The ICDT Model: A Framework for e-business

Article by Anthony Leong © Copyright 1998


In order for companies to fully exploit the growing Internet 'marketspace', a framework is needed to aid in the design of their on-line business strategies. Businesses hoping to expand their activities onto the Internet are re-engineering or refining their products and services in order to take advantage of the new opportunities, as well as face the new challenges, of the medium.

The ICDT model (http://www.insead.fr), developed by Albert Angehrn at INSEAD, is a systematic approach to the analysis and classification of business-related Internet strategies. It serves as a basis for identifying how existing goods and services can be extended and redesigned to take advantage of the Internet, as well as suggesting the characteristics of new goods and services made possible through this new medium.

This model takes its name from the segmentation of the virtual 'marketspace' into four distinct areas:

      1. the Information Space
      2. the Communication Space
      3. the Distribution Space
      4. the Transaction Space

A firm's activities in some or all of these virtual marketspaces should be aimed at increasing overall profitability, which can be achieved either by increasing revenues:

or decreasing costs:

Furthermore, these activities can be directed both outward and inward:

Each of these new areas of activity created by the Internet will be examined in relation to the Web activities of your competitors, and hopefully this information will provide some direction for your company's own Internet strategy.

The Information Space

The Information Space consists of the channels by which companies can provide information about themselves, their products, and their services. The area of greatest activity for the Information Space is the World Wide Web, an area of the Internet in which companies can set up 'home pages' that allow global reach and the ability to provide rich information.

Turning Interest into Action

For consumers, the World Wide Web has provided a new efficient approach for gathering information and making comparisons between competing offerings. The key aim in exploiting the Information Space is to move prospective customers further along the sales cycle by converting interest into action. This can be done by:

Though this is the simplest of Internet-based activities that a company can undertake, many companies have entered into the Information Space without any strategy, providing little more than electronic versions of their company brochures. There are numerous examples of web sites that fail to:

Content Isn't Just for Customers

However, the Information Space is not merely restricted to servicing the needs of customers and stimulating sales. The Information Space can also be used by a company to serve the needs of other stakeholders, such as:

with content specifically tailored to their interests. Some examples of web-mediated initiatives for serving these other stakeholders include providing supply chain partners with a shipment status lookup application, or allowing investors to view the annual report on-line. While these activities may not necessarily increase a company's revenues, they certainly can help to reduce expenses and increase the responsiveness in serving these other stakeholders.

The Communication Space

The Communication Space allows for companies to exchange information with the various stakeholders in their business: their suppliers, customers, and strategic allies. Unlike the information provision activity in the Information Space, communication in the Communication Space can go both ways.

The Internet has allowed for high-speed and low-cost communication, unhindered by physical and geographical constraints, by the use of e-mail, Usenet discussion groups, and chat rooms. This new communication channel can be used for lobbying, influencing opinions, negotiating potential collaborations, and the creation of communities. However, in most organizations, this is an undeveloped area.

E-mail as a Communications Channel

The simplest use of the Communication Space is to allow customers to ask questions or provide feedback to a company, usually through e-mail, and not surprisingly, a majority of companies have implemented this. However, simply having an e-mail link for customers to use is not enough-- the company must be able to handle incoming e-mails and respond to them in a timely fashion.

To test the behind-the-scenes e-mail handling operations of each site, we sent an e-mail to each company, inquiring about the ability of the company to ship to Canada. Generally, the general guideline for e-mail turnaround is 48 hours.

Incoming e-mail must be treated like telephone messages, and responded to quickly, rather than like incoming postal mail. By ensuring that it is captured properly and answered in a timely manner, you are helping to ensure customer satisfaction. Many companies don't understand this, and waiting more than 48 hours can cause ill-will. In fact, the failure to respond to e-mail promptly is one of the single most common reasons for lost business and lost image over the Internet. In the very least, if it is not possible to provide a proper response in that time, a company should send a simple e-mail back to the customer stating that the query was received and when an answer should be expected.

Follow-on Marketing with Mailing Lists

The next step up for a company would be to proactively direct content on a regular basis to its customers. This can be done by asking visitors to subscribe to a mailing list that would provide them with updated content on a timely basis. This way, the company can maintain top-of-mind awareness in the potential customer, even if they never get around to visiting the site again.

Furthermore, with the right content, a company might be able to stimulate additional sales through follow-on marketing. So instead of spending money on postage to send out promotional mailings or circulars, some companies are sending out weekly e-mails outlining their new offerings and special promotions at considerably less expense.

Creating Communities

In the Internet marketspace, the creation of on-line communities, where like-minded individuals can interact and exchange information, is another aspect of the Communication Space. Community creation can encourage visitors to return to a site more frequently, serve as a means of generating demand for a company's offerings, cultivate customer loyalty, and further reinforce a company's positioning as a destination site.

'Sticking' is what retail analysts call the creation of a community around a product in the real world. In creating such a community, visitors are encouraged to linger longer in a store and are provided with an incentive to return. In essence, creating a community makes a store a 'fun place to shop'. Examples in the real world would include:

The key to creating a community around a product in the virtual marketspace is to augment the customers' experience with the product, thereby encouraging them to return, which would hopefully drive further sales. For example, community-building activities can include:

The value in a community lies not in the product itself. Instead, it lies in what the business can do to create new value for the customer by enriching the experiential aspects of the purchasing process, whether it be the provision of valued content on the products, or offering a forum where customers can speak with other like-minded individuals.

The Distribution Space

The Distribution Space is a new distribution channel which companies can use for their goods and services, especially those goods and services without a physical component, such as digitizable media (such as books, music, software, etc.) and services (consulting, technical support, education, financial services, etc.). Like the Information Space and Communication Space, activities in the Distribution Space can be directed both outward (to customers, the media, investors, and supply chain partners) and inward (to the company's own employees).

The Transaction Space

The majority of web sites today are what could be termed 'brochureware'. A brochureware site essentially provides little more than product information with a phone number or address for contact-- electronic versions of the company's real-world brochures.

Completing the Sales Cycle On-line

However, having a 'brochureware' web site does not necessarily mean that potential clients will follow through by making an inquiry about a company's products. Web-based businesses must turn interest into action as quickly as possible, so as to avoid the potential customer's demand from 'leaking away'. The Virtual Transaction Space provides a means of capturing this demand via new channels by which companies can carry out business transactions with their customers-- orders, invoices, and payments.

The Pitfalls of On-line Sales

Unfortunately, conducting on-line sales with your customers does raise two issues for companies:

Barriers to On-line Sales

Even if a company manages to resolve the logistical issues and can alleviate the possibility of channel conflict, simply having a few available items and a 'for sale' sign does not guarantee that visitors will actually place orders on-line. Research has found that on-line shoppers are a cautious group, and their reasons for not engaging in on-line transactions include:

e-retailing Best Practices

In order to overcome consumer reluctance in making use of the Transaction Space, a number of web retailers have come up with a number of best practices:

Among all the demand generation models in current use, syndicated selling has been found to be the most inexpensive way of acquiring new customers, since advertisers are only paying for click-throughs that result in actual sales. An analysis conducted by eToys found that a $40 sale on their web site cost only $10 under their syndicated selling program, whereas the same sale triggered by a banner ad would cost $20 or more.

On-line Transactions Beyond Ordering and Sales

The Transaction Space is not merely limited to the automation of sales or order-processing operations. Web-based activities can also impact on supplementary activities or back-end operations, for stakeholders both outside and within the confines of a firm. The use of the Transaction Space in this respect would include such as customer account management activities, invoicing, order tracking, and payment functions.

Collaborating with Supply Chain Partners On-line

Finally, the Transaction Space is also being used as a tool for coordinating the movement of products along the supply chain. The adoption of this business-to-business application is being driven by the ability to lower purchasing costs, reduce inventories, cut down cycle times, improve customer service, lower sales/marketing costs, and create new sales opportunities. While this type of coordination has traditionally been done with manual order management processes, and more recently with EDI, the Internet is providing a more cost-effective and more easily adaptable vehicle for collaboration.


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