that for many EU-based companies selling through both retail and online channels in the case of B2C-based business models finds that coordinating their supply chains is the first step in coordinating their trusted-based initiatives to ensure the highest levels of replicable performance possible. Specifically for B2C companies in the EU the challenge is presenting a unified a global presence despite being constrained by local trading, currency, and customer validation processes. Adding in the component of online casinos based in the EU and the entire aspect of online trust becomes even more acute. This is certainly the case with Harrods' Online Casino, which is available to those customers from EU-based countries, the Middle East, and China. The fact that online gambling exacerbates and makes the steps in the EU e-commerce Maturity Model all the more acute clearly supports the fundamental concepts the model is based on. Harrods', through IP filtering and the location of bank draft locations, can enforce this policy. Admittedly the technological aspects of enforcing trust for an online casino are orders of magnitude over and above what a typical B2B or B2C site would have to contend with. Yet the example of online gambling and the implications surrounding the quantification of trust and the corresponding level of maturity accomplished on the proposed maturity model framework show what synchronization between trading partners, suppliers and legal jurisdictions is critical if trust is to be maintained.

At the highest levels of maturity in the proposed model, what would be considered "best practices" in the context of this research model is the level of orchestrating functions across a federation of departments, divisions and even like-minded corporations who form joint ventures and alliances. For B2C companies this level of performance is nearly impossible to accomplish due to the competitive disadvantage inherent in showing potential competitors the intricacies if how transactions are handling, pricing implemented, and the development of customer relationships over time. In the B2B sector however, the ability to attain best practices and orchestration of trust initiatives is more prevalent. General Electric for example, in their approach to creating their channel partner programs through France, has been able to scale into this level of best practices performance by allowing visibility into core process areas via protection under contracts and binding agreements. In the case of B2B companies, the ability to provide enhanced levels of visibility is actually a competitive advantage and an inherently stronger attribute in becoming more trustworthy over time. It is not surprising then that even in the preliminary research of this maturity model the majorities of B2B companies attaining best practices have multiple layers of visibility into their supply chains, can provide accurate shipment dates to customers, and have an unparalleled command of their order workflows. All these aspects of a B2B transaction, when consistently executed on, create a level of trust that becomes one of the strongest and most unassailable differentiators there are in a market.

Companies occupying the second highest layer, Collaborating, are using portals and other Internet-based tools to maximize information sharing and co-development of strategies and the co-sharing of communications tools and ultimately platforms. Security, DRM and digital signature strategies all aimed at increasing trust as a differentiator; apply equally across B2B and B2C selling strategies, with B2B-based approaches having the greatest long-term impact on eventually quantifying trust and leading to greater levels of synchronization across channel, supply chain, and selling partners.

Anticipating, the second highest level in the maturity model, is where the majority of companies are today from both a B2B and B2C perspective. The focus on making a strong correlation between making information flow optimized vs. striking a collaborative focus with other global trading partners on the part of EU manufacturers and service companies. This level of the maturity model is a transitory one and is focused more on either small, incremental gains from the first level, which is Reacting. For many companies in the Anticipating layer of the model, initial efforts have proven at time successful, and time problematic. An example would be the use of online transactions from Expedia where prices are changed suddenly at check-out as old pricing tables are used for the presenting of offers and new pricing tables, for check-out. This technological gap causes a lack of trust to take hold and eventually force a company to re-define their process workflows over time to stay competitive. When the medium of exchange is trust in transactions, no company can afford to stay in this layer of the model for very long.

In the Reacting layer of this proposed PR Maturity Model, the majority of EU manufacturers and service companies alike have decidedly "every department in the company for itself when it comes to security" approach to process maturity and have trusted workflows that are purely dependent on personal productivity applications that have no synchronized series of processes and programs that align efforts internally . That is to say specifically that at this low level of performance in the model, e-commerce departments focuses first on tactical wins at the expense of global victories in the pursuit of trust with either B2B or B2C customers.

This mindset in turn creates an isolated approach to defining trust in e-commerce initiatives from a strategic perspective for industries where the majority of companies inhabit this lowest layer of the model. One of the key attributes of this level of the PR Model is the neglecting of the many user-generated from of content including blogs, Wikis and other forms of interactive customer feedback. The short-sighted nature of being a company in the Reacting layer of this model forces security and marketing teams more into firefighting and creating a chaotic environment where security firefighting pervades the growth of strategies for turning trust in a competitive differentiator.

In summary, the three critical success factors of becoming a trusted advisor, focusing on value-based differentiation and less on features and functions, and the strong trend towards the quantification of any company's ability to generate trust through its strategies. Underscoring all this in the research is the acceptance that blogs, Wikis, and user-generated content is here to stay and is aiding in the globalization of B2C and B2B activities by companies comprising the EU manufacturing and service base. Finally, the correlation of a company's ability to attain trusted advisor status with its customers and retain that status through continual reinforcing of security and DRM initiatives that validate that trust once earned must be kept if any EU-based company will survive for the long-term.

Proposed Thesis Chapter Structure

In completing this thesis the following chapter structure will provide for enough flexibility on covering core concepts yet also be flexible enough in defining the future developments in the quantification of trust and the introduction of the EU e-commerce Maturity Model as briefly discussed in this proposal:

2) The challenges of E-Commerce Maturity - Contractual issues

2-i) the beginning of this chapter will discuss and define the issues surrounding E-commerce, and divide them into two types- contractual and non-contractual. It will then discuss their shared basis in the development of trust and its preservation from the perspective of go-to-market strategies on behalf of B2B and B2C companies. The EU e-commerce Maturity Model will be used for illustrating the growth of contractual and non-contractual impacts on companies whose B2C and B2B strategies strive to create trust and align with these legal areas of compliance.

2-ii) the second section will discuss contracting in E-commerce, to investigate general differences between the traditional legal paradigms of contract and the contractual possibilities offered by E-commerce. The section will be centred on a discussion of general contract theory, setting up the following section's discussion of specifics. The e-commerce Maturity Model illustrates the impact of contract and contractual implications on companies with B2C, B2B, or a combination of both models in their approaches to quantifying and furthering trust as a lasting differentiator to their companies.

2-iii) the chapter will then discuss the specific contractual issues created by E-commerce, and some potential legal solutions, drawn from various jurisdictions, including the UK and the U.S.A. Included in subsections of this part will be the issues surrounding validity, jurisdiction, applicable law, signature, place and time of formation, agency and the methods for redress of mistake. This chapter will concentrate on analysing the way the arguments used by legal responses have been constructed, to show how they have been dependent on, and specific to, the technologies which raised the above issues.

2 -- iv) The role of the EU e-commerce Maturity Model will next be defined in the context of the contractual positive and negative influences on global growth. The use of customer listening systems and the ability to quantify the performance of EU-based companies in retaining and growing trust as a sustained perceived value over time will be explored. The concepts of using online security, DRM, digital signatures, and the growth of technologies to support the quantification of trust as it relates to the growth of trust as a sustainable differentiator for EU-based companies trading globally will also be explored.

3) The Challenges of E-Commerce- Introducing the EU e-commerce Maturity Model

3-i) this chapter will cover issues not specifically related to contract, but still connected to the promotion of trust in E-commerce, unifying insights into the context of the EU e-commerce Maturity Model as defined in the previous sections of this proposal.

3-ii) this second section will cover the issue of privacy, related to concerns over details and data, both of businesses and consumers, along with a discussion of technology such as cookies and their use for tracking overall browsing activity and the tracking of confidential data. The role of the proposed Maturity Model in defining the ability to be transparent with customers, partners, suppliers and buyers is also covered in this section.

3-iii) the second section will discuss technologies and commercial practices which impact the perception of trust and measure its impact on the stages of the EU e-commerce Maturity Model maturity. An analysis of strategies both B2C and B2B companies use in sustaining and strengthening trust in their online initiatives is also covered in this specific section.

3-iv) the final part of this chapter will illustrate the process, first discussed in chapter 2, whereby legal understandings of issues surrounding trust in E-commerce are created by technology, but in turn technology is influenced by the legal understandings of E-commerce. These findings are put into the context of the e-commerce Maturity Model and the progression of companies through the maturity levels.

4) The Governance of E-Commerce

4-i) This, and the following chapter will analyse the responses of the EU to the issues raised by E-commerce, and its attempts to overcome these issues on the way to realising the aims set out in the Lisbon Agenda and the Information Society Programmes, to take full advantage of the commercial possibilities offered by E-commerce.

4-ii) the chapter will discuss the political responses to the challenges of E-commerce, and the way in which those political responses seek to take advantage of the opportunities offered by E-commerce.

4-iii) the chapter will then be able to analyse the overall governance regime surrounding E-commerce in the EU, looking at whether there is an effective "EU Model" of E-commerce governance.

5) The evolution of E-Commerce in the EU using the e-commerce Maturity Model

5-i) looking across several industries and the progression of their initiatives to generate and sustain the quantification of trust as a competitive differentiator are critically evaluated in this chapter, using the EU e-Commerce Maturity Model as the basis of the analysis. Those companies operating in the EU that have attained best practices in creating trust as a valid differentiator are explored in this section.

5-ii) the effects of trust on the maturity of global content growth over and above transactions is explored in this section of the chapter. Specifically addressing the concept of trust